Financial life in a big town

NEW YORK — The stock market posted its biggest plunge after a presidential election Wednesday as reports on jobs and service industries stoked concern the economy will worsen.

Citigroup Inc. tumbled 14 percent and Bank of America Corp. lost 11 percent as the Standard & Poor’s 500 index and Dow Jones industrial average sank more than 5 percent. Nucor Corp., the largest U.S.-based steel producer, slid 10 percent after bigger rival ArcelorMittal doubled production cuts amid slowing demand. Boeing Co. lost 6.9 percent after UBS AG forecast a 3 percent drop in global air traffic next year.

"We had an election; that doesn’t mean the problems go away," said Kevin Rendino, a Plainsboro, N.J.-based money manager at BlackRock Inc. who oversees $10 billion.

The S&P 500 tumbled 5.3 percent to 952.77, erasing Tuesday’s 4.1 percent rally. The Dow retreated 5.1 percent to 9,139.27. The Nasdaq composite index fell 98.48 to 1,681.64.

The slide halted an 18 percent rebound from the S&P 500’s five-year low on Oct. 27. The benchmark for U.S. equities has lost more than 35 percent this year.

A report by ADP Employer Services showed companies cut 157,000 jobs in October, the most since November 2002.

Citigroup lost $2.05 to $12.63, and Bank of America plunged $2.78 to $21.75. The S&P 500 financials index sank 8.8 percent.

Nucor sank $4.16 to $35.50.

Boeing fell $3.67 to $49.55. Its share price, which rose 28 percent from Oct. 10 through Tuesday, "is at least six to nine months from bottoming and beginning to mover higher again," David E. Strauss, a New York-based analyst at UBS, wrote.

Textron Inc. lost $1.71, or 9.2 percent, to $16.93. The world’s biggest business-jet maker reduced the number of Citation jets it plans to deliver next year default payday loan.

General Growth Properties Inc. tumbled almost 50 percent to $2.25 for the biggest drop in the S&P 500.

MBIA Inc. and Ambac Financial Group Inc. slumped after the bond insurers posted wider losses than analysts estimated. MBI fell 22 percent to $8.16. Ambac fell 41 percent to $2.01. Slumping credit markets forced the companies to increase reserves for claims.

Pioneer Natural Resources lost 15 percent to $24.79. The oil and natural-gas producer in North America and Africa reported third-quarter earnings that missed analyst estimates and said it will cut drilling activity.

Sara Lee Corp. slid 14 percent to $10.20. The maker of frozen cakes and Jimmy Dean sausages said full-year profit will be less than previously estimated.

Marsh & McLennan Cos. fell 12 percent to $26.06. The world’s second-biggest insurance broker said profit dropped 78 percent in the third quarter amid the slowing economy and price declines for commercial coverage and reinsurance.

Medco Health Solutions Inc. climbed 9.1 percent to $41.47 for the biggest of only 13 advances in the S&P 500. A surge in use of generic and mail-order prescription drugs fueled a 38 percent increase in third-quarter profit at the largest U.S. drug benefits manager.

Molson Coors Brewing Co. gained 8.3 percent to $41.78. The third-largest U.S. beer maker reported market-share gains in Canada and the U.K.

Chesapeake Energy Corp. climbed 8.2 percent to $24.83 on speculation it will be acquired by BP PLC.

General Motors Corp. slipped 16 cents, or 2.8 percent, to $5.56.

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NEW YORK–Hotels, construction firms and retailers saw business shrink in October as slower spending and declining employment sent the service sector into contraction, another gloomy sign for the economy.

The Institute for Supply Management, a trade group of purchasing executives, said Wednesday its service sector index suffered a sharper-than-expected drop to 44.4 in October from 50.2 in September.

Wall Street economists surveyed by Thomson Reuters expected a reading of 47.5. A reading below 50 signals contraction.

"In short, horrible, but only to be expected in the wake of the equity plunge and the subsequent collapse in confidence," said Ian Shepherdson, chief economist at High Frequency Economics, a private research firm.

Asked in a one-time question whether the financial crisis was affecting business, 82.2 per cent of respondents said they had reduced spending, hiring or both, according to the ISM report.

New orders, deliveries, backlogs and inventories all fell.

The one glimmer of good news could also be further evidence of a recession: After a summer of price hikes, the index of prices paid showed its largest one-month decline since the index was first reported in 1997 bad credit pay day loans.

One of the few industries reporting growth was utilities, but that business is not immune to the downturn. Duke Energy Corp., one of the nation's largest electric power companies, said Wednesday its third-quarter profit fell 65 per cent. It blamed the worsening economy, as well as record Midwest storm outages, for the decline.

On the retail front, intimate apparel maker Maidenform Brands Inc. on Wednesday lowered its 2008 profit and sales outlook to reflect the bankruptcies of department store chains Mervyns LLC and Boscov's Department Store LLC.

A manufacturing report issued Monday by ISM showed the worst reading since September 1982, when the country was near the end of a 16-month recession.

Stocks fell in late-morning trading, with the Dow Jones industrial average down more than 120 points. The broader indexes also fell.

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UBS AG said a government bailout is helping to stem client money outflows but warned that it could take a 6 billion Swiss franc ($5.20 billion) hit in the fourth quarter due to accounting effects.

The world’s largest wealth manager had already reported most of its third-quarter figures, including a small profit, last month when it announced it was getting a 6 billion franc capital injection from the government and was also unloading $60 billion of risky assets into a central bank fund.

UBS, one of the European banks hit hardest by the financial crisis, said on Tuesday it had seen some improvement in client flows since the central bank deal. It reported net outflows of 83.6 billion francs in the third quarter.

“Whilst the situation was very difficult at the start of October, there have been encouraging signs for net new money flows following the announcement,” it said.

UBS shares were up 0.2 percent to 18.99 Swiss francs at 1040 GMT, compared with a 2.2 percent stronger Dow Jones index of European bank stocks. The stock is down nearly 60 percent since the start of the year, slightly underperforming the European index which is 52 percent lower this year.

“Management claims the trends after the settlement with the Swiss National Bank have been encouraging, but we have seen these statements before,” said Dirk Becker, analyst at brokerage Kepler Capital Markets.

“Our impression is that it might take a while before UBS gets back to meaningful inflows.”

The Swiss bank, which suffered massive damage to its reputation in the subprime crisis and is under pressure at home to return executive bonuses, said it expected market conditions to remain “challenging” and shrinking client assets to affect fees cash til payday loan.

UBS, which has changed its top management this year and is undergoing a massive restructuring, will give an update on client flows at an extraordinary shareholder meeting on November 27, Chief Financial Officer John Cryan told an analysts’ call.

Q4 HIT BY CHARGES, REVERSAL OF CREDIT GAINS

Cryan said the bank was sticking to its goal of returning to profit in 2009 while continuing to reduce its huge balance sheet. But he said he expected it to take a 2 billion Swiss franc hit in the fourth quarter if its funding costs remain at current levels.

UBS also expects a charge of about 4 billion francs on equity sold to the central bank fund in the fourth quarter.

“The total loss is about 6 billion Swiss francs. It cannot be offset by new revenues. They will show a loss in the fourth quarter,” Georg Kanders, an analyst with WestLB, said.

Cryan said UBS will also be affected by goodwill and restructuring charges in the fourth quarter.

UBS confirmed on Tuesday it had made a third-quarter net profit of 296 million Swiss francs ($256.3 million), helped by a gain on its own credit of 2.2 billion francs, plus a tax credit of 913 million francs. 

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British bank Barclays Plc is raising 7.3 billion pounds ($12.1 billion) from investors from Qatar, Abu Dhabi and elsewhere to allow it to avoid taking UK government rescue cash, it said Friday.

The fundraising is being made through a range of complex capital instruments, which could see Middle East investors owning about one-third of the bank.

An issue of reserve capital instruments (RCIs) will pay annual interest of 14 percent until June 2019. Warrants representing billions more pounds could also be issued.

Britain’s second biggest bank is raising up to 3.5 billion pounds from Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi’s royal family. That could give him a 16.3 percent stake in the bank.

Barclays shares initially jumped after the news as investors welcomed the bank’s ability to raise cash in tough markets and an adequate trading update, but later eased back. At 0930 GMT they were unchanged at 205-1/4 pence after touching 228p.

The bank said group profit in the first nine months of this year was “slightly ahead” of the same level a year earlier.

It took a net writedown of 129 million pounds from credit market writedowns for the third quarter, but said 1 billion pounds of gains on debt it carries were reversed in October.

Barclays is raising up to 2 billion pounds from Qatar Holding and 300 million from Challenger, an investment vehicle of a member of Qatar’s royal family freecreditreport. That could leave Qatar Holding a 12.7 percent stake and Challenger with 2.8 percent.

Barclays’ investor base has been transformed in the past two years, as it has raised funds from investors in China, Singapore and Japan as well as the Middle East and the bank expects to benefit commercially from the links as well as getting cash.

“There has been a significant shift in the availability of capital and economic power in the world over the last five years and we’re ensuring we’re aligned with those changes,” said John Varley, Barclays chief executive.

AVOIDING TAXPAYER CASH

The bank is seeking to raise up to a further 1.5 billion pounds from the sale of MCNs (mandatorily convertible notes) with existing and other investors.

Asked on a conference call whether Barclays has enough capital to avoid more fundraising, Varley said: “Yes, we have what we need.”

Barclays earlier this month turned down an offer of government funds under Britain’s 400 billion bailout package and said it would raise capital privately.

Rivals Royal Bank of Scotland, Lloyds TSB and HBOS have agreed to take up to 37 billion pounds of taxpayers’ funds to help rebuild balance sheets hit by the credit crisis and prepare for possible recession. 

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Even as markets plunge amid a crisis of confidence, Wall Street officials argued on Tuesday that the world’s financial institutions need a new and different kind of regulation, rather than more of it.

As the securities industry’s reputation sank to new lows, nearly a thousand Wall Streeters braved rain and plunging bank stocks to attend the Securities Industry and Financial Markets Association’s annual meeting. Officials ranging from New York Mayor Michael Bloomberg and former SEC Chairman Harvey Pitt called for streamlined regulation and a system that can better handle the market’s dramatic changes of the past decade.

“Our regulatory system is sometimes called a patchwork. It seems there are more holes than patches,” said Blythe Masters, global head of commodities at JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) and SIFMA’s new chairwoman.

Among other proposals, Masters said SIFMA would encourage the consolidation of two federal bank regulators –Office of Thrift Supervision and Office of the Comptroller of the Currency — as well as a merger of the Securities and Exchange Commission and the Commodities Futures Trading Commission.

Masters also took issue with supervision from 50 states and warned against individual states weighing in on a part of the market she knows well, credit default swaps.

“We have to avoid redundancy and burdensome regulation,” she said. “State regulation is not appropriate and it will add to complexity and risk.”

The recent settlement of Lehman Brothers CDS transactions showed that these structured securities do not need new layers of regulation one hour cash loan.

Masters observed that insurer American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) collapsed despite the oversight of dozens of state and federal bodies.

SIFMA does seek, however, the establishment of a new, federal-level regulator for insurance companies.

That said, Masters acknowledged that Wall Street has a ways to go to restore the public’s trust. “It’s safe to say our industry’s image is at an all-time low.”

BAD REPUTATION

Harvey Pitt, who served a brief and stormy term as SEC chairman, said the U.S. market regulatory system “is terribly broken.” He blamed a lack of transparency and information.

“One thing is clear within firms and externally: no one knew just how leveraged these firms were,” Pitt said, observing that CEOs announced write-downs within weeks of denying they had an exposure problem.

Though there is plenty of debate over how the U.S. financial industry should be regulated, most speakers agreed the current system of multiple state and federal agencies failed to prevent the current crisis.

Mary Schapiro, chief executive of the brokerage industry-owned regulator FINRA, said she favors a “twin peaks” model, comprised of two regulators. One would be financial markets stability regulator, with broad enforcement powers, and the other a business practices watchdog. 

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SIOUX FALLS, S.D. — The United States added nearly 1,400 megawatts of new wind energy capacity during the second quarter of 2008, providing enough electricity to power more than 400,000 homes, according to an industry report released Wednesday.

The American Wind Energy Association said new wind turbines this year will generate some 7,500 megawatts of additional electricity, far surpassing the 5,249 megawatts installed in 2007.

Wind power accounted for more than one-third of the new electric generating capacity installed in the U.S. in 2007, and the industry is projected to grow at a 45 percent pace for the second straight year, said Randall Swisher, the association’s executive director.

"We’re past the point of wind being a marginal player," Swisher said.

A financial bailout package passed by Congress and signed by President George W. Bush earlier this month provided an eight-year extension of investment tax credits for the solar industry but gave just a one-year extension of production tax credits for the wind industry.

Swisher said wind advocates were disappointed they couldn’t secure a more long-term policy, but the industry will work with the next administration on a stable five-year tax credit extension and a federal renewable energy standard internet payday loans.

The government, utilities and financiers also will have to come together to build a nationwide network of high voltage lines that will provide a backbone so the country can fully access its wind potential.

"In 2009, energy will be front and center with the new Congress and the new administration," Swisher said. "Both McCain and Obama have made that clear."

Swisher said the credit crisis and overall economic downturn undoubtably will have some effect on the capital-intensive industry, but it’s too early to predict to what extent.

He said capital in the near-term clearly will cost more and be more difficult to get, but other factors provide a bit of a silver lining. Transportation costs are continuing to come down, and steel prices have dropped significantly in the last few months. A wind turbine, by weight, is 89 percent steel, Swisher said.

Industry growth also is occurring on the manufacturing side. Eight new wind turbine component manufacturing facilities opened in the U.S. this year, nine were expanded and 19 new facilities were announced, according to the trade group.

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WASHINGTON — The Navy will inspect hundreds of F-18 Hornet fighter jets built by Boeing Co. after discovering "fatigue cracks" on more than a dozen aircraft deployed overseas.

The service issued an inspection alert late Thursday for all 636 Hornet aircraft to reduce any safety risk to pilots and the planes. The attack aircraft, which have been used in Iraq and Afghanistan by the Navy and Marine Corps, cost roughly $57 million each.

The Hornet is built by Boeing’s St. Louis-based defense unit.

Each Hornet will be inspected to check for cracks in a hinge that connects the aileron to the plane’s wing. Ailerons are flaps that control a plane’s banking movements and help to stabilize the aircraft in flight.

Failure of the hinge could "result in loss of (the) aileron, possible further damage to the aircraft, or possible loss of the aircraft," according to the Navy.

Most of the inspections are expected to be completed within the next few weeks. The service plans to stagger its inspections and repairs to spare disruptions of any missions, Navy spokesman Lt. Clayton Doss said Friday free credit report.com. The service will then decide whether to ground planes or restrict flights.

The first crack was discovered during a routine flight inspection.

John Pike, a defense analyst and director of GlobalSecurity.org, said carrier-based aircraft absorb more shock and corrosion than land-based models as they slam onto carriers’ shorter runways at high-speeds in saltwater air that can rot the planes.

"Cracks and corrosion. That’s what kills airplanes," said Pike.

There are 112 Hornets deployed on carriers worldwide, including in the western Pacific and the Arabian Sea. The planes affected have flown between 5,000 and 7,500 flight hours, according to the Navy.

The Navy twice has extended the life of the Hornets to a maximum of 10,000 hours of service to help bridge the gap until the Joint Strike Fighter, a new stealth fighter jet built by Lockheed Martin Corp., comes online.

The legacy planes are expected to be retired in 2023.

Boeing representatives did not return calls for comment Friday afternoon.

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Dell (DELL.O: Quote, Profile, Research, Stock Buzz), the world’s second-biggest computer maker, is seeing softness in demand for personal computers due to the global economic downturn, but hopes to increase market share in emerging markets such as India, a senior official said on Thursday.

“We already talked about seeing a little bit of softness in demand. We were pretty clear about that number of weeks ago,” Chief Marketing Officer Mark Jarvis told reporters.

Dell, which trails Hewlett-Packard (HPQ.N: Quote, Profile, Research, Stock Buzz) in the computer sector, in August posted a steep drop in second-quarter profit, as slow demand for PCs spread from the U.S. corporate sector to the public sector and small businesses, and to Europe and Asia.

But Jarvis, who reports to CEO Michael Dell, said Dell would outpace the industry in unit shipments in the second half of the year, as it sharpens its focus on markets such as India, where the companies are stepping up investments on technology cash advance in one hour.

“We believe that an economic slowdown will eliminate some of our marginal competitors and will give us the ability to gain share and we are strategically focused on gaining that share in a number of markets,” Jarvis said.

“We are extremely bullish on India,” he said.

Chief Executive Dell told reporters in Shanghai on Wednesday the company was performing well in unit shipments compared with the overall industry, and expected to grow faster than the industry this year.

The company said in August it had slashed 8,500 jobs out of a planned 8,900 headcount reduction, as it realigns its business to confront slowing demand. 

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United Airlines parent UAL Corp (UAUA.O: Quote, Profile, Research, Stock Buzz) posted a quarterly loss due to July’s record-high energy prices and a drop in the value of its fuel hedges as oil later plummeted, but the results were not as bad as Wall Street expected, and the company’s shares rose more than 10 percent.

The loss underscores the troubles UAL and its rivals had last quarter as they grappled with skyrocketing fuel bills that peaked alongside crude oil in July.

The carrier suffered an additional noncash loss of $519 million, however, as its hedges — designed to blunt the impact of rising fuel — lost book value as oil began a rapid descent.

“While oil prices are lower in recent weeks, they continue to be volatile,” UAL Chief Executive Glenn Tilton said in an e-mail to employees.

“That said, the convergence of falling oil prices with our capacity flexibility, strong improvement on costs and competitive revenue put us in a position to make our margin and return United to profitability,” Tilton said faxless online payday advances.

Minus the noncash loss, the carrier’s results easily beat market expectations. UAL shares rose $1.30, or 10.3 percent, to $13.97 in morning Nasdaq trade.

The airline industry has been battered by soaring fuel costs, which peaked alongside crude oil as it notched a record high in July. Oil has fallen about 50 percent since it touched its high.

Nevertheless, airlines are rapidly downsizing to offset fuel bills. UAL, which intends to reduce its domestic capacity by 14 percent in the fourth quarter, is cutting 7,000 jobs from its workforce of 55,000. 

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CARACAS–Venezuela's economy minister expects OPEC to agree to cut oil supply at an emergency meeting next week to stem crashing world prices by bringing supply and demand into better balance.

The minister, Ali Rodriguez, who is a former OPEC president and a longtime advocate of Venezuela's hawkish stance to bolster prices, reinforced the emerging position among the organization's members that supply will be reduced Oct. 24.

"It is likely there will be a cut" at the meeting, he said in an interview broadcast on state television late Friday.

OPEC's president has said a cut is likely and Qatar's oil minister has said it could be about 1 million barrels a day from an organization that supplies the world with about a third of its oil supply no checking account payday advance.

Oil prices have plunged in recent weeks as a global credit crunch has spurred fears of recessions worldwide that would slash demand for oil. Prices lapped up at $150 a barrel in July but have fallen to less than half that this week.

Leftist Venezuelan President Hugo Chavez depends on oil revenue to sustain his high spending on the majority poor of his nation. If oil stays at its current levels for long, he likely will have to use other sources of income – such as loans or savings funds – to keep programs of food subsidies and free health clinics.

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