Stock futures were once again lower this morning, setting up stocks for a sharp decline after AIG reported a big $7.8 billion loss and oil set a record above $125 a barrel. With credit crunch concerns resurfacing and inflation worries on investors' minds, futures point to heavy losses today.
On Thursday, U.S. stocks ended higher despite another surge in oil prices following better-than-expected April sales reports from many retailers including Wal-Mart and Costco. The Dow industrials ended 52 points, or 0.41%, higher, the S&P 500 rose 5 points, or 0.37% and the Nasdaq Composite rose 12 points, or 0.52%.
Without much economic news set for today except for the March U.S. trade gap, investors will focus on AIG's results and their implication on the financial and credit market as well as on oil prices.
American International Group (NYSE: AIG) reported a quarterly $7.8 billion loss after the market close Thursday. AIG also said it will raise $12.5 billion in the coming months as its capital base has deteriorated due to the crisis in the credit markets. Shares of AIG have declined over 7.2% in premarket trading, but the real affect of its results can seen across the financials as fears have resurfaced once again about the impact of the credit crunch on financial firms.
As if that was not enough, adding to the negative sentiment is oil. Crude oil for June delivery climbed as much as $1.43, or 1.3%, to $125.12 a barrel. While prices have retreated somewhat, they remained near $125 at around $124.8 a barrel. For the week, oil has risen 7.4%, making Wall Street nervous about inflation. Mind you, 55%of 372 petroleum industry executives surveyed by KPMG LLP said they think the price of a barrel of crude will drop below $100 by the end of the year.
Gasoline prices continue to increase along with crude prices, and the latter seem to find a new record every single day. Wasn't it just a few months ago that the media was going crazy about oil reaching the $100 per barrel mark? It hit $122 this week. Now, that's not a year later; that's less than half a year later. It's not surprising then that automakers with an inflexible SUV-selling strategy are getting pummeled, while automakers with a decent offering of gas-efficient vehicles are seeing product mix changes in retail sales.
Ford Motor Co. (NYSE: F), which showed a surprising profit in its most recent quarter, said that it plans to really up the presence of gas-efficient six-speed transmissions by the end of 2009, and wants to have these transmissions in 98% of its North American vehicles by 2012. If Ford follows through with this commitment, it'll be a game-changer for the industry. And, it will force General Motors Corp. (NYSE: GM) to do the same thing. Ford stated that the newer 6-speed automatics will get 4% to 6% better gas mileage than the standard 4-speed and 5-speed automatic transmissions.
GM is not sitting idly by at the same time, though. It debuted a 6-speed automatic transmission in the popular 2008 Chevy Malibu, which it is pitting as a strong competitor to market leaders Honda Motor (NYSE: HMC) Accord and Toyota Motor Corp. (NYSE: TM) Camry. Will the new trend in the consumer vehicle market be smaller 4-cylinder engines with advanced, fuel-efficient 6-speed automatic transmissions? You can count on it until oil prices fall to $50 a barrel. And, that'll be when pigs fly.
The deal, which freezes wages and reduces vacation pay but avoids changes to base wages, was approved by 78% of the membership.
Ford (NYSE: F)'s shares fell 2 cents to $8.23 on the news during Monday morning trading.
Economist Richard Felson told BloggingStocks Monday the deal, in his interpretation, represents "a qualified win for both sides. The Canadian workers got most of what they wanted, which mainly was an avoidance of the two-tier wage system that Ford is implementing in the United States," Felson said. "But Ford also got the wage freeze and vacation changes critical to bringing Canadian labor costs down."
Further, while both GM and Chrysler, which are set to begin talks with the CAW, may initially view the Ford deal less-favorably, Felson said he expects both to negotiate similar deals with the CAW.
"The downside is GM and Chrysler accepting a deal that's slightly more generous than they'd want to offer," Felson said. "But the upside is avoiding a major production shut-down during a critical transition period for the automakers, as they adjust their fleets to compete better with more-efficient foreign vehicles."
Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) reported a 64% drop in quarterly profit late Friday. At the company's annual meeting this past weekend, the legendary investor said that while a Berkshire unit has bought portfolios of subprime mortgages (and has frozen resets that were due to send interest rates on those loans higher) he warned investors that housing-market weakness isn't over yet and predicted more losses for banks. At the same time, Buffett said Sunday he will consider investing in the insurance business of U.K. banking giant Royal Bank of Scotland (NYSE: RBS) and is close to buying a medium-sized company in the country.
Hovnanian Enterprises Inc. (NYSE: HOV) estimated on Monday it would take $225 million to $275 million of land-related charges for the that fiscal second-quarter and said that home deliveries dropped 21% to 2,494 homes in the period. The company also turned cash-flow positive faster than it expected and tripled its full-year estimate of cash flow.
After being rejected by Continental Airlines Inc. (NYSE: CAL) last month, United Airlines parent UAL Corp. (NYSE: UAUA) is intensifying merger talks with US Airways Group Inc. (NYSE: LCC), according to The Wall Street Journal. A deal is said could emerge in as soon as 10 days. In light of rising fuel costs, the more than $1.5 billion in potential cost savings and revenue enhancements the companies see from joining forces is no doubt appealing more and more.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
When it comes to comparing the pick-up trucks of Ford Motor Co. (NYSE: F) and Chevrolet by General Motors Corp. (NYSE: GM), I can honestly say that I've owned both brands. I bought one F-150 off the showroom floor. I also bought one that was very well used. Both my Chevy Silverados were low-mileage, used models. I leased one of them from my dad and the other one I bought from my brother. I have also had opportunities to drive multiple specimens of each brand that were owned by friends or associates. I like both brands as far as their trucks go. Their cars are a story for another day.
To me, Chevy trucks always seem a bit more solid, with interior appointments a little more lush and inviting. Ford trucks seem to focus more on utility and usability within a bit roomier interior. The Chevy trucks always exhibit deep power, easily delivered upon demand. Fords trucks always seem a bit more spunky with their aggressiveness always close under foot. Chevy trucks appeal to the gentleman in me but they've always done any job I asked of them. Ford trucks appeal to the workman in me and they sometimes seem immortal.
Today, in a headline ripped from the 1970s, the front page of The New York Timesannounced: "As Gas Costs Soar, Buyers Flock to Small Cars." In the immortal words of Yogi Berra, it's deja vu all over again.
A lot of people moan and wail about the tough times in Detroit, but it's not as if the American automakers didn't have plenty of time to prepare for the current market. They were warned, over and over again, that they needed to develop better small cars and more efficient vehicles. But they did nothing. Instead, they focused on wasteful but high-margin SUVs. Well, now the time has come to pay the piper.
The Times reports that in April, 20% of new vehicle sales were compacts or subcompacts. That's the first time this has happened in the American market. In another first, more cars with four cylinder engines were sold than cars with six cylinders. Clearly, as gas approaches $4 a gallon, Americans are looking for more efficient cars.
The market hasn't seemed to have fully made up its mind yet regarding Wednesday's Federal Reserve announcement about its policy. While stocks shot up immediately after the announcement, markets finished the Wednesday in the red. Still, this morning stocks futures edged higher as investors not only continued to digest the news, but awaited several more economic reports. The Bank of England saying the worst of the credit crisis may be over, definitely helps boost sentiment this morning.
Indeed, stocks ended Wednesday's session lower despite the Dow topping 13,000 briefly after the Fed's statement. It seemed also investors were divided, some preferring the Fed to signal clearly a pause in rate cuts so the dollar would gain strength and halt the rise in commodity prices and hence inflationary pressures. Meanwhile others were more concerned about the economy and perhaps preferred either a more positive language regarding the economy or indications of further measure. Regardless, the Dow Jones Industrial Average fell 11.81 points, or 0.09%, and the S&P 500 index shed 5.35 points, or 0.38%. The Nasdaq dropped 13 points, or 0.55%.
On the economic calendar for Thursday are the March figures for personal income and spending, which includes a key inflation measure. The ISM index for manufacturing activity also is on tap as well as construction spending. The weekly jobless claims is due before the opening bell, but April jobs report is due tomorrow, and that will likely affect markets the most.
If you thought the news going to be the actual FOMC cut was the key today, it wasn't. The bias and tone for more rate cuts was the most important, and the tone was not hawkish enough. Traders wanted to see a signal of the end of rate cuts, at least for now, so that oil and gold would tank and that the dollar would recover.
GDP came out and showed a +0.6% gain, meaning the official recession isn't technically here yet. Warren Buffett said it is, and he might be good enough of a judge over anyone. Regardless, this is the first positive month for the S&P after it just missed a positive month in March.
Below are the unofficial closing levels for key US index levels:
Buffalo Wild Wings (NASDAQ: BWLD) was upgraded by KeyBanc Capital Markets to Buy and by Cowen & Co. to Outperform. Yesterday, Buffalo Wild Wings reported strong quarter results with a 22% revenue boost and earnings meeting street expectations. Shares were up 18% to $30.74 in the final minutes of the day.
General Motors Corp. (NYSE: GM) is recently up $2.64 to $23.85. GM reported Q1 EPS loss of 62 cents versus consensus estimates of a loss of $1.54.
Calyon Securities has a Neutral rating and $29 price target on GM. GM call option volume of 43,469 contracts compares to put volume of 56,520 contracts. GM May option implied volatility of 53 is below a level of 64 from April 24 and below its 26-week average of 56 according to Track Data, suggesting decreasing price movement.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Shares of the nation's largest automaker, General Motors Corp. (NYSE: GM), have been soaring in premarket despite posting a large first quarter loss, as the company surprised Wall Street by reporting a smaller than expected loss per share.
For the quarter, General Motors said it swung to a loss of $3.3 billion, hurt by continued weakness in U.S., waning demand for its sport utility vehicles, and a supplier strike. The company stated that the strike, which started two months ago at American Axle and Manufacturing Holdings Inc. (NYSE: AXL), came with charges that totaled $800 million, and slashed vehicles production by 100,000.
Weighed down by those costs, GM posted a net loss of $5.74 per share, compared with a profit of 11 cents a share a year-earlier. However, excluding one-time items, the automaker reported a loss of 62 cents per share. Going into today's earnings announcement, analysts had been expecting the company to show a much higher loss of $1.60 per share.
Recovery? Not These Stocks Not all stocks in battered sectors will bounce back in a second-half economic upturn. Here are some that could be left behind. Recovery? Not for These Stocks - BusinessWeek
Egypt's Bread Lines Highlight Dangers of Food Crisis Well before 8 o'clock on a late April morning, a line of about 30 eager customers forms at a modest bakery in this working-class neighborhood. With a global food crisis roiling countries from Asia to the edge of Europe, at least 11 people have been killed recently in such lines here, struggling to get their daily bread. Tension in Egypt shows potency of food crisis - USATODAY.com
General Motors Corp. (NYSE: GM) reported a staggering $3.3 billion loss in its first-quarter, due in part to a weak U.S. market, a strike at a major supplier and plummeting sales of sport utility vehicles and pickups. While the loss amounted to $5.74 per share, GM's adjusted results are a loss of $350 million, or 62 cents per share, handily beating analysts' expectations of a $1.60 loss per share. Still, compared to last year, when the automaker had earned $62 million, or 11 cents a share, the results are far from stellar especially when considering that GM's revenue slipped despite being up 20% outside North America. GM shares are up about 3.5% in premarket trading.
Alcatel-Lucent (NYSE: ALU) also reported a loss Wednesday morning, its fifth straight quarterly loss and said it expected annual revenues to fall while scaling back its market forecast for 2008. Shares of ALU are down nearly 8% in premarket trading.
According to Fortune, AT&T (NYSE: T) is planning to cut the price by as much as $200 on Apple Inc. (NASDAQ: AAPL) iPhone when the new 3G model comes out this summer. Subsidizing the phone by that much will cut the price to $199 to for customers who sign two-year contracts, the Fortune source says.
Stocks futures were lower early Wednesday morning as investors awaited not only a rate decision from the Federal Reserve this afternoon but several key economic indicators and lots of corporate earnings too.
U.S. stock markets ended mostly lower on Tuesday. While the Dow Jones Industrial Average ended down 39 points, or 0.31%, the S&P 500 ended 5 points lower, or 0.39%. Only the heavily tech weighted Nasdaq Composite rose 1.7 points, or 0.07% due to a lift from upbeat earnings from Corning.
Today, investors will focus their attention on different items throughout the day as they await the Fed decision coming at 2:15 p.m. EDT when the Fed releases its policy statement. Most expect the Federal Reserve to cut key rates by a quarter point to 2%, but to hint at a pause in the cuts.
Before the bell, Wall Street will also look at earnings from heavyweights such as General Motors, Procter & Gamble and Time Warner. PG and TWX already reported results.
Procter & Gamble (NYSE: PG) reported that first-quarter profit rose 8% o $2.71 billion, or 82 cents per share as cost control and price increases helped offset higher commodity costs. Revenue rose 9% to $20.46 billion. Analysts predicted profit of 81 cents per share on revenue of $20.43 billion.
Time Warner Inc. (NYSE: TWX)'s first-quarter profits fell 36% following an asset sale a year ago, and the company also said it will spin off the rest of its cable business. Excluding one-time effects, per-share results were 22 cents per share, a penny below analyst estimates and in line with a year ago. Revenues rose 2% to $11.42 billion from $11.18 billion.
Stock futures were once again lower this morning, setting up stocks for a sharp decline after AIG reported a big $7.8 billion loss and oil set a record above $125 a barrel. With credit crunch concerns resurfacing and inflation worries on investors' minds, futures point to heavy losses today.
Gasoline prices continue to increase along with crude prices, and the latter seem to find a new record every single day. Wasn't it just a few months ago that the media was going crazy about oil reaching the $100 per barrel mark? It hit $122 this week. Now, that's not a year later; that's less than half a year later. It's not surprising then that automakers with an inflexible SUV-selling strategy are getting pummeled, while automakers with a decent offering of gas-efficient vehicles are seeing product mix changes in retail sales.
This post is part of our 
Here are some highlights from this past week's 
Today, in a headline ripped from the 1970s, the front page of The New York Times 
he market hasn't seemed to have fully made up its mind yet regarding Wednesday's Federal Reserve announcement about its policy. While stocks shot up immediately after the announcement, markets finished the Wednesday in the red. Still, this morning stocks futures edged higher as investors not only continued to digest the news, but awaited several more economic reports. The Bank of England saying the 
General Motors Corp.
Shares of the nation's largest automaker, 
The Wal-Mart Weekly: Examining shareholder resolutions, Part 2
Earnings expectations for JC Penney, Nordstrom, Macy's, Abercrombie and others
Comfort Zone Investing: Financial stocks: Is the worst over yet?
