Stocks finished mixed Monday as investors focused on earnings and prepared for a possible bankruptcy filing by General Motors (GM). The Treasury Dept. is directing GM to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite GM's public contention that it could still reorganize outside court, according to The New York Times.
Gains among financials ahead of first quarter earnings reports due from Goldman Sachs (GS), Citigroup (C), and some other banks this week helped offset some profit taking in the broader market as well as a plunge in GM shares on renewed bankruptcy speculation and a drop in Boeing (BA) shares on 777 production cutbacks.
Goldman Sachs, which released its first quarter earnings a day ahead of schedule, surpassed Wall Street's expectations. It posted EPS of $3.39, above analysts' forecast of $1.64 per share.
Earlier, the company said it planned to raise $5 billion in stock to help it pay back government bailout funds. Ahead of Goldman Sachs' earnings report, a Citigroup analyst initiated coverage on Goldman shares with a buy rating, saying the shares are attractively priced at a modest premium to tangible book.
On Monday, the 30-stock Dow Jones industrial average fell 25.57 points, or 0.32%, to 8,057.81. The broad S&P 500 index edged up 2.17 points, or 0.25%, to 858.73. The tech-heavy Nasdaq composite index ended the session essentially flat, up 0.77 point to 1,653.31.
Treasuries and gold futures rallied in a flight to safety from falling stocks. The dollar index was lower. And crude oil futures fell as IEA said demand will fall. Energy stocks were lower.
Earnings and merger news dominated attention today as there were no economic reports scheduled. On Tuesday comes data on retail sales and March CPI. Later in the week are reports on industrial production, initial jobless claims, Philadelphia Fed Index, housing starts and Michigan consumer sentiment index.
Among stocks in the news Monday, WellPoint (WLP) and Express Scripts (ESRX) announced an agreement whereby ESRX will acquire WLP's NextRx prescription subsidiaries for $4.675 billion, which includes consideration for the value of a future tax benefit for ESRX based on the structure of the transaction.
Yahoo (YHOO) shares were higher, as Dow Jones' All Things Digital has an unconfirmed story indicating YHOO and Microsoft (MSFT) executives, including CEOs Carol Bartz and Steve Ballmer, have been talking about potential collaboration in the search and advertising areas.
Boeing (BA) says monthly production of the 777 will decline from seven to five airplanes per month beginning in June 2010. Will also delay previous plans to modestly increase 747-8 and 767 production. Also notes significant declines in the escalation indices that affect forecasted pricing for commercial airplanes already ordered. Production decisions, unfavorable price escalation are expected to reduce first quarter EPS by about $0.38.
Chevron (CVX) sees first quarter 2009 EPS sharply lower than in fourth quarter 2008. It says upstream earnings are expected to decline substantially, in part due to lower prices for crude oil and natural gas; downstream earnings are also anticipated to be much lower than in the previous period, with average margins on the sale of refined products off significantly.
MEMC Electronic Materials (WFR) maintained first quarter revenue forecast of $214 million, but due to lower pricing, additional underutilization charges, first quarter gross margin is now expected to be approximately 9% of sales vs. previous outlook of gross margins declining to 20% range.