US stocks slumped as a management shake-up at Bank of America and Microsoft's earnings disappointment weighed on investor sentiment. After the close, Google reported earnings and sales that topped estimates. The stock gained 2 percent in extended trading. The DJIA closed 105.30 points lower at 8122.80, the S&P500 fell 12.74 points to close at 817.50 and the Nasdaq fell 41.58 points to close at 1465.49.
Stocks posted bigger losses through the early afternoon, but managed to recover as the session progressed. The Dow once again dipped below the all important 8000 level, and then bounced back above it.
In company news, John Thain will leave Bank of America amid criticism of his management of the purchase of Merrill Lynch. The stock lost 14 percent in the afternoon. Citigroup said late Wednesday that former Time Warner chairman Richard Parson has been named its new chairman. Last week, the company announced it was splitting its business in two. Separately, it was reported that the chief executives of Bank of America and Citigroup bought some company stock last week. This failed to reassure investors. Citigroup fell 13 percent.
Aflac shares fell after Morgan Stanley raised worries about its exposure to certain securities issued by hard hit European financial firms, according to reports. Shares of the insurer lost 33 percent. Microsoft led the group of technology companies issuing weak profit reports or big job cut announcements. Microsoft said it will cut up to 5000 jobs over the next 18 months due to the impact of the recession. The company also reported lower fiscal second quarter earnings that missed estimates on higher revenue that also missed estimates. The stock fell 10 percent. EBay reported a lower fourth quarter profit that nonetheless topped estimates. The company also issued a current quarter profit forecast that is short of expectations. The stock fell 12.7 percent.
Late Wednesday, Intel said it was shutting sites in Asia and scaling back US operations in a restructuring move that will affect up to 6000 people. The stock fell 5 percent. Also, Apple reported higher fiscal first quarter sales and earnings that topped estimates. The tech company also issued a fiscal second quarter sales and earnings forecast that was short of forecasts. But investors focused on the earnings and sent the stock 8 percent higher.
In economic news, housing starts and building permits both tumbled to record lows in December, the government reported. Permits fell 10.7 percent from November to an annual rate of 549,000 in December. Starts fell to 15.5 percent from November to an annual rate of 550,000. The declines were worse than expected. Another report from the Federal Housing Finance Agency showed that house prices fell a record 1.8 percent in November from October levels. A separate report showed that weekly claims for unemployment rose to a 26 year high last week, rising 62,000 from the previous week to 589,000. That was a bigger than expected rise.
Treasury prices slipped, raising the yield on the 10 year note to 2.58 percent from 2.52 percent. The dollar gained against the euro and fell against the yen. US light crude for March delivery rose 12 cents to settle at $43.67 a barrel on NYMEX. COMEX gold for April delivery rose $8.80 to settle at $860.50 an ounce.
The Nikkei fell to a 2 month closing low falling 306 points to 7745.25 a drop of 3.8% after Sony reported a record $2.9bn annual loss due to sliding demand and a stronger yen while Steel shares also slumped following production cuts by Nippon Steel. It’s the third consecutive negative week for the Nikkei its longest losing streak for nearly 4 months. The index is currently showing a drop of 12.6% for the year.
The Hang Seng is marginally lower in late trade as short covering in HSBC offset profit warnings from Sinopec, Aluminium Corp of China and China Railway Group.
UK stocks closed lower for a fourth straight session on Thursday, as weakness in telecoms led by Vodafone and BT Group outweighed gains in energy stocks and beaten down banks. The FTSE100 closed 7.65 points lower at 4052.23.
BT Group slumped 9.1 percent after it warned it would take charges of £340m at its Global Services unit for the quarter to end December that would outweigh better than expected results at the rest of the group. Vodafone fell 3.2 percent after Britain's Competition Commission said Vodafone, T-Mobile, Orange, 02 and H4G may have to cut the price they charge to connect incoming calls to their networks. Banks performed better, rebounding from recent falls. Lloyds Banking, Standard Chartered and HSBC were up between 2 and 8.9 percent. Barclays however fell more than 10 percent and RBS lost 2.4 percent amid concerns that the UK government may have to nationalise major banks.
Oil producers added the most points to the index. BP, Royal Dutch Shell, BG Group, Cairn Energy and Tullow Oil added 0.4 to 3.7 percent. Autonomy rose 3.8 percent as investors reacted positively to a placing of around 21.6m by the company to part fund its $775m acquisition of US group Interwoven Inc.
On the downside, William Morrison fell 4.4 percent on disappointment that the company did not upgrade full year profit forecasts despite delivering underlying Christmas sales growth. Sainsbury and Tesco fell 3.5 and 0.4 percent.
The FTSE is trading lower this morning with Insurers and Banks again suffering together with Miners. AstraZeneca leads the risers following news that Pfizer is in talks to acquire rival Wyeth in a deal that could be valued at more than $60bn. Supermarkets fill the other top stops together with Tobacco stocks.