Markets & Finance

Stocks Fall on Earnings Gloom


Major indexes finished lower in light trading Monday as Wall Street began a holiday-shortened week

U.S. stocks closed lower in light trading Monday afternoon at the start of a holiday-shortened week.

Investors were greeted with some disappointing corporate earnings news Monday. The auto sector remained in focus, as a fiscal 2009 profit warning from Toyota Motor Corp. (TM) followed Friday's news of a $17.4 billion U.S. government rescue plan for Chrysler LLC and General Motors (GM). Shares of GM, Toyota, and Ford Motor Co. (F) were lower Monday.

Walgreen Co. (WAG) shares sank Monday on weak November-quarter earnings. Other retailers were lower as well as snow storms hurt store sales over the weekend.

Employment services firm Manpower (MAN) withdrew its fourth-quarter guidance, sending its stock plummeting Monday.

There were no major economic reports scheduled for release Monday. Attention turns Tuesday to the final reading of U.S. third-quarter gross domestic product, the final University of Michigan consumer sentiment index for December, and November new home sales.

Against this backdrop, some market observers expect investors to do some bargain hunting as the year draws to a close. The market will close early on Wednesday at 1:00 p.m. ET, and it will be closed all day Thursday for the Christmas Day holiday.

Bonds fell. The dollar index index edged higher in choppy trading. Gold futures were higher. Oil futures were lower.

On Monday, the 30-stock Dow Jones industrial average finished lower by 59.42 points, or 0.69%, at 8,519.69. The broader S&P 500 index shed 16.25 points, or 1.83%, to 871.63. The tech-heavy Nasdaq composite index shed 31.97 points, or 2.04%, to 1,532.35.

On the New York Stock Exchange, 22 stocks were lower in price for every nine that gained. The ratio on the Nasdaq was 20-8 negative.

European equity markets finished lower Monday, with London stocks down 0.88%, Paris lower by 2.31%, and Frankfurt off 1.23%. Asian markets closed mixed, with Tokyo stocks rising 1.57% while Hong Kong fell 3.34% and Shanghai was lower by 1.52%.

The UBS risk index slipped back under 1.0 to 0.89 on Monday, reports Action Economics, from 1.02 on Friday amid lower cross-market volatility and tightening spreads. The VIX equity volatility index has also subsided following last week's Fed actions and the auto sector bridge loans. The VIX fell from highs above 58.0 last week to lows of 41.29 on Friday before closing at 44.93 -- about half of its 89.53 peak.

Among companies in the news Monday, Toyota reportedly forecast a 150 billion yen fiscal 2009 group operating loss. The automaker also reportedly cut its its vehicle sales forecast to 7.54 million.

American International Group (AIG) entered into a deal to sell its HSB Group unit (HSB) to Munich Re Group for $742 million in cash. Munich Re will also assume $76 million of outstanding HSB capital securities.

Wal-Mart Stores (WMT) announced that it will launch a tender offer to acquire all of the issued and outstanding shares and American Depositary Shares of Distribucion y Servicio D&S S.A. (DYS). Wal-Mart says the tender offer price is denominated at $0.408 per common share, and represents a premium of approximately 37.4% over the average closing price for the prior 30 trading days.

Amerigon Inc. (ARGN) cut its $14 million-$15 million fourth-quarter revenue forecast from sales of its Climate Control Seat system to $12 million-$13 million due to an accelerating and precipitous decline in the automotive industry. The company sees a modest fourth quarter net loss. Due to increases in plant shutdowns, and significant reductions in planned production for the 2009 first quarter recently announced by several of its customers, Amerigon expects to report a year-over-year decline in product revenues of about 50% and a net loss for the first quarter of 2009.

Huntsman Corp. (HUN) said it received the $325 million termination fee provided for in the merger agreement between the company and Hexion Specialty Chemicals, Inc. Huntsman said Hexion committed to pay the termination fee in connection with a previously announced $1 billion settlement between Huntsman and Hexion, Apollo Management, L.P., and certain of its affiliates. Huntsman also expects to receive another $250 million from Apollo affiliates, and a further $250 million payment upon issuance of 10 year Huntsman convertible notes to Apollo on or before Dec. 31, 2008.

In other U.S. markets Monday, Treasuries fell, partly pressured by a $38 billion auction of two-year notes that added new supply to the

market. The 10-year note was off 06/32 in price at 114-08/32 for a yield of 2.14%. The 30-year bond was down 41/32 at 138-29/32 for a yield of 2.60%.

The U.S. dollar index was higher at 81.24.

February West Texas Intermediate crude oil futures were down $2.47 to $39.89 per barrel at 3:08 p.m. ET, depressed by investors' worries about shrinking demand for energy. Such worries were exacerbated by a profit warning at Toyota, which expects to post an operating loss for fiscal 2009.

Gold futures for February delivery were up $9.20 to $846.60 per ounce at 2:45 p.m. ET, scoring their first gain in three sessions as investors returned to the yellow metal as a safe-haven investment against the weak global economy.


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