Stock futures were lower Monday morning ahead of a wave of economic data, a tropical storm and, most important, the Federal Reserve meeting and decision Tuesday. Before the opening bell, the economic calendar includes personal income and spending data for June, as well as the core PCE deflator, an inflation gauge the Federal Reserve eyes closely. Factory orders for June are also due after the open. Oil prices were steady near $125 a barrel Monday as the market kept on eye on both tropical storm Edouard that could turn into a hurricane and hit oil facilities in the Gulf of Mexico, and on further developments in Iran. But most of trading today will likely be affected by expectations the Fed will not change interest rates Tuesday, and issue a neutral statement with the focus changing to the weak economy.
Bank troubles aren't over. HSBC Holdings PLC (NYSE: HBC) reported a significant profit drop as costs for bad U.S. mortgage loans mounted. "HSBC Chairman Stephen Green said the first half of 2008 saw one of the most difficult financial markets for decades." As long as the housing market slump continues, and before the bottom can be seen, no doubt the financial sector will continue to suffer. And given that only about 40% on the $1 trillion expected writedowns were taken, the challenges for financials are far from over. For now, HBC shares are dropping about 3% in premarket trading.
From one ailing sector to another: cars. Chrysler said on Sunday that its financial unit had been able to renew only $24 billion of the $30 billion credit lines, or short term debt it has with banks, coming up $6 billion short. Not only does Chrysler need the capital for its operations, it will also pay more for what it managed to get. The obvious question then is what will happen if -- and some would say when -- Ford (NYSE: F) and General Motors (NYSE: GM) will face the same problem. Following the dismal July U.S. sales the Big 3 reported Friday, and GM's massive loss, how long can they keep going?
The British Daily Mail site claims Apple Inc. (NASDAQ: AAPL) "is about to launch a 'nano' version of the hugely successful iPhone. It is expected to be in the shops in time for Christmas." Without any sources provided, while this stories has been making the rounds on the blogosphere, it doesn't sound reliable. It also doesn't make much sense to have an iPhone nano -- what would be the benefits of such a device, and where would Apple "cut," or what features it would take out to make the phone smaller. And most importantly, why? Can't be because of the price, the iPhone is priced aggressively as it is. If the iPhone nano is just a phone added to the iPod nano, then the iPhone would lose much of its unique positioning. It would definitely be interesting to see the results of such a scale down if the rumors are true.
The Wall Street Journal said over the weekend that Time Warner Inc. (NYSE: TWX) "has completed the internal work necessary to separate its AOL unit's dial-up-access business from its advertising and content business," and that the media giant will likely announce it Wednesday, same day it is reporting quarterly results. It may sell one or both of the businesses since AOL has been a drag on Time Warner's stock with the uncertainties surrounding the prospects for its ad-based business, the Journal said.
I started with banks, I'll end with banks. Citigroup Inc. (NYSE: C) "is closing a $400 million convertible arbitrage fund, the final step in winding down its $2 billion Tribeca Global Investments group," Bloomberg reported. Citigroup has been struggling due to losses from the subprime meltdown and has troubles with its alternative-asset management unit. It has already closed Old Lane Partners and started closing its Falcon Strategies hedge funds after suspending redemptions. Until Citigroup can show it has its house in order, the stock, already down 36% year-to-date will likely continue to suffer.
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