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>> interest rate futures indicating traders expect the fed’s target lending rate to be closer to 3.75% rather than 4%. the rate currently 2.75%. for the week, all of the indexes down quite a bit. the dow jones and s&p more than 3%, the nasdaq finishing down more than 4.5%. i.b.m.’s disappointing earnings sparked losses in technology shares worldwide. i.b.m. at the close finishing down almost $7 on the day, $76.70, an 8% loss. also helping the decline, a dollar loss for general motors, almost 4%, and alcoa down on the day by almost 50 cents. an improved profit outlook from general electric and better-than-expected numbers from citigroup failed to boost the market . we’ll speak with the chief market strategist with a.g. edwards coming up. investors are worried about the one-two punch of slowing earnings growth and higher interest rates. deirdre bolton has the story.
>> stocks dropped worldwide as earnings fell short at i.b.m., samsung, ericsson and citigroup, disappointing investors. i.b.m. closed down 8%, the biggest drop since april 2002, the latest news to push investors to rethink their forecasts for the economy.
>> the bulls and bears will agree that the economy is slowing down.
>> some say the slow revenue growth at i.b.m. and citigroup is particularly disturbing.
>> especially on the revenue side. the revenues are reflecting what’s happening in the economy.
>> technology and hardware companies were the heaviest weights on the stock market . a who’s who of high-tech names sank. i.b.m. said it had trouble closing deals at the end of the quarter, a sign that c.e.o.’s are pulling back on spending. consumers appear to be doing the same thing, which raises a new batch of questions about how the federal reserve will react to a slowing economy.
>> the question being, will they continue to raise, will they raise too high, to where this will totally choke off growth in our economy and really cause a big problem for the stock market ?
>> if alan greenspan raises rates too high, the u.s. could fall into recession. the only group with any sizable gains today, drug stocks. eli lilly won a court case protecting its best-selling schizophrenia treatment from generic drug competition, lifting other drug stocks with patent fights of their own -- pfizer, bristol-myers squibb and abbott labs closed higher. genentech with an all-time high, a study showing their drug, avastin, slows down the progression of breast cancer. this pharmaceutical group is one of the five worst performing groups in the past year, underperforming the s&p 500 by 6%. mike, back to you.
>> deirdre bolton. more on i.b.m., which led technology shares lower. bloomberg’s bob bowden has more on that from the new york stock exchange.
>> yesterday, on thursday, the dow and s&p 500 fell to their lowest points of 2005. today, both indexes fell to new lows of 2005. checking the dow jones industrial average, there’s the year-to-date chart on the right side, 10,087, down 6.5% for the year. the intraday chart showing a linear, downward move for the dow and s&p for three sessions in a row, not just friday’s session. and at 10,087, one more day like friday and we’ll be below the 10,000 mark, not seen since october 2004. i.b.m. reporting first-quarter earnings only 85 cents a share. analysts expected 90 cents. revenue also missed estimates. that stock down 8.3%, shares falling to a two-year low, down for their 11th consecutive session. the rest of the tech market went with it. texas instruments, a.m.d., national semi down and micron down on the day. a.m.d. now down 30% year to date. data storage stocks like e.m.c., seagate, storage technology and western digital down on the day. computer services also down, including e.d.s., down 4.6%. computer sciences, s.r.a. international, both down over 4%. oil stocks also down. they had been the darling so far in 2005 but fell today as crude prices were down with exxon-mobil and occidental -- all down between 4% and 5%. conocophillips and marathon, as well. saks shares fell the most in 3.5 years today, the company saying they’re expanding an internal accounting probe and will not meet the deadline for their annual report. other retailers flounder, as well, like j.c. penney, home depot and abercrombie & fitch. i’m bob bowden, reporting from the new york stock exchange for bloomberg news.
>> want to go over to the nasdaq where tech shares led the nasdaq to its lowest close in six months. robert gray has details on the nasdaq trading from the market site in times square.
>> i.b.m.’s profit disappointment and concerns that the u.s. and global economies are slowing sent the nasdaq to a six-month low in friday’s session. we did see volume exceeding two billion shares for the first time sincesfriday, march 18, also a day of declines for the nasdaq. we also saw a measure of volatility on the nasdaq, rising some 21% to its highest reading since election day. we did see today’s decline was fairly widespread, led by telecom and tech stocks and also transport stocks were falling as there was concern there would be fewer commodities and consumer goods to ship if the economy is slowing down. the decline was widespread and broad throughout different groups, as well. we saw sun microsystems, after their profit disappointment from thursday evening. apple computer falling for a second day after its profit disappointment, the worst performer on the nasdaq composite index. we also saw petco shares falling as it said its fourth-quarter profit will fall and asked for a 15-day extension to determine whether or not it will restate fourth-quarter results. google shares also falling below its 200-day moving average, just ahead of its earnings, due out next thursday after the close of regular trading. there were a few gainers in friday’s session. we saw cree, maker of chips that light dash boards and cell phones, their earnings came in better than the average estimate and forecast at the high end of their forecast exceeding the average analyst estimates by one cent. starbucks rising, bear stearns raising it to an outperform with a $60 target and electronic arts and video game makers rising after data showed sales up 32% in march year over year, piper jaffray saying that beat their estimates and software publishers benefiting from the launch of the sony p.s.p. model.
>> crude oil fell for a second week as higher output from opec countries bolstered inventories. crude for the week is down a little over 5%. friday’s close, oil finishing down, as well, over 8%, a 64-point loss. currently, a barrel of crude oil going for $50.49. among other energy movers, unleaded gasoline, heating oil and natural gas all lower. what’s the outlook for oil prices heading into next week? the latest bloomberg survey shows the majority of traders and analysts expect prices to continue falling. in the industrial production report today, the fed said overall production rose .3% in march, reflecting increases in mining and utilities. manufacturing fell .1%. the gain compares with a .2% increase in february. the share of industrial capacity in use rose to 79.4%, the highest since december 2000. the fed admits, by the way, the report was accidentally released 15 minutes early on its website and they blame human error. mixed reaction from bond traders. a big move on the long end in the trading day but not much in other durations. the 10-year note finishing up almost 7/8 -- the dollar, on the, trading lower, falling against the yen, euro and british pound. the chicago board of trade is one step closer to becoming a public company. members of the 157-year-old exchange approving a plan to convert to a for-profit company. the vote, 98-1. the vote may be followed by a ballot as soon as this quarter to allow a public share sale. the chicago board of trade is the second biggest u.s. futures market . the benchmark stock indexes had their steepest weekly declines since august . when. when we return, we’ll speak with one equity strategist who expects the volatility to continue, but to the upside. hear more from al goldman of a.g. edwards, next
>> here’s something to consider. general electric reports a 25% gain in profit. citigroup said profits are a record for the first quarter and the dow jones industrials fall almost 2%, the nasdaq hits a six-month low. to find out what’s going on, we’re joined by al goldman, chief market strategist with a.g. edwards, joining us from st. louis. thank you very much for joining us. awful lot of fear, it seems, on wall street right now. is this a herd thing that maybe after we take a weekend break we’ll see it turn around?
>> i think you described it pretty well. i saw a high degree of just dumping of stocks today, kind of the washout phase. we’ve had three nasty days in the market . investors have been in a bad mood ever since the stiff correction started in the first part of march and that’s understandable. the mood has become one of the glass is half empty and therefore even good news is looked at negatively like the drop in oil and the drop in the c.r.b. index and the rise for the dollar. these are positive for the economy. but we did see a degree of capitulation today and i think a couple of days on the golf course over the weekend and you’ll see the market attempt a reflex oversell rally at least on monday.
>> we’ve seen a big rise in volatility this week. the v.i.x. index, to look at that on a friday, it’s jumped over 16 and it was down at 11 yesterday or the day before. does that tell you anything about how much saying power -- staying power people have in the markets right now?
>> not really. the v.i.x. indicator is not a very good good short-term indicator but at this point out, people are not complacent and that’s understandable. portfolios are down sharply. people have forgotten the big rally from october 26 and after the november 2 election but the mood is what controls the market . and when folks are feeling grouchy, they look at everything in a negative mood. markets were thin until today. today we had a big increase in volume, which makes me feel a little more comfortable that we have gotten that bang in the market , you know, the bear market—i should say bull market corrections end with a bang, not a whimper, as the poet said. we had a pretty big bang today.
>> people have often said that two bellwether stocks are i.b.m. and general electric. they had diametrically opposed earnings releases. which one will the street believe long term? they went to the i.b.m. story today.
>> i don’t think it’s like it used to be when the country was controlled by big blue and we were a purely industrial nation. it used to be general motors, but in today’s world, i think we’re a much broader scope. the important point is that corporate earnings, whether you look at g.e. or i.b.m., corporate earnings will be up in the area of 7% to 9% this year and so far even preannouncements have been better than expected, have been up from consensus so far and we haven’t gotten the good earnings releases so i’m not worried about corporate earnings and we’re still optimistic on the economy but we did have a soft patch in the economy that started in mid march probably because of the jump up in oil and gasoline prices and retail sales did come down a bit but we think that’s temporary. we think we’ll see 3.6% g.d.p. growth this year.
>> what’s your forecast? are you changing?
>> no. i’m not. i started—well, in december, my prediction for the s&p 500 was up 7% to 1300. right now, it’s closer to make my 1300 would be a 11% or 12% rally and that may be aggressive but the important point is not a specific guesstimate on where the market will be, but the direction. based on a pretty good economy, pretty good corporate earnings and a market selling at 15.9 times this year’s estimated earnings, indicates the market will be higher. exactly where, nobody knows.
>> we were speaking with craig coach a few minutes ago, a bond strategist, about the treasury department report on foreign investment in the united states. while people have been buying a lot of u.s. bonds overseas, there has been weakness in equities. why aren’t we attracting a lot of foreigners to u.s. equities right now?
>> we will. foreigners classically are not great timers of our market . i was pleased to see foreign money come into our bond market in february and march because everyone thought the opposite would happen. but we’re still the safest economy, marketplace to invest in the world and i think that will continue. and with the dollar doing better, people have seemed to have forgotten the last couple of weeks, that will also help. i’m optimistic and believe that this sharp drop off in interest rates, particularly the 10-year treasury, is due to more of a flight to safety rather than prediction of a bad economy.
>> i have 30 seconds left. any worries about the federal reserve? are they steady as she goes and off the charts right now, off the mind?
>> i think the fed is going to continue to raise something like 25 basis points. fed funds are now 2.75%. by year end, maybe 3.75% or 4%, something like that, and it will be steady as you go, i believe, and the recent market pullback helps them in that case.
>> thank you very much, al goldman, chief market strategist with a.g. edwards. as we’ve been talking about shares of general electric and citigroup rising after both companies report higher profits. su keenan will take a closer look at the earnings season thus far, next
World Bank headquarters in Washington, D.C. Finance ministers and central bankers from the major economic powers are gathering in Washington Friday for a meeting in advance of the semi-annual session of the International Monetary Fund (IMF), and World Bank.
Calling themselves the group of seven, top finance officials from Europe, America and Japan are meeting late Friday and again on Saturday. Their primary business is a sharing of views on economic performance, currently robust in North America and China but weak in Europe and Japan. The heads of the World Bank and IMF are also taking part. As usual, the fund's global economic forecast forms the basis of the discussions. IMF economists expect world growth to remain strong this year and next, but they worry about the yet-to-be-determined impact of rising interest rates and oil prices.
The meetings are paying particular attention to Africa as proposals for more assistance and debt are at the core of an economic summit Britain will host in July. Africa is currently experiencing a strong recovery with growth reaching an eight-year high of five percent last year. Abdoulaye Bio-Tchane heads the IMF's Africa department.
“Growth picked up to 3.5 percent in South Africa last year and to 3.5 percent in Nigeria, after the record high witnessed in Nigeria in 2003,” he said.
Nigeria, an oil producer, and South Africa account for the biggest share of African economic output.
Other topics include China's fixed currency exchange rate with the U.S. dollar. The group of seven has been urging China to permit its currency's value to be set by market forces, a move thus far resisted by the Chinese authorities. It is thought that if the Chinese yuan floats against the dollar it would gain value, contributing to an eventual decline in China's huge trade surplus, particularly with the United States
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