The Truth will prevail, But only if we Demand it from Congress!
9-11 Inside Job and Neocons Hacked 2004
By Barry Grey
15 April 2008
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The US stock market plunged Friday on news that General Electric’s
first-quarter 2008 profits fell far below the company’s projections.
Long considered among the most gilt-edged of stocks, GE shares fell
13 percent, their sharpest one-day drop since the stock market
collapse of October 1987.
The announcement that GE’s first-quarter earnings were down 5.8
percent stunned Wall Street, which was confident the company would
meet its earlier projections since it had reaffirmed those
predictions only weeks before, on March 13. GE Chairman Jeffrey R.
Immelt attributed the profit decline, mainly the result of large
write-downs of assets in its financial business, to the
intensification of the credit crunch in the wake of the collapse of
Bear Stearns on March 14.
“The last two weeks in March were a different world in financial
services,” GE Chairman Jeffrey R. Immelt said in a conference call
to investors.
However, the company also saw profits fall in its healthcare and
industrial branches. GE cut its forecast for all of 2008. The
one-day stock decline wiped out $44 billion in share values.
GE’s results shook the financial markets because they indicated that
the impact of the housing and credit crisis was spreading beyond the
housing and banking sectors to broader parts of the US economy. GE’s
report came at the beginning of the first-quarter earnings report
season, and seemed to confirm the worst fears on Wall Street that
profits will drop sharply nearly across the board.
These fears were compounded by the earnings report earlier in the
week by the aluminum giant Alcoa, which said high energy costs had
helped push its profits down 54 percent in the first quarter. Also
last week, United Parcel Service said its quarterly results would be
as much as 12 percent below expectations because of rising fuel
costs and falling package shipments.
The Dow Jones Industrial Average fell 257 points, or 2 percent, on
Friday. The Standard & Poor’s 500 Index also fell 2 percent, and the
Nasdaq Composite Index plunged by 2.6 percent.
Also on Friday, a report issued by the University of Michigan on US
consumer confidence augured a rapid slowdown in the American
economy. The index, measuring consumer sentiment this month, fell by
6.3 points to 63.2 points, the lowest level since March of 1982,
when the country was in the grips of the most severe downturn since
the Great Depression.
Underscoring the growing pessimism and economic distress within the
US population, a Pew Research Center report found that the
percentage of Americans saying they are better off than they were
five years ago is at its lowest level in 44 years of polling.
On Monday, the Commerce Department reported a mere 0.2 percent
increase in retail sales in March, underscoring the slump in
consumer spending, which accounts for more than two-thirds of the US
economy. Americans actually spent less on furniture, clothing and
appliances in March, and overall sales registered a slight increase
only because of soaring prices for gasoline and food.
These developments coincide with the release of the International
Monetary Fund’s World Economic Outlook report, which projects a
sharp decline in both US and global economic growth.
This week, major US banks and finance houses publish their quarterly
earnings reports, and they are expected to show continuing huge
losses from mortgage-backed securities and other speculative
investments that have gone bad. Analysts expect JPMorgan Chase to
report a near-halving of its profits.
Far worse is anticipated in the reports from Citigroup, the largest
US bank, and investment bank Merrill Lynch. The former is expected
to report more than $10 billion in additional write-downs and the
latter more than $7 billion in new losses. These markdowns come up
top of billions already reported since the eruption of the credit
crisis last summer.
At Citigroup, analysts anticipate a net loss for the first quarter
of $5.7 billion, after a $9.8 billion net loss in the final quarter
of 2007. Merrill Lynch is also expected to report its second
consecutive quarter in the red, with an estimated first quarter loss
of $520 million.
Last week, Washington Mutual, the biggest US savings and loan
company, obtained a $7 billion cash infusion to ward off possible
collapse by selling shares of its stock to investors at a steep
discount. On Monday, Wachovia, the fourth largest US bank, announced
a first-quarter loss of $393 million, confounding analysts who had
predicted a profit. The bank also announced a 41 percent cut in its
dividend and said it would raise $7 billion in capital by selling
its stock at a discount.
Tens of thousands of jobs in the financial services industry have
already been eliminated over the past eight months, but the carnage
has only begun. Wall Street firms are estimated to have cut over
34,000 jobs, but according to one financial research company a total
of 200,000 jobs just in the commercial banking sector could be cut
over the next 12 to 18 months.
Analysts at Celent LLC issued a report last Tuesday saying they
expected US commercial banks to eliminate 200,000, or ten percent,
of their 2 million jobs. This does not count tens of thousands of
job cuts likely to be carried out by investment banks and other
financial companies.
Citigroup alone is drawing up a cost-cutting plan that could involve
the elimination of over 25,000 of its 370,000 employees. Merrill
Lynch is expected to slash more than 2,000 jobs.
And the job-cutting is spreading to other sectors of the economy.
Last week, the Silicon Valley chip-maker Advanced Micro Devices
announced it would cut 1,650 workers, about 10 percent of its work
force. Google said it would eliminate 300 jobs from the US
operations of DoubleClick, an advertising technology company it
recently acquired.
The downward spiral in economic activity is being fueled by the
banking crisis, which has resulted in a sharp contraction in
lending. Stocks and corporate profits boomed following the 2000-2001
recession on the basis of cheap and plentiful credit, which was
itself largely based on vastly inflated housing values and financial
speculation.
Now, the credit crunch is hitting growing sections of the economy,
slowing capital investment, driving down profits and leading to
higher unemployment, a wave of home foreclosures and economic
desperation for millions of working class families. The slump in
consumer spending and fall in home values, in turn, deepen the
financial crisis of the banking system.
The consulting firm Greenwich Associates reported that of 293 large
companies surveyed world-wide, most are suffering from tightened
credit conditions. Among US companies, 63 percent said they were
paying more for bonds and revolving credit, and 62 percent were
paying more for loans.
This downward spiral has battered hopes on Wall Street that the
economic turmoil could be limited to a few economic sectors and that
stock prices, which have fallen 13 percent since their October, 2007
high, could revive.
According to an article in the Los Angeles Times, estimated first
quarter profit growth for the tech sector of the S&P Index has
fallen from 14 percent on January 1 to 7 percent now. The industrial
sector is expected to post growth of just 1 percent, down from an
estimated 8 percent on January 1.
For the S&P 500 as a whole, first quarter earnings are expected to
be down 14 percent from a year earlier, largely because of
continuing losses at financial companies.
But the results posted by GE and Alcoa suggest that profits could
take an even bigger hit.
Another stark indicator of the downward trajectory in both the US
and other countries was provided Friday by the International Energy
Agency, which made its biggest reduction in world oil demand growth
estimates in seven years. It cut its projection of world oil demand
growth by 35 percent from its January estimate.
