U.S. Foreclosure Filings in 2008 rose 81% from 2007

From MarketWatch: U.S. Foreclosure Filings in 2008 rose 81% from 2007
U.S. foreclosure filings in 2008 rose 81% from 2007 and tripled from 2006. A total of nearly 3.16 million foreclosure filings -- measured by default notices, auction-sale notices, and bank repossessions -- were reported in 2008. 1.84% of all U.S. housing units --1 of every 54 -- received at least one foreclosure filing during the year, up from 1.03% in 2007. In December, foreclosure filings were reported on more than 303,000 U.S. properties. That's up 17% from November and 41% from the year-earlier month. In the fourth quarter, foreclosure activity rose 40% from the year-earlier quarter.

Today's Earnings

From Yahoo! Finance: Intel 4Q profit plunges 90%, meets forecasts
Intel Corp. says its fourth-quarter profit plunged 90 percent. But the chip maker still met Wall Street's subdued expectations. Intel was hurt by a huge writedown and wheezing PC sales that have crimped demand for microprocessors.

Net income was $234 million, or 4 cents per share, compared with $2.3 billion, or 38 cents per share, in the year-ago period. Sales were $8.2 billion, a 23 percent shortfall from last year. Intel blunted the shock of the big declines by lowering its guidance twice.

From Yahoo! Finance: Genentech 4Q profit rises, but just short of views

Biotechnology company Genentech Inc.'s fourth-quarter profit fell short of Wall Street expectations, despite a 47 percent boost from higher sales of the blockbuster cancer drug Avastin. The company also set a weaker-than-expected profit outlook for 2009.

During the quarter, profit reached $931 million, or 87 cents per share, up from $632 million, or 59 cents per share, a year earlier. Revenue rose 25 percent to $3.71 billion from $2.97 billion.

Banking Fear - Citi, BAC, JPM

From Yahoo! Finance: US mulls Fresh aid Package for Bank of America
The federal government is considering a fresh multibillion-dollar aid package for Bank of America Corp. to help it absorb losses at Merrill Lynch.

Shares of both Bank of America plummeted more than 20 percent. Bank of America could get another capital infusion from the government, and possibly secure government guarantees against losses on problem loans. A fresh capital injection could come from the Treasury Department's $700 billion bailout pot, while any money that might be put up for loan guarantees could come from a mix of government sources.

Bank of America has received a total of $25 billion in capital injections from the Treasury bailout fund, called the Troubled Asset Relief Program, or TARP. That includes $10 billion for Merrill Lynch & Co., which Bank of America bought in a deal that closed Jan. 1.

Bank of America, which reports its fourth-quarter and annual results Tuesday, declined comment about a new aid package Thursday. The Wall Street Journal late Wednesday reported that the government was nearing a new deal with Bank of America, and said details of the aid are expected to be announced with earnings next week. Some analysts are predicting the nation's biggest bank by assets to report a loss or lower-than-expected earnings for the fourth quarter. Its board has already halved the company's dividend and could slash the payout again.

From Yahoo! Finance: JPMorgan posts profit, but "disappointing" one
JPMorgan Chase narrowly avoided a loss in the fourth quarter, indicating that it is weathering the financial crisis better than some of the other big banks. But the meager profit was driven by its acquisition of Washington Mutual Inc., and the bank added $4.1 billion to loan loss reserves -- proving that it is not immune to the deepening global recession.

Chief Executive Jamie Dimon called the quarter "very disappointing." Results were hurt by $2.9 billion in markdowns in JPMorgan's investment bank, and losses in various types of loans -- from mortgages to home equity loans to credit cards to commercial real estate loans.

"If the economic environment deteriorates further, which is a distinct possibility, it is reasonable to expect additional negative impact on our market-related businesses, continued higher loan losses and increases to our credit reserves," Dimon said in a statement. The New York-based bank on Thursday reported a profit of $702 million, or 7 cents per share, down 76 percent from $2.97 billion, or 86 cents per share, a year ago.

During the fourth quarter, JPMorgan's investment bank posted a loss of $2.4 billion, after a profit of $124 million a year ago. Card services also reported a loss of $371 million, after a profit of $609 million a year ago, as more cardholders failed to make their payments. Losses in cards are expected to rise as unemployment increases. Dimon said that in his opinion, unemployment will rise to between 7.5 percent and 8 percent, at minimum.

The retail financial services segment reported a 15 percent drop in profit to $624 million, due to losses in consumer lending. Income from asset management fell to $255 million from $527 million, while income from the corporate and private equity business rose to $1.5 billion from $270 million. The commercial banking unit reported a record profit of $480 million, up from $288 million a year ago. Treasury and securities services also posted a record profit, of $533 million, up from $422 million. For all of 2008, JPMorgan Chase posted a profit of $5.6 billion, or $1.37 a share. That was down from a record annual profit in 2007 of $15.4 billion, or $4.38 a share.

From MarketWatch: Financials Fall as Citi Shares Drop (1/14/2009)

Investors focused their attention on Citigroup Inc. shares of which fell below $5 for the first time since Nov. 21. They touched an intraday low of $4.44.

The fall came following reports that Citi will soon unveil a plan to unload several businesses and reduce its size by one-third. The moves will effectively dismantle the old, super-sized Citi model pioneered in part by former chief Sandy Weill.

Fears about Citi also rose after its announcement Wednesday that it will report fourth-quarter financial results before the open on Friday, nearly a week earlier than its previously scheduled Jan. 22 release date. Citi did not give a reason for the change in its timetable.

Royal Bank of Scotland Group said it sold a 4.26% equity stake in Bank of China for about $2.3 billion. The decision is part of the ongoing review of the company's businesses announced in October.

Barclays PLC saw its shares fall more than 14%. Barclays said it will cut about 2,100 jobs in investment banking and investment management, and further headcount reductions may be in the offing.

Deutsche Bank traded down 9%. The German bank said it will report a loss of about $6.4 billion for the fourth quarter, citing weak markets and the impact of further write-downs. Germany's largest listed bank said "exceptional market conditions" severely hurt its sales and trading operations. It also faces losses from its efforts to slash exposure to risky assets an impairment charge at fund unit DWS Scudder and "substantial" injections into money market funds.

HSBC Holdings shares at one point fell to their lowest level since March 4, 1999. A Morgan Stanley report published Wednesday said the bank, which had so far avoided the worst of the financial crisis, may need to raise $30 billion in equity and halve its dividend.

December Wholesale Prices Fall 1.9%

From Yahoo! Finance: December Wholesale Prices Fall 1.9%
Another huge plunge in energy costs sent wholesale inflation down for a fifth straight month in December, closing out a year in which prices dropped by the largest amount in seven years.

Wholesale prices fell by 1.9 percent in December. For the year, the government said wholesale prices fell by 0.9%, the first annual decline since prices dropped by 1.6% in 2001. By contrast, inflation at the wholesale level soared by 6.2 percent in 2007.

Core inflation, which excludes food and energy, posted a modest 0.2 percent rise in December. For the year, core inflation was up 4.3 percent, the biggest annual increase since a 4.4 percent increase in 1988.

Energy prices last month dropped by 9.3 percent, reflecting a record 25.7 percent plunge in the cost of gasoline. Food costs fell by 1.5 percent, the biggest monthly decline since February 2006.

The cost of passenger cars jumped by 1.2 percent in December, the biggest gain since August.

The big slowdown in inflation at the wholesale level also has been reflected in falling prices at the consumer level. Consumer prices plunged by 1.7 percent in November, the largest one-month decline on records going back 61 years. That surpassed a 1 percent drop in October.

New Jobless Claims increase more than expected

From Yahoo! Finance: New Jobless Claims increase more than expected
The Labor Department reported Thursday that first-time requests for unemployment insurance jumped to a seasonally adjusted 524,000 in the week ending Jan. 10, from an upwardly revised figure of 470,000 the previous week. Analysts had expected 500,000 new claims. The increase is partly due to a flood of requests from newly-laid off people who delayed filing claims over the holidays, a Labor Department analyst said.

The layoffs continued Thursday.
1. MeadWestvaco, which makes paper and plastic products: cut 2,000 (10%)
2. Software company Autodesk Inc.: 750 jobs (10%)
3. Google: Close three engineering offices and cut 100 recruiters
4. Seagate: Cut 2,950 jobs (6%)
5. Pfizer
6. Motorola: 4000 more jo
7. Textron Inc.
8. Cummins Inc.

The four-week average of claims, which smooths out fluctuations, fell by 8,000 to 518,500 last week. In one spot of good news, the number of people continuing to request benefits declined to 4.5 million from an upwardly revised 4.6 million the previous week. The continuing claims lag the initial claims data by one week. Still, the number of people remaining on the rolls is near a 26-year high and is up sharply from a year ago, when it stood at 2.7 million.

Retail Sales Fall

After the worst holiday season in 40 years, retailers face more sales declines in the months ahead as the recession deepens, job losses mount and consumers retrench further. Last month's weakness -- more than double what economists had expected -- has extended into the new year with bankruptcy filings, store closings and more layoffs.

Excluding autos, retail sales were down a record 3.1 percent in December, reflecting the widespread weakness in most other areas, led by the big plunge at gasoline stations. But even with gasoline sales removed, retail sales were down a sizable 1.4 percent in December.

From Big Picture: Retail Sales Fall 9.8%

• December 2008 Sales down 2.7% from November and down 9.8% percent versus December 2007, a record sixth straight monthly fall
  
• December 2008 Sales = $343.2 billion
• 2008 total sales (12 months of calendar year) were essentially flat — down 0.1% percent from 2007, less than the margin of error, first annual drop since record started in 1992.
  
• November sales were also revised lower. Ex-Autos, sales fell 3.1% for the month. Health and personal care were the sole growth areas. Going ex-autos and ex-gasoline, sales fell 1.5%.
• Total sales for the October through December 2008 holiday shopping period were down 7.7% from the same period a year ago.
• Gasoline stations sales were down 35.5% from December 2007, and off 15.9%;
• Auto sales were down 22.4% from last year.
• Sales were down 1.8% at furniture retailers; 2.5% at clothing stores; 1.0% at electronic stores; 2.2% at eating and drinking establishments; 0.4% at sporting goods, hobby and book stores; 1.3% at general merchandise stores; 1.4% at food and beverage stores; 2.9% at building material and garden supplies dealers; and 1.9% at mail order and Internet retailers.

Readings for the Day

From CNBC: For Major Banks, Trouble is Just Getting Started
From Bloomberg: Hedge Fund Assets Slumped 48% Last Year on Losses, Withdraws

Mid - Week Picture Post

Trade Deficit Declines Sharply

From Calculated Risk: Trade Deficit Declines Sharply
Both exports and imports are declining, but the decline in the trade deficit was mostly about oil prices. Petroleum import prices fell from $92 per barrel in October to under $67 per barrel in November - and will fall further in December.

[T]otal November exports of $142.8 billion and imports of $183.2 billion resulted in a goods and services deficit of $40.4 billion, down from $56.7 billion in October, revised. November exports were $8.7 billion less than October exports of $151.5 billion. November imports were $25.0 billion less than October imports of $208.2 billion.

Although the trade deficit is declining - and will probably decline further in December because of the continued decline in oil prices - growth in export related businesses will probably no longer be a positive for the U.S. economy as the global economy slides into recession too.

This graph shows the U.S. trade deficit through November. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. The current recession is marked on the graph.

The oil deficit declined sharply in November and will decline further in December. But even ex-petroleum, the trade deficit is still declining.

Yesterday's Market

From Bonddad: Today's Market

Some very important technical developments occurred yesterday.
1.) Since the end of November, the SPYs have been in an upward sloping trend channel. Yesterday prices fell through the lower support line of that channel.
2.) Starting in early October, there was a downward sloping trend line that acted like the top of a triangle consolidation pattern. Prices broke through this trend line a little over a week ago. Prices broke back through this line yesterday.
3.) While the RSI has been trending higher for the last few months, it is now at a technically important level
4.) Prices have fallen through all the SMAs over the last few trading days.

It looks as though prices want to test the lower 80s levels again. Considering Alcoa's announcement yesterday to kick off the earnings season along with the announcement that banks will announce their first quarterly loss since 1990, a retesting of lows makes sense right now.

U.S. Economy May Shrink 1.5% in 2009

From Bloomberg: U.S. Economy May Shrink 1.5% in 2009 as Recession Stymies Fed
Economists slashed forecasts for U.S. growth in 2009 and projected Federal Reserve policy makers won’t be able to start raising interest rates until 2010, according to a monthly Bloomberg News survey.

The world’s largest economy will contract 1.5 percent this year, a half percentage point more than projected last month, according to the median of 59 forecasts in the survey taken from Jan. 5 to Jan. 12. The slump will push inflation below what some Fed officials consider price stability, the survey showed.

Gross domestic product dropped at a 5 percent annual pace in the last three months of 2008 and will contract 3 percent this quarter, with a 0.8 percent drop in the next three months, according to the survey median. All estimates were lower than in the previous monthly survey.

The odds that the economy will be out of the recession in the next 12 months were 55 percent, the survey showed. Consumer spending, the biggest part of the economy, may fall at a 1.6 percent pace this quarter after dropping 2.7 percent in the last three months of 2008, the survey showed. Combined with the decline in last year’s third quarter, it would be the first time in the postwar era that spending fell during a nine-month span.

Stocks had the biggest one-week drop since November last week on growing concern over the economy and company earnings.

The first simultaneous recession in the U.S., Japan and euro area means American businesses will keep paring output.

Prices are retreating as the economy slows. The Fed’s preferred inflation gauge, based on consumer spending and excluding food and fuel costs, will rise 1.2 percent this year, the smallest gain since 1962, the survey showed. The increase would be less than the long-term forecast of 1.3 percent to 1.7 percent that reflects policy makers’ expectations for the level of inflation given “appropriate” monetary policy.

The deceleration, also called disinflation, is less sinister than the persistent decline in costs that economists call deflation. Still, the Fed last month discussed setting an inflation target to discourage expectations that price increases will slow “below desired levels,” according to minutes of the meeting.

China's exports likely contracted 2.8% in December

From MarketWatch: China's exports likely contracted 2.8% in December
China's export growth likely contracted 2.8% in December from a year earlier, its sharpest pace of contraction since 1999. The figures were cited in a J.P. Morgan research note Tuesday which attributed the data to mainland China media reports. The decline follows a 2.2% contraction in November. "The difficulty of obtaining trade finance in the closing months of 2008 may have had a further exacerbating effect on the headline number". China's export growth will likely be flat this year when compared to 2008, although early months of the year will see trade contract.

Sony seen reporting 1st operating loss in 14 years

From MarketWatch: Sony seen reporting 1st operating loss in 14 years
Japanese electronics major Sony Corp. is expected to report its first operating loss in 14 years as demand for flat-screen televisions and other consumer products sags and profit margins are pared by a strong yen. Sony is likely to post a group operating loss of around 100 billion yen ($1.12 billion) in the year ending March 31, but the final figure could be significantly higher depending on inventory levels in the January-March quarter.

The loss would be only the second since Sony went public in 1958.

S&P Broke 10, 20, and 50DMA, also broke the uptrend since Nov 20 Low, are we starting to go down now?

From Bonddad: Market Monday's

From the weekly chart:
-- All the SMAs are moving lower
-- The shorter SMAs are below the longer SMAs
-- Prices are below the 20 and 50 day SMA, but have risen above the 10 day SMA and are currently using the 10 day SMA as technical support
-- The RSI is rising
-- The MACD is turning around
-- The OBV is terrible

From the daily Chart:
-- Prices and the SMA are bundled together in a tight range, indicating indecision
-- The 10 day SMA is rising through the other SMAs
-- The MACD is increasing
-- The RSI is increasing
-- The OBV is neutral

Notice the triple top break-out failed miserably. That is not a good sign for the future. In addition, look at the lack of volume in the second half of the chart relative to the first half of the chart. There is just not a lot of excitement.

Economic News and Earnings Next Week

Earnings:

Monday: Alcoa
Tuesday: Linear Technology
Wednesday: Xilinx Inc.
Thursday: Genetech, Intel
Friday: First Horizon National Bank, CitiBank

Economic News:

Tuesday: Goldman Store Sales, International Trade
Wednesday: Retail Sales, Input & Export Prices, Business Inventories, Beige Book
Thursday: Producer Price Index, Empire State Manufacturing Survey, Jobless Claims, Philadelphia Fed Survey
Friday: Consumer Price Index, Industrial Production, Consumer Sentiment

Readings for the Day

From Mish: Economic Potpourris January 11, 2009