Service Sector Signals Recession
1 ISM's nonmanufacturing survey composite index was 44.6 in Jan., well below the neutral 50 level. The business activity index dived 12.5 points to 41.9, the lowest since Oct. '01 -- in the midst of a recession and just after 9/11. It was a record monthly decline. After last week's weak jobs and GDP reports, the ISM data raised the risk of a recession to new heights.
Stocks Sell Off On Poor Service
2 The major averages opened lower on the startlingly weak ISM report and kept getting worse during the session, closing near Tue. lows. The S&P 500 fell 3.2%, the Nasdaq 3.1% and the Dow 2.9%. The NYSE composite lost 3.6%. Volume was higher across the board. Just 5 of 197 industry groups gained ground.
Fed's Lacker Sees Recession Risk
3 Richmond Fed President Jeffrey Lacker sees "the possibility of a mild recession." Most Fed officials have said growth should continue. After the weak ISM services reading, futures traders fully priced in at least a half-point 18ate cut by the March 20-21 meeting. Merrill Lynch sees a strong chance of a 2nd intermeeting cut. The 10-year Treasury yield fell 7 ticks to 3.57%.
McCain Seeks Knockout Blow
4 Despite presidential hopeful Mitt Romney's last-minute, multistate campaigning and heated attacks on John McCain, polls showed the Ariz. senator likely to win a majority of 964 delegates up for grabs in 21 states on Super Tuesday; 1,191 delegates are needed to secure the GOP nomination. Mike Huckabee appeared a distant third.
Clinton Battles As Obama Gains
5 Hillary Clinton campaigned at rallies coast to coast to counter surging support for Dem rival Barack Obama. Underscoring his momentum, polls showed Obama pulling ahead of Clinton in Calif., a longtime bedrock of her campaign. Clinton appeared likely to hold N.Y., but N.J., Conn., Mass. and other states were too close to call.
BHP Ups Rio Tinto Bid To $174 Bil
6 The company raised its hostile bid to 3.4 shares per Rio (NYSE:RTP - News) share, or $173.6 bil. Rio rejected the prior, informal 3-for-1 offer. If the deal occurs, BHP Billiton (NYSE:BHP - News) will buy back $30 bil in shares. Last week, Aluminum Corp. of China (NYSE:ACH - News) and Alcoa (NYSE:AA - News) bought 12% of Rio to block BHP. BHP's half-year profit fell 3% to $6 bil. Sales rose 15.5% to $25.5 bil. Rio's U.S. shares rose 4% late. BHP's U.S. shares edged up.
Oil Sells Off On Demand Worries
7 Crude fell more than $2 intraday as U.S. recession fears raised concerns about energy demand. March oil ended down $1.61 at $88.41 a barrel. That matched the 3-month closing low set Jan. 23. Weekly data will be released Wed. Analysts estimate stockpiles up 2.6 mil barrels -- the first four-week uptrend since June '07.
CME, NYSE Profits Up On Volume
8 The world's No. 1 derivatives exchange said Q4 profit rose 30% to $3.77 a share ex items, topping views by 15 cents on strong trading volume. Revenue jumped 88% to $530 mil, below views. NYSE Euronext's (NYSE:NYX - News) 47% profit rise met views. Revenue was $1.18 bil, above views. But shares tumbled 14% as the exchange pushed back some planned cost cuts. CME (NYSE:CME - News) shares slid 5%.
Toyota's Earnings Rise On China
9 The Japanese auto giant's Oct.-Dec. profit rose 7.5% to $4.29 bil, the smallest gain in a year. Sales rose 9.2% to $62.79 bil, the lightest growth in 21/2 years. Sales were strong in China, Africa and South America, but fell in North America. Toyota (NYSE:TM - News) expects profit to fall this quarter, citing a weak dollar and strong yen. It plans to retire 4.5% of shares out to boost EPS. Shares fell 3.5%.
Record Giants Sue China's Baidu
10 Universal, Sony BMG and Warner Music (NYSE:WMG - News) sued vs. China's Internet search giant in Beijing. The labels, which are also suing Chinese Web portal Sohu.com (NasdaqGS:SOHU - News), want Baidu (NasdaqGS:BIDU - News)'s music service to end links to copyright-infringing tracks. The action follows a Chinese court's ruling vs. Yahoo (NasdaqGS:YHOO - News)'s music service in that country. Baidu shares fell 7% and Sohu 5% on a bad day for stocks overall.
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