Stocks to Open Lower
Stocks turned higher Wednesday after Federal Reserve Chairman Ben Bernanke signaled more interest rate cuts are on the way, and regulators said they would lift restrictions on government-sponsored mortgage firms’ investment portfolios.
The government moves allow Freddie Mac («www.businessweek.com») and Fannie Mae («www.businessweek.com») to buy up more mortgages. That could help add liquidity to a mortgage market damaged by the subprime credit crisis. The news came on the same day that Fannie Mae posted a $3.6 billion loss.
“It is important to recognize that downside risks to growth remain,” Bernanke said in testimony before a U.S. House of Representatives committee. The Fed is closely watching “information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,” he added.
Also Wednesday, U.S. durable goods orders fell 5.3% in January, the biggest drop in five months. The volatile measure was up 4.4% in December. Transportation orders dropped 13.4% last month; excluding transportation, orders fell 1.6%. The volatility of the data makes it difficult for the market to take many conclusions about the economy, Action Economics says.
Fannie Mae’s losses are mounting as home-loan delinquencies rise, a trend it expects to continue this year along with general weakness in the housing market. The mortgage buyer, chartered by the federal government, posted a loss of $3.80 per share, triple what analysts were expecting.
On Wednesday afternoon, the Dow Jones industrial average was up 58.62 points, or 0.46%, to 12,743.54. The broader S&P 500 rose 5.35 points, or 0.39%, to 1,386.64. And the tech-heavy Nasdaq composite index gained 15.65 points, or 0.67%, to 2,360.64.
Oil prices fell Wednesday but remain above the $100 per barrel mark, which was breached on Tuesday. April West Texas Intermediate crude oil futures were down 25 cents to $101.63 per barrel in NYMEX trading.
The U.S. dollar is falling against the Euro for the fifth straight day, and the value of the Euro surpassed $1.51 for the first time Wednesday. On Wednesday afternoon, the Euro was trading at $1.5132, up 1.05%.
Among stocks in the news, Microsoft Corp. («www.businessweek.com») was fined a record $1.3 billion Wednesday by the European Union. As part of its ongoing antitrust fight with the EU, regulators say Microsoft charged rivals “unreasonable prices” for software information, needed to make products compatible with the Windows operating system.
Toll Brothers («www.businessweek.com») reported a 61 cent per share loss, vs. earnings of 33 cents a year ago. Revenue for the homebuilder fell 19%, with results including a $245 million pre-tax writedown. Standard & Poor’s equity analysts maintain a ‘buy’ rating on the stock, noting its strong balance sheet.
R.R. Donnelly & Sons («www.businessweek.com») posted earnings of 80 cents per share, vs. 70 cents a year ago. Also, the firm acquired Pro Line Printing for $122 million.
Autodesk («www.businessweek.com») reported lower-than-expected earnings of 52 cents per share, vs. 46 cents a year ago. Revenue rose 20% to almost $600 million, but the software firm expects revenue to fall as much as $24 million next quarter, and total revenue to be from $2.425 billion to $2.475 billion for this year.
Dreamworks Animation SKG («www.businessweek.com») posted earnings of 98 cents per share, vs. a 20 cent loss last year, as revenue jumped 42%. The movie “Shrek the Third” contributed $179.4 million in revenue, and the firm plans a Shrek Broadway musical in December.
Amgen («www.businessweek.com») and Johnson & Johnson («www.businessweek.com») shares were under pressure after reports that their anti-anemia drugs may raise the risk of death and blod clots. An article in this week’s Journal of the American Medical Association will examine the issue, reviewing 51 clinical studies, Dow Jones reports.
European stocks were mixed Wednesday. In London, the FTSE 100 index fell 0.18% to 6,076.50. In Paris, the CAC 40 Index edged down 0.09% to 4,968.82, and in Germany the DAX index rose 0.17% to 6,997.85.
Asian stocks were higher. In Japan, the Nikkei 225 index was up 1.49% to 14,031.30, and Hong Kong’s Hang Seng Index rose 3.24% to 24,483.84.
Treasury market
Treasury prices were falling Wednesday. The two-year note was down 02/32 to 100-06/32 for a yield of 2.03%; the ten-year note dropped 09/32 to 96-26/32 for a yield of 3.89%; and the 30-year bond lost 18/32 to 94-28/32 for a yield of 4.69%.
