Briefing.com Intraday Commentary

[BRIEFING.COM] Sellers claimed control of the stock market for the second straight session, pushing the S&P 500 2.3% lower Friday. That left stocks down 0.7% for the week.

Stocks actually began the session with a gain after investors reacted positively to a better-than-feared GDP report. However, a closer look at the data revealed conditions are hardly sound. According to the latest data, the U.S. economy contracted at an annualized rate of 3.8% during the fourth quarter, marking the steepest drop in economic activity since 1982. The decline was less severe than the 5.5% drop that was expected, but that was largely due to an unexpected increase in inventories. Consumer spending, which accounts for roughly 70% of economic activity, remains weak as consumption expenditures dropped at a 3.5% annual rate.

Obama congratulates Iraq for peaceful polls

(RTTNews) - U.S. president Barack Obama congratulated Iraq for holding a largely peaceful vote for provincial councils across the country and called the elections an "important step forward".

Obama said the U.S. is "proud to have provided technical assistance, along with the United Nations and other international organizations, to Iraq's Independent High Electoral Commission, which performed professionally under difficult circumstances."

Voting in the provincial elections ended peacefully amid brisk turnout on Saturday evening. Preliminary results from the electoral commission are expected within five days, while the final numbers are due at the end of February.

Sunnis, who boycotted the January 2005 elections, turned out in force. More than 14,000 candidates were running for just 440 seats on 14 provincial councils. The first nationwide vote in four years is seen as a test of stability before a general election due later this year.

Anti-government rallies staged across Russia as economic woes intensify

(RTTNews) - Thousands of people held anti-government rallies across Russia to protest the government's economic course and its handling of the financial crisis

In Far East cities, including Vladivostok and Khabarovsk, several thousand people hit the streets waving banners with slogans like "The crisis is in the heads of the authorities, not in the economy." They demanded the resignation of Prime Minister Vladimir Putin's government over growing economic problems and accused authorities of suppressing dissent.

In Moscow, Russian police reportedly detained more than 40 people during one protest alone. Meanwhile, government supporters also held their rallies across the country.

Russia has been hit hard by the international economic crisis following year of economic boom amid record high oil prices. However, with the economy in deep trouble, ordinary Russians have been increasingly concerned about what the future might hold as unemployment and the prices of basic food and utilities have risen rapidly.

BOND REPORT: Treasurys Rally After GDP Shrinks Most Since 1982

By Deborah Levine

Treasurys advanced Friday, pushing yields lower, after the worst quarterly contraction in the U.S. economy since 1982 sent investors seeking the safety of government debt.

Yields on two-year notes (UST2YR), which move inversely to the price, fell 3 basis points to 0.93%. A basis point is 0.01%.

Ten-year note yields (UST10Y) declined 2 basis points to 2.84%.

The fourth quarter's 3.8% annualized decline in gross domestic product would have been worse except the government counts an unwanted buildup of goods in stores as growth, even if no one is buying it.

Economists surveyed by MarketWatch expected GDP to contract 5.5% in the three months ended in December.

"This is nothing to get excited about," said Kevin Flanagan, fixed-income strategist at Morgan Stanley Global Wealth Management. "This will serve as a drag in the first quarter. You can't dismiss the facts of where the economy is and that's going to cap rates."

The report's inflation measure excluding food and energy, closely watched by the Federal Reserve, rose 0.6% in the quarter.

LATIN AMERICAN MARKETS: CORRECT: Mexico, Brazil Stumble As U.S. Economic Picture Dims

By Carla Mozee

Four sessions of consecutive advances by Latin American equities came to an end Thursday as investors sifted through another round of poor economic data from the U.S. and took gains off the table.

Mexico's IPC fell 3% to 19,537.05, zapping its 2.7% rise on Wednesday.

Brazil's Bovespa fell 1.5% to 39,638.42, a day after a 3.9% surge.

On Wall Street, the Dow Jones Industrial Average (DJI) dropped 2.7% and the S& P 500 Index (SPX) fell 3.3%.

Regional stocks were hammered as their U.S. counterparts suffered from fresh layoff announcements. Coffee retailer Starbucks Corp. (SBUX) and Eastman Kodak Corp. (EK) were among the companies that said they will cut thousands of jobs in a bid to reduce costs to help offset the impact of the economic recession.

Moving the Market

[BRIEFING.COM] Market participants spent the session focusing on word the government may be close to creating a "bad bank" that will purchase risky assets from existing banks. Divesting risky assets would help banks protect against further asset write-downs, and increase cash on their books. That would help limit the need to raise additional capital, which can be dilutive to shareholders.

Helping financial companies restore their health is largely seen as the first step in repairing the financial system and the broader economy. The financial sector responded by gaining 13%, leading the broader market more than 3% higher.

Wells Fargo (WFC 21.19, +5.00) provided the most support to the financial sector and the broader market. It gained 31%, marking its best single-session performance in months. Wells Fargo won kudos after announcing it is maintaining its dividend, and has no plans to ask for additional TARP capital. Wells Fargo reported a loss of $0.79 per share including items, but a profit of $0.41 per share after excluding the items. The consensus called for earnings of $0.33 per share.

Public trusts business, CEOs, less than ever

Edelman's latest business Trust Barometer finds that corporations and their CEOs have lost considerable credibility with the public in recent months.

The company, a large public relations firm, has put out the Trust Barometer for ten years, with this year's survey including the opinions of 4,475 college-educated people who regularly follow current events, or "informed publics."

According to the findings, 62 percent of respondents say that they trust corporations less than they did a year ago, while only 17 percent said that they trust information provided by a company CEO. The poll found that 38 percent say they trust business to do the right thing, down 20 percent from last year's survey. Also, the poll showed only 13 percent who trust corporate or product advertising, breaking last year's record low of 20 percent.

Venture capital investments down in '08

Venture capital investments were mostly down in 2008, although a couple of categories continued to see growth.

In the latest MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, overall venture capital investments were down eight percent from 2007, while fourth quarter of 2008 investments were at their lowest point since early 2005.

"As we emerge from an extremely difficult year, the venture capital industry is holding
its own and taking steps to adjust to the new reality," Mark Heesen, president of the
NVCA, said in a statement.

BOND REPORT: Treasurys Decline As Stimulus Package Grows

By Deborah Levine

Treasurys declined Wednesday, pushing yields up, as the size of the government's stimulus package grew to nearly $900 billion.

Ten-year note yields (UST10Y) rose 2 basis points to 2.56%. A basis point is 0.01%.

A larger spending plan leads to more debt issuance, making investors demand higher yields.

President Barack Obama's stimulus proposal may be voted on by the House of Representatives later Wednesday.

Reports that the government is moving closer to creating a "bad bank" to buy up toxic assets that have wreaked havoc on the global financial system is also reducing investors' desire for the relative safety of U.S. debt.

Wells Fargo Posts $2.55 Billion Loss; Wachovia's Loss $11 Billion

DOW JONES NEWSWIRES

Wells Fargo & Co. (WFC) swung to a fourth-quarter loss on a $5.6 billion credit reserve on slumping loan quality.

The company also reported that Wachovia, the struggling bank it bought Dec. 31 and didn't include in its bottom line, lost $11 billion in the period.

Wells Fargo agreed in October to acquire Wachovia days after federal regulators brokered a deal for the struggling bank to be acquired by Citigroup Inc. (C).

Wachovia has been weighed down by surging credit losses, notably related to its purchase several years ago of California-based mortgage lender Golden West. That saddled Wachovia with more-exotic loans that have been going bad fast as the housing market continues to deflate.

NY Times' 4Q Net Down 48%; May Sell New England Sports Stake

DOW JONES NEWSWIRES

New York Times Co.'s (NYT) fourth-quarter net income plummeted 48% as weak online advertising sales added to its print-advertising woes.

The publisher of The New York Times and The Boston Globe also said it is exploring a sale of its 18% stake in New England Sports Ventures LLC, owner of baseball's Boston Red Sox and Fenway Park as well as 80% of New England Sports Network. It bought the stake in 2002 and is considering a sale as the cash- strapped company looks to raise capital.

It also warned that crumbling equity markets have "adversely" affected the status of its pension plans, leaving it underfunded by an estimated $625 million. It said it will have to fund the deficiency over seven years, assuming harsh conditions continue.

That is not good news for a company already grappling to restructure debt and cut costs in efforts to boost its liquidity. New York Times got a $250 million cash infusion earlier this month from Mexican billionaire Carlos Slim and is nearing a deal to raise as much as $225 million from a sale-leaseback of its share of its midtown Manhattan headquarters.

BOND REPORT: Treasurys Under Pressure Ahead Of Fed Meeting

By Deborah Levine

Treasurys were little changed on Wednesday, recovering from earlier losses as the size of the government's stimulus package grew to nearly $900 billion.

Traders are also focused on what the Federal Reserve will say when the central bank ends its policy meeting later on.

Yields on the two-year note (UST2YR), which move inversely to the price, rose 1 basis point to 0.88%. A basis point is 0.01%.

Ten-year note yields (UST10Y) were little changed at 2.53%.

A larger spending plan leads to more debt issuance, making investors demand higher yields.

President Barack Obama's stimulus proposal may be voted on by the House of Representatives later Wednesday.