Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm, reported earnings that beat analysts' estimates, easing concern that losses from the mortgage market are eroding its capital.
Lehman surged 18 percent in New York trading after falling a record 19 percent yesterday. First-quarter net income declined 57 percent to $489 million, or 81 cents a share, the New York-based company said in a statement today. Analysts had estimated Lehman would earn 72 cents a share.
Tuesday, March 18, 2008
Goldman Sachs Beats 1Q Expectations
Goldman Sachs Group Inc., the world's largest investment bank, on Tuesday reported stronger asset management and commodities performance pushed first-quarter results well above Wall Street projections.
However, the investment house was not vulnerable to the global credit crisis. Goldman posted net losses on residential mortgages and securities of $1 billion, credit products produced another $1 billion loss, and investment banking returns were sluggish.
"Market conditions are clearly very difficult," Chairman and Chief Executive Lloyd Blankfein said in a statement.
Goldman reported first-quarter earnings of $1.47 billion after preferred dividends, or $3.23 per share, down from $3.2 billion, or $6.67 per share, last year. Revenue fell to $8.33 billion from $12.73 billion a year earlier.
Analysts polled by Thomson Financial on average expected earnings of $2.58 per share on $7.47 billion in revenue. Reflecting the uncertain nature of the times, the 18 analysts reporting earnings estimates had forecast anything from $1.95 to $3.40 per share in profits.
Shares of the company rose 6 percent to $160.05 in premarket trading from a $151.02 close Monday.
However, the investment house was not vulnerable to the global credit crisis. Goldman posted net losses on residential mortgages and securities of $1 billion, credit products produced another $1 billion loss, and investment banking returns were sluggish.
"Market conditions are clearly very difficult," Chairman and Chief Executive Lloyd Blankfein said in a statement.
Goldman reported first-quarter earnings of $1.47 billion after preferred dividends, or $3.23 per share, down from $3.2 billion, or $6.67 per share, last year. Revenue fell to $8.33 billion from $12.73 billion a year earlier.
Analysts polled by Thomson Financial on average expected earnings of $2.58 per share on $7.47 billion in revenue. Reflecting the uncertain nature of the times, the 18 analysts reporting earnings estimates had forecast anything from $1.95 to $3.40 per share in profits.
Shares of the company rose 6 percent to $160.05 in premarket trading from a $151.02 close Monday.
US Stocks Heading for Higher Open
Stocks were poised to open higher Tuesday as investors anticipated a massive interest rate cut from the Federal Reserve just two days after the central bank backed JPMorgan's buy of Bear Stearns and also loosened up its lending.
In the meantime, investors will be hearing from two rivals of Bear Stearns Cos. -- Lehman Brothers Inc. and Goldman Sachs Group Inc. -- which are scheduled to release their fiscal first-quarter earnings Tuesday morning. Both are expected to post profits, but profits that are significantly lower than they were a year ago. Investors will want to get more details about the souring mortgage-backed bets on their books.
Stockholders have been especially pessimistic about Lehman Brothers, as it is the investment bank most similar in structure and exposure to Bear Stearns. Lehman shares fell 19 percent on Monday after JPMorgan Chase & Co. said Sunday it was buying Bear Stearns for just $2 a share, or $236 million.
The Fed on Sunday, in addition to guaranteeing up to $30 billion of Bear's most troubled assets for JPMorgan, lowered its discount rate -- the rate it charges banks directly -- by a quarter-point. It also is allowing more types of financial firms to borrow from the central bank, and is accepting more various types of collateral.
In the meantime, investors will be hearing from two rivals of Bear Stearns Cos. -- Lehman Brothers Inc. and Goldman Sachs Group Inc. -- which are scheduled to release their fiscal first-quarter earnings Tuesday morning. Both are expected to post profits, but profits that are significantly lower than they were a year ago. Investors will want to get more details about the souring mortgage-backed bets on their books.
Stockholders have been especially pessimistic about Lehman Brothers, as it is the investment bank most similar in structure and exposure to Bear Stearns. Lehman shares fell 19 percent on Monday after JPMorgan Chase & Co. said Sunday it was buying Bear Stearns for just $2 a share, or $236 million.
The Fed on Sunday, in addition to guaranteeing up to $30 billion of Bear's most troubled assets for JPMorgan, lowered its discount rate -- the rate it charges banks directly -- by a quarter-point. It also is allowing more types of financial firms to borrow from the central bank, and is accepting more various types of collateral.
After Bear Stearns Rescue, Who's Next?
With a deal in place to save Bear Stearns from bankruptcy, the company's shares traded above the offer price Monday even as investors began turning a critical eye to other investment banks amid worries about how far the credit contagion could spread.
Despite the weekend agreement for JPMorgan Chase & Co. to buy Bear Stearns for a fraction of its value last week, worries that other banks had sizable exposure to troubled credit markets sent global markets tumbling. The uncertainty was evident on Wall Street, where the Dow Jones industrials sank by more than 100 points.
At Bear Stearns' 47-story headquarters in midtown Manhattan, many employees said they still couldn't believe that the nation's fifth-largest investment bank is -- essentially -- out of business. Employees said there was no meeting to inform employees about what was happening.
"It's my first job out of school. I thought it was a big company -- it would be good experience," said Ki Byung, who works for a division of Bear Stearns. "Now after a couple of months something like this happens."
A complete collapse of Bear Stearns might have crushed the already-dwindling confidence in the global financial system, which has frozen up after last year's troubles in the subprime mortgage market.
Bear Stearns was the most exposed to risky bets on the loans; it is now the first major bank to be undone by that market's collapse. But the fact that a major investment bank could reach the verge of buckling -- and be sold at such a discount -- sent dismay through Wall Street and beyond.
"One reaction is shock that a company that reaffirmed its book value at around $84 on Wednesday can be worth $2 per share four days later on Sunday," said Deutsche Bank analyst Mike Mayo.
With Bear Stearns seemingly gone, investors pondered who might be next. Lehman Brothers Holding Inc. stock fell more than 34 percent Monday, following a 15 percent drop on Friday amid concerns it might be facing similar liquidity issues. Lehman Chief Executive Richard Fuld denied Monday that the firm was having such problems.
Bear Stearns shares fell $26.32, or 87.7 percent, to $3.68 -- above the shockingly low price of $2 per share that JPMorgan Chase is paying -- while JPMorgan rose $3.03, or 8.3 percent, to $39.57. UBS AG, hit hard by the same type of write-downs for mortgages that felled Bear Stearns, dropped nearly 12 percent in Zurich.
JPMorgan announced Sunday night that it would acquire Bear Stearns for $236.2 million in a deal that was fast-tracked by the federal government to avoid a bankruptcy. The price represents roughly 1 percent of what the investment bank was worth just 16 days ago.
The Federal Reserve and the U.S. government swiftly approved the all-stock buyout to complete the deal before world markets opened. The Fed also essentially made the takeover risk-free by saying it would guarantee up to $30 billion of the troubled mortgage and other assets that got the nation's fifth-largest investment bank into trouble.
JPMorgan said it will guarantee all business -- such as trading and investment banking -- until Bear Stearns' shareholders approve the deal, expected to be completed during the second quarter. The acquisition includes Bear Stearns' headquarters, which as one of the world's tallest buildings could fetch more than $1 billion in a sale.
JPMorgan Chief Financial Officer Michael Cavanagh did not say what would happen to Bear Stearns' 14,000 employees worldwide, or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression and a slew of recessions. He told analysts and investors on a conference call that JPMorgan was most interested in buying Bear Stearns' prime brokerage business, which completes trades for big investors such as hedge funds.
Despite the weekend agreement for JPMorgan Chase & Co. to buy Bear Stearns for a fraction of its value last week, worries that other banks had sizable exposure to troubled credit markets sent global markets tumbling. The uncertainty was evident on Wall Street, where the Dow Jones industrials sank by more than 100 points.
At Bear Stearns' 47-story headquarters in midtown Manhattan, many employees said they still couldn't believe that the nation's fifth-largest investment bank is -- essentially -- out of business. Employees said there was no meeting to inform employees about what was happening.
"It's my first job out of school. I thought it was a big company -- it would be good experience," said Ki Byung, who works for a division of Bear Stearns. "Now after a couple of months something like this happens."
A complete collapse of Bear Stearns might have crushed the already-dwindling confidence in the global financial system, which has frozen up after last year's troubles in the subprime mortgage market.
Bear Stearns was the most exposed to risky bets on the loans; it is now the first major bank to be undone by that market's collapse. But the fact that a major investment bank could reach the verge of buckling -- and be sold at such a discount -- sent dismay through Wall Street and beyond.
"One reaction is shock that a company that reaffirmed its book value at around $84 on Wednesday can be worth $2 per share four days later on Sunday," said Deutsche Bank analyst Mike Mayo.
With Bear Stearns seemingly gone, investors pondered who might be next. Lehman Brothers Holding Inc. stock fell more than 34 percent Monday, following a 15 percent drop on Friday amid concerns it might be facing similar liquidity issues. Lehman Chief Executive Richard Fuld denied Monday that the firm was having such problems.
Bear Stearns shares fell $26.32, or 87.7 percent, to $3.68 -- above the shockingly low price of $2 per share that JPMorgan Chase is paying -- while JPMorgan rose $3.03, or 8.3 percent, to $39.57. UBS AG, hit hard by the same type of write-downs for mortgages that felled Bear Stearns, dropped nearly 12 percent in Zurich.
JPMorgan announced Sunday night that it would acquire Bear Stearns for $236.2 million in a deal that was fast-tracked by the federal government to avoid a bankruptcy. The price represents roughly 1 percent of what the investment bank was worth just 16 days ago.
The Federal Reserve and the U.S. government swiftly approved the all-stock buyout to complete the deal before world markets opened. The Fed also essentially made the takeover risk-free by saying it would guarantee up to $30 billion of the troubled mortgage and other assets that got the nation's fifth-largest investment bank into trouble.
JPMorgan said it will guarantee all business -- such as trading and investment banking -- until Bear Stearns' shareholders approve the deal, expected to be completed during the second quarter. The acquisition includes Bear Stearns' headquarters, which as one of the world's tallest buildings could fetch more than $1 billion in a sale.
JPMorgan Chief Financial Officer Michael Cavanagh did not say what would happen to Bear Stearns' 14,000 employees worldwide, or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression and a slew of recessions. He told analysts and investors on a conference call that JPMorgan was most interested in buying Bear Stearns' prime brokerage business, which completes trades for big investors such as hedge funds.
Bernanke May Cut Benchmark Rate by Most Since Volcker
Federal Reserve Chairman Ben S. Bernanke may be readying the deepest interest-rate cut in a generation as the central bank struggles to prevent a meltdown in financial markets and a recession.
Traders predict the Federal Open Market Committee, meeting today in Washington, will lower the overnight lending rate by a full percentage point or more, based on futures prices in Chicago. That would be the biggest reduction since 1984, when Paul Volcker led the central bank, and would bring the benchmark rate down to 2 percent.
The Fed took emergency steps over the weekend to stave off a financial panic, lowering its rate on direct loans to banks and becoming lender of last resort for Wall Street's biggest dealers in government bonds.
Traders predict the Federal Open Market Committee, meeting today in Washington, will lower the overnight lending rate by a full percentage point or more, based on futures prices in Chicago. That would be the biggest reduction since 1984, when Paul Volcker led the central bank, and would bring the benchmark rate down to 2 percent.
The Fed took emergency steps over the weekend to stave off a financial panic, lowering its rate on direct loans to banks and becoming lender of last resort for Wall Street's biggest dealers in government bonds.
MARKET OUTLOOK
GLOBAL MARKET IS MIXED. YESTERDAY ACCROSS THE BOARD WE SAW HEAVY SELLING,FII TURNED NET SELLER THROUGH OUT THE MONTH,SHORT POSITION IS BUILDING UP IN EVERY SECTOR.LEVEL TO BE WATCH OUT FOR NIFTY IS 4450-4500-4550-4600.IF NIFTY TOUCH 4600 AND ABOVE THEN CAN ASSUME LONG POSITION OTHER WISE FROM 4500 LEVEL LONG CAN ASSUME WITH A FINAL S L OF 4450 FOR ALL LONG.SECTOR COULD BE WATCH OUT FOR THE DAY INFRA&OIL GAS FOR LONG AND METAL FOR SHORT.
HAVE A NICE TRADING DAY
HAVE A NICE TRADING DAY
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