Major U.S. stock indexes were trading mixed on Monday, as worries about further asset writedowns and renewed fears of recession continued to weigh on investor sentiment. The sharp declines seen last week are believed to be signs of a longer term correction, exacerbated by ongoing weakness in the U.S. dollar and high oil prices.
On Monday morning, the Dow Jones industrial average was up 34.71 points, or 0.27%, at 13,077.45. The broader S&P 500 index edged up 1.65 points, or 0.11%, to 1,455.35. The tech-heavy Nasdaq composite index was off 6.27 points, or 0.24%, at 2,619.81.
There didn't appear to be much reaction to a report that Citigroup (IBM), JP Morgan Chase & Co. (JPM) and Bank of America (BAC) have hashed out the structure of a $100 billion fund designed to help thaw a portion of frozen credit markets, S&P MarketScope said. Meanwhile, HSBC may have to boost its reserves against souring subprime loans by $2.4 billion to $4.5 billion, according to two London analysts.
No new economic data come out until Tuesday, when the National Association of Realtors will report the September index of pending home sales, which is expected to decline further after a 6.5% drop in August and a 10.7% plunge in July.
The key economic reports will be the producer price index on Wednesday and the consumer price index on Thursday, which will will be "litmus tests to the concern that inflation may tie the Fed's hands" in making further rate cuts, Standard & Poor's Equity Research said.
Oil prices retreated on talk that OPEC producers are considering boosting production in hopes of getting prices to moderate, although Iran denied it would raise output, according to CNBC. Crude oil for December delivery in New York dropped $2.21 to $94.11 per barrel after getting very close to $100 per barrel on Friday.
Among stocks in the news Monday, International Business Machines (IBM) agreed to acquire Cognos (COGN) in a $4.9 billion deal, with Cognos shareholdersd to receive $58 cash per share.
E*Trade Financial (ETFC) said additional deterioration in the fair value of its $3 billion asset-backed securities portfolio since Sept. 30 will likely result in write-downs that exceed previous expectations and that investors should no longer expect prior earnings levels to be achieved. The online brokerage said total exposure to ABS collateralized debt obligations was about $450 million in amortized cost. Citigroup reportedly downgraded the stock to a sell.
In its quarterly filing to the Securities and Exchange Commission, Countrywide Financial (CFC) warned that its cost of debt would increase if its credit ratings are downgraded to junk. And because the mortgage company is very dependent on the availability of credit to finance its operations, disruptions in the debt markets or a reduction in its credit ratings could hurt its earnings and financial condition, particularly in the short term. While Moody's, Standard & Poor's and Fitch currently have investment-grade ratings on Countrywide, they also have attached some form of negative outlook to those ratings, Countrywide said.
European equity indexes were trading lower on Monday. In London, the FTSE 100 index slipped 0.26% to 6,288.60. Germany's DAX index fell 0.46% to 7,776.51. In Paris, the CAC 40 was off 0.27% at 5,509.35.
Asian markets ended sharply lower Monday. In Japan, the Nikkei 225 index fell 2.48% to 15,197.09. In Hong Kong, the Hang Seng index dropped 3.88% to 27,665.73. The Shanghai composite index slid 2.40% to 5,187.74.
Treasury Market
The U.S. bond market was closed for the Veterans' Day holiday.