Merrill Lynch posts dreadful result hinting worse is still to come

Disappointing earnings reports, higher crude price and weak data from the housing sector hammered US stocks badly today, Wednesday, 24 October 2007. But going into the final hour of trading, the indices managed to recover from most of their losses incurred earlier in the day. Five of the ten economic sectors posted gains today led by the energy sector. Technology was the biggest laggard today. Financials continued to be hard hit with Merrill Lynch’s dreadful result.

The Dow Jones industrial Average was down by more than 200 points in the initial trading hours. But at the end, the index closed almost unchanged at 13,675.25, marginally lower by 0.98 points. The Nasdaq Composite Index, finished lower by 24.5 points at 2,774.76. S&P 500 finished lower by 3.71 points at 1,515.88.

Fifteen out of thirty Dow components ended in red today. Intel led the team of Dow laggards.

Financial stocks today continued to bear the burnt of the the subprime mess in the US market. The story once again started today after Merrill Lynch reported a larger loss than expected. The company reported write-downs of $7.9 billion across U.S. sub prime mortgages, significantly greater than the $4.5 billion write-down disclosed earlier. The stock lost almost 6% today.

Existing home sales fall by 8% in September

On the top of the hour, the National Association of Realtors announced that September existing home sales slid 8% to an annualized rate of 5.04 million. The figure was much above market’s expectation of a 4.6% decline to an annualized rate of 5.25 million.

The technology sector was hard hit today after a sell-off was spurred in Amazon.com stock. Though the online retailer announced above expected earnings, the stock slipped by almost 14% today as investors were concerned with the company’s profit margin.

Dow component, Boeing, reported third quarter earnings today before the bell and beat the consensus estimate. But the stock was down after the company issued mixed earnings guidance.

Indian ADRs closed mixed today. Apart from VSNL, MTNL and HDFC Bank, all other ADRs ended in red today. Infosys and Wipro Technologies were top two losers today, each shedding almost4%.

Crude futures rise helping energy stocks

Unexpected drop in crude supplies took oil prices higher today. Price had actually continued to drop since the past couple of days after market expected that weekly inventory report on crude and fuel products are expected to show a climb in inventories for week ended 19 October.

Crude-oil futures for light sweet crude for December delivery closed at $87.1/barrel (higher by $1.83/barrel or 2.55%) on the New York Mercantile Exchange. Prices fell to $84.7/barrel today earlier in the day but the recovered. Prices are up 47% on a yearly basis.

Volume on the New York Stock Exchange came to nearly 1.6 billion, with declining stocks outpacing those advancing more than 5 to 3. On the Nasdaq, almost 2.8 billion shares exchanged hands, and declining issues topped advancers nearly 2 to 1.

Tomorrow there will be another couple of economic reports to garner attention. September's Durable Goods Orders, the weekly Jobless Claims data and September's New Home Sales data are expected to come out one after another.