April 13, 2009 in Business

Wall Street falls ahead of earnings reports

Associated Press
 

NEW YORK — Wall Street retreated Monday as investors awaited a flurry of earnings reports and readings that could provide insight into the direction of the economy.

Major stock indicators fell about 1 percent, including the Dow Jones industrial average, which lost 100 points.

Traders were uneasy about a New York Times report saying the Treasury has directed General Motors Corp. to lay the groundwork for a potential bankruptcy filing by June 1. GM might be forced to file for bankruptcy if it cannot complete a plan to exchange debt for equity and receiving concessions from the United Auto Workers, according to the report.

A White House official, speaking on condition of anonymity because no specifics of the GM plan have been announced, told The Associated Press that any speculation about a GM bankruptcy filing was “premature.” GM fell 32 cents, or 15.7 percent, to $1.72.

Jamie Cox, managing partner at Harris Financial Group, said the possible consequences of a GM bankruptcy filing will likely weigh on the market.

“Think of the economic fallout potential,” Cox said. “It’s inconceivable (GM) gets in to bankruptcy” and gets out quickly, he added.

Investors are also looking to a spate of earnings results throughout the week, including reports from key financial firms such as Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. Financial companies had been among the hardest hit by the economic downturn and credit crisis, but they have also helped lead a rally over the past month. Goldman’s earnings report is due out Tuesday; JPMorgan’s on Thursday; and Citigroup’s on Friday.

In midmorning trading, the Dow fell 108.16, or 1.3 percent, to 7,975.22.

Broader stock indicators also slid. The Standard & Poor’s 500 index fell 8.67, or 1 percent, to 847.89, and the Nasdaq composite index fell 14.08, or 0.9 percent, to 1,638.46.

On Thursday, a surprise announcement by Wells Fargo & Co. that it will report a record quarterly profit for the first quarter helped send the market sharply higher ahead of a long weekend. Markets were closed for Good Friday. The sharp gains made Monday’s selling unsurprising.

The Dow has rallied five weeks, but last week showed increased volatility as investors prepared for earnings reports. The Dow lost 2.8 percent over Monday and Tuesday as investors became worried about potentially weak earnings reports. But after the Wells Fargo report Thursday, the Dow surged and ended up 0.8 percent for the week.

Aside from major financial firms reporting this week, investors will also get earnings results from key companies in other industries, such as Intel Corp., Johnson & Johnson and General Electric Co.

Investors also will receive key economic reports on inflation, housing and manufacturing throughout the week.

Cox said that with no major earnings or economic reports due out Monday, it could be a light trading day as investors await more information as the week progresses.

In corporate news, prescription benefits manager Express Scripts Inc. said it will buy the pharmaceutical benefit management subsidiaries of health insurer WellPoint Inc. for $4.68 billion. Shares of both companies rose in early trading — Wellpoint was up $2.81, or 7 percent, to $43.15 while Express Scripts rose $3.39, or 6.9 percent, to $52.56.

Meanwhile, bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.86 percent from 2.92 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.18 percent from 0.17 percent late Thursday.

The dollar mostly declined against other major currencies, while gold prices rose.

Light, sweet crude fell $2.93 to $43.91 a barrel on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei stock average fell 0.4 percent. Major European markets were closed Monday for Easter.

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