Apple’s Stock Drops

30 09 2008

Apple’s shares fell 17.5 percent in early trading Monday, as two noted brokerage firms scaled back their recommendations to a “hold” from a “buy.”

Apple fell as low as $105.77 a share in intraday trading, down substantially from its close of $128.24 on Friday. Apple’s shares sold off sharply after Morgan Stanley and RBC Capital Markets downgraded the stock.

Morgan Stanley not only revised its recommendation for the stock, but also lowered its fiscal 2009 earnings estimate to $5.47 a share from $5.91 a share.

In listing its reasons for its revisions, Morgan Stanley said in a research note:

First, PC unit growth is decelerating and the remaining source of growth is increasingly in the sub-$1,000 market where Apple does not play. Second, even in the best of scenarios, Apple’s earnings per share growth will decelerate meaningfully from June quarter levels. A combination of tough compares (with the previous years figures) and investments in iPhone growth drive our December quarter earnings per share to a decline of 8 percent year over year, down from +29 percent growth June.

Morgan added that it expects Apple to offer a more conservative guide to Wall Street and investors for the three-month period ending in December.

RBC Capital, meanwhile, downgraded Apple’s stock based on “elevated risks” from a slowdown in consumer spending.

According to RBC’s research note:

In a worsening consumer spending environment we are downgrading from outperform to sector perform on: 1) reduced visibility growth, margins. 2) elevated risks to valuation.

RBC noted in its report that its September data showed the number of those intending to purchase a Mac laptop within the next 90 days has dropped to 29 percent, compared with 34 percent in August, and those expecting to purchase a Mac desktop fell to 26 percent from 30 percent in the same period.





Apple’s Stock Drops

30 09 2008

Apple’s shares fell 17.5 percent in early trading Monday, as two noted brokerage firms scaled back their recommendations to a “hold” from a “buy.”

Apple fell as low as $105.77 a share in intraday trading, down substantially from its close of $128.24 on Friday. Apple’s shares sold off sharply after Morgan Stanley and RBC Capital Markets downgraded the stock.

Morgan Stanley not only revised its recommendation for the stock, but also lowered its fiscal 2009 earnings estimate to $5.47 a share from $5.91 a share.

In listing its reasons for its revisions, Morgan Stanley said in a research note:

First, PC unit growth is decelerating and the remaining source of growth is increasingly in the sub-$1,000 market where Apple does not play. Second, even in the best of scenarios, Apple’s earnings per share growth will decelerate meaningfully from June quarter levels. A combination of tough compares (with the previous years figures) and investments in iPhone growth drive our December quarter earnings per share to a decline of 8 percent year over year, down from +29 percent growth June.

Morgan added that it expects Apple to offer a more conservative guide to Wall Street and investors for the three-month period ending in December.

RBC Capital, meanwhile, downgraded Apple’s stock based on “elevated risks” from a slowdown in consumer spending.

According to RBC’s research note:

In a worsening consumer spending environment we are downgrading from outperform to sector perform on: 1) reduced visibility growth, margins. 2) elevated risks to valuation.

RBC noted in its report that its September data showed the number of those intending to purchase a Mac laptop within the next 90 days has dropped to 29 percent, compared with 34 percent in August, and those expecting to purchase a Mac desktop fell to 26 percent from 30 percent in the same period.





Oil Prices Fall

30 09 2008

Oil prices dropped sharply on Monday as the House voted down a $700 billion bailout plan for the financial markets, raising the specter of slower economic growth and depressed demand for petroleum products. The House leadership, however, plans a second attempt to pass the bill.

Crude oil futures fell $10.68 to close at $96.21 a barrel on the New York Mercantile Exchange. They have lost nearly $25 since last Monday, and dropped sharply as the House voting began.

In the last two weeks, commodity markets have been shaken by the turmoil on Wall Street while still recovering from the impact of two powerful hurricanes in the Gulf of Mexico. After reaching $145.29 a barrel in July, prices had slumped to nearly $90 a barrel earlier this month as the nation’s economic prospects dimmed. But in a wild market, they spiked back up last week on the back of tremendous uncertainty in the financial markets.

Anxiety once again gripped investors on Monday after Congressional leaders failed to garner enough votes to pass a compromise bailout agreement that was reached over the weekend. The plan, the biggest bailout in history, would have allowed the Treasury Department to buy back troubled assets held by banks and other financial institutions. It is unclear when the House can reschedule a vote, or whether it will pass this time.

Before the vote, investors were also reminded that the financial crisis was far from over. In the latest episode of the unfolding meltdown, Citigroup will buy the banking operations of the Wachovia Corporation, the government said Monday. Meanwhile, the Belgian, Dutch and Luxembourg governments partially nationalized the European financial conglomerate Fortis, another sign that the crisis that began because of sour home mortgages in the United States could be spreading.

Analysts at Barclays Capital said the frantic weekend negotiations that led to the bailout agreement “appear to have failed to revive market sentiment.” As the economic situation deteriorates, the demand for commodities, including oil, is expected to slow.

“The outlook for global equity, interest rate and exchange rate markets has become increasingly uncertain,” analysts at Deutsche Bank wrote in a note to investors. “We believe commodities will be unable to escape the contagion. From a commodity perspective our most pressing concern is to what extent the U.S. virus spreads globally and specifically to China.”

The bank’s analysts pared their expectations for next year as oil consumption drops because of slowing economic growth, reducing their oil and gas price forecasts by about 20 percent for 2009.

Concerns that the crisis might be spreading to Europe helped push down the value of the European common currency. The euro dropped against the dollar to $1.43 on Monday from $1.46 on Friday.

The weaker economic outlook could further push down oil prices in the coming months if demand for oil in developed countries keeps falling, according to Ben Dell, an analyst at Bernstein Research. He expects oil consumption could fall by 1.3 million barrels a day, or 2.6 percent, in the fourth quarter this year. That is much more than the 470,000 barrels a day drop forecast from the International Energy Agency.





S&P 500 Loses -8%

29 09 2008

Stocks took a dramatic plunge on Monday afternoon after the government’s bailout plan — touted by its supporters as a balm for the current market stress — failed to pass the House of Representatives, setting off a fresh wave of anxious selling.

In yet another day that has shaken the embattled canyons of Wall Street, the Dow Jones industrials fell more than 725 points after it became clear that the legislation could not muster the support it needed to pass the House. points shortly before 3:45 p.m.

A more holistic measure of the American stock market, the Standard & Poor’s 500-stock index, was down by -8.79% at closing, after the House defeated the bill by a vote of 228-205. The Nasdaq was down -9.14% at closing.

The fear was most pronounced in the world’s credit markets, considered gauges of anxiety among investors. Yields on Treasuries plummeted after the House rejected the plan, with the one-month Treasury note yielding virtually zero.

Banks are charging enormous premiums for short-term financing; the difference between the cost of a three-month loan from a bank, and a three-month loan from the government, rose to the widest point since at least 1984. Other lending rates stayed high.

On Wall Street, the drops were sharp and swift, catching many investors and stock strategists on Wall Street by surprise. Many had expected the measure to be passed in the House, and lawmakers in Congress had suggested as much in comments earlier on Monday.

Instead, traders around the world turned to their television screens to see the votes opposed to the bill adding up, and eventually surpassing those in favor. The banal image broadcast on several television networks — a no-frills table of ‘yay’ and ‘nay’ votes — contrasted with the expressions of increasing concern on the faces of workers on the floor of the New York Stock Exchange.

“The bottom line is that everybody seems confused,” Ryan Detrick, a strategist at Schaeffer’s Investment Research, said just moments after the initial plunge. “When that happens, you get selling, you get panicky, you get selling.”

The sell-off reinforced the fear coursing through Wall Street as investors wondered, first, whether the bailout plan would pass Congress, and second, what would happen if it did not.





S&P 500 Loses -8%

29 09 2008

Stocks took a dramatic plunge on Monday afternoon after the government’s bailout plan — touted by its supporters as a balm for the current market stress — failed to pass the House of Representatives, setting off a fresh wave of anxious selling.

In yet another day that has shaken the embattled canyons of Wall Street, the Dow Jones industrials fell more than 725 points after it became clear that the legislation could not muster the support it needed to pass the House. points shortly before 3:45 p.m.

A more holistic measure of the American stock market, the Standard & Poor’s 500-stock index, was down by -8.79% at closing, after the House defeated the bill by a vote of 228-205. The Nasdaq was down -9.14% at closing.

The fear was most pronounced in the world’s credit markets, considered gauges of anxiety among investors. Yields on Treasuries plummeted after the House rejected the plan, with the one-month Treasury note yielding virtually zero.

Banks are charging enormous premiums for short-term financing; the difference between the cost of a three-month loan from a bank, and a three-month loan from the government, rose to the widest point since at least 1984. Other lending rates stayed high.

On Wall Street, the drops were sharp and swift, catching many investors and stock strategists on Wall Street by surprise. Many had expected the measure to be passed in the House, and lawmakers in Congress had suggested as much in comments earlier on Monday.

Instead, traders around the world turned to their television screens to see the votes opposed to the bill adding up, and eventually surpassing those in favor. The banal image broadcast on several television networks — a no-frills table of ‘yay’ and ‘nay’ votes — contrasted with the expressions of increasing concern on the faces of workers on the floor of the New York Stock Exchange.

“The bottom line is that everybody seems confused,” Ryan Detrick, a strategist at Schaeffer’s Investment Research, said just moments after the initial plunge. “When that happens, you get selling, you get panicky, you get selling.”

The sell-off reinforced the fear coursing through Wall Street as investors wondered, first, whether the bailout plan would pass Congress, and second, what would happen if it did not.





Congress Aims to Finalize Rescue Bill

28 09 2008

Congress on Sunday made public a proposed bill that would enact a far-reaching government rescue of the financial system.

The core of the bill is based on Treasury Secretary Henry Paulson’s request for authority to purchase as much as $700 billion in troubled mortgage assets from financial institutions so banks can resume lending and so the credit markets, now virtually frozen, can begin to operate more normally.

But Democrats and Republicans – concerned about the potential taxpayer cost – have added several conditions and restrictions. Key negotiators for the financial rescue plan will be busy trying to line up votes on Capitol Hill on Sunday to support the accord they reached soon after midnight.

Among the provisions:

  • The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury’s use.
  • Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, the bill would limit golden parachutes to executives at companies that participate; they will not be able to deduct the salary they pay to executives above $500,000.
  • An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary.
  • Allow for the Treasury to receive the option to take ownership stakes in participating companies under certain circumstances.
  • Treasury may establish an insurance program – with risk-based premiums paid by the industry – to guarantee companies’ troubled assets, including mortgage-backed securities, purchased before March 18, 2008.

Lawmakers’ goal is to shore up a deal before financial markets around the world open on Sunday evening.

Treasury Secretary Henry Paulson first announced the administration would seek an economic bailout plan on Sept. 18, after meeting with key lawmakers in the House and Senate – a meeting that left lawmakers looking ashen when they spoke to the press afterwards.

If enacted, the rescue plan would be the most dramatic and extensive government intervention in the economy since the Great Depression. President Bush on Sept. 24 gave a prime-time address to the nation in which he urged lawmakers to pass his plan and warned that the “entire economy is in danger.”

The aim of the rescue is to unfreeze the credit markets – short-term lending among banks and corporations. The core of the problem is bad real estate loans that have led to record foreclosures when the housing bubble burst and home prices declined.

In the past two weeks, the banking world and Wall Street have been reordered by a wave of collapses and corporate mergers. The most recent development was the seizure by federal regulators on Thursday night of Washington Mutual, once the nation’s largest thrift and a major mortgage lender.

Pain on Main Street, risk to taxpayers

The chill of the credit freeze has been felt far beyond Wall Street, as well. Businesses large and small have seen the cost of borrowing spike higher.

At the same time, the scale of the administration’s plan – and the quick pace of the debate over it – has given pause to many Americans and lawmakers worried about its potential cost to taxpayers.

“We begin with a very important task, a task to stabilize the markets, to protect all Americans – and do it in a way that protects the taxpayer to the maximum extent possible,” Paulson said early Sunday morning.





Morgan Stanley Holding Talks With Possible Suitors

20 09 2008

US investment bank Morgan Stanley is holding talks with possible suitors, reports say.

The bank is currently in talks with Wachovia and China Investment, about a takeover or investment opportunity, according to Reuters.

Shares in the group have taken a battering in recent days amid concerns about the effect of the credit crisis.

Recent dramatic changes in the world markets may mean more consolidation in the banking sector, analysts have said.

In the US, banking giant Merrill Lynch agreed to be taken over by Bank of America in a $50bn deal earlier this week.

Meanwhile, in the UK, Lloyds TSB came to the rescue of HBOS, the country’s leading mortgage lender amid concerns for its survival.

Uncertain future

Traders now believe Morgan Stanley could follow suit after its shares plunged, over the past week.

News of a government rescue package to bail-out the stricken sector gave a Morgan Stanley’s shares a boost on Friday, pushing them 26% higher to $28.44.

However, they remained 32% lower than their price two weeks ago.

Meanwhile analysts suggest Morgan’s recovery and the government’s rescue package have given the bank breathing room to consider its options.

The recent credit crisis – sparked by sub-prime loans to high risk borrowers in the US – has spread through the financial system, leaving many big names unsure about their future.








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