While you were sleeping: BusinessWire overnight wrap

Friday 23rd January 2009

Stocks on Wall Street fell after Microsoft announced weaker-than-expected earnings, figures showed a surge in unemployment benefit claims and housing starts tumbled to a record low.

Bank stocks dropped, giving up some of their gains from the previous day, amid concern about a prolonged recession and after Ohio-based Fifth Third Bancorp posted its third quarterly loss in a row.

The Dow Jones Industrial Average fell 2.3% to 8041.16 and the Standard & Poor's 500 declined 2.4% to 820. The Nasdaq Composite slipped 3.2% to 1458.31.

Citigroup fell 14% to US$3.15 and Bank of America declined 14% to US$14.76, leading the Dow lower. The two financial companies have led stocks on the Dow on a three-day rollercoaster - slumping on Inauguration Day then leading a rebound the following day before slumping Thursday in New York. Bank of America said John Thain, who came on board with the acquisition of Merrill Lynch, would leave the company, effective immediately, after discussions with chief executive Kenneth Lewis.

Microsoft slipped 11% to US$17.27, sinking to its lowest level in almost a decade after announcing plans to eliminate 5,000 jobs, its biggest ever cuts, blaming weakening demand for PCs. It declined to forecast earnings this year other than to predict a further decline.

Earnings in the software maker's second quarter fell to US$4.17 billion, or 47 cents per share, from US$4.71 billion, or 50 cents, a year earlier, it said in a statement. Earnings lagged analysts' consensus estimate of 49 cents. Sales rose 2% to a lower-than-expected US$16.6 billion.

Fifth Third Bancorp dropped 31% to US$2.79 after Ohio's second-largest lender posted a fourth-quarter net loss of US$$2.14 billion, from a year-earlier profit of US$16 million.

First-time claims for unemployment benefits in the US rose by a greater-than-expected 62,000 to 589,000 last week, from 527,000 in the previous week, according to the Labor Department. The rise in jobless claims comes after figures showed American companies shed 2.6 million jobs in 2008.

Housing starts tumbled 15.5%, seasonally adjusted, to an annual rate of 550,000 units in December, the lowest level since records began in 1959, according to the Commerce Department. Economists had forecast an annual rate of 610,000 units for December, according to a Reuters survey.

House prices fell 8.7% in November from the same month of 2007, the biggest drop since at least 1991, according to the Federal Housing Finance Agency.

The US House of Representatives will consider President Barack Obama's US$825 billion stimulus package next week, according to House Speaker Nancy Pelosi. The shape of the package faces opposition from Republicans who want more weight given to tax cuts and less to government spending.

Signs of a protracted economic downturn are growing worldwide with China yesterday reporting economic growth slowed to 6.8% in the fourth quarter, for an annual rate of 9%, the lowest in seven years.

China is the world's largest consumer of copper and the metal fell for a third day in London amid rising stockpiles. Copper inventories rose 1.2% to 422,450 metric tons, according to the London Metal Exchange. Copper for delivery in three months fell 3% to US$3,125 a ton.

In Japan, government figures showed exports slumped by a record 35% in December from the same month of 2007, as demand slumped in the US, Europe and Asia. The Bank of Japan, which has kept interest rates unchanged near zero, forecast two years of deflation in the world's second-biggest economy.

The yen strengthened against the US dollar and held near its record high against the British pound as the global downturn spurred investors to exit holdings of higher yielding, or riskier assets funded with Japan's currency.

The yen was at 88.84 per dollar from 89.49. It climbed to 123.31 per pound from 124.88. Japan's currency rose to 115.43 per euro from 116.54. The US dollar yesterday, when it reached 112.12, the strongest level since March 2002. The dollar rose to $1.2999 per euro.

In Europe, industrial orders fell by a record 26% in November from a year earlier, more than economists had expected, according to the European Union statistics bureau. In France, consumer spending on manufactured goods fell 0.9% last month, more than economists had predicted, according to the national statistics office, Insee.

European shares fell for a fourth day after Nokia, the biggest mobile-phone maker, reported a biggest-than-expected decline in fourth-quarter earnings and predicted the downturn would continue this year. The shares fell 9%.

The Dow Jones Stoxx 600 Index fell 0.9% to 182.85, led by a 10% slide in Barclays. Germany's Commerzbank gained 1.9% and Lloyds Banking Group climbed 8.9%.

The FTSE 100 declined 0.2% to 4052.23 in London, with BT Group sliding 9% after announcing 340 million pounds of charges at its Global Services unit. In Germany, the DAX 30 fell about 1% to 4219.42 and France's CAC 40 fell 1.2% to 2869.62.

Crude oil fell after US Energy Department figures showed inventories rose 6.1 million barrels to 332.7 million barrels as the economic slump curbed demand for fuel. Crude for March delivery fell 2.2% to US$41.74 a barrel on the New York Mercantile Exchange.

Gold futures for February delivery rose 1% to US$858.80 an ounce on the New York Mercantile Exchange.

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