Wednesday’s Market Recap: Another Down Day For Stocks As Retail Sales Come In Weak

The market had another off day, as the Dow (^DJI) was down -2.18%.  The NASDAQ (^IXIC) closed at 1664.19 while the S&P (^GSPC) closed at 883.92, as the two indexes were down -3.01% and -2.69% respectively.  The 10-year yield finished the day at 3.116% as prices on treasuries rose.  Crude oil was down today and settled at $58.02, while gold was up at the end of the day settling at $925.9o.

In earning’s news, Freddie Mac (FRE) announced afterhours yesterday a loss of $9.85 billion, or $3.14 per share in the first quarter, stretching the loss from a year ago of $151 billion.  The government controlled mortgage lender saw revenue decline from $1.41 billion last year to $771 million this year as Freddie Mac continued to suffer from rising mortgage delinquencies and losses stemming from it owning mortgage backed securities.  Provisions to cover credit losses rose to $8.8 billion from $7 billion in the fourth quarter of 2008 as foreclosures and delinquent mortgages both were on the rise.  Despite suffering greatly, Freddie Mac continues to receive loans from the government. Freddie Mac needs these loans because it handles the majority of housing mortgages and that the government wants money to be available to potential home buyers.  Freddie Mac is currently on life support and the only thing keeping them alive is the government backing.

MGM Mirage (MGM) announced that they will be selling $2.5 billion worth of stocks and bonds with $1.05 billion from the sale going to buy debt that matures by the end of the year.  MGM announced that it will be selling 81 million shares as it tries to take advantage of good investor sentiment in the equity market.  MGM needs cash as the company struggles to pay $14 billion in debt forcing the company to put liens on key assets such as the Bellagio and the Mirage and also forcing the company to consider selling properties.  This only adds to the standoff between major equity holder Kirk Kerkorian and major debt holder Carl Ichan, who pushed for bankruptcy of MGM Mirage earlier this year.  MGM was down over -29% today and is down significantly from its 52-week high of $53.67.

In economic news, the Commerce Department reported April retail sales fell 0.4% from March as opposed to the increase of 0.1% from the previous month, which most economists expected.  This does not bode well for second quarter GDP numbers, 70% of which come from consumer spending.  Despite lower gas prices and Barack Obama’s economic stimulus plan, consumer spending has declined as many are still worried about economic stability and job security.  Not including automobile and gas station sales, sales from all other sectors fell 0.3% with electronic and clothing stores seeing the biggest losses, losing 2.8% and 0.5% respectively.  Despite retail sales declining for the second straight month, sales in April declined at a slower pace than the revised number of  negative 1.3% for March.  Many believe that the shrinking decline could be indicating a bottoming of the declines in retail sales.  Consumer sentiment is key for retail sales, and hopefully the market will see positive number on Friday when the preliminary Michigan Consumer Sentiment numbers are released.

Disclosure: None.

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