Obama's message of hope collides ,Dow falls 332 on inauguration

Just dislike him....and his wife.... empty talkers = No.1大黑熊

http://articles.moneycentral.msn.com/Investing/Dispatch/market-dispatches-012009.aspx?icid=dispatch_090120

Dow falls 332 as stocks rain on Obama's parade


Obama's message of hope collides with intensifying worries about the health of the financial sector: State Street plunges more than 50% on a weak forecast; Wells Fargo drops nearly 24%. But IBM's outlook cheers the Street. Fiat takes a stake in Chrysler.

[By Charley Blaine and Elizabeth Strott
Financial markets gave Barack Obama no inauguration honeymoon.

As the nation's 44th president took office from George W. Bush and walked up Pennsylvania Avenue to the White House on a cold, sunny afternoon, deepening fears about financial companies battered stocks to two-month lows.

At the close, the Dow Jones Industrial Average was down 332 points, or 4%, to 7,949.

The percentage decline was the biggest ever on the first day of an administration. That broke the old record of 2.9%, set on Nov. 22, 1963, when Lyndon Johnson took over after John F. Kennedy's assassination.

The Nasdaq Composite Index shed 88 points, or 5.8%, to 1,441, and the Standard & Poor's 500 Index dropped 45 points, or 5.3%, to 805.

The market's close was the worst since Nov. 20 when the Dow closed at 7,552. The S&P 500 closed that day at 752 and the Nasdaq at 1,316.

The market rallied more than 20% from that low, peaking on Jan. 6. Since, then, Dow has fallen 1,066 points, or 11.8%; the S&P 500 has fallen 14.2% and the Nasdaq 12.8%.

Futures trading late today suggests stocks will open higher on Wednesday. But there was talk that U.S. stocks, which are off more than 44% from their 2007 highs, will head lower. Technical analyst Louise Yamada predicted today that the Dow would fall below its lows in 2002 and 2003. After the dot-com bust, the blue chips bottomed at 7,286 on Oct. 9, 2002.

"There is yet scant evidence of a significant bottom, no directional conviction and no definable leadership; and macro statistics continue to deteriorate," Yamada wrote in a note to clients.

Investors using borrowed money helped many stocks and commodities climb to records in recent years and there is a "very low probability" of those highs being regained anytime soon, she wrote.

Financial stocks were by far the biggest losers today after money management firm State Street (STT, news, msgs) disclosed large unrealized losses and Wells Fargo (WFC, news, msgs) was hit by an analyst downgrade.

State Street was down 59% to $14.89. Wells Fargo was down 23.8% to $14.23 after Friedman, Billings, Ramsey's Paul Miller said the company needs to boost capital. It also may have to cut its dividend.

Bank of America (BAC, news, msgs) fell 29% to $5.10, the worst performer among the 30 Dow stocks, after one analyst predicted it would need to raise $80 billion in new capital.

Technology shares were slammed as well. Apple (AAPL, news, msgs), which reports fiscal-first-quarter earnings after Wednesday's close, was down 5% to $78.20. That was the lowest close for the stock since Oct. 18, 2006. The stock is off 61% from its closing peak of $199.83 on Dec. 28, 2007.

Stock Charts (Year)
Apple

IBM
Microsoft (MSFT, news, msgs) fell 6.2% to $18.48. The company reports fiscal-second-quarter earnings after Thursday's close. (Microsoft is the publisher of MSN Money.) Google (GOOG, news, msgs), which also reports on Thursday, fell 5.7% to $282.75.

But investors seemed cheered by IBM's (IBM, news, msgs) forecast that it could earn at least $9.20 a share in 2009. While that would be just a 3% gain over 2008's full-year earnings of $8.93, it was 5.1% higher than the $8.75 analysts have been predicting.

The company earned $3.28 a share in the fourth quarter, better than the Wall Street estimate of $3.03 a share. Revenue was $27 billion, down from $28.9 billion a year ago.

Revenue was impacted by a rising dollar in the quarter. A rising dollar trims the revenue from non-U.S. sources. More than half of IBM's business comes from outside the United States.

IBM shares were up 3.3% to $85.83 after hours. The stock had fallen 3.5% to $81.98 in regular trading.

All 30 Dow stocks were lower, along with all 100 stocks in the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks. Only 12 S&P 500 stocks were higher on the day. The hit absorbed by the Nasdaq-100 was so bad that 95 stocks in the index had losses of 2% or more.

While drops in the Dow have occurred on 72% of past inauguration days, Obama's inaugural address signaled that his administration will confront the economy's problems head on.

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"The challenges we face are real. They are serious, and they are many. They will not be met easily or in a short span of time. But know this, America -- they will be met," President Obama said in his inaugural address.

Banks continue to struggle
State Street forecast flat operating earnings for 2009 -- far below its long-term goal of between 8% and 12% growth.

State Street also said fourth-quarter net income fell to $65 million, or 15 cents per share, from $223 million, or 57 cents per share, in the same period a year ago.

State Street and Wells Fargo were among several banks pressuring the overall financial sector; the S&P Bank Index ($BIX.X) was down 21% to 75.

"We have got a crippled financial sector, not only in the U.S. but across the globe," Keith Wirtz, president and chief investment officer of Fifth Third Asset Management, told Thomson Reuters. "We thought 2008 was bad. I think 2009 is going to be a continuation of that whole song."

Stock Charts (Year)
State Street
The financial company also disclosed that it has more than $9 billion in unrealized losses from two areas of its business and that it is taking a $450 million charge to cover investment fund losses.

State Street received a $2 billion cash injection from the Troubled Assets Relief Program in October and has announced a restructuring plan and job cuts. But all of that wasn't enough to prevent problems on the bank's balance sheet, analysts say.

At the same time, Wells Fargo was down 19.7% to $15.01 on an analyst’s prediction that they’ll need to take steps to shore up capital.

"All the banks are going to have to recapitalize," Greg Woodard, portfolio strategist at Manning & Napier Advisors in Fairport, N.Y., told Bloomberg News. "That’s not done. That’s in front of them, and we don’t want to try to get in front of that trade."

On Monday, British bank Royal Bank of Scotland (RBS, news, msgs) tumbled 67%, the steepest drop in the stock in 20 years, as investors worried that the government might take full control of the company. The British government currently owns 70% of RBS.

"The problem with governments increasing their stakes in selected names is that the market then speculates that the barriers to further nationalization are lowered," Jim Reid, a strategist at Deutsche Bank, told MarketWatch.com.

The U.K. government had already provided about $560 billion in a rescue package for banks, and is now preparing to offer tens of billions more in cash injections and loan guarantees to help the troubled sector.

"The risk of investing in financials remains relatively high," said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Va. "There’s an atmosphere of cynicism and di*****elief with regard to a lot of these turnaround stories."

U.S. financial losses from the credit crisis may reach $3.6 trillion, according to New York University economist Nouriel Roubini, who predicted last year’s economic and stock-market meltdowns.

"The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said at a conference in Dubai today.

Top stocks blog: Alcoa -- another blue chip has fallen

Energy prices -- New York close Tues. Fri. Chg. Month chg. YTD chg.
Crude oil (NYMEX) (per barrel) $38.74 $36.51 $2.23 -13.14% -13.14%
Heating oil (per gallon) $1.3758 $1.4734 -$0.0976 -2.13% -2.13%
Natural gas (per million BTU) $4.6420 $4.8010 -$0.1590 -17.43% -17.43%
Unleaded gasoline (per gallon) $1.1431 $1.1672 -$0.0241 13.38% 13.38%



Oil rises after demand worries
Crude oil closed up $2.23 to $38.74 a barrel. The February contract expires after today's trading. Crude closed below $35 a barrel Monday in European trading.

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Worries about the economy have been evident in the continued decline in oil prices; oil closed at an all-time high of $145.08 in July 2008.

"The easing of the conflict in Israel-Gaza and the promise of a signed resolution (Monday) of the Russian-Ukraine gas supply dispute may weigh on price sentiment already subdued by the weight of lower demand forecasts," Sucden Financial Research wrote in a note to clients Monday.

On Friday, the International Energy Agency predicted that oil demand would fall in 2009, which would mark the first back-to-back yearly drops in nearly 30 years. The IEA cut its 2009 forecast by 1 million barrels a day on concerns about weakness in economies around the world.

Fiat to get 35% stake in Chrysler
Italian automaker Fiat and troubled U.S. auto company Chrysler announced an agreement this morning where Fiat will get a 35% equity stake in Chrysler in exchange for Fiat technology.

No cash will change hands in the deal, and Fiat isn't committing to any future financing.

The move would help Fiat expand into the U.S. market, where it currently sells only Maseratis and Ferraris.

"We'll have to see how much Fiat will need to invest, but this would allow them to enter the U.S. market as a protagonist in a forthcoming recovery with its expertise in small cars, and that's a great opportunity," David Manenti, head of research at Nuovi Investimenti Sim, in Biella, Italy, told Bloomberg News.

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"To get financing, U.S. (automakers) have to show that they are really committed to developing over the short term a new family of vehicles that pollute less," a source close to the deal told Thomson Reuters Monday. "By itself, Chrysler would not be able to meet this condition."

Chrysler recently received $4 billion in aid from the U.S. government, provided to stave off collapse of the company.

More earnings news today
Health care giant Johnson & Johnson (JNJ, news, msgs) announced fourth-quarter earnings of $2.7 billion, or 97 cents per share, higher than the $2.4 billion, or 82 cents per share, it earned in the fourth quarter a year ago.

The results topped analysts' expectations of 92 cents per share; the stock was down 1.2% to $56.75.

The company has announced some aggressive acquisitions in the third quarter: J&J spent $1.07 billion for implant specialist Mentor (MNT, news, msgs), then bought Omrix Biopharmaceuticals (OMRI, news, msgs), a producer of bleeding-control products, for $438 million. It also completed a summer deal to buy tissue-sealing products maker SurgRx for an undisclosed amount.

J&J has been dinged by recent studies disputing the effectiveness of some of its key products.

Rail and truck transportation provider CSX (CSX, news, msgs) will also report earnings today after the markets close. The company is expected to earn 90 cents a share on revenue of $2.7 billion.

Shares were down 6.5% to $27.88.

Rail transportation is suffering in the recession with freight carloads down 8.2% and shipping volume falling 14%, according to the American Association of Railroads. In the past, companies like CSX have been able to compensate for reduced volume by increasing their prices, but in a recession this strategy has been hard to maintain.

Analysts predict mediocre performance this quarter, with a worsening outlook.

Prince Alwaleed loses billions
Saudi Prince Alwaleed bin Talal had a rough fourth quarter. His Kingdom Holding company posted a fourth-quarter loss of nearly 31 billion riyals, or $8.26 billion, in the quarter, as many of the prince's investments struggled.

For the full year, Kingdom Holding lost 29.9 billion riyals.

"The loss is phenomenal," John Sfakianakis, chief economist at Saudi British Bank told Bloomberg News. "This is the biggest corporate story for Saudi Arabia in many years."

Prince Alwaleed is the biggest individual investor in Citigroup (C, news, msgs), which saw its shares plunge by 75% last year. Kingdom is also invested in News Corp. (NWS, news, msgs) and Songbird Estates (SBEPF, news, msgs), according to Bloomberg.

Andrew Rosenbaum contributed to this report.

Short hits from the markets -- New York close Tues. Fri. Chg. Month chg. YTD chg.
Treasurys
13-week Treasury bill 0.100% 0.115% -0.015 -13.04% -13.04%
5-year Treasury note yield 1.454% 1.451% 0.003 -6.25% -6.25%
10-year Treasury note yield 2.345% 2.304% 0.041 4.50% 4.50%
30-year Treasury bond yield 2.947% 2.894% 0.053 9.51% 9.51%
Currencies
U.S. Dollar Index 86.865 85.365 1.500 5.74% 5.74%
British pound in dollars $1.3914 $1.4391 -0.0477 -5.57% -5.57%
Dollar in British pounds £0.7187 £0.6949 0.0238 5.89% 5.89%
Euro in dollars $1.2893 $1.3068 -0.0175 -7.97% -7.97%
Dollar in euros