The remedy being prescribed by economic thinkers at the Fed and at the academy is to 'bury the problem in liquidity.' They had better be prepared to pile it high and deep.
In the short term remember this is April stock options expiry week and the Bowery Boys are flush with hot money, so anything can happen.
Goldman Strategists Say U.S. Earnings Are `Awful'
By Alexis Xydias
April 14 (Bloomberg) -- An ``awful'' start to the first- quarter U.S. earnings season is a ``harbinger of things to come'' that will push stocks lower, according to Goldman Sachs Group Inc.
``Early signs are awful,'' a team led by New York-based David Kostin, Goldman's U.S. investment strategist, wrote in a note today. ``We expect generally disappointing results and a swath of lowered profit guidance that will drive the Standard & Poor's 500 Index lower in coming weeks.''
The S&P 500, the benchmark index for American equities, dropped 2.7 percent last week after General Electric Co. said the credit-market crisis caused an unexpected earnings decline, while slowing economic growth and rising energy prices eroded profit at United Parcel Service Inc. and Alcoa Inc. Futures on the S&P 500 lost 0.1 percent at 10:50 a.m. in London.
Analysts surveyed by Bloomberg have cut their projections for first-quarter earnings at S&P 500 companies every week since Jan. 4. They now predict a 12.3 percent drop, compared with an estimate for an increase of 4.7 percent at the start of 2008.
Alcoa marked the start of the earnings reporting season on April 7 when it became the first company in the Dow Jones Industrial Average to post results.
Johnson & Johnson, the world's largest maker of consumer health-care products, is scheduled to report earnings tomorrow, while International Business Machines Corp., the biggest computer-services company, will follow a day later. Merrill Lynch & Co. will report April 17, while Citigroup Inc. will post results April 18.
Merrill and Citigroup will reveal at least $15 billion more of subprime mortgage writedowns this week, the Sunday Times of London reported yesterday, citing analysts it didn't identify...
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.
Wachovia Posts Loss, Plans $7 Billion Capital Raising
By David Mildenberg
April 14 (Bloomberg) -- Wachovia Corp., the fourth-largest U.S. bank, reported an unexpected loss because of subprime- infected mortgage holdings, cut its dividend and said it will raise about $7 billion in a share sale to replenish capital.
The first-quarter loss of $393 million, or 20 cents a share, compared with earnings of $2.3 billion, or $1.20, a year earlier, the Charlotte, North Carolina-based company said in a statement today. Analysts had been estimating Wachovia would earn about 40 cents a share, according to a survey by Bloomberg. Wachovia fell 8.4 percent to $25.66 in German trading.
Chief Executive Officer Kennedy Thompson said he was ``deeply disappointed'' after Wachovia posted its first quarterly loss since 2001 and reduced the dividend to preserve $2 billion of funds. The company's market value has dropped 50 percent since its ill-timed $24.6 billion takeover of Golden West Financial Corp. in 2006 at the peak of the housing market.``The most painful decision was to reduce the dividend because it adversely affects our shareholders,'' Thompson said in the statement. ``But we believe the long-term benefit to shareholder value outweighs the disadvantage of the dividend reduction as we fortify our balance sheet against continued instability in the housing and capital markets.''
Wachovia also said today it will cut 500 investment banking jobs, without providing specifics. The planned capital raising, comprising common stock and convertible preferred shares, has attracted strong interest from investors and will ``enhance our ongoing financial flexibility,'' Thompson said. The bank listed a Tier 1 capital ratio of 7.5 percent.
