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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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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Anheuser-Busch Cos. shareholders will meet on Nov. 12 to decide whether to approve InBev NV’s $52-billion takeover of the St. Louis-based brewer, Anheuser-Busch announced today.

The special shareholders meeting will take place noon at the Crowne Plaza Hotel Hotel & Exhibition Center Meadowlands in Secaucus, N.J.

Two weeks ago, Anheuser-Busch announced that it had set Oct. 3 to be the record date that establishes which shareholders can vote on the proposal. Investors must have owned A-B shares on Friday to be able to vote on the deal, which will create the world’s largest brewer (fast cash loan). If approved, shareholders will get $70 for each A-B share.

On Sept. 29, InBev shareholders approved the proposed acquisition as well as changing the new company’s name to Anheuser-Busch InBev. They also approved the appointment of Anheuser-Busch chief executive August Busch IV as a director in the new company.

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Intel (INTC.O: Quote, Profile, Research, Stock Buzz) will continue to invest in products and technologies even though it sees that a U.S. financial meltdown is likely to affect the emerging markets that are crucial for its growth, its chairman said on Tuesday.

“I think you’d have to be prudent and assume that if the financial marketplace melts down there’s going to be some impact but nobody’s predicting that, nobody knows how big it’s going to be,” Chairman Craig Barrett told Reuters journalists.

“The only thing we can do is look at that part of our future destiny that we can control, and that’s our investment in the future, in the products we create and the technologies we create,” he said on a visit to Reuters.

“We’ve always had the attitude that you have to make that investment in good times and bad,” he said. “It’s R&D, capital, marketing-intensive, and we’re just like a blind greyhound, we just continue to race down the track.”

Of its $38.3 billion 2007 revenue, the world’s biggest chipmaker spent $5.8 billion on research and development and $5 billion on capital items such as property, plants and equipment overnight payday loans.

“You can’t save your way out of a recession, you have to invest your way out, and so we’ve always kept a rainy day plan to accommodate that,” Barrett said, adding that Intel had a financial cash cushion of about $10 billion for that purpose.

Barrett said Intel’s creditworthiness meant it should be able to make acquisitions if the chance arose, even given the current turmoil in financial markets.

Intel has an A+ credit rating from Standard and Poor’s. 

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Mining stocks took another beating today over concerns about falling demand combined with the financial woes on Wall Street, but the industry remained confident thoat a "long-term commodity bull market" will soon reassert itself.

"I think we can conclude that when everything goes up for sale, then nobody's immune to a market selloff, but the demand for commodities is still extremely robust," said Bradford Cooke, chairman and CEO of Vancouver-based Endeavour Silver Corp. (TSX: EDR).

"We're still firmly in a long-term commodity bull market, and the selloff of the commodities in general and the mining shares in particular is overdone," he added.

The diversified metals index on the Toronto Stock Exchange was down more than five per cent in trading today, after a retreat of more than seven per cent Monday.

Prices for commodities fell over investor concern that the financial crisis in the United States will spark a deep recession in that country and spill over to weaken European, Indian and Chinese economies.

India and China have been growing rapidly in recent years and have been at the heart of soaring demand for everything from oil, steel and coal to nickel, grain, chemicals and other commodities.

As well, traders worry that global market liquidation prompted by the ongoing financial crisis on Wall Street, is also prompting the selloff since many financial companies invested in soaring commodities contracts to cash in on rising prices.

Wall Street was rocked Monday by announcements that Lehman Brothers Holdings Inc., the fourth-largest investment bank in the U.S., had filed for bankruptcy protection.

Further jitters were caused by the US$50-billion takeover of struggling Merril Lynch by Bank of America and news that insurer American International Group Inc. could need billions of dollars to strengthen its balance sheet.

But investors tend to see commodities – particularly precious metals like gold and silver – as a safe bet in times of financial crisis, said Cooke.

"Gold and silver in particular having a historic role as hedges against financial crisis and monetary inflation, they lose that role only temporarily in a market selloff and they certainly should resume that role once the peak selloff is past," he said.

Haytham Hodaly, an analyst with Salman Partners Inc., added that the financial crisis will likely result in a weaker U.S free credit report.com. dollar, which will push investors to the "safe haven" of precious metals.

"I think what's going to happen is the issues that we're seeing in the United States will end up resulting in a weaker U.S. dollar, at least in the near term, which will shed some positive light on owning precious metals, particularly gold and silver as basically a safe haven in this time of economic turmoil," said Hodaly.

Monday's gold and silver prices seemed to confirm this. Gold for December delivery rose $22.50 to settle at $787 an ounce on the New York Mercantile Exchange, after earlier rising as high as $791.40, while December silver rose 34 cents to settle at $11.135 an ounce.

Commodity prices "took off" when the U.S. credit crisis began a year ago, but equities didn't follow, said Cooke.

"I've never seen commodity prices move so high so fast in my life … but the equities did not confirm that upward move," he said.

"So the equities, which never joined the commodity price party, have been nailed on the downside."

But Cooke said he's confident that "the bottom is near" and commodity stocks will respond favourably when it hits.

"I feel that if you look at both the fundamentals and the technical charts on these things, this selloff is way overdone. Gold and silver in particular do have a traditional role to play and they're going to resume it, soon," he said.

"It's not a time to panic, it's a time to reflect."

13:31ET 16-09-08

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At first glance, the losses on Wall Street look to be a bottomless pit. As the financial crisis enters its second year, there appears no end in sight, with total losses on soured investments now estimated by the International Monetary Fund at $1 trillion (U.S.), about the same as the tab for U.S. military operations in Iraq and Afghanistan.

Some good will come of the maelstrom that hit Wall Street over the weekend like a Category 5 hurricane. But for now, the Street’s denizens are numbed by how their world has abruptly changed. A crippled Merrill Lynch & Co., which pioneered Main Street investing, has been rushed into the arms of Bank of America Corp.

The venerable Lehman Brothers Holdings Inc., America’s fourth-largest brokerage, has filed for Chapter 11 bankruptcy protection. New York-based American International Group, among the world’s biggest insurers, has secured a $20 billion lifeline. Washington Mutual Inc., America’s largest thrift, or savings and loan, is hanging by a thread.

The current disaster is without precedent in the modern history of the markets. Previous crises such as the 1980s insolvency of brokerage Drexel Burnham Lambert and the 1998 rescue of Long-Term Capital Management were isolated events. Today’s damage is so widespread that the stock market value of the U.S.’s largest banks and brokerages – even the ones that appear most sound – has plummeted as much as 80 per cent.

It isn’t so much fear that grips the denizens of Lower Manhattan today as self-doubt and mourning. The masters of the universe, as Tom Wolfe called them, believed themselves to be geniuses as they promoted and profited enormously from the record U.S. housing boom of the mid-decade. These financial engineers are now clueless about how many subprime, effectively junk mortgages, are on their balance sheets.

The bonus-fuelled exuberance of these stewards of the financial system has culminated in their exposure as incompetents – and they know it absolutely free credit report. If it keeps up like this much longer the grief counsellors will have to be called in. Wall Street firms already have shed some 85,000 employees, even before the weekend’s traumatic events. And with this hollowing out of the Street’s greatest institutions, New York is in danger of losing its status as the world’s financial capital to London, which already leads Gotham by several measures.

All this, of course, after Washington’s $200 billion bailout just last weekend of the gigantic mortgage lenders Fannie Mae and Freddie Mac and the Feds’ forced merger earlier this year of brokerage Bear Stearns Cos. into J.P. Morgan Chase Co. with a guarantee that Uncle Sam will backstop $29 billion worth of Bear’s irrevocably lost "assets."

But here’s the real, hopeful story.

There were no bank runs by retail or institutional clients. A consortium of global banks has pledged $70 billion to a bailout fund for banks in trouble.

And, most important, with Lehman the Feds drew a line in the sand by letting it fail, signalling that from here out the survivors who authored this crisis will have to find their own way out of it or, like Lehman and its wiped-out shareholders, pay the ultimate price for failure.

Flushing the system of dubious assets and failed managers and practices that have caused the biggest U.S. financial crisis since the Great Depression is a necessary curative. The end-game will see the emergence of fewer but stronger financial players, more scrupulously monitored by regulators. That’s why capitalism, as Americans conduct it, is called "creative destruction."

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ROME–Italy’s government held emergency talks with unions and investors yesterday over a plan to save Alitalia, as the bankrupt airline risks having to ground flights for lack of fuel.

The rescue plan would have investors buying profitable assets and investing euro1 billion ($1.4 billion).

But the plan also envisages wage cuts and layoffs opposed by the unions.

The government began mediating when direct talks broke down Friday after the investors failed to win the unions’ crucial support. The investors said, however, that their offer remained on the table.

The labour and transport ministers met yesterday with representatives of flight attendants and pilots, who have been the most critical of the rescue plan.

The talks with unions and investors had started Saturday but ended late at night with no resolution.

Among the sticking points in the talks are new contracts, salary cuts and layoffs that might run to 5,000, out of the airline’s 20,000-strong work force.

Each side has accused the other of being intransigent. But with time running out and the airline edging toward collapse, officials gave some signal of compromise. "There is a different atmosphere. Everybody is aware that there are no alternatives to an agreement," said Giuseppe Caronia of the transport chapter of the UIL national labour confederation cash advance. “There’s a sense of a moderate, cautious optimism.”

Labor Minister Maurizio Sacconi, who summoned all nine Alitalia unions to the meeting, expressed confidence that a deal would be reached.

Italian reports said the investors might offer an additional euro100 million ($140 million) in order to minimize the wage cuts and overcome the unions’ opposition.

However, pilots union representative Fabio Berti said after yesterday’s talks that he saw no substantial improvement. "Right now it is very difficult to be optimistic,” he added. Other union leaders voiced similar concerns.

In a sign of high tensions yesterday, Administrator Augusto Fantozzi was heckled and booed as he walked into the Labor Ministry for the meetings. Some in a crowd of 200 Alitalia workers that had gathered outside the ministry shouted: "Buffoon! Buffoon!" while others threw coins at him.

Workers have been holding protests and demonstrations for days, including at Rome’s Leonardo da Vinci airport, where on one occasion flights had to be cancelled.

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UK gas producer BG Group admitted defeat in its hostile bid for Australian coal-bed methane producer Origin Energy, but analysts said BG may shift its focus to another target or become a target itself.

BG said in a statement on Tuesday it would not increase or extend its A$15.50/share offer, which closes on September 26, and said it expected the offer to lapse, after Origin formed an $8 billion joint venture with U.S. oil major ConocoPhillips.

“The price implied by this newly announced joint venture is higher than BG Group is able to justify,” BG Chief Executive Frank Chapman said. “We wish Origin and ConocoPhillips every success with their joint venture.”

Origin said on Monday it had agreed to spin off its massive coal-seam gas assets in Queensland into a joint venture in which ConocoPhillips would inject up to $8 billion.

BG had hoped to use the reserves to expand a liquefied natural gas export terminal it plans to build with Queensland Gas Co.

Some analysts had predicted BG would abandon its bid after the Origin-Conoco tie-up, prompting BG’s shares to rally 6 percent on Monday.

The shares traded up 1.5 percent at pence at 4:02 a.m no fax payday loan. EDT, outperforming a 0.2 percent rise in the DJ Stoxx European oil and gas index.

Origin shares closed down 1.42 percent at A$17.40 before the announcement. 

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Apple Inc (AAPL.O: Quote, Profile, Research, Stock Buzz) shares fell as much as 5 percent on Monday ahead of a highly anticipated event on Tuesday when the maker of the Mac, iPod and iPhone is expected to roll out a new iPod Nano and may give an update on iPhone sales.

Stock in the high-flying company often sells off ahead of its major product announcements, said Shannon Cross, an analyst at Cross Research, adding that concerns about the strength of overall consumer spending also weighed on Apple shares.

The Cupertino, California-based company e-mailed reporters and analysts last week with an invitation to a San Francisco event entitled “Let’s Rock,” which bore an image of an iPod- wearing man jumping in the air, with the words “playing soon.”

Analysts said ahead of the event that they expected more incremental updates to the iPod line. Cross said some may have been expecting new versions of their laptop line, but those may not be announced on Tuesday.

“Right now Apple stock is kind of caught between concerns about strength in the consumer market and questions about how quickly they will be refreshing products and what they will announce tomorrow,” Cross said instant payday advance. “It is kind of a buy on the rumor sell on the news kind of stock. Apple often sells off ahead of their announcements.”

Analyst Shaw Wu of American Technology Research said in a note to clients: “While there is always room for surprise, it seems this event may be somewhat underwhelming vs previous expectations and events.”

He said his checks in the industry suggested the event will be focused mainly on the market-leading iPod, which in a sense was Apple’s coming out as a consumer electronics company, known for more than just its iconic Mac computers.

“This may be viewed as disappointing as some were hoping to see new Macs,” Shaw wrote. 

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