US Market Down As Investors Wait For Obama’s Plan

Wednesday’s market slid as investors await the details of the Obama administration’s government plan to relieve banks of money losing assets. The Dow Jones Industrial Average slipped -1.51% to a close of 7,956.74 while the Nasdaq and S&P fell a minuscule -0.08% and -0.75% respectively to levels of 1,515.05 and 832.20. During the day, crude oil fell -$0.48 to a close of $40.30 due to a bigger than expected increase in the nation’s crude supply indicating further OPEC production cuts, while gold was boosted $15.90 to $908.40.

Obama released limitations on the ongoing bailout plan which included pay ceilings that outline a strict new limit on executive salaries for certain companies that receive “exceptional assistance.” Companies that receive this exceptional assistance will not be able to pay any top executive more than $500,000, in which any addition compensation would be in restricted stock.

Experiencing effects from falling cable demand, Time Warner Inc. (TWX) released a diluted earnings per share loss of $4.47. Excluding charges to write down the value of intangible assets they would have earned $0.23 per share, this is compared to $0.28 per share a year before. In response to the down market, they announced that they will cut more than 1,250 jobs in order to restructure and cut overall costs. They announced that AOL’s advertising revenue dropped 18% in the latest quarter, noting that declining in display ads on AOL Network sites drove the decrease in the latest quarter, along side sales of advertising on third-party sites.

Philip Morris International (PM) also released diluted earnings per share of $0.71, down from $0.74 per share a year before, saying that the stronger dollar shrank their profits from selling cigarettes in other currencies and will most likely pull down their profit this year as well. Due to falling demand for cigarettes, Philip Morris is pursuing sales of smokeless tobacco products to replace falling revenue. Overall sales volume in the United States has been falling due to smoking bans, higher taxes, and overall health concerns.

Kraft Foods Inc. (KFT) also released disappointing earnings of $0.11 per share compared to $0.38 earnings per share a year before. Excluding one-time items that were related to asset impairment, exit and implementation costs, and an adjustment on a gain from its split-off of Post cereals, net income came in at $0.43 per share. Kraft noted that North American volume fell during a environment of markdowns and inventory reductions by retailers, they company shaved less profitable items.

Although beating analysts estimates of $0.30 earnings per share, Cisco Systems Inc (CSCO) reported earnings of $0.33 per share amid a 27% drop in fourth quarter profit. Cisco said they would accelerate its move to cut costs in the face of the economic downturn since sales are down 7.5% since 2007.

Thanks for catching up with us today, please join us again tomorrow.

Disclosure: The mutual fund the author manages is long PM and CSCO.

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