Obama Oratory Fails To Woo Wall Street

Inauguration Day usually makes for a lackluster trading session, but yesterday's was historically bad as the Dow sank 4 percent, dipping below 8,000 and erasing the early rally of 2009. Financial stocks again led the way down. The New York Times reckons it was one of the "worst Inauguration Day losses in more than a century," as investors turned a deaf ear to the incoming president's message to choose hope over fear. There is not much hope in the numbers. The newspaper gloomily reminds us, "housing values are falling faster, trade is shrinking and the unemployment rate, now at 7.2 percent, is expected to hit 9 percent or more." The Wall Street Journal adds the task of sorting out America's stricken financial sector to President Obama's growing to-do list. A top priority is pumping more money into tottering banks by buying up their bad assets, possibly in the form of convertible assets that would see the federal government owning more and more of these institutions. And, yes, full-blown nationalization of the most precarious banks is an option, though one of "last resort," the newspaper says. Expecting some dramatic intervention, investors bailed on the sector yesterday, sending U.S. bank stocks down 20 percent.

The toxicity of financial stocks is perhaps best summed up at Merrill Lynch, now part of Bank of America, where investors pulled out $10 billion worth of assets during the fourth quarter and another $3 billion in the third quarter, Bloomberg reports this morning. Boston-based State Street also saw investors wipe out more than half its value yesterday after it revealed it has potentially $9 billion worth of troubled assets on its books, the Boston Globe reports.

Overseas in the United Kingdom, the banking sector outlook is even worse—if that's possible. There are fresh calls today for the U.K. government to nationalize two of the country's largest lenders, Royal Bank of Scotland and Lloyds Banking Group. The latest plea comes from John McFall, a prominent U.K. politician serving in the Commons Treasury Committee, who writes in a column for today's Financial Times, "things are bad—unprecedentedly bad—so we need to consider radical actions and actions that would have been thought lunatic a year or so ago." For Lloyds and RBS, it appears to be just a matter of time before the government steps in, McFall suggests. "If it is to happen, the sooner the better. Let us get it over with—nationalise the pair of them."

"Chysler's Italian Job"—that's what CNNMoney.com is calling the hastily arranged Fiat-Chrysler merger announced yesterday. (Even the leak-happy Italian press was playing catch-up on this one.) There are two advantages for Chrysler, as CNNMoney.com sees it. First, the deal represents a public-perception boost that it's found a (more) solvent partner, and, secondly, Fiat's expertise is in smaller, fuel-efficient autos, a Chrysler weak spot. Alas, racing fans, Chrysler would get access to all Fiat vehicle platforms except Ferrari, the FT points out. But of more concern is what this alliance means for Chrysler's perceived credit-worthiness as it lobbies lawmakers for an additional $3 billion in bailout funds. Naturally, Bob Nardelli, Chrysler’s CEO, says its strengthens the automaker's case, the FT writes. Not so fast, writes the WSJ. The newspaper, citing sources in the know, writes that the Fiat-Chrysler tie-up is contingent upon Chrysler first securing the $3 billion. If the deal does go through, Fiat could end up an outright majority owner after the first 12 months. As it stands now, Fiat would obtain 35 percent of Chrysler for no money down. Instead, it would offer Chrysler technological expertise and vehicles Chrysler could build and sell in the United States. After 12 months, Fiat, depending on whether it meets a series of sales goals, would be able to buy an additional 20 percent in Chrysler for just $25 million, more or less, the newspaper writes.

Barack Obama may have new job, but his inauguration bucks a more general global trend summed up by BHP Biliton's decision to cut 6,000 employees and contractors from its global operations, the FT reports. And it's not just the world's largest mining company that is suffering. In the world of entertainment, Warner Bros. announced it was cutting 800 jobs, the Los Angeles Times writes, while Clear Channel, "struggling in the advertising downturn," will eliminate 1,850 positions, or about 9 percent of its staff, immediately, the NYT reports.

At least IBM is looking good. While the rest of the tech sector crumbles, it posted a 12 percent increase in fourth-quarter profit and gave an upbeat outlook for 2009, the WSJ reports. Despite the dire economic outlook, IBM says it continues to "benefit from the growing profitability of its software and services businesses," in the words of the WSJ. The same cannot be said for Intel. Its CEO, Paul Otellini, told employees in an internal webcast that the company could post a loss this first quarter for the first time since 1986. Sony also risks falling into a loss this year, according to many analysts, the FT reports. The somber forecast comes as Sony CEO Sir Howard Stringer battles an old guard of managers as he seeks to push through 16,000 full-time and part-time job cuts in a sweeping restructuring of the company.

And, finally, Google has finally caught on to what most every newspaper publisher in the country could have told it: Selling ads in newspapers is no way for a search engine to make money. According to the NYT, Google is abandoning its two-year-old Google Print Ads business, saying, “while we hoped that Print Ads would create a new revenue stream for newspapers and produce more relevant advertising for consumers, the product has not created the impact that we—or our partners—wanted.”