Wednesday’s Market Recap: American Airlines Beats Expectations, UBS Expects To Lose Billions More

The markets were up today, as the S&P 500 was up 1.52% closing at 852.06.  The NASDAQ and the Dow Jones were up, 0.07% and 1.38% respectively.  Gold was up closing at $893.50, with oil up as well closing at $49.25.  The 10-year yield was down, ending the session at 2.770%.

AMR Corporation, (AMR) the company that owns American Airlines, reported earnings that beat analyst estimates, and as a result it’s stock was up over 18%.  AMR reported a loss of $375 million, or $1.35 a share, citing a decrease in passenger demand and lower ticket prices.  AMR beat analyst estimates of a loss $1.62 a share, as operating costs fell more than expected.  American’s increasing liquidity and forecasts of a decline in operating costs of -10.4% up from estimates of -6.6% gave investors confidence to buy into AMR despite a wider loss from the year before.  American has also been benefiting from declining fuel costs, with jet fuel on average falling -30%.  American is also maintaining a positive outlook for demand, as it sees demand increasing with the US summer travel season. Delta Air (DAL) and US Airways (LCC) were both up today, benefiting from the positive news about American Airlines.

In negative news today, UBS (UBS) announced that it is expecting to lose 2 billion Swiss francs, or $1.8 billion, for the first quarter of 2009 and that 9,000 employees will lose their jobs.  UBS plans on cutting jobs to cut costs, saving between 3.5 and 4 billion francs, helping its bottom line.  UBS also has been forced  to write down over $50 billion in toxic assets and has been hurt most recently due to many clients withdrawing money from its wealth management and private banking segments.  UBS’ clients have pulled out 23 billion francs from their management service, but this was partially offset by the injection of 16 billion francs into its Americas wealth-management unit.  UBS is now focusing on maintaining clients in its private banking segment as well as strengthening its capital base.

Fiat announced today that they see no problem closing a deal by April 30 to acquire Chrysler, but Fiat also has no problem walking away from the deal if certain agreements are not reached.  The CEO of Fiat, Sergio Marchionne, said that he is willing to walk away from the deal if the UAW does not agree to pay cuts that are in line with wages that workers of Japanese car manufactures in America receive.  President Obama said that unless Chrysler can find a partner before the end of the month they will have to file for bankruptcy.  Chrysler seems to be limited to two options now, either partnering with Fiat or filing for bankruptcy.  If the Fiat deal goes through, Fiat would get a 20% stake in Chrysler with the ability to increase its ownership to 49% after the government loans are paid off.  We will see by the end of the month where the future of Chrysler lies.

Check back Thursday to Bullish Bankers for another market recap.

Disclosure: None

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