Today's Market Recap

Market recap: Facebook's glow faded almost as soon as the IPO began trading, and more headlines out of Europe implying discord between Greece and Germany helped push stocks lower for the 12th time in 13 sessions. Crude oil slid another 1.2% to $91.48, lowest since October, while the dollar index fell for the first time in 15 sessions. NYSE losers led winners nearly three to one.  The S&P 500 closed down 0.79%, the DOW closed down 0.97% and the NASDAQ closed down 1.25%.

Morgan Stanley Bullish on AAPL

While Facebook underwhelms on its big day, Apple (AAPL +1.4%) is outperforming after a string of selloffs. Possibly helping is a bullish note from Morgan Stanley's Katy Huberty (previous), who predicts average U.S. household spending on Apple gear will go from $444 in 2011 to $635 in 2013, and reach $888 in 2015, provided rumors (I, II, III) of an iTV pan out. Meanwhile, BMO says its talks with carriers suggest they want to cut iPhone subsidies, but that actually doing so could prove tough.

Hewlett-Packard Said to Consider Cutting Up to 25,000 Jobs

Hewlett-Packard Co. (HPQ) is considering cutting as many as 25,000 jobs, or 8 percent of its workforce, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.

The number to be cut includes 10,000 to 15,000 from Hewlett-Packard’s enterprise services group, which sells a range of information-technology services and has been beset by declining profitability, said these people, who asked not to be identified because the plans aren’t final and may change.

Meg Whitman, chief executive officer since September, is seeking to reverse the growth slump that led to the ouster of her predecessor, Leo Apotheker. The company’s PC sales are dropping as consumers favor tablets, such as Apple Inc.’s iPad, and it has been slow to adapt to the shift toward cloud computing, away from the IT services Hewlett-Packard provides.  “Hewlett-Packard could make the difficult decision of announcing” a workforce reduction, Brian Marshall, an analyst at ISI Group, wrote in a research note earlier this month. This “would enable investments in strategic, higher growth areas.”

Eliminating 18,000 jobs could result in savings of about $1.2 billion and add 50 cents to annual per-share earnings, he estimated.

Michael Thacker, a spokesman for Palo Alto, California- based Hewlett-Packard, declined to comment.
Shares of Hewlett-Packard rose to as high as $22.27 after Bloomberg reported the changes, and gained 3 cents to $22.06 the close in New York. The stock has dropped 14 percent this year.

Early Retirement Offers

Some of the cuts to Hewlett-Packard’s workforce of 324,600 may come through early-retirement packages, the people said. Hewlett-Packard may offer early retirement to several thousand people, the people said.

The overall reduction and additional cost savings throughout the company could result in savings that reach billions of dollars, one person said.

Hewlett-Packard, the world’s largest maker of personal computers and printers, is working with management consulting firm McKinsey & Co. to draw up the job-cuts plan.

Whitman, former CEO of EBay Inc., said in March that she’ll combine the PC and printing divisions, ending deliberations to spin off the PC unit. She has also said she’ll step up investment in research and development and take steps to shore up Hewlett-Packard’s balance sheet.

Besides tussling with Apple, Hewlett-Packard is also vying with companies including International Business Machines Corp., Oracle Corp. and Cisco Systems Inc. in the market for hardware, software and services for large corporations.

More Declines Predicted

Hewlett-Packard in February forecast sales for the quarter through April that fell short of analysts’ predictions. Sales in the current year may decline 4 percent to $122.4 billion, according to average analyst predictions compiled by Bloomberg.

The enterprise services group includes the 2008 acquisition of Electronic Data Systems for $13.9 billion made by former CEO Mark Hurd.  Hurd, who was CEO from 2005 to 2010, reduced costs through actions including a 5 percent pay cut for most employees in 2009, lower research spending and plans to eliminate at least 48,000 jobs.

Hewlett-Packard is scheduled to report fiscal second- quarter earnings on May 23.
Hewlett-Packard plans “significant” layoffs and seeks to cut its workforce by 10 percent to 15 percent, Business Insider reported yesterday, citing an unidentified person.

Is this really an economy which is recovering Mr. President?

Goldman Sachs Downgrades RATE

Goldman Sachs downgrades Bankrate (RATE) to Neutral from Buy after finding better risk/reward propositions in the space. The company - which cut its teeth reporting the highest rates on CDs and the lowest rates on mortgages - has struggled bringing in online advertising dollars at an increasing pace.

JPM Built Up $150B in Complex Positions

JPMorgan's (JPM) Chief Investment Office has built up over $100B of positions in complex, risky bonds and structured products, according to the Financial Times, with the CIO's "non-vanilla" portfolio now over $150B.

Jamie Dimon "couldn't breathe" when he saw the actual positions behind the $2B (and growing) CIO loss, according to an inside-baseball account. Dimon's risk-management instincts appear over time to have been dulled by the profits the unit was producing, leaving him unaware the CIO had morphed from a hedging outfit to one making big directional plays.

Today's News From Europe & Asia

China's Q2 GDP could slow to 7.5% because of property sector curbs and dampened external demand, according to the State Information Center, a Chinese government think-tank. That would be in-line with China's official target of 7.5% for the year, but would raise concerns about the sustainability of China's job creation.

New home prices fell in most major Chinese cities in April, while the three cities that saw month-on-month gains averaged just 0.2% increases.

"It's like a contagious disease that will spread," says an executive with the Chinese Auto Dealers Association of car inventories that risen to more than 45 days of sales - typically a level at which dealers being "debilitating" price cuts. Total sales declined 1.3% in the January-April period, the worst showing since 1998. 

The typical pattern of China building up metals inventories in Q1 and using up through the rest of the year isn't holding as the piles keep growing larger, with granaries and car parks taking the excess from brimming warehouses. The stationary cargo trains at Qingdao port are tell a different story than still-decent PMI reports.


No shocker, but Fitch cut Greece's credit rating to CCC from B- on concerns the country won't be able to find the political support to sustain eurozone membership. With a second national vote in six weeks, failure to form a government willing to implement the bailout terms would mean a "probable" exit from the currency union.

A new poll puts the right-wing New Democracy party back in the lead in Greece with 26.1%, ahead of the anti-austerity SYRIZA, which had been well out in front last week. Crucially, New Democracy and the Socialist PASOK party would have enough seats to form a pro-bailout government.

Support for anti-bailout Syriza has grown since the May 6 election, with a poll showing the party would win another ballot with 22% of the vote (vs. 17% on May 6). Support for establishment parties - New Democracy and Pasok - has also grown as voters abandon the fringe. Another poll here with different result. Hey, it's more fun than divining the U.S. 


The European Commission and the ECB are working on "emergency scenarios" in case Greece leaves the euro, Trade Commissioner Karel De Gucht tells Belgium's De Standaard newspaper. This appears to be the first time that an EU official has publicly confirmed that such work is being carried out. 

The ECB is playing a game of chicken - sitting on its hands to play tough with the Club Med states - but (along with the other major central banks) will "step in massively," says HSBC's David Bloom, and set off a powerful rally. Bob Janjuah agrees - "The Fed and the ECB will respond (soon) and trigger a short, sharp rally."

The level of loans more than 90 days past-due at Spanish banks rose to 8.37% in March, says the central bank, the highest level in 17 years (that's all?). As for bank runs, the data show a slight increase in system deposits for March, but a 4% decline for Q1 to €1.16T.


Ireland may need another bailout, reckons Deutsche Bank, as even a small increase in capital requirements for its banks would require the government to pump more money in. Mortgage delinquencies actually hung in there in 2009 and 2010, but rose sharply over the past year; toss in possible easier bankruptcy laws and bank losses could be set to grow.

Today's Market Recap

Market recap: Stock losses piled up in the final hour, succumbing to concerns about Spain's banks and the potential for a run on southern European banks that outweighed Wal-Mart's upbeat earnings. Yields on 10-year Treasurys slid to 1.7%, with the next target the all-time intraday low of 1.672%, set last September. NYSE decliners topped advancers more than four to one.  The S&P 500 closed down 1.48%, the DOW closed down 1.28% and the NASDAQ closed down 2.11%.