The Fed's Beige Book noted improvement in some districts but said "overall economic activity contracted further or remained weak"
Stocks rallied in the last hour of trading Wednesday after fluctuating for most of the session. The Federal Reserve's Beige Book indicated the economy contracted in April, but 5 of the 12 districts said the slump moderated.
Investors were disappointed with the uncertain earnings outlook from Intel (INTC). This morning, Wal-Mart's (WMT) CEO said the economy was still under stress and he foresaw no quick fix. The latest mixed bag of earnings reports and economic data were giving no clear pictures, notes S&P MarketScope.
After rocking back and forth on Wednesday, the 30-stock Dow Jones industrial average finished with a gain of 109.44 points, or 1.38%, to 8,029.62. The broad S&P 500 index moved up 10.56 points, or 1.25%, to 852.06. The tech-heavy Nasdaq composite index added 1.08 points, or 0.07%, to 1,626.80, held back by weakness in tech stocks.
Treasuries were mixed. The dollar index was up, and gold futures were flat. Crude oil futures were lower after inventory data.
The Fed's Beige Book revealed some of Bernanke's "green shoots" but was still generally quite gloomy, reiterating that "overall economic activity contracted further or remained weak," notes Action Economics. For good news, "five of twelve Districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level."
Manufacturing activity was said to have "weakened across a broad range of industries in most Districts," but manufacturers' assessments of future factory activity improved marginally. Consumer spending "remained generally weak," yet some Districts said that "sales rose slightly or declines moderated". For housing, "markets remained depressed overall, but there were some signs that conditions may be stabilizing," and for lending, "most Districts reported weaker loan demand overall." Prices were said to be experiencing continued downward pressures.
"Overall, the book remains bleak, but considerably less so than prior Beige Book updates since September," says Action Economics.
In other economic news, the consumer price index (CPI) dipped 0.1% in March, while the core rate (excluding energy and food) edged up 0.2% after February gains of 0.4% and 0.2%, respectively. Markets expected a 0.1% gain in both readings. Energy prices fell 3.0%, almost offsetting the 3.3% gain in February. Gasoline prices fell 4.0%. Transportation costs declined 1.1%, while food and beverage prices edged down 0.1%. Apparel prices dipped 0.2%. Housing costs declined 0.1%, with the homeowners' equivalent rent measure up 0.2%. "The near consensus inflation data aren't likely to have much impact on the markets, though gives the Fed more flexibility in interest rate policy during the recession," says Beth Ann Bovino, economist at Standard & Poor's.
The New York Fed's Empire State index rose to -14.7 in April from -38.2 in March. U.S. industrial production fell 1.5% in March after a 1.5% decline in February -- this is a fifth staright montly decline in production. Capacity utilzation dropped to 69.3 from 70.2% previously. Manufacturing output fell 1.7% thanks to a 4.2% decline in machinery and a 2.5% drop in computers; vehicles and parts rose 1.5%.
On Thursday, reports include weekly jobless claims, housing starts, and Philadelphia Fed index. Earnings releases are coming from JPMorgan Chase (JPM), Google (GOOG), and Gannett (GCI).
Among stocks in the news Wednesday, Intel (INTC) posted $0.11, vs. $0.25 a year ago, first quarter EPS on 26% revenue drop. Due to continued economic uncertainty and limited visibility, the company is not providing second quarter revenue outlook. For internal purposes, Intel is currently planning for revenue approximately flat to first quarter.
UBS AG (UBS) sees a first quarter loss attributable to shareholders of almost CHF 2 billion, which stems from negative contribution totaling roughly CHF 3.9 billion due to losses on previously disclosed illiquid risk positions, credit loss expenses, valuation adjustments on the last positions transferred to a fund controlled by Swiss National Bank. It says the outlook for its remaining risk positions has not changed materially. It also announced plans to cut 8,700 jobs worldwide by the end of next year.
Raymond James Financial (RJF) says second quarter EPS will come in below $0.37 consensus estimate, it expects $75 billion loan loss provision, vs. $25 million in the first quarter, and charge-offs will likely total $40 million. S&P downgrades to sell from hold.
Capital One Financial (COF) reports that its credit card defaults rose in March. For U.S. cards, it posted annualized net charge-off rate of 9.33%, 30 days + delinquency rate of 5.08%. In auto finance it posted 4.08% annualized net charge-off rate, in international metrics 8.67% annualized charge-off rate.
EBay (EBAY) reached a tentative agreement to buy controlling stake in GMarket (GMKT), South Korea's largest online auction Web site, according to The Wall Street Journal. EBay will pay $24 a share for 34.2% stake of GMKT, a premium of around 50% over Gmarket's share price in past month. The price values the stake at $413 million, overall the company at $1.21 billion. Separately, eBay plans to separate Skype from the company, beginning with an initial public offering that is intended to be completed in first half of 2010.
Burger King Holdings (BKC) expects third quarter EPS to be in the range of $0.33-$0.35. It says EPS negatively impacted by significant traffic declines in the month of March, resulting in lower-than-expected company restaurant margins for the quarter.
CSX Corp. (CSX) posted better-than-expected $0.62, vs. $0.85, first quarter EPS on 17% revenue drop. The Street was looking for $0.51.
Abbott Laboratories (ABT) posted $0.73, vs. $0.63, first quarter EPS (excluding special items) on 5.4% higher worldwide operational sales, which exclude an unfavorable 6.1% effect of exchange rates. Press reports indicate sales, particularly for the company's Humira drug, may be weaker than analysts had expected. ABT sees second quarter EPS of $0.87-$0.89, excluding items estimated at $0.07 tied to acquisitions and cost cuts. Including these items, it sees $0.80-$0.82 second quarter GAAP EPS. It confirms 2009 non-GAAP and GAAP EPS guidance of $3.65-$3.70.
Procter & Gamble (PG) raised its quarterly dividend by 10%, to $0.44 from $0.40. The next dividend is payable May 15 to holders of record April 24.