13 January, 2009

Dow slide continues in 5th straight session of losses

For a fifth consecutive day the Dow Jones Industrials posted negative returns leading their slide from the 9000 point mark early last week. The 600 point slide during the sell-off was caused by continued US economic concern, the weakening of the domestic job picture and the sustained struggles of banks and automakers.

News makers and headliners over the past week have been significantly negative as company quarterly losses and job cuts continue to rule the front pages. Alcoa (AA), one of the main culprits of the bearish trading tone, reporting a loss far wider than analysts expected along with a 35% decline in revenues. Whether in North America or across the world the story seems the same as Sony (SNE), the electronics giant is rumored to be looking at steep job cuts amidst a rumored loss of $1.1Billion for the year, a first in the history of the company.

Citigroup (C), a bank with its well-known fair share of troubles, has confirmed talks with Morgan Stanley (MS) to combine investment banking units. The troublesome news here for Citi is that just months ago the executive branch was adamant about not wanting to sell its brokerage unit Smith Barney. The supposed deal would net Citi group anywhere from $2.5Billion to $3Billion in gains and give Morgan Stanley 51% control over the combined brokerage partnership. It doesn't help either that estimates for the bank's quarterly loss have risen to as high as $10Billion and renewed talks of another capital infusion from the Federal Government will likely be needed.

On a counter-note, left for dead and unprofitable smart phone maker Palm (PALM) was the star of the show at the Consumer Electronics Show in Las Vegas, reviving hopes that the company can turn the corner as it announced a new platform and phone to Apple-like fanfare. The Palm Pre will be available later this year, sports an intuitive interface and sleek design, and has set web bloggers ablaze with its style and functionality. Traders have taken note as well, sending Palm shares almost 100% higher since the device was first revealed.

Disclosure: Author owns C

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