Markets Lower, Closing News 8/8/11

The Dow fell over 600 points today following Friday night’s  announcement by S&P to downgrade the US credit rating from AAA to AA+. The Dow closed below 11,000 for the first time since October 19, continuing the historic slide that has seen the Dow lose 11% and the S&P lose 13% since the beginning of the month.

The President addressed the decision by S&P to cut the US credit rating to AA+ this afternoon. The President said he does not believe that the cut was merited, and that he considers America to be a AAA nation. The President also said that Congress needs to extend payroll tax cuts and unemployment benefits to avoid stunting economic growth.

S&P announced today that in connection with the US credit rating cut, it was also cutting the ratings for DTCC, OCC, National Securities Clearing Corp, and Fixed Income Clearing Corp. from AAA to AA+. S&P also announced that the ratings for ADP, Exxonmobil, J&J, Microsoft, GE, and WW Grainger will not be affected because of their global reach.

On a conference call last night, the European Central Bank announced it has purchased an estimated €2 billion in Italian and Spanish debt. The other major announcement on the call was that the Euro-zone rescue fund will begin buying back bonds when it is operational, which is expected within three months. Jean Claude Trichet said the ECB deviated from their policy because markets were not reacting to their policies. Trichet also denied that the Euro as a currency is not in any danger, and confirmed the ECB will hold the Spanish and Italian bonds to insure it gets repaid.

Gold extended its run of new highs, crossing over the $1,700 per ounce mark (hit intraday high of $1,723.40) as investors flock to safety. In another sign of how much fear and volatility is in the market right now, the VIX jumped 45.16% today, hitting a new annual high of 46.90.

In an interview over the weekend, Treasury Secretary Tim Geithner told CNBC and NBC that he will not step down from his post, saying that he loves his work and will continue as the Treasury Secretary as per the President’s request. Mr. Geithner also said he does not think the US is at risk for another recession despite the downgrade because the government has the tools to strengthen the economy in the short-term.

Thoughts and prayers go out to the families of the 30 servicemen who gave their lives in the helicopter crash in Afghanistan over the weekend. 20 of the 30 servicemen killed were a part of SEAL Team 6 that was involved in the operation that killed Osama Bin Laden in May.

Market Indices/Statistics:

  • Dow closed down 634.76 pts/-5.55% to 10,809.85
  • S&P closed down 79.81 pts/-6.65% to 1,119.57
  • Nasdaq closed down 174.72 pts/-6.90% to 2,357.69
  • All 30 Dow stocks closed lower (four by more than 9%)
  • All 10 S&P 500 sectors closed lower (five by more than 6%)
  • Financials was the worst performing sector (down 9.08%)
  • The VIX was up 15.41 pts to 47.41
  • Oil is down $6.38 to $80.51
  • Nat Gas is up $0.018 to $3.959
  • Gold is up $64.80 to $1,716.04
  • Euro vs. Dollar down $0.0194 to $1.4190
  • Dollar vs. Yen down $0.52 to $77.60

Companies in the News:

Bank of America fell 20.32% to $6.51, the lowest level since April 1, 2009, on speculation that the Dow component may need to raise capital to meet regulatory requirements. A Bank of America spokesperson stated that the company has more than enough capital to operate, and that there are no plans to raise capital. BAC shares were also under pressure after AIG sued Bank of America for $10 billion based on the accusation that BofA deceived investors when selling mortgage debt.

Shares of Transatlantic Holdings finished higher (+6.79% to $48.31) after Berkshire Hathaway unit National Indemnity proposed to acquire Transatlantic for $52 a share, a deal valued at $3.2 billion, over the weekend.

ExamWorks Group, Inc. closed lower today (-5.00% to $13.10) despite announcing a $20 million share repurchase program, and that the company expects an additional $40 million annual revenue by the end of 2011.

Earnings:

Tyson Foods beat earnings estimates this morning, announcing Q3 earnings per share of $0.51 vs. estimates of $0.40 per share. Tyson also announced that they are forecasting annual revenue to be more than $32 billion, again beating analysts’ estimates of $31.9 billion for the year. Shares of TSN traded lower (-3.86% to $15.68) today as a part of the broader market sell-off.

Shares of US Cellular fell 9.14% to $36.07 in trading today after reporting Q2 earnings before the opening bell this morning.  While earnings ($0.87 per share vs. $0.40 consensus) beat consensus, shares were under added pressure today because the customer base fell to 5.97 million, down from 6.14 from last year.

Dynegy Inc. slid today (-10.81% to $4.37) after reporting a Q2 loss of $0.95 per share, missing estimates of a loss of $0.49 per share. The loss comes during a reorganization that prevented the company from providing full-year guidance for either profit or revenue.

Dollar Thrifty Automotive Group announced earnings this morning, reporting earnings of $1.35 per share on $395 million revenue, just below estimates of $1.37 on $408 million. Shares were pushed lower (-12.75% to $58.79) after the CEO commented that if the rate environment does not improve it will impact revenue growth, and results will be in-line with 2010.

Coming Tuesday:

Economic Reports: Productivity (expected to be -0.8%) and Unit Labor Costs (expected to be 0.7%) at 8:30 am and the FOMC Statement at 2:15 pm; Earnings from AOL, Beazer Homes, KAR Auction Services,  Walt Disney Co.