The markets had a bad day, as the Dow Jones closed down -0.19% to 8,410.65. The NASDAQ was down -0.54% closing at 1754.12, while the S&P was down -0.38% closing at 903.80. Oil and gold were both down settling at $53.84 and $904.30 respectively. The price of the 10-year was down, as yields closed at 3.163%.
According to many unnamed sources, American International Group (AIG) will not be one of the supposed ten to nineteen financial institutions that the U.S. government will announce need to raise capital levels. AIG is expected to report a loss of $0.06 a share on revenue of $26.17 billion this coming Thursday. In addition to AIG, it is believed that Goldman Sachs (GS) and JP Morgan (JPM) also have enough capital to weather a worsening economic situation. The government stress tests, which are supposed to single out companies that do not have sufficient capital to handle potential worsening economic times, have reportedly identified Wells Fargo (WFC), Citi (C), and Bank of America (BAC) as companies that will have to raise additional capital. The report that was supposed to include a list of fourteen days has been reduced in recent days, as the government believes that more companies then expected had sound balance sheets. The government is hoping that the release of the stress test will reduce the fear that investors have of the financial sector.
In earnings news, Chesapeake Energy (CHK) announced a loss of $5.75 billion according to GAAP non-cash accounting, or $9.63 per share, an increase from a loss of $142 million in the same period from a year prior, after hours yesterday. Earnings based on continued operations were $0.46 a share, missing analyst estimates of $0.48. Revenues rose in the quarter from $1.61 billion to $2 billion, as production of natural gas increased 5% this quarter. The loss reflects a sharp decline in the value of its oil and natural gas assets, as natural gas makes up 92% of Chesapeake’s output. With energy demand decreasing, Chesapeake decreased its production of natural gas in March by 200 million cubic feet a day and 400 million cubic feet a day in April, and it plans on keeping these rates of production into the second half of 2009. Chesapeake also announced plans to sell half of its Barnett Shale and Mid-Continent natural-gas gathering and processing segment for $550 million by the end of the third quarter in 2009 to provide more cash for the Oklahoma City energy company. The energy company is hoping that the second half of 2009 will produce better earnings results, with energy demand picking up on hopes that the economy will turn around.
Disney (DIS) reported earnings today, excluding extraordinary items the company earned $0.43 per share compared to $0.40 per share estaimtes from analysts, sending Disney up over 2% after hours. Revenue fell 7% to $8.1 billion, missing expectations of $8.21 billion. Profits for the multimedia company fell 46% to $613 million, or $0.33 per share, due to a decrease in advertising revenue, restructuring charges, and a decline in DVD sales. CEO Bob Iger said that he sees that a decline in ad revenue does not just reflect the poor state of the economy, but also shows a change in consumer behavior, where consumers watch television online or on-demand and not necessarily at the time it is first aired on television.
Check back tomorrow for another market recap from Bullish Bankers.
- Matt Shannon
Disclosure: The fund the author is associated with is long CHK, GS, and JPM and has interests in DIS.
