The U.S. stock market rallied yesterday, sending the Dow and Nasdaq up about 1.5% and the S&P 500 up just over 1%. Nearly the entire day’s gains were fueled by an early-morning earnings announcement from IBM. Big Blue beat fourth-quarter earnings estimates by a handsome margin.
But we’re willing to bet very few people noticed this: IBM's outsized profits were the result of currency moves in its global sales.
“If you take out the currency component,” Chuck Butler from EverBank points out, “IBM's sales increased 4%, not the 10% for revenues expected. Even big old (boring) IBM can make some money in the currency markets!”
In all, the move shows how desperate the Street is for good news.
And with good reason. Citigroup announced a cornucopia of bad news this morning:
- $18 billion write-down
- $12.5 billion cash infusion from outside investors, including Government of Singapore Investment Corp, Saudi Prince Alwaleed bin Talal and former Citi CEO Sandy Weill
- 41% dividend cut
- 70% decline in year-over-year revenue
- a 4,200 job cut -- at minimum
- $9.8 billion net loss -- the biggest quarterly loss in the bank’s 196-year history.
Merrill Lynch, Wells Fargo, JP Morgan and Washington Mutual all report earnings this week. While Citi is expected to be the worst of the bunch, similar write-downs and losses are practically guaranteed.
When the dust settles, this might be the worst quarter for financials since the Great Depression
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