Wednesday morning, ADP reported a loss of 20,236,000 US private sector jobs in April, a record likely never to be broken again (unless an asteroid hits somewhere along the East or West coast).
Job losses covered the entire spectrum, with 11,274,000 jobs lost by businesses with fewer than 500 employees, and 8,963,000 losses by businesses with over 500 employees. The numbers comfirm what everybody already knows, that the United States and the world at large are at the beginning of a Greater Depression, many metrics having already surpassed the Great Depression of the 1930s.
For the week ending May 1, US residential mortgage applications edged up 0.1% while the interest rate on a 30-year fixed loan fell to its lowest level ever, checking in at 3.4%, according to the Mortgage Bankers Association. Purchase activity remains almost 19 percent below year-ago levels.
Stocks gained on Tuesday, though the rally was shunted late in the day, shaving off roughly two-thirds of the gains in the final hour of trading.
While stocks seem to be always going up in recent days, all rallies have been capped by violent resurges of selling, as was the case on Friday, when the major indices gave back all the gains of the week in one session. Stocks have traded in a relatively stable, narrow range since April 6, after the markets had rebounded smartly off the March lows. The S&P 500, during that span, has fluctuated between a low of 2663 and a high of 2939, the all time high of 3386.15 (February 19, 2020) a fading memory.
COVID-19 and the government response to the outbreak has caused wild swings, anguish, and some recovery, after the Federal Reserve, in conjunction with the US Treasury Department has sought to stabilize equity markets, buying up every losing asset they could find, from junk bonds to munis.
Despite the gargantuan lifting by the Fed, stocks are still being stung by first quarter earnings releases showing how disruptive just two to three weeks of partial shutdown (late March) had on the bottom line of various companies.
One of the latest casualties is Disney (DIS), which posted first quarter earnings (fiscal second quarter) of 60 cents against expectations for 91 cents after the closing bell Tuesday. The company, which owns a variety of media and entertainment assets, including movies, ABC, ESPN, Disneyland, DisneyWorld, and other theme parks around the world, also found it necessary to eliminate its semiannual dividend of 88 cents per share for the first half of their fiscal year (October-March). Instead of paying out the $1.6 billion to shareholders, the company will keep the cash for itself, ostensibly to cover ongoing expenses.
Profits at the "magic kingdom" fell 90% year-over-year.
Putting it bluntly, the Mouse in the House just screwed over a large swath of investors expecting a payout on the dividend. Imagine the frustration and angst of not only seeing the stock fall from an all-time high of 161 (November, 2019) to as low as 85 in March, but now to have what was thought to be a guaranteed dividend denied. The stock is trading right around 100 per share as of Tuesday's close.
Also cutting its dividend, Wendy's Co. (WEN) reported Wednesday that its first-quarter net income declined 54.9 percent to $14.4 million from last year's $31.9 million.
Earnings per share were $0.06, down 57.1 percent from $0.14 a year ago. Adjusted earnings per share were $0.09, compared to prior year's $0.14. The company - which reported flat to declining same-store sales across all markets and a number of outlets running out of beef patties on Tuesday - lowered its dividend for the second quarter from 12 cents per share to 5 cents per share, payable on June 15, to shareholders of record as of June 1.
On Tuesday, shares of rental car company Hertz (HTZ) fell more than 14% after it disclosed that it received approval from its lenders to continue negotiations through May 22 to “develop a financing strategy and structure that better reflects the economic impact" of COVID-19. The company, which operates rental car business, many located at airports around the country, is on the ropes and close to filing Chapter 11 reorganization bankruptcy.
Shares of the company, which had reached a 52-week high of 20.29 on February 20, have slid to three dollars in May, closing at 3.01 on Tuesday.
Also on the ropes are retailers Nordstrom (JWN), closing 16 stores permanently, and J. Crew (private), which filed for chapter 11 on Tuesday. Neiman Marcus is reportedly close to chapter 11, and rumors that JC Penny's is in talks with lenders are circulating. An avalanche of store closings, restructurings, and bankruptcies are expected in the sector over the next few weeks and months.
Amid all the chaos, most analysts still insist that major banking firms, such as Bank of America (BAC), wells Fargo (WFC), Citi (C), and JP Morgan (JPM), are all well enough capitalized to survive cascading defaults in commercial real estate, residential real estate, consumer brands, lines of credit, credit cards, student loans and other funding vehicles.
Others are not so certain, expecting rather that the entire edifice of global debt is about to become torn down amid a worldwide pandemic and depression resulting in the collapse of fiat currencies, governments, and central banks.
Whatever your individual outlook, it may be wise to amplify that to the downside by orders of magnitude.
At the Close, Tuesday, May 5, 2020:
Dow: 23,883.09, +133.33 (+0.56%)
NASDAQ: 8,809.12, +98.41 (+1.13%)
S&P 500: 2,868.44, +25.70 (+0.90%)
NYSE: 11,135.40, +79.12 (+0.72%)
Showing posts with label DIS. Show all posts
Showing posts with label DIS. Show all posts
Wednesday, May 6, 2020
Wednesday, February 4, 2009
Bye, Bye, Bank of America
There was a rally underway on Wall Street, until, that is, around 10:30 am, when President Obama announced that executive pay for bankers whose institutions receive TARP funds would be capped at $500,000. That's when stocks peaked, eventually losing more than 200 points from top to bottom on the Dow, which was the worst affected of all indices.
Dow 7,956.66, -121.70 (1.51%)
NASDAQ 1,515.05, -1.25 (0.08%)
S&P 500 832.23, -6.28 (0.75%)
NYSE Composite 5,242.75, -25.27 (0.48%)
The blue chips were aided in their descent by 4th quarter earnings reports from Disney (DIS) and Kraft (KFT), in addition to Bank of America (BAC), which reportedly lost 12 investment bankers on the Obama announcement, jumping ship to join Deutsche Bank (DB), which has received no TARP funds nor money from their home, German government.
Among the three big losers on the Dow, Kraft posted a 72% earnings decline year-over-year, losing 9% on the day as traders punished the stock, sending it to 26.13, down 2.61 at the close. Disney suffered through a troubling fiscal first quarter, earning 45 cents a share in the quarter ended Dec. 27, compared with 63 cents a share, in the same quarter a year ago. Disney finished at 19.00, off 1.60, a 7.8% loss.
Bank of America was hit with massive selling, with more than 600 million shares changing hands, almost 4 times the average daily volume. shares fell to 4.60, a 17-year low, off 0.60, a decline of more than 11%. The number of shares trading is significant in that many funds, by charter, cannot maintain positions in stocks valued under $5 per share. The rout of the bank's backers should continue as long as the company's shares remain at depressed levels.
In truth, Bank of America should already have filed for bankruptcy protection as its operations have been underwater for quite some time. Continuing to shovel money into the bottomless pits of BofA and Citigroup, particularly, has been a mistake from the very start. No business is "too big to fail" and pouring taxpayer money into these obviously failed institutions is a monumental blunder on the part of the federal government, more likely to prolong and deepen the financial crisis than repair it.
A very astute rendering of the current economic malaise is offered by Ismael Hossein Zadeh, in "Too Big to Fail:" a Bailout Hoax at counterpunch.org. This article should be required reading for all of our elected federal officials, who, as a group, are poorly prepared to handle any kind of economy, especially one which is in dire straits.
Sadly, most of them will not read it or any other tract on economics, being that, for most of them, their major accomplishments involve using other people's money to land big-time government jobs. Of all the 650 or so congresspeople there is maybe a handful (10 to 20) who really have a grasp for economics of this scale. The rest simply are led by their noses by supposed government "experts" who dictate policy. There's little doubt that the worst enemy of the United States of America does not domicile in Afghan or Pakistani caves, but in tony residences around the Capitol. The lot of them and their predecessors has led America down this path of destruction since 1980 at least. Those currently holding office in congress will certainly finish the job in a smashing manner, impoverishing the nation in a manner never before seen.
As for the president who promised change, little has. Instead, he has surrounded himself with the very same people who are responsible for the whole mess. Yes, I voted for him, thinking he could turn around many of our mistakes, but, thus far, he has been a huge disappointment, favoring massive deficit spending over actual, practical solutions, like cutting the payroll tax, surely the easiest and quickest way to stimulate the overall economy.
Interestingly, and probably not coincidentally, today's morning rally stalled out just above my magic 8149.09 mark, the level which cannot be penetrated before lows are retested. This number is turning out to be a very strong resistance point, one that could endure for months, if not years. The Dow needs to fall further and our economy needs to find a solid footing before advancing in any meaningful way. That, sadly, is also months, or years, away and seemingly getting pushed further along the horizon every day.
The sooner the pols in Washington realize that decentralization of everything from the energy grid to banking to politics is at the heart of recovery, the sooner various parts of the country can begin to function well again. What's interesting and even amusing about this economic era is that the people being damaged the most are, not in any particular order, the rich, Wall Street, and Washington politicians, the last of which is rapidly losing credibility and relevance.
Recovery will begin more on local levels than at the federal. Communities with forward-looking. realistic activists will be better prepared to deal with the downturn and offer solutions for recovery. Those solutions will be more proactive and less involved with government and other macro-style solutions. They are likely to be based on models of sustainability, conservation and localism. The ideas are emerging. Many of them will be featured on this very blog as they become evident.
On the day, market internals confirmed the absolute pummeling the markets took on Wednesday. Declining issues overwhelmed advancers, 3732-2766. New lows expanded their edge over new highs, 235-17. Volume was strong, indicating that the decline is gaining momentum.
NYSE Volume 6,413,953,000
NASDAQ Volume 2,187,395,750
Commodities continue to trade in mixed fashion with oil falling 46 cents to $40.32, while gold gained $9.70, to $902.20, and silver posting a 17 cent gain, to $12.47. This is likely a trend which will continue. Commodities which are used widely - energy and food stocks - should continue to feel the pinch of deflation, while the safety of the precious metals will attract smart money seeking safety. Naturally, when the real effects of government overspending become evident in a weakened dollar, those same commodities should rise, and the metals will go parabolic. That eventuality is likely 2-3 years away, maybe longer.
In the interim, the US and world economies are undergoing a massive shift from globalization to localization. More and more people every day are understanding that their basic needs are not being met by government and ultra-national corporate entities, but by local economies, farms, businesses and people. This could be the beginning of the absolute end of big government in its many layers. From towns and villages all the way up to the federal level, the American public is increasingly weary of being overtaxed and underserved, harassed and obligated to the very institutions which are supposed to support and protect us.
Wall Street and Washington has screwed us all the way down. The American people will fix this on the way up, but, like a drunk with a problem, the first step is bottoming out, and we haven't done that yet. Mostly, we are still in denial.
More tomorrow.
Dow 7,956.66, -121.70 (1.51%)
NASDAQ 1,515.05, -1.25 (0.08%)
S&P 500 832.23, -6.28 (0.75%)
NYSE Composite 5,242.75, -25.27 (0.48%)
The blue chips were aided in their descent by 4th quarter earnings reports from Disney (DIS) and Kraft (KFT), in addition to Bank of America (BAC), which reportedly lost 12 investment bankers on the Obama announcement, jumping ship to join Deutsche Bank (DB), which has received no TARP funds nor money from their home, German government.
Among the three big losers on the Dow, Kraft posted a 72% earnings decline year-over-year, losing 9% on the day as traders punished the stock, sending it to 26.13, down 2.61 at the close. Disney suffered through a troubling fiscal first quarter, earning 45 cents a share in the quarter ended Dec. 27, compared with 63 cents a share, in the same quarter a year ago. Disney finished at 19.00, off 1.60, a 7.8% loss.
Bank of America was hit with massive selling, with more than 600 million shares changing hands, almost 4 times the average daily volume. shares fell to 4.60, a 17-year low, off 0.60, a decline of more than 11%. The number of shares trading is significant in that many funds, by charter, cannot maintain positions in stocks valued under $5 per share. The rout of the bank's backers should continue as long as the company's shares remain at depressed levels.
In truth, Bank of America should already have filed for bankruptcy protection as its operations have been underwater for quite some time. Continuing to shovel money into the bottomless pits of BofA and Citigroup, particularly, has been a mistake from the very start. No business is "too big to fail" and pouring taxpayer money into these obviously failed institutions is a monumental blunder on the part of the federal government, more likely to prolong and deepen the financial crisis than repair it.
A very astute rendering of the current economic malaise is offered by Ismael Hossein Zadeh, in "Too Big to Fail:" a Bailout Hoax at counterpunch.org. This article should be required reading for all of our elected federal officials, who, as a group, are poorly prepared to handle any kind of economy, especially one which is in dire straits.
Sadly, most of them will not read it or any other tract on economics, being that, for most of them, their major accomplishments involve using other people's money to land big-time government jobs. Of all the 650 or so congresspeople there is maybe a handful (10 to 20) who really have a grasp for economics of this scale. The rest simply are led by their noses by supposed government "experts" who dictate policy. There's little doubt that the worst enemy of the United States of America does not domicile in Afghan or Pakistani caves, but in tony residences around the Capitol. The lot of them and their predecessors has led America down this path of destruction since 1980 at least. Those currently holding office in congress will certainly finish the job in a smashing manner, impoverishing the nation in a manner never before seen.
As for the president who promised change, little has. Instead, he has surrounded himself with the very same people who are responsible for the whole mess. Yes, I voted for him, thinking he could turn around many of our mistakes, but, thus far, he has been a huge disappointment, favoring massive deficit spending over actual, practical solutions, like cutting the payroll tax, surely the easiest and quickest way to stimulate the overall economy.
Interestingly, and probably not coincidentally, today's morning rally stalled out just above my magic 8149.09 mark, the level which cannot be penetrated before lows are retested. This number is turning out to be a very strong resistance point, one that could endure for months, if not years. The Dow needs to fall further and our economy needs to find a solid footing before advancing in any meaningful way. That, sadly, is also months, or years, away and seemingly getting pushed further along the horizon every day.
The sooner the pols in Washington realize that decentralization of everything from the energy grid to banking to politics is at the heart of recovery, the sooner various parts of the country can begin to function well again. What's interesting and even amusing about this economic era is that the people being damaged the most are, not in any particular order, the rich, Wall Street, and Washington politicians, the last of which is rapidly losing credibility and relevance.
Recovery will begin more on local levels than at the federal. Communities with forward-looking. realistic activists will be better prepared to deal with the downturn and offer solutions for recovery. Those solutions will be more proactive and less involved with government and other macro-style solutions. They are likely to be based on models of sustainability, conservation and localism. The ideas are emerging. Many of them will be featured on this very blog as they become evident.
On the day, market internals confirmed the absolute pummeling the markets took on Wednesday. Declining issues overwhelmed advancers, 3732-2766. New lows expanded their edge over new highs, 235-17. Volume was strong, indicating that the decline is gaining momentum.
NYSE Volume 6,413,953,000
NASDAQ Volume 2,187,395,750
Commodities continue to trade in mixed fashion with oil falling 46 cents to $40.32, while gold gained $9.70, to $902.20, and silver posting a 17 cent gain, to $12.47. This is likely a trend which will continue. Commodities which are used widely - energy and food stocks - should continue to feel the pinch of deflation, while the safety of the precious metals will attract smart money seeking safety. Naturally, when the real effects of government overspending become evident in a weakened dollar, those same commodities should rise, and the metals will go parabolic. That eventuality is likely 2-3 years away, maybe longer.
In the interim, the US and world economies are undergoing a massive shift from globalization to localization. More and more people every day are understanding that their basic needs are not being met by government and ultra-national corporate entities, but by local economies, farms, businesses and people. This could be the beginning of the absolute end of big government in its many layers. From towns and villages all the way up to the federal level, the American public is increasingly weary of being overtaxed and underserved, harassed and obligated to the very institutions which are supposed to support and protect us.
Wall Street and Washington has screwed us all the way down. The American people will fix this on the way up, but, like a drunk with a problem, the first step is bottoming out, and we haven't done that yet. Mostly, we are still in denial.
More tomorrow.
Subscribe to:
Posts (Atom)
Posts
