Wednesday, 21 October 2009

Indexes end down as financials slide

NEW YORK (Reuters) - U.S. stocks ended lower on Wednesday, hurt by a late-day sell-off in financial shares after an influential analyst recommended selling Wells Fargo (WFC.N).

Based on the latest available data, the Dow Jones industrial average .DJI fell 92.12 points, or 0.92 percent, to unofficially end at 9,949.36. The Standard & Poor's 500 Index .SPX was down 9.66 points, or 0.89 percent, to finish unofficially at 1,081.40. The Nasdaq Composite Index .IXIC was down 12.74 points, or 0.59 percent, to close unofficially at 2,150.73.


Surprising Sell Off, Beige Book Positive, Unemployment Grows

Stocks traded in positive territory for the majority of the session then late day downgrades triggered a surprisingly sharp sell off. Positive words from the Fed's Beige Book report indicating that the economy has indeed grown modestly were offset by a climb in unemployment across 23 states. Wal-Mart's dire predictions for a difficult holiday season and a Wells Fargo downgrade sent shares tumbling in the final hour. The DJIA dropped -92.12 to 9949.36, the Nasdaq fell -12.74 to 2150.73 and the broad based S&P 500 gave back -9.66 to 1081.40.

Wells Fargo (): Shares tumbled 5.12% or $1.56 to $28.90 after an analyst at Rochdale Securities discovered that the positive results were due to fees rather than better business.

Boeing (): Warned it will cut prices to weather the coming stressful holiday season, sending the stock down by 2.07% or $1.07 to $50.63.

Knight Capital (): Missed analysts estimates resulting in shares tumbling 16.80% or $3.66 to $18.13.

Gold climbed $5.90 to 1064.50, oil added $2.25 to $80.97 and the VIX index climbed 6.31 to 22.22.

European Stocks Rise on Morgan Stanley Earnings; Natixis Gains

By Adam Haigh -

Oct. 21 (Bloomberg) -- European stocks rose as higher-than- estimated earnings at Morgan Stanley bolstered speculation that the seven-month rally in equities is justified.

Natixis SA surged 11 percent after Credit Suisse Group AG added the bank to its so-called focus list. Tesco Plc gained 2.3 percent as Nomura International Plc boosted its share-price estimate by more than 25 percent on prospects for increased profitability and foreign sales. Deutsche Bank AG, Germany’s largest bank, sank 2.4 percent after pretax profit missed some analysts’ estimates.

Europe’s Dow Jones Stoxx 600 Index added 0.4 percent to 249.19, having earlier slid as much as 1.1 percent. The regional gauge has jumped 58 percent since March 9 as the French and German economies unexpectedly exited recessions, pushing valuations in the index to more than 52 times reported earnings, the most expensive level since 2003, Bloomberg data show.

“The market has gone up a little too quickly in a short period of time,” said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which oversees $60 billion. “Following that we’re likely to see a rally through the seasonally strong November and December as strong earnings results lead to another round of upgrades” from analysts, he added.

In the U.S., Morgan Stanley posted third-quarter profit of 38 cents per share today, exceeding the 30-cent average analyst estimate in a Bloomberg survey. Boeing Co. posted a loss that was bigger than analysts estimated and reduced its full-year profit forecast.

U.S. Earnings

More than 130 companies in the S&P 500 are scheduled to report third-quarter results this week. Earnings have surpassed analysts’ projections for at 79 of the 97 companies that released results so far, according to Bloomberg data. More than 72 percent beat the average estimate in the second quarter, matching the highest proportion in data going back to 1993.

The S&P 500 has rebounded 62 percent since March 9 as the Federal Reserve lent, spent or guaranteed $11.6 trillion to combat the worst U.S. recession since the 1930s and companies from Alcoa Inc. to JPMorgan Chase & Co. reported earnings that beat estimates.

Natixis climbed 11 percent to 4.40 euros after Credit Suisse raised its price estimate on the shares 36 percent to 5.70 euros.

Tesco gained 2.3 percent to 392.45 pence. The U.K.’s largest retailer is a “disciplined, defensive, sustainable growth story that is significantly undervalued by the market,” Nomura analysts including Matt Truman wrote.

Russia, Sweden

Tele2 AB, Sweden’s second-largest telephone company, soared 5.1 percent to 101.80 kronor after reporting third-quarter profit rose as it added new customers in Russia and Sweden. Net income was 1.7 billion kronor ($244 million), from 831 million kronor a year earlier when the company booked writedowns in Austria. Analysts projected net income of 975 million kronor.

Deutsche Bank retreated 2.4 percent to 54 euros even after third-quarter profit more than tripled to 1.4 billion euros ($2.1 billion). Net income was boosted by tax credits and the resolution of tax audits related to prior years, the bank said. Pretax profit was about 1.3 billion euros.

“We saw a similar fairly ambivalent response to U.S. investment banking numbers and the headline pretax figure wasn’t a blow out,” said Matthew Clark, a London-based analyst at Keefe Bruyette & Woods Ltd. who has an “outperform” recommendation on the stock.

PSA Peugeot Citroen slid 4.8 percent to 23 euros as Europe’s second-biggest carmaker said third-quarter revenue dropped 7.7 percent to 11.8 billion euros from a year earlier.

PPR SA, the owner of the Gucci brand, sank 4 percent to 81.80 euros after sales declined 7.6 percent to 4.56 billion euros, missing the 4.63 billion-euro median estimate of three analysts surveyed by Bloomberg.

SEB AB declined 4 percent to 45.10 kronor after posting net income of 25 million kronor in the third quarter, trailing the median estimate by analysts in a Bloomberg survey. The second- biggest lender in the Baltics also said it sees slowing growth of non-performing loans in Estonia, Latvia and Lithuania.

To contact the reporter on this story: Adam Haigh in London at

Last Updated: October 21, 2009 12:57 EDT

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