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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.633720 |
| Euro to US Dollar | 1.398406 |
| Japanese Yen to US Dollar | 0.010414 |
| Canadian Dollar to US Dollar | 0.861846 |
The stock market today lost more than two-thirds of Tuesday's gains as slumping commodity prices battered metals, fertilizers and energy stocks.
The selling overwhelmed good news from a very successful initial public offering and first day of trading for credit card processor Visa (V, news, msgs) and better-than-expected earnings from investment bank Morgan Stanley (MS, news, msgs).
At the close, the Dow Jones industrials were down 293 points, or 2.4%, to just under 12,100 after gaining 420 points on Tuesday -- its best point gain since July 29, 2002, and fourth-largest of the decade.
The Standard & Poor's 500 Index was off 32 points, or 2.4%, to 1,298, and the Nasdaq Composite Index tumbled 58 points, or 2.6%, to 2,210.
The pullback was a disappointment to bulls. They'd hoped that Tuesday's big turnaround would signal the start of a new market rally.
"There are still major uncertainties and risks," Jean-Marie Eveillard, who runs the $21.3 billion First Eagle Global Fund in New York, said during a Bloomberg Television interview. "The Federal Reserve is pedaling as fast as possible to keep the bicycle out of the ditch."
The commodity price decline was sudden and sharp. There were several reasons for it, including:
- A government report today showing falling U.S. oil demand.
- A rise in the U.S. dollar against the British pound, euro and Japanese yen. The dollar's increase against the euro, for example, was not large, and it's still down 6.5% on the year. But the gain was the second in a row after four straight declines.
- More important was the possibility that regulators told brokers in commodities that they had to boost margin requirements on commodity contracts. Typically, an investor puts up 10% of the cost of a contract in, say, crude oil and effectively borrows the rest. The report today was that that requirement had been boosted to 20% or more.
The effect was that crude oil fell 4.5% to $104.48 a barrel in New York. Gold fell 5.9% to $945.30 an ounce in New York. Wheat fell 90 cents a bushel to $10.74.
The impact on stocks: ExxonMobil (XOM, news, msgs) was down nearly 5% to $84.43. Alcoa (AA, news, msgs) fell 8% to $35.62 and was the worst performer among the 30 Dow stocks. Copper producer Freeport-McMoRan Copper & Gold (FCX, news, msgs) tumbled 11% to $87.60. U.S. Steel (X, news, msgs) slumped 9% to $109.86.
Fertilizer maker Mosaic (MOS, news, msgs) fell 11% to $97.25, and agricultural chemical and seed producer Monsanto (MON, news, msgs) fell 12% to $98.87.
At the same time, financial stocks began to move lower again as reports suggested brokerage Merrill Lynch (MER, news, msgs) had larger-than-expected losses from the subprime mortgage crisis. Merrill Lynch shares fell 11% to $41.45 and dragged financial stocks generally lower, along with Discover Financial Services (DFS, news, msgs), which was the worst S&P 500 performer with a 12.6% loss to $15.20.
Discover's shares fell after it reported that its first-quarter profit fell 65% to $81.2 million after shedding its card business in Britain and preparing for more defaults from U.S. cardholders.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $104.48 | $109.42 | -$4.94 | 2.59% | 8.86% |
| Heating oil (per gallon) | $3.0167 | $3.1379 | -$0.1212 | 6.23% | 13.86% |
| Natural gas (per million BTU) | $9.0240 | $9.4140 | -$0.3900 | -3.81% | 20.59% |
| Unleaded gasoline (per gallon) | $2.5603 | $2.6600 | -$0.0997 | 1.91% | 2.79% |
Record IPO for Visa
Late Tuesday, Visa launched the largest initial public offering in U.S. history, selling 406 million shares at $44 each to raise $17.9 billion. Shares jumped 29% to $56.58 today as more than 177 million shares changed changes.- Top Stocks blog: Why the Visa IPO is so hot
The IPO price topped the range of $37 to $42 per share that Visa set three weeks ago, reflecting high demand to own a piece of a company that's promising earnings growth of 20% despite a credit crunch that's choking the U.S. economy.
"This shows that all the recent financial turmoil obviously hasn't bothered a lot of people," said Nicholas Einhorn, an IPO analyst for Renaissance Capital of Greenwich, Conn.
San Francisco-based Visa began trading on the New York Stock Exchange under the "V" ticker symbol and debuted with a market value of about $36 billion.
The world's largest credit card processor -- unlike Discover Financial Services and American Express (AXP, news, msgs) -- isn't a lender. Rather, Visa, like MasterCard, is a transaction conduit, collecting a fee every time a user uses a debit card as well as a credit card. Many investors are betting that it will easily survive the faltering U.S. economy and credit climate.
The Fed has slashed key rates by more than half since last summer, when the mortgage crisis claimed its grip on the global credit markets. But the housing and lending industries are still hurting.
The government loosened the capital restraints on mortgage-finance companies Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) today, so they can play larger roles in the struggling housing market. The Office of Federal Housing Enterprise Oversight, which oversees the government-sponsored companies, will announce the plan today, people familiar with the matter said Tuesday.
Fannie Mae shares jumped 9% to $30.71 on the day; Freddie Mac was up 15% at $29.90.
More profit on Wall Street
Investment bank Morgan Stanley said today that strong stock and bond trading had pushed first-quarter earnings above Wall Street projections.Morgan Stanley shares jumped nearly 10% at the open but fell back to just a 1.4% gain to $43.45 at the close.
The company reported a profit of $1.53 billion after preferred dividends, or $1.45 per share -- down 44% from $2.66 billion, or $2.17 per share, a year ago. Revenue fell 17% to $8.3 billion from $10 billion a year earlier.
- Top Stocks blog: Who got bailed out at Bear Stearns?
Results easily topped analysts' expectations for a profit of $1.03 per share on $7.19 billion of revenue, according to Thomson Financial.
However, Morgan Stanley -- like its rivals Goldman Sachs (GS, news, msgs) and Lehman Bros. (LEH, news, msgs) on Tuesday -- did show vulnerability to the ongoing credit crisis. It reported write-downs of $2.3 billion -- $1.2 billion from mortgage securities and $1.1 billion from loans.
Upgrades and downgrades
Shares of Home Depot (HD, news, msgs) fell 1.3% to $26.84 today in part because of a downgrade from Morgan Keegan analyst Laura Champine.Champine said that the home-improvement retailer's monthly sales trends indicate the company may not be able to meet its earnings guidance.
Champine lowered her rating to "underperform" from "market perform" and reduced her earnings-per-share estimates for the first quarter and fiscal 2008.
More from MSN Money
Meanwhile, Countrywide Financial (CFC, news, msgs) shares finished the day at $5.11, unchanged from Tuesday, after a Wachovia Capital Markets analyst upgraded the company and narrowed his first-quarter-loss estimate.
Analyst Jim Shanahan upgraded Countrywide to "market perform" from "underperform" and said the stock was worth $5 to $7 per share. The high end of the range is the value implied by Bank of America's (BAC, news, msgs) planned acquisition price for Countrywide. Earlier this year, Bank of America, a Dow component, agreed to pay about $4 billion in stock to acquire the nation's largest mortgage lender. Bank of America fell 1% to $38.56.
The low end of the range factors in a potential renegotiating of the sale price to reflect continued weakness in the mortgage market, Shanahan wrote in a research note.
"Some concern remains about the ultimate price that Bank of America will pay for Countrywide, but we believe that the market has priced in this risk," Shanahan wrote.
Shanahan now estimates Countrywide will lose 31 cents per share in the first quarter, compared with a previous estimate of 35 cents per share. The loss reduction is tied to a revision in mortgage origination forecasts, Shanahan said. He also estimated that Countrywide will originate about $72.3 billion in loans during the first quarter, down from $84 billion.
Bank takeover abandoned
Meanwhile, after JPMorgan Chase's (JPM, news, msgs) announcement Sunday that it was buying out the troubled investment bank Bear Stearns (BSC, news, msgs), French bank BNP Paribas (FR:BNP, news, msgs) said today it is no longer interested in making a takeover bid for rival Société Générale (SCGLF, news, msgs).Société Générale has been hurting from exposure to toxic credit markets and a $7 billion loss blamed on a rogue futures trader.
Carlyle fund insolvent
Carlyle Capital, the mortgage-backed investment fund created by private-equity firm Carlyle Group, is insolvent with few assets to pay liabilities, the company's liquidators said today.The fund had said Sunday that it would liquidate its assets after lenders seized most of them as collateral against rapidly deteriorating investments held by the fund.
The U.K. lawyers charged with winding down the fund said it has "extremely limited cash assets" and "limited investment assets which can be liquidated to meet liabilities."
The fund "has substantial liabilities which are likely to exceed its remaining assets and therefore is considered by the liquidators to be insolvent," the firm said.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.650% | 0.900% | -0.250 | -63.89% | -79.30% |
| 5-year Treasury note yield | 2.343% | 2.406% | -0.063 | -6.62% | -32.19% |
| 10-year Treasury note yield | 3.362% | 3.451% | -0.089 | -4.87% | -16.68% |
| 30-year Treasury bond yield | 4.222% | 4.329% | -0.107 | -4.48% | -5.32% |
| Currencies | |||||
| U.S. Dollar Index | 72.620 | 72.040 | 0.580 | -1.54% | -5.31% |
| British pound in dollars | $1.9841 | $1.9845 | -0.0004 | -0.30% | -0.26% |
| Dollar in British pounds | £0.5040 | £0.5039 | 0.0001 | 0.30% | 0.26% |
| Euro in dollars | 1.5623 | 1.5649 | -0.0027 | 2.92% | 6.89% |
| Dollar in euros | € 0.6401 | € 0.6390 | 0.0011 | -2.84% | -6.45% |
| Dollar in yen | ¥98.85 | ¥98.64 | 0.21 | -5.10% | -11.62% |
| Canadian dollar in U.S. dollars | $0.988 | $0.989 | -$0.0010 | -2.63% | -0.49% |
| U.S. dollar in Canadian dollars | $1.013 | $1.011 | $0.0016 | 2.57% | 0.49% |
| Commodities | |||||
| Gold | $945.30 | $1,004.30 | -$59.00 | -5.42% | 12.80% |
| Copper | $3.6335 | $3.7465 | -$0.11 | -5.08% | 19.48% |
| Silver | $18.4450 | $19.9600 | -$1.52 | -10.70% | 23.63% |
| Crude oil (NYMEX) (per barrel) | $104.48 | $109.42 | -$4.94 | -5.20% | 8.86% |
Elizabeth Strott is on vacation.
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