From Calculated Risk: Alcoa to eliminate jobs, cuts capital spending plans
Alcoa Inc. announced deeper work-force cuts, more plant closures and a 50% reduction in capital expenditures. By the end of this year, there will be 15,000 fewer positions at the company, or roughly 14.5% of its current employees and contractors.
The moves raise the question of whether other companies that have cut costs also will feel the need to dig deeper. Alcoa, the world's largest aluminum producer, announced a round of cost cutting in October when demand for commodities and the availability of credit began to fall.
International Business Machines Corp., the biggest technology employer, may cut 16,000 jobs this month amid the global economic slowdown.
Tuesday, January 6, 2009
December FED Meeting Minutes and a Long Recession
From Big Picture: Long Recession
The current U.S. recession, with no end in sight, threatens to be the longest since 1933, and that helps explain why investors are having so much trouble gauging the stock market.
Models developed in the more normal times of the past few decades, based on things like corporate-profit forecasts, the interest-rate environment or the length of the average recession, have failed in the current, exceptional economy. Many have signaled that stocks were cheap and it was time to buy, but stocks kept falling and got cheaper.
The Fed projects GDP to decline in 2009 "as a whole", and unemployment to "rise significantly into 2010". The Fed also expects disinflationary pressures to continue into 2010.
The information reviewed at the December meeting pointed to a significant contraction in economic activity in the fourth quarter. Conditions in the labor market deteriorated considerably in recent months as most major industry groups shed jobs.
Private payrolls continued to fall at a faster pace than earlier in the year, and the unemployment rate rose to 6.7 percent…The housing market weakened again as construction activity, new home sales, and home prices declined further.
In the business sector, investment in equipment and software appeared to continue to contract. Industrial production fell markedly in November after sizable declines in the preceding two months. The recent contraction in industrial output was broadly based…
Real personal consumption expenditures (PCE) fell for the fifth straight month in October, with the slowdown evident in nearly all broad spending categories.
Sales of light motor vehicles, which slumped in October, fell further in November, but the available information on retail sales suggested a small increase in real outlays for other consumer goods…
Real construction activity continued to decline in November. Single-family housing starts and permit issuance fell further…
In the business sector, investment in equipment and software appeared to be contracting at a faster rate in the fourth quarter than during the third quarter…
The current U.S. recession, with no end in sight, threatens to be the longest since 1933, and that helps explain why investors are having so much trouble gauging the stock market.
Models developed in the more normal times of the past few decades, based on things like corporate-profit forecasts, the interest-rate environment or the length of the average recession, have failed in the current, exceptional economy. Many have signaled that stocks were cheap and it was time to buy, but stocks kept falling and got cheaper.
Since the Great Depression, only two recessions have run longer than this one, the first ending in 1975 and the other in 1982. Each lasted 16 months.
The Fed projects GDP to decline in 2009 "as a whole", and unemployment to "rise significantly into 2010". The Fed also expects disinflationary pressures to continue into 2010.
The information reviewed at the December meeting pointed to a significant contraction in economic activity in the fourth quarter. Conditions in the labor market deteriorated considerably in recent months as most major industry groups shed jobs.
Private payrolls continued to fall at a faster pace than earlier in the year, and the unemployment rate rose to 6.7 percent…The housing market weakened again as construction activity, new home sales, and home prices declined further.
In the business sector, investment in equipment and software appeared to continue to contract. Industrial production fell markedly in November after sizable declines in the preceding two months. The recent contraction in industrial output was broadly based…
Real personal consumption expenditures (PCE) fell for the fifth straight month in October, with the slowdown evident in nearly all broad spending categories.
Sales of light motor vehicles, which slumped in October, fell further in November, but the available information on retail sales suggested a small increase in real outlays for other consumer goods…
Real construction activity continued to decline in November. Single-family housing starts and permit issuance fell further…
In the business sector, investment in equipment and software appeared to be contracting at a faster rate in the fourth quarter than during the third quarter…
As financial market conditions worsened over the intermeeting period, investors seemed to become more concerned about the likelihood of a deep and prolonged recession…
From Calculated Risk: Fed's Yellen: Recession Long and Deeper than "Garden Variety"
Readings for the Day
From Big Picture: WSJ Video:: End of Wall Street
From Calculated Risk: Foreclosure Moving On Up
From Calculated Risk: New Home sales and Unemployment
Usually New Home sales are declining before a recession.
Usually New Home sales bottom during the recession and start to increase 3 to 6 months before the recession ends. Therefore New Home sales are usually a good leading indicator of an economic recovery.
The unemployment rate usually starts increasing just before the recession begins.
The unemployment rate peaks after the recession ends. During the last two recessions, the unemployment rate didn't peak until over a year after the recession ended.
The unemployment rate typically lags New Home sales.
From Bonddad: Treasury Tuesday's: Why there is a Treasury Bubble?
From Mish: Factory Orders Tumble, Retail Sales Fall, Foreclosure Sales Triple
From Calculated Risk: Foreclosure Moving On Up
From Calculated Risk: New Home sales and Unemployment
From Bonddad: Treasury Tuesday's: Why there is a Treasury Bubble?
From Mish: Factory Orders Tumble, Retail Sales Fall, Foreclosure Sales Triple
Monday, January 5, 2009
Terrible Car Sales Report
From Big Picture: Car Sales in 2008 Were Horrific
• General Motors U.S. sales plunged to a 49-year low in 2008. December was another poor month, down 31%;
• Toyota U.S. deliveries plummeted 37% percent; Auto sales in Japan dropped 5 percent in December and finished the year at a 28-year low.
• Honda fell 35%;
• Ford Motor fell 32%
• Nissan was down 31% percent;
• Chrysler dived 53%;
• Mercedes-Benz was off 24;
•Audi sales fell 9.3%
• BMW sales fell 36%
• Subaru sales were down 7.7%;
• Volkswagen AG said its December sales fell 14%;
• This was the worst annual volume since 1992;
• 2008 will be the first year in which the U.S. automakers combined market share was less than 50%;
• This was the first drop in sales for Japanese automakers for Toyota since (1995) and Honda (1993)
From Calculated Risk: Hamilton on December Auto Sales
The big difference is in early 2008, the primary problem for U.S. auto manufactures was the sharp hike in gasoline prices, which explains the collapse of sales of SUVs at the same time that imports of smaller cars were on the way up. By contrast, the current problems for the auto sector resulted from the broad collapse in overall consumer spending.
• General Motors U.S. sales plunged to a 49-year low in 2008. December was another poor month, down 31%;
• Toyota U.S. deliveries plummeted 37% percent; Auto sales in Japan dropped 5 percent in December and finished the year at a 28-year low.
• Honda fell 35%;
• Ford Motor fell 32%
• Nissan was down 31% percent;
• Chrysler dived 53%;
• Mercedes-Benz was off 24;
•Audi sales fell 9.3%
• BMW sales fell 36%
• Subaru sales were down 7.7%;
• Volkswagen AG said its December sales fell 14%;
• This was the worst annual volume since 1992;
• 2008 will be the first year in which the U.S. automakers combined market share was less than 50%;
• This was the first drop in sales for Japanese automakers for Toyota since (1995) and Honda (1993)
From Calculated Risk: Hamilton on December Auto Sales
The big difference is in early 2008, the primary problem for U.S. auto manufactures was the sharp hike in gasoline prices, which explains the collapse of sales of SUVs at the same time that imports of smaller cars were on the way up. By contrast, the current problems for the auto sector resulted from the broad collapse in overall consumer spending.
Construction Spending Declines in November
From Calculated Risk: Construction Spending Declines in November
Spending on private construction was at a seasonally adjusted annual rate of $756.4 billion, 1.5 percent (±1.1%) below the revised October estimate of $767.7 billion. Residential construction was at a seasonally adjusted annual rate of $328.3 billion in November, 4.2 percent (±1.3%) below the revised October estimate of $342.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $428.2 billion in November, 0.7 percent (±1.1%)* above the revised October estimate of $425.1 billion.
Residential spending fell at a 4.1% rate in November to $336.3 billion, 22.8% lower than November 2007. Despite the credit crunch and worsening economy, nonresidential spending showed surprising resilience, rising 1% during the month to $742.1 billion, up 9.2% from the previous year. But how long can Non-residential spending keep up?
From Calculated Risk: Non-residential Structure Investment vs. Residential Investment
Typically non-residential investment in structures trails residential investment by about 5 quarters. Although a 5 quarter lag is the best fit, non-residential investment typically trails residential investment by 3 to 8 quarters.
Spending on private construction was at a seasonally adjusted annual rate of $756.4 billion, 1.5 percent (±1.1%) below the revised October estimate of $767.7 billion. Residential construction was at a seasonally adjusted annual rate of $328.3 billion in November, 4.2 percent (±1.3%) below the revised October estimate of $342.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $428.2 billion in November, 0.7 percent (±1.1%)* above the revised October estimate of $425.1 billion.
Residential spending fell at a 4.1% rate in November to $336.3 billion, 22.8% lower than November 2007. Despite the credit crunch and worsening economy, nonresidential spending showed surprising resilience, rising 1% during the month to $742.1 billion, up 9.2% from the previous year. But how long can Non-residential spending keep up?
From Calculated Risk: Non-residential Structure Investment vs. Residential InvestmentTypically non-residential investment in structures trails residential investment by about 5 quarters. Although a 5 quarter lag is the best fit, non-residential investment typically trails residential investment by 3 to 8 quarters.
Sunday, January 4, 2009
Economic News Next Week
Economy News:
Monday: Motor Vehicle Sales Report, Construction Spending
Tuesday: Goldman Store Sales, Factory Orders, ISM Non-Manufacturing Index, Pending Home Sales Index
Wednesday: MBA Purchase Applications, Challenger Job-Cut Report, ADP Employment Report
Thursday: Chain Store Sales, Jobless Claims, Consumer Credit
Friday: Employment Situation, Wholesale Trade
Earnings:
Thursday: Chevron
Friday: KB Home
Monday: Motor Vehicle Sales Report, Construction Spending
Tuesday: Goldman Store Sales, Factory Orders, ISM Non-Manufacturing Index, Pending Home Sales Index
Wednesday: MBA Purchase Applications, Challenger Job-Cut Report, ADP Employment Report
Thursday: Chain Store Sales, Jobless Claims, Consumer Credit
Friday: Employment Situation, Wholesale Trade
Earnings:
Thursday: Chevron
Friday: KB Home
For tech investors, the annual Macworld trade show kicks off Tuesday with a keynote speech by a top Apple official -- but not Apple CEO Steve Jobs. The announcement last month that Jobs would forego his traditional opening remarks sent Apple's stock tumbling as worries resurfaced about Jobs' health. This is also the last Macworld Apple plans to attend.
The sector gets a doubly whammy of product news next week as Microsoft Corp., Cisco Systems and other tech heavyweights head to Las Vegas for the annual International Consumer Electronics Show.
S&P 500 Jumps to 2-Month High on the first trading day of 2009
From Bloomberg: U.S. Stocks Advance, S&P 500 Jumps to 2-Month High; GM Rallies
The S&P 500 rose 3.2 percent to 931.8, capping its first three-day gain in five weeks and best start to a year since 2003. The Dow Jones Industrial Average increased 258.3 points, or 2.9 percent, to 9,034.69. Both the S&P 500 and Dow climbed to their highest closes since the first week of November. About 7.2 billion shares changed hands on all U.S. exchanges, 29 percent fewer than the three-month daily average as trading slowed at the end of the holiday-shortened week.
The S&P 500 rose 3.2 percent to 931.8, capping its first three-day gain in five weeks and best start to a year since 2003. The Dow Jones Industrial Average increased 258.3 points, or 2.9 percent, to 9,034.69. Both the S&P 500 and Dow climbed to their highest closes since the first week of November. About 7.2 billion shares changed hands on all U.S. exchanges, 29 percent fewer than the three-month daily average as trading slowed at the end of the holiday-shortened week.
The S&P 500 decreased 38.5 percent in 2008, the most since the 38.6 percent plunge in 1937, and sank to an 11-year low on Nov. 20. Volatility increased, with the index rising or falling at least 5 percent in a single day 18 times during the year.
Majority analyst believes the worst has been seen, and the market has been holding very well after bad news since November 20, this is a sign of a bottom. Majority believes we are going to see a rebound in both the economy and the stock market in the 2nd half of 2009. 2009 will not be a super year, but it will be better than 2008. Investors should be cautioned against reading too much into Friday's advance due to the light volume. The first full week of the new year
should provide insight into investor sentiment for 2009. Expectations are extremely low for the economy, for corporate earnings and for the stock market itself. We need to see how the market reacts to the economy news and corporate earnings in January, whether a lot of bad news is priced in, and we might see some sell offs.
The S&P 500 climbed 6.8 percent this week, its best week since November, and extended its rebound from Nov. 20 to 24 percent. At its lowest closing level of 2008 on Nov. 20, the S&P 500 was down 49 percent for the year and 52 percent from its Oct. 9, 2007, record of 1,565.15. The plunge came as more than $1 trillion in credit-related losses at global financial companies triggered the first simultaneous recessions in the U.S., Europe and Japan since World War II.
Semiconductor Sales Plunged 9.8% in November
From CNBC: Semiconductor sales plunged 9.8% in November
Semiconductor sales plunged nearly 10 percent in November from a year ago, led by a steep decline in revenue from memory chips.
The news marks the second monthly sales decline for chip companies, whose stocks were battered in 2008 as the recession sapped demand for consumer electronics and prices declined dramatically in some markets.
Semiconductor sales plunged nearly 10 percent in November from a year ago, led by a steep decline in revenue from memory chips.
The news marks the second monthly sales decline for chip companies, whose stocks were battered in 2008 as the recession sapped demand for consumer electronics and prices declined dramatically in some markets.
Sales in November totaled $20.8 billion, down 9.8 percent from the same month a year ago and 7.2 percent from October. Excluding memory chips, the worst hit by falling prices, sales declined by 4.8 percent to $17.3 billion.
Chip sales during the first 11 months of 2008 inched 0.2 percent higher to $232.7 from the year-ago period. Excluding memory products, sales rose 5.6 percent.
Pegging November's revenue decline as the worst since 2002, JPMorgan analyst Christopher Danely cut his sales estimate for the full year 2008 to a 2 percent drop, from a previous forecast of 1 percent growth. In 2009, Danely now expects a 20 percent decline, instead of a 17 percent drop, with a price decline of 9 percent.
Saturday, January 3, 2009
US Manufacturing Orders at 60 Year Low
From Mish: US Manufacturing Orders at 60 Year Low, China Contracts 5th Straight Month
From Yahoo! Finance: Manufacturing Index Drops to 28-Year Low
Signs grew that the economy could turn even weaker in 2009, as an index of December manufacturing activity sank to its lowest point in 28 years. Every corner of the sector was down, from bakeries to cigarette-makers to aluminum smelters.
The Institute for Supply Management, a trade group of purchasing executives, said Friday its manufacturing index fell to 32.4 in December, a greater-than-expected decline from November's reading of 36.2.
From Yahoo! Finance: Manufacturing Index Drops to 28-Year Low
Signs grew that the economy could turn even weaker in 2009, as an index of December manufacturing activity sank to its lowest point in 28 years. Every corner of the sector was down, from bakeries to cigarette-makers to aluminum smelters.
The Institute for Supply Management, a trade group of purchasing executives, said Friday its manufacturing index fell to 32.4 in December, a greater-than-expected decline from November's reading of 36.2.
Components of the index hit historic lows. New orders fell to their lowest level on records going back to 1948. Prices fell as the number of respondents saying they had paid more in December than in November sank to its lowest monthly reading since 1949.
A reading below 50 for the overall index indicates contraction. The index, based on a survey of the institute's members, has fallen steadily for the last five months as the economy deteriorated.
If December's rate of manufacturing activity were to persist for 2009, the nation's gross domestic product would show a 2.7 percent contraction, said Norbert Ore, chairman of the group's business survey committee.
The U.S. weakness is part of a worldwide slowdown. China's manufacturing sector, which accounts for 43 percent of the economy, contracted for a fifth straight month in December. Singapore said its economy shrank in the fourth quarter, and South Korea said its exports fell 17.4 percent in December. With European manufacturing indexes also dropping, "the case for a massive global fiscal stimulus continues to grow," Ryding said.
As the economy sputters through a recession that began in December 2007, no industry is proving resistant. No sector reported overall growth in December. Also, none reported growth in new orders, production, employment or prices, as businesses from tobacco to coal products to foodmakers saw declines. Purchasing managers' employment index showed its lowest reading since 1982 as manufacturers across industries continue to cut jobs.
From Big Picture: Global Manufacturing Collapse
>
Thursday, January 1, 2009
Readings for the Day
From Big Picture: Low Mortgage rates to Spur New waves of defaults
From Big Picture: GMAC decision by the Fed is a Travesty
From Big Picture: Stock Market Internals - Further headway in '09?
From Mish: Case Shiller and CAR Analysis December 2008 Release
From Mish: Treasury Makes Subprime Auto Loans
From Mish: 200,000 Retail Store Closings coming in 2009
From Big Picture: GMAC decision by the Fed is a Travesty
From Big Picture: Stock Market Internals - Further headway in '09?
From Mish: Case Shiller and CAR Analysis December 2008 Release
From Mish: Treasury Makes Subprime Auto Loans
From Mish: 200,000 Retail Store Closings coming in 2009
The most dramatic pullback in consumer spending in decades could transform the retail landscape, as thousands of stores and whole malls close down. And analysts expect prolonged woes in the industry as the dramatic changes in shopping behavior could linger for another two or three years amid worries about the deteriorating economy and rising layoffs.
"You are going to see a substantial retrenchment in the retail industry," said Rick Chesley, partner in the global bankruptcy and restructuring group at international law firm Paul Hastings. "The downturn has been catastrophic."
The retail casualties, which were first among home furnishing stores and then many apparel stores over the past year or so, are expected to cut across all sectors as shoppers have slashed their spending on non-essentials, from TVs to jewelry.
About 160,000 stores will have closed this year and 200,000 more could close next year, said Burt P. Flickinger III, managing director of consulting firm Strategic Resource Group. That would be the industry's biggest contraction in 35 years. Flickinger expects 2,000 to 3,000 malls to close in March and April.
AlixPartners, a turnaround consulting firm, predicts that 25.8 percent of 182 major retailers it tracks are facing major financial distress or will face a significant risk of filing for bankruptcy next year or in 2010 -- the highest level in the 10 years that the firm has been compiling the figures. That compares with the 4 percent to 7 percent that it predicted would face financial woes in the previous two years.
Happy New Year! 2009!
Happy New Year Everyone!
It is glad that 2008 is eventually over, and hopefully 2009 will be a better year.
There will be light posting today with some articles to read.
It is glad that 2008 is eventually over, and hopefully 2009 will be a better year.
There will be light posting today with some articles to read.
Wednesday, December 31, 2008
Last Post of 2008
VIX has hit 90 in October and November, now it is back to below 40 for the first time since early October. Before the turmoil in the stock market in October, VIX with higher than 35 has been considered record high and a turning point.
S&P is above 900, which is a critical resistance level for the S&P - 50DMA
1. Are we going to see high volatility again in 2009?
2. Is the market too dangerous to be short, and way too early to be long?
3. Has market priced in all the bad news already? How will the bad economy news (4th Quarter GDP, retail, unemployment, housing) and a fresh new round of corporate earnings effect the market?
4. Are we going to see a Bear Market Rally until Obama's inauguration? With hope in Obama, will his $1 Trillion Stimulus package help the U.S. and even global economy? Is it good to buy consumer staples and infrastructure stocks?
5. If market is up in January, then the chance of the stock market being positive in the whole year is quite high. Is January going to be a critical month? The economic data for 4Q, 2008 is going to be bleak. While the 1Q 2009 is going to be even worse, since it is often the slowest and weakest quarter of the year. Many analysts suggested the market is going to see a turnaround in the second half of 2009, true? Will cash finally come off and boost the stock market? Will 2009 be better or worse? Depending on housing, treasury, credit spread, unemployment, and etc.
6. What will be the 2009 Strategy, and how to rearrange portfolios to prepare for 2009?
7. Will technology section be the last to drop and first to recover?
8. Will American become the next Japan? A Nation Deep in Debt.
9. Is commodity going to be up in 2009? Oil? Gold? Good to buy UPL, DIG?
10. We are seeing a Treasury bubble right now, short Treasury. Are we going to see an inflation in the end of 2009?
S&P is above 900, which is a critical resistance level for the S&P - 50DMA
1. Are we going to see high volatility again in 2009?
2. Is the market too dangerous to be short, and way too early to be long?
3. Has market priced in all the bad news already? How will the bad economy news (4th Quarter GDP, retail, unemployment, housing) and a fresh new round of corporate earnings effect the market?
4. Are we going to see a Bear Market Rally until Obama's inauguration? With hope in Obama, will his $1 Trillion Stimulus package help the U.S. and even global economy? Is it good to buy consumer staples and infrastructure stocks?
5. If market is up in January, then the chance of the stock market being positive in the whole year is quite high. Is January going to be a critical month? The economic data for 4Q, 2008 is going to be bleak. While the 1Q 2009 is going to be even worse, since it is often the slowest and weakest quarter of the year. Many analysts suggested the market is going to see a turnaround in the second half of 2009, true? Will cash finally come off and boost the stock market? Will 2009 be better or worse? Depending on housing, treasury, credit spread, unemployment, and etc.
6. What will be the 2009 Strategy, and how to rearrange portfolios to prepare for 2009?
7. Will technology section be the last to drop and first to recover?
8. Will American become the next Japan? A Nation Deep in Debt.
9. Is commodity going to be up in 2009? Oil? Gold? Good to buy UPL, DIG?
10. We are seeing a Treasury bubble right now, short Treasury. Are we going to see an inflation in the end of 2009?
Readings for the Day
From CNBC: Hard Time: Gift Cards are used for Cash, Necessities
From Bonddad: Wednesday Commodity Round-Up:
Bottom Line: Technically, the chart wants to rally. But there are no fundamental reasons to commit to the commodities market right now.
From Bonddad: Employment is looking grim
From Calculated Risk: Office rents off as much as 25% in New York
From Bonddad: Wednesday Commodity Round-Up:
Bottom Line: Technically, the chart wants to rally. But there are no fundamental reasons to commit to the commodities market right now.
From Bonddad: Employment is looking grim
From Calculated Risk: Office rents off as much as 25% in New York
“We have fallen further faster than any time in the last 20 years,” said Mitchell S. Steir, chief executive of Studley, a national brokerage firm that represents tenants. “There has been more damage to real estate values in the last four months than in any other four-month period. The pace with which it has occurred has been astonishing.”
...
[B]rokers say that actual rents have fallen much further than the data suggests. Studley said that the asking rents for 40 percent of the spaces included in its research are listed as “negotiable.”
“No one knows what the rents are, because there has been very little activity for the past three months,” said Ruth Colp-Haber, a partner at Wharton Property Advisors, which represents small to medium-size tenants. “No one is paying attention to the asking rents.”
...
[A]ctual rents have slipped as much as 25 percent since the summer, said Mitchell L. Konsker, a vice chairman of Cushman & Wakefield.
Mortgage rates drop to 37-year low
From Yahoo! Finance: Mortgage rates drop to 37-year low
Interest rates on U.S. 30-year fixed-rate mortgages dropped for a ninth consecutive week, reaching their lowest level in 37 years. Interest rates on the 30-year fixed-rate mortgage dropped to an average of 5.10 percent for the week ending Wednesday, down from the previous week's 5.14 percent, Freddie Mac said.
U.S. loan issuance in 2008 tumbled 55 percent to $764 billion, the lowest volume since 1994, as the global credit crunch choked off lending to American businesses, according to data from Reuters Loan Pricing Corp.
Loan issuance was down from $1.69 trillion in 2007 as banks focused on repairing balance sheets damaged by mortgage losses and had little interest in underwriting riskier deals, RLPC reported on Tuesday.
Interest rates on U.S. 30-year fixed-rate mortgages dropped for a ninth consecutive week, reaching their lowest level in 37 years. Interest rates on the 30-year fixed-rate mortgage dropped to an average of 5.10 percent for the week ending Wednesday, down from the previous week's 5.14 percent, Freddie Mac said.
It was the lowest rate for the 30-year fixed-rate mortgage since Freddie Mac started the Primary Mortgage Market Survey in 1971.
Mortgage rates have dropped dramatically since the Federal Reserve unveiled a plan last month to buy up to $500 billion of mortgage securities backed by government-sponsored enterprises Fannie Mae and Freddie Mae, and Ginnie Mae. The program also entails buying up to $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
From Yahoo! Finance: 2008 loan issuance falls 55 percentU.S. loan issuance in 2008 tumbled 55 percent to $764 billion, the lowest volume since 1994, as the global credit crunch choked off lending to American businesses, according to data from Reuters Loan Pricing Corp.
Loan issuance was down from $1.69 trillion in 2007 as banks focused on repairing balance sheets damaged by mortgage losses and had little interest in underwriting riskier deals, RLPC reported on Tuesday.
Investment-grade loans fell to $319 billion, down 52 percent from 2007's 658 billion, while leveraged loan issuance slid to $294 billion, down 57 percent from $689 billion in 2007.
Lending will likely remain anemic in 2009, according to an RLPC quarterly survey of loan market participants. Nearly 54 percent of respondents said their lending will be limited to key relationships.
Institutional loans were especially hard hit as collateralized loan obligations disappeared from the market. Loans purchased by institutional investors slid to $69.6 billion, down 84 percent from 2007's $425.8 billion.
Loans backing leveraged buyouts, a key source of loan growth for the past several years, were down by 80 percent to just $41.3 billion from $209.9 billion.
From Big Picture: Low Mortgage Rates to Spur New Waves of Defaults
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