Markets & Finance

Dow Closes at New Bear-Market Low


Weakness in financials and Hewlett-Packard led the blue-chip benchmark lower Thursday, with other major indexes also posting losses

U.S. stocks finished weaker Thursday, sending the Dow Jones industrial average to a new bear-market closing low of 7465.95, accompanied by drops in the S&P 500 and other, broader market indicators. The Dow's former bear-market closing low had been 7552.29, set on November 20, 2008.

Leading the blue-chip barometer lower were steep drops in Bank of America (BAC) and Citigroup (C) in the banking arena, and Hewlett-Packard (HPQ) in the technology sector.

Fresh reports on jobless claims, producer prices and manufacturing pointed to lingering economic weakness.

On Thursday, the 30-stock Dow Jones industrial average finished lower by 89.68 points, or 1.19%, at 7,465.95. The broad S&P 500 index fell 9.48 points, or 1.20%, to 778.94. The tech-heavy Nasdaq composite index shed 25.15 points, or 1.71%, to 1,442.82.

Trading was moderate, with some volatility before Friday's expiry of futures and options.

Treasuries fell on profit taking. The dollar index eased. Gold futures retreated. But energy futures rose after the Energy Dept.'s weekly inventory report, showed crude oil inventories unexpectedly fell 200,000 barrels, gasoline stocks rose 1.1 million barrels, and distillate stocks fell 800,000 barrels.

Atlanta Fed President Lockhart said the inflation rate is at an "acceptable level." While its is a concern, he sees "nothing that suggests risk of deflation." That's consistent with the Fed's forecasts released yesterday, as well as with this morning's bounce in PPI. Lockhart expects the unemployment rate to rise above 8%, but should fall short of 9%. The Fed president did not rule out guaranteeing toxic assets as another measure that could be taken to try to stabilize the credit markets.

Meanwhile, amid Wall Street fears that U.S. banks will be nationalized, he said "I am not aware at this time of any serious consideration of nationalization." Lockhart said he expects the recession to last through the first half of the year. He said the current state of the economy is weak and there are still obstacles that work against a strong rebound over the next several months.

Shares of insurance giant Prudential Financial

(PRU) slumped Thursday after Fitch Ratings cut its senior unsecured debt to BBB from A- and commercial paper rating to F2 from F1, as well as Prudential's financial strength ratings of its primary domestic life insurance subsidiaries to A+ from AA-.

In economic news Thursday, the Philadelphia Fed index plunged to -41.3 in February, after improving in both January (-24.3) and December (-36.1). That's the lowest reading since 1990. The February employment index dropped to -45.8 from -39.0 in January as the pace of job cuts accelerated. New orders fell to -30.3 from -22.3. Prices paid rose to -13.7 from -27.0. Prices received fell to -27.8 from -26.2. The 6-month general business activity index improved to 15.9 versus 7.4 in January, although the index of capital expenditures declined to -17.8 from -16.4.

The U.S. index of leading indicators rose 0.4% in January to 99.5, from a revised 99.1 in December (was 99.5). November's 99.2 was revised down to 98.9. Boosting the index again last month (as was the case in December) was money supply with a 0.54% positive contribution. The yield spread also contributed 0.23% to the index, while consumer expectations added 0.11%. Negative contributions came mainly from jobless claims, -0.16%, and building permits, -0.13%.

The U.S. producer price index (PPI) rose 0.8% in January after a 1.9% drop in December, while the core rate, excluding food and fuel, jumped 0.4% from a 0.2% pace the month before. Both were much stronger than the 0.3% and 0.1% increases expected, respectively. While higher energy prices suggested a rise in headline producer prices, the big bounce in the core rate was a surprise. Energy prices rose 3.7% following a 9.3% drop in December. Consumer goods prices rose 1.0% after falling 2.6% the month before. Food prices fell 0.4% following a 1.5% decline in December.

While the inflation jump may help reduce deflation risks, a continued moderation in core inflation remains likely in 2009, according to S&P senior economist Beth Ann Bovino.

U.S. jobless claims were unchanged at 627,000 for the week ended Feb. 14, from a previous 623,000 print. Continuing claims were up 170,000 to 4,987,000 in the week ended Feb. 7, from a revised from 4,817,000 (previously 4,810,000), and are again the highest on record. The 4-week moving average rose to 619,000 from 608,500. Overall, the claims were about as-expected, though still showing distress in the jobs market,

Among companies in the news Thursday, Hewlett-Packard posted $0.93 vs. $0.86 first-quarter non-GAAP EPS on a 1% revenue rise (+4% when adjusted for forex impact). The company sees a second-quarter revenue decline of 2%-3%, with non-GAAP EPS of $0.84-$0.86, and a fiscal 2009 revenue decline of 2%-5%, with non-GAAP EPS of $3.76-$3.88.

CBS Corp. (CBS) posted $0.20 vs. $0.43 fourth-quarter EPS on a 6.1% revenue decline. The company cut its quarterly dividend to $0.05 from $0.27. CBS's CEO called the dividend cut "wise and prudent."

Priceline.com (PCLN) posted $1.29 vs. $0.96 fourth-quarter pro forma EPS on a 21% revenue rise. The company sees a first-quarter year-over-year increase in gross travel bookings of flat to 7.5%, a 5%-10% revenue rise, and $0.85-$0.95 pro forma EPS.

O'Reilly Automotive ORLY shares surged after the company posted better-than-expected $0.32 vs. $0.35 fourth-quarter EPS as more shares outstanding offset 4% higher same-store sales and 84% higher total sales. The company sees $0.35-$0.39 first-quarter EPS, and $1.80-$1.84 in 20009, both including the impact of acquisition charges of $.01 per diluted share.

Advance Auto Parts (AAP) shares also jumped after the company posted $0.51 vs. $0.35 fourth-quarter EPS on 3% higher same-store sales and 14% higher total sales.

Whole Foods Market (WFMI) posted better-than-expected $0.20 vs. $0.28 first-quarter EPS on 4% lower same-store sales and flat total sales. The company sees fiscal 2009 EPS of $0.71-$0.76, based on an assumption of flat same-store sales. Wall Street is looking for EPS of $0.66.

CVS Caremark (CVS) posted $0.70 vs. $0.58 fourth-quarter adjusted EPS from continuing operations on 3.6% higher same-store sales, 4.5% higher pharmacy same-store sales, and 10% higher total sales.

Walt Disney Co. (DIS) says it will lay off an unspecified number of workers as it restructures its U.S. theme parks in the wake of declines in attendance and revenue.

The market-research firm NPD Group said Apple Inc.'s (AAPL) unit sales of computers through U.S. retail channels fell 6% in January from the same month in 2008, the first monthly decline in three years, according to a Wall Street Journal report.


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