Monday’s Market Recap: Stocks Dragged Down By Financials

The markets started the week off with a poor first day, as the S&P (^GSPC) fell 2.15%.  The NASDAQ (^IXIC) and Dow Jones (^DJI) also were down, falling 0.45% and 1.82% respectively.  Futures for June gold fell today, settling at $913.50, with crude prices also falling, to settle the day at $58.50.  The price on the 10-year saw a gain with yields closing at 3.176%.

In earnings news, Dish Network (DISH) announced earnings of $312.7 million, or $0.70 per share, bettering the same period the year before, when it posted earnings of $0.58 per share.  Dish shares were up over 17% on the news as the announcement bested analyst estimates of $0.56 per share, as revenues rose 2.1%.  Dish lost 94,000 subscribers this past quarter bringing its total amount of subscribers down to 13.6 million, while DirecTV (DTV) added 460,000 subscribers in the past quarter.  The telecommunications giant is experiencing rough times with the economic downturn as their service is typically geared towards a more low-end customer base, compared to their main rival DirecTV who is seeing significant growth.  CEO Charles Ergen is very hopeful and confident that a shakeup in his management will put the company on a path that will have a bright outlook.

In tech news today, Microsoft (MSFT) for the first time since the company’s inception announced it filed paper work for a bond offering.  The company in lieu of the filing commented on the fact that it is filing to take advantage of good market conditions and a superior credit rating noting is not in any financial trouble.  Microsoft will be offering bonds with a five, ten, or thirty year maturity and expects great demand for their bonds as there is little AAA paper out in the market place.  The debt offering would put Microsoft’s debt on many bond indexes attracting many investors as the offering is expected to be significant in size, rumored to be around $3.75 billion.  It is reported that Microsoft plans on using the new capital as part of a stock buyback plan and as capital for acquisitions.

In banking news, US Bancorp (USB), Capital One (COF), KeyCorp (KEY), Principal Financial (PFG), and BB&T (BBT) all announced that they would collectively be buying back $7 billion dollars in stocks to raise capital, with three of the companies trying to pay back TARP funds.  These banks, along with many others, want to repay government money to avoid strict government regulation, especially those rules associated with executive pay.  US Bancorp, Capital One, and BB&T were banks that successfully passed the government stress test, and despite not needing to raise capital want to take advantage of strong investor demand for their stocks.  These companies then want to take some of the capital raised from the sale of the stock to buyback preferred stock and warrants that they sold to the Treasury Department.  All five of these banks, along with the whole financial sector, were down significantly in trading today as the news of the buyback plan was released.

Disclosure: None.

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