The market is having a bad couple of days – down 121 – that follows a 116 point fall yesterday. The SFE Futures suggested a 42 point fall this morning.

WALL ST DOWN 112 – Wall St. moved in a 153 point range and finished the session lower after Federal Reserve Chairman Ben Bernanke, testifying before Congress, said there could be more bank failures to come, particularly from smaller banks. Wall Street also concerned by the jobs numbers, the Labor Department said 19,000 more Americans filed for unemployment benefits last week, taking the total to 373,000 (highest since Oct 2005). GDP came in lower than expected. The Commerce Department announced a 0.6% gain in 4th Q GDP below some expectations for a rise of +0.7% to +0.8%. Oil and gas exploration and production companies had their biggest gain in 5 years helped by record oil prices. EOG Resources closed up 18% after it lifted its production target for 2009 and 2010 after identifying “significant” crude oil reserves in Colorado and “substantial natural gas potential” in the British Columbia Horn River Basin. In company related news, Limited Brands, the owner of Victoria’s Secret lingerie chain closed down 10% – hitting a 7 year low – after announcing a lower than expected earnings result and Freddie Mac closed down for the 6th straight session after it recorded a $2.45bn 4Q loss on the back of rising defaults. The NASDAQ lost 0.94%.

Of course the big problem at the moment is interest rates. A skybound bank bill yield implies rates are going up to 8.0% (from 7.0%) in 3 months. A reflection of continuing tight credit market conditions. No let up in interest rates it seems and it all comes into focus ahead of the RBA Meeting next week. The market is betting on another 50bp by May. That’s causing a banks collapse. The CBA was down 5.1% yesterday. It is down 4.6% today. The NAB was down 4.3% yesterday and is down 4.6% today. It is a rout. At this point it would be an improvement if the market thought half the financial stocks were half empty. The market seems to think half of them don’t exist.

Earnings results today…

  • Insurance Australia (IAG) – down 8.1% to 350c – MISSED EXPECTATIONS – Announced a net profit of $110m, down 68% from $345m last year and not even close to the $154m analysts had expected. Weather claims the main reason for the result, but company is confident of meeting its FY premium growth target of 7-9%. Declared interim dividend of 13.5c.
  • AGL Energy Limited (AGK) – down 38c to 1122c – AHEAD OF EXPECTATIONS but only thanks to lower depreciation than expected. Post Depreciation it is about 2% ahead of forecasts. Guidance reconfirmed – Expects FY08 NPAT to be between $330-$360m (consensus $355m), and FY09 NPAT of between $360-$390 (consensus $381m) – Declared an interim dividend of 26c, up from 9.5c. JB Were say they wouldn’t “chase the stock above $12”.
  • Boart Longyear (BLY) – up 4c to 203 – GOOD – Pro-forma net profit of $165m, up 80% and 10% ahead of prospectus. Analysts expected $163m. EBITDA of US$336m against forecasts of $334m and prospectus of $320m. Announced it is assessing a number of acquisitions. US credit concerns not impacting mineral exploration market. Guidance for 12-15% earnings growth in 2008 and the outlook beyond that is robust.
  • Harvey Norman (HVN) – down 17c to 477c – IN LINE – announced a 1H NPAT (excluding one-offs) of $174.14m, up from $132.8m last year and in line with the $175.6m analysts had expected and the company’s own guidance. Net profit – inc. one-offs – increased to $230.15m from $180.50m. 2Q sales up 13.1% with like-for-like sales up 7.9%.
  • Australian Worldwide Exploration (AWE) – down 1c to 359c – 1H profit increased 9 fold to $83.3m from $8.5m after it started production at the Tui Fields in New Zealand. Operational profit came in at $171.2m. The result included an unexpectedly high $87.4m in tax, one of the main reasons why it missed JP Morgan’s forecasts of $135.3m and UBS’s expectations of $150m. Didn’t issue a dividend.
  • Centro Properties (CNP) – down 6c to 52c – Announced a loss of $1.11bn for the 1H because of write downs in the US. The good news is that it has won an extension on a total of $5.4bn in debt until April 30, but is still under pressure to sell assets to raise cash by the new deadline. The stock is down 90% since December.
  • Commander Communications (CDR) – unchanged at 14c – Announced a loss of $244.8m from a $5.6m loss last year mainly due to a $193m non-cash impairment charge. Operating cash flow was $100.3m and revenue fell to $458.1m from $505.3m. No dividend.

In other news…

  • Latest developments in ABC Learning: The AFR says Eddy Groves is in the US with Goldman Sachs JB Were and Austock talking to someone about the sale of assets. Couple of names in the frame. After a two day trading halt the stock has been put into suspension….for an expected 3 days. Temasek upped their substantial shareholding in the last few days from 12.25% to 14.66% (cost $17m – presumably buying some of the margin lending stock). They are seen as an investor only. Lazard Asset Management have also upped their stake to 13.93% from 12.2%. ABS last traded at 214c.
  • Lihir Gold’s board has approved a $696m plan to increase gold production to around 1m ounces a year from 2011 at its Island operations. LGL up 12c to 412c.
  • Allco Finance Group (AFG) managed Rubicon America Trust (RAT) has announced plans to sell up to $800m worth of assets in the next year saying there is considerable pressure on its funding structure. RAT recently announced a profit of $50.2m, down from $102.7m. AFG has also announced its unit Mobiu, has ceased accepting new mortgage applications and could see its assets sold off. AFG down 1c to 97c and RAT 8.5c or 30% to 19.5c.

We have a list of the CHEAPEST stocks in the ASX 200 and those with the HIGHEST YIELDS in the newsletter today. We also have an article about called The Life of Brian.

Catch Marcus in The Age on Saturday and the Sydney Morning Herald tomorrow and in the WA Newspaper today.

Have a good weekend.