Stocks, which suffered their worst loss since Dec. 1 today, may be pressured again Thursday after Apple (AAPL, news, msgs) CEO Steve Jobs announced he will be taking a medical leave of absence until at least June.
Jobs' announcement came after the stock market had closed with the Dow Jones industrials down 248 points, or 2.9%, to 8,200.
Jobs' health has been a huge concern to investors since he appeared at an event in San Francisco last summer looking surprisingly gaunt.
That prompted questions about whether he was suffering from a recurrence of pancreatic cancer. Last week, looking to quell speculation, he said he was suffering from a hormonal imbalance.
"Unfortunately, the curiosity over my personal health continues to be a distraction not only for me and my family, but everyone else at Apple as well," Jobs wrote in an e-mail to employees today. "In addition, during the past week I have learned that my health-related issues are more complex than I originally thought."
Chief operating officer Tim Cook will manage day-to-day operations.
Stock Charts (Year)
Apple
- Top Stocks blog: What's Apple not telling investors about Jobs' health?
Few companies are wrapped up in the personality of its CEO as is Apple. Jobs was out of the company for a number of years, returning in 1997.
Since then, a niche player in personal computers has evolved into a colossus, thanks to its iPod music player, a vastly expanded range of computers and its iPhone.
Apple's stock suffered in the dot-com bust, but it rose from $7 to $197.80 -- a gain of 61% a year -- between December 2000 and December 2007. In the last year, however, the stock has fallen about 57%, partly because Jobs' health has cast a huge shadow over the company. Jobs underwent surgery for his cancer in 2004.
Stock index futures were trading lower late today, suggesting a weak open on Thursday. While Jobs' health issues will grab many headlines, other issues may weigh on stocks, including:
- Earnings reports from JPMorgan Chase (JPM, news, msgs) and semiconductor company Intel (INTC, news, msgs).
- Reports that Bank of America (BAC, news, msgs) is seeking more federal aid to help it digest its acquisition of brokerage giant Merrill Lynch. Bank of America has already received $25 billion in rescue funds. The company told the Treasury Department it needed more help because of Merrill's larger-than-expected losses in the fourth quarter, The Wall Street Journal said. Bank of America shares were down 4.2% to $10.20 in regular trading and were off an additional 5.2% to $9.67 after hours.
- More layoffs. This time, they're from Motorola (MOT, news, msgs). The maker of mobile phones said late today that it will cut 4,000 jobs, or 6% of its work force, on top of 3,000 layoffs announced last fall. The company warned that fourth-quarter earnings will be worse than expected. Down 4.9% to $4.11 in regular trading, the shares fell to $4.10 after hours.
Weak December retail sales slam stocks
The stock market had been signaling for the last week that it might blow up.Today, investors who couldn't stand the tension any longer got the excuse to sell they were looking for: a weak report on December retail sales.
Sell they did, pushing the Dow down as much as 300 points in the first hour of trading, and the market never recovered.
At the close, the Dow was down 248 points, or 2.9%, at 8,200. The Standard & Poor's 500 Index was down 29 points, or 3.4%, to 843, and the Nasdaq Composite Index fell 57 points, or 3.7%, to 1,490.
Today's losses were the worst for the major indexes since Dec. 1, when the Dow fell 680 points. After a nice rally between Christmas and Jan. 6, stocks have turned lower.
The Dow has had six straight losses, the longest losing streak since a eight-day streak from Oct. 1 through Oct. 10. The blue-chip index has fallen by 815 points since Jan. 6. It's now off 6.6% this month, with the S&P 500 down 6.7% and the Nasdaq down 5.5%.
The Dow's loss for the month and that of the S&P 500 are larger than the losses the indexes suffered in January 2008, when the Dow fell 4.6% and the S&P 500 dropped 6.1%. The Nasdaq lost 9.9% in January 2008.
Financial stocks were the big losers on the day, along with energy stocks, pushed lower by falling oil prices. The Select Sector SPDR-Financial (XLF, news, msgs) exchange-traded fund, which tracks the financial sector of the S&P 500 was down 5.8% to $10.46.
Citigroup (C, news, msgs), which agreed to sell a controlling interest in its Smith Barney brokerage business to Morgan Stanley (MS, news, msgs), was down 23.2% to $4.53. That was by far the worst performance among the 30 Dow stocks and the stocks in the S&P 500.
Exxon Mobil (XOM, news, msgs) and Chevron (CVX, news, msgs), down 3.6% to $75.10 and 3% to $69.69, respectively, contributed 42 points to the Dow's loss.
All 30 Dow stocks were lower, along with 480 S&P 500 stocks and 92 Nasdaq-100 ($NDX.X) stocks.
The selloff pushed many investors to seek safety in government securities. The yield on the 10-year Treasury note was 2.13%, down from 2.3% on Tuesday.
At the same time, the CBOE Volatility Index ($VIX.X), a widely watched measured of market fear, jumped 13.6% to 49.14. The index measures the ratio of put options to call options traded on the CBOE. A rising index indicates more investors are interested in protecting themselves against more declines.
The S&P 500 leader today was defense contractor Raytheon (RTN, news, msgs), up 3.4% to $50.95. Tuesday, Credit Suisse's Robert Spingarn raised his outlook on the shares to "outperform" from "neutral."
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $37.28 | $37.78 | -$0.50 | -16.41% | -16.41% |
| Heating oil (per gallon) | $1.4631 | $1.5141 | -$0.0510 | 4.08% | 4.08% |
| Natural gas (per million BTU) | $4.9700 | $5.1840 | -$0.2140 | -11.60% | -11.60% |
| Unleaded gasoline (per gallon) | $1.1677 | $1.1489 | $0.0188 | 15.82% | 15.82% |
Fed report: Economy continues to weaken
The U.S. economy continued to weaken into 2009, the Federal Reserve's Beige Book reported.Activity declined "in a wide range of manufacturing industries," the report said, while housing "continued to worsen," commercial real estate "deteriorated" in most regions, and even tourism slowed or declined.
The employment market also softened, and year-end bonuses at financial institutions are likely to be down at least 20% to 30%.
The Beige Book report is an anecdotal look at the economy.
Retail pain worst in 16 years
The government said that sales at department stores, restaurants, gas stations and other retailers fell 2.7% last month from November -- nearly double what economists had been expecting -- and were 9.8% lower than sales in December 2007.December's drop is the sixth month in a row of declining sales -- the worst string of declines since 1992.
Excluding autos, sales were down 3.1% from November. That's the worst since 1947, according to Philippa Dunne and Doug Henwood of the Liscio, an economic newsletter.
Sales at furniture retailers fell 1.8%, and clothing stores saw a 2.5% decline last month. Electronics stores were hit with a 1% drop in sales, restaurant sales slumped 2.2%, sales at building materials and garden supplies dealers fell 2.9%, and mail-order and Internet retailers saw a 1.9% decline in sales.
Retailers across the board saw shares decline. Among the bigger losers: Macy's (M, news, msgs) was down 5.8% to $9.47, Best Buy (BBY, news, msgs) was 3.4% to $26.12, and Darden Restaurants (DRI, news, msgs) was down 4.9% to $24.40.
- Top Stocks blog:Retailers go bankrupt as sales collapse
Wal-Mart Stores (WMT, news, msgs), however, was off just 1.1% to $51.56. Target (TGT, news, msgs) was down 3.6% to $33.70, and Family Dollar Stores (FDO, news, msgs) fell 2.1% to $27.37.
"Consumers are pulling back," Michael Gregory, a senior economist at BMO Capital Markets, told Bloomberg News. "The first half is going to be bleak in terms of consumer spending and economic activity."
The mood was darkened by jeweler Tiffany (TIF, news, msgs), down 0.2% to $21.95. The company cut its full-year profit outlook and said domestic holiday same-store sales dropped 24% because of weak consumer spending. Tiffany fell 0.2% to $21.95.
Earlier Wednesday, Tiffany said weakness at U.S. stores caused same-store sales in November and December to decline.
Tiffany now anticipates full-year profit of $2.25 to $2.30 per share, down from its November projection of $2.30 to $2.50 per share, and below Wall Street's target of $2.40 per share, according to Thomson Reuters.
Online jeweler Blue Nile (NILE, news, msgs) fell 8.5% as well to $19.94.
Growing oil supplies hit energy shares
Crude oil fell $1.49, or 3.9%, to $36.67 a barrel and pulled energy shares with it -- despite a big cold snap that has hit the Midwest and Northeast.In addition to losses for Exxon Mobil and Chevron, Apache (APA, news, msgs) was off 4.1% to $73.28, and offshore driller Transocean (RIG, news, msgs) was down 4.6% to $49.60.
The largest losses were in coal stocks. Peabody Energy (BTU, news, msgs) was off 9.2% to $23.33. Massey Energy (MEE, news, msgs) was down 5.7% to $13.70.
In its weekly supply report, the Energy Information Agency said oil supplies rose by 1.2 million barrels last week, a smaller build than analysts had expected.
But gasoline and distillate inventories surged: Gasoline supplies rose by 2.1 million barrels last week, and distillate supplies, which are used for heating oil, surged by 6.4 million barrels.
Crude prices have been pressured by burgeoning supplies in the United States and elsewhere as traders are holding on to oil, hoping for higher prices in the spring and summer.
Deutsche Bank warns of huge loss
Deutsche Bank (DB, news, msgs) this morning said that it will report a fourth-quarter loss of 4.8 billion euros, or $6.4 billion, as it struggles to deal with the credit mess.Deutsche Bank posted profit of 1 billion euros in the same quarter last year.
The bank also said it will report a loss of 3.9 billion euros for 2008.
Deutsche Bank shares fell 9.2% to $28.98 in New York.
What's next for Citigroup?
Citigroup reportedly is preparing to sell piece after piece of its empire, potentially including its CitiFinancial consumer-lending unit, its consumer businesses in Japan and its Primerica Financial Services.Citi could split its businesses into a "good bank," which would include corporate banking, investment banking, securities underwriting and trading, and a "bad bank," which would include its illiquid assets, Reuters reported.
Stock Charts (Year)
Deutsche Bank
Citigroup
Citigroup announced late Tuesday that it will put Smith Barney into the joint venture with Morgan Stanley. The new venture, called Morgan Stanley Smith Barney, would combine Smith Barney's 11,000 brokers with Morgan Stanley's 8,000.
Morgan Stanley will pay $2.7 billion for a 51% stake, with terms allowing it to increase its stake in the venture over the next three years. Citigroup will recognize a $5.8 billion profit from the deal and gain about $6.5 billion of equity capital.
"Morgan Stanley has experience in the business, and I think it's a positive for them and a negative for Citi," Matt McCormick, a money manager at Bahl & Gaynor, told Bloomberg News. "Citigroup needed the funds, and clearly the government is exerting its power and wants them to raise some capital."
Citi is expected to post a fourth-quarter operating loss of $10 billion on Jan. 22.
The company has received $20 billion in capital injections from the federal government and an additional $25 billion from the Troubled Assets Relief Program funds.
Bankruptcy for Nortel Networks
Canadian networking company Nortel Networks (NT, news, msgs) filed for bankruptcy protection in Wilmington, Del., this morning."The company's normal day-to-day operations are expected to continue without interruption," Nortel said in a statement. "This process will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner."
Nortel's board met on Tuesday in an effort to arrange for the repayment of about $107 million in interest on debt which is due on Thursday.
Chrysler reportedly in talks with Renault
Chrysler is reportedly in discussions with other automakers to sell key assets, including its well-known Jeep brand, Reuters reported today.French automaker Renault (RNSDY, news, msgs) has been named as a potential acquirer, though it has denied discussing the deal with Chrysler. Japan's Nissan Motor (NSANY, news, msgs) has also been named as a possible buyer.
Chrysler has received $4 billion in rescue funding from the government and could receive additional funds if it comes up with a viable restructuring plan by March 31.
Andrew Rosenbaum contributed to this report.
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.110% | 0.105% | 0.005 | -4.35% | -4.35% |
| 5-year Treasury note yield | 1.361% | 1.428% | -0.067 | -12.25% | -12.25% |
| 10-year Treasury note yield | 2.213% | 2.297% | -0.084 | -1.38% | -1.38% |
| 30-year Treasury bond yield | 2.895% | 3.017% | -0.122 | 7.58% | 7.58% |
| Currencies | |||||
| U.S. Dollar Index | 85.170 | 84.995 | 0.175 | 3.68% | 3.68% |
| British pound in dollars | $1.4596 | $1.4512 | 0.0085 | -0.93% | -0.93% |
| Dollar in British pounds | £0.6851 | £0.6891 | -0.0040 | 0.94% | 0.94% |
| Euro in dollars | $1.3180 | $1.3187 | -0.0007 | -5.92% | -5.92% |
| Dollar in euros | € 0.7587 | € 0.7583 | 0.0004 | 6.29% | 6.29% |
| Dollar in yen | 89.08 | 89.35 | -0.27 | -1.73% | -1.73% |
| Canadian dollar in U.S. dollars | $0.802 | $0.817 | -$0.0155 | -1.96% | -1.96% |
| U.S. dollar in Canadian dollars | $1.248 | $1.224 | $0.0245 | 2.00% | 2.00% |
| Commodities | |||||
| Gold | $808.80 | $820.70 | -$11.90 | -8.54% | -8.54% |
| Copper | $1.4875 | $1.5470 | -$0.06 | 5.50% | 5.50% |
| Silver | $10.4750 | $10.6800 | -$0.21 | -5.44% | -5.44% |
| Corn | $3.6650 | $3.6250 | $0.04 | -9.95% | -9.95% |
| Crude oil (NYMEX) (per barrel) | $37.28 | $37.78 | -$0.50 | -16.41% | -16.41% |
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