Archive for January, 2009

Stock futures up; Fed, slew of earnings eyed (Reuters)

Wednesday, January 28th, 2009 | Finance News

(Reuters) –
Stock index futures pointed to a higher open on Wall Street on Wednesday, extending recent gains, as investors braced for a slew of company results as well as the outcome of a Federal Reserve meeting.

The central bank has already slashed interest rates to nearly zero and is looking for other tools to revive economic growth. The market will be looking for any announcement of new policy measures, such as purchasing long-dated Treasuries. Analysts said markets will also be looking out for any updated forecasts from the Fed on the economic outlook.

At 1019 GMT, futures for the S&P 500 were up 2.2 percent, Dow Jones futures were up 2.1 percent and Nasdaq 100 futures were up 2.4 percent.

Investors' attention will be on results from companies that include Starbucks (SBUX.O), AT&T (T.N), ConocoPhillips (COP.N), Boeing (BA.N), Boston Scientific (BSX.N), Cabot (CBT.N), Legg Mason (LM.N), Qualcomm (QCOM.O), Symantec (SYMC.O) and Wells Fargo & Co (WFC.N).

Yahoo Inc's (YHOO.O) fourth-quarter results beat Wall Street's low expectations on Tuesday, thanks to a series of cost cuts in a weak advertising market, sending its shares up 5 percent in a relief rally.

However, Yahoo gave first-quarter forecasts for operating income that were well below Wall Street estimates and did not give its usual full-year outlook, which disappointed some analysts and underscored the uncertainties the company faces.

High-end computer and software company Sun Microsystems (JAVA.O) posted better-than-expected results, as a strong software and open storage business cushioned declining overall sales, and its shares rose.

The company, which like rivals Dell Inc (DELL.O) and EMC Corp (EMC.N), is struggling with diminishing tech spending, posted an 11 percent decline in quarterly revenue.

Swiss drugmaker Novartis (NOVN.VX) expects 2009 to be increasingly tough, even after sales of blood pressure and cancer drugs helped drive fourth-quarter net profit up 62 percent. Profit hit $1.5 billion but missed forecasts as the strong dollar weighed, and Novartis said on Wednesday it expected 2009 to be an "increasingly challenging environment."

Confidence among heads of the world's top companies meeting in Davos has tumbled to a new low, with the prospect of a long recession torpedoing faith in corporate prospects. The findings from a poll of more than 1,100 CEOs sets a grim backdrop to the four-day meeting of the world's business and political elite in the Swiss ski resort, which begins on Wednesday.

U.S. stocks climbed on Tuesday, with the S&P 500 and the Nasdaq up for a third straight day, as better-than-feared corporate results fueled a glimmer of hope in earnings, overshadowing fresh signs that consumers remain glum.

The Dow Jones industrial average (.DJI) rose 0.72 percent, to 8,174.73. The Standard & Poor's 500 Index (.SPX) gained 1.09 percent, to 845.71, and the Nasdaq Composite Index (.IXIC) advanced 1.04 percent, to 1,504.90.

(Reporting by Blaise Robinson; editing by Karen Foster)

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Take bad assets out of banks: Obama adviser (Reuters)

Wednesday, January 28th, 2009 | Finance News

DAVOS, Switzerland (Reuters) –
Repairing financial markets and revitalizing lending will require governments to remove bad assets from banks and recapitalize them, Laura Tyson, an economic adviser to the Obama administration, said on Wednesday.

"The natural next step is, which is real simple, you take the bad assets out, the balance sheets are hit really hard, you recapitalize banks with different rules, and they go out again and lend," Tyson said in a panel discussion at the annual meeting of the World Economic Forum.

The Obama administration is weighing the "bad bank" idea as part of its overhaul of the $700 billion financial rescue plan.

Tyson also said that testimony to the seriousness of the world economic crisis is that inflation is no longer the risk. "The issue that people are concerned about is deflation, not inflation but deflation. That's the depths of the crisis that we are now confronting," she said.

She also strongly disputed views that government debt issuance to finance fiscal stimulus and bailout plans is crowding out the private sector, saying that "right now the securities markets are broken."

(Reporting by Stella Dawson; editing by Simon Jessop)

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Japan carmakers to lose money in Q3, revisions eyed (Reuters)

Wednesday, January 28th, 2009 | Finance News

TOKYO (Reuters) –
Japanese automakers are looking at an ugly third-quarter earnings season that will almost certainly include profit warnings from Nissan Motor Co (7201.T) and others that have not updated their outlooks in the past three months as global vehicle demand shows no sign of reviving.

Even Honda Motor Co (7267.T), which slashed its forecasts in mid-December, could lower its annual outlook for a fourth time after outlining more production cuts at home for the business year ending on March 31.

With production and sales in various markets plumbing multi-decade lows in recent months, operating losses at the top three -- Toyota Motor Corp (7203.T), Honda and Nissan -- for October-December are a foregone conclusion, analysts said.

Many analysts have also lowered their projections for next business year, when global vehicle sales are expected to shrink further led by recession-hit Europe, Japan and the United States.

"I'm telling investors simply to wait," said Tatsuo Yoshida, an auto analyst at UBS Securities.

"The news flow and currency markets are too unstable right now," he said, citing the frequent announcements of production cuts across the industry.

Consensus estimates have Toyota posting the biggest quarterly loss out of Japan's top five automakers, which also include Mazda Motor Corp (7261.T). Suzuki Motor Corp (7269.T) is expected to post a small profit, while five analysts polled by Reuters Estimates put Toyota's loss at 263 billion yen ($2.95 billion). Toyota, the world's biggest automaker, has never posted a quarterly operating loss.

Nissan is seen swinging to a third-quarter loss of 81.7 billion yen, paving the way for its first annual operating loss in 14 years.

"Compared with rivals, Nissan's management has been relatively quick to implement crisis measures in expectation of a downturn in the business environment," HSBC auto analyst Seiji Sugiura wrote in a report, citing early production adjustments in the United States and the freezing of new pickup truck development, among other steps.

He added, however, that Nissan was still vulnerable to the faster-than-expected declines in sales, which are slowing automakers' efforts to bring inventory levels under control.

Unusually, Nissan Chief Executive Carlos Ghosn is scheduled to preside over the third-quarter results briefing on February 9, when he is expected to unveil measures to stop the bleeding. Ghosn normally appears only for full-year earnings announcements.

The CEOs of Mazda, Suzuki and Mitsubishi Motors Corp (7211.T) will also preside over their companies' briefings.

COST CUTTING URGENT

With factories closing for weeks or months at a time, analysts said they would be looking for automakers to outline more countermeasures to conserve cash over the next few years.

"Toyota will need to reduce total fixed costs by 10 percent to return to a profit, and we think this is likely to take at least two years," said JPMorgan Securities analyst Takaki Nakanishi.

Toyota's outgoing president, Katsuaki Watanabe, said last month the company aimed to make its operations lean enough to secure profits with parent-only sales of just 7 million vehicles. For this year, it has forecast an operating loss of 150 billion yen on group-wide sales of 7.54 million vehicles.

Projecting its first-ever operating loss in what it called an unprecedented crisis, Toyota has put all new projects to expand production capacity on hold to save cash.

Honda has gone further, pulling out of Formula One racing and considering an exit from other races.

Japan's No.2 automaker is set to burn through more cash next business year, having announced plans to halt production at its British plant in April and May, extending the closure beyond February and March.

"We don't think even a 30 percent fall in global production in January-March will signal an end to inventory adjustment," Goldman Sachs analyst Kota Yuzawa wrote in a report. He said quarterly earnings were unlikely to turn positive until January-March of 2010, making a rise in share prices difficult for the near term.

(Editing by Michael Watson)

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