Economic Update — Government Unnerves Market with Reassurances
- Feb 24, 2009
Don’t worry, we’re working on the problem, and don’t call it nationalization, please, said the most important U.S. financial regulators in a rare–unprecedented, in fact–joint statement on Monday. Actually, the text of the statement by the U.S. Treasury Department, the Federal Deposit Insurance Corp., the office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve went in part like this: “The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses.” How so? “The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth,” the statement continued. “Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.” The markets seem worried nevertheless. Both and Dow Jones Industrial Average and the S&P 500 dropped to their lowest levels since the late 1990s, possibly dragged down on fears of nationalization by one name or another for “systemically important financial institutions” (that means you, Citi). The Dow was down 250.89 points, or 3.41 percent, while the S&P 500 lost 3.47 percent. The Nasdaq was down 3.71 percent. In the current topsy-turvy economy, however, one way to drive stock prices up is to report a steep drop in earnings that still manages to beat expectations–especially if you’re an upmarket retailer. That’s what happened to Seattle-based Nordstrom Inc., which reported late Monday that its fourth-quarter 2008 earnings were down 68 percent, due mostly to holiday-season discounting. The company earned 31 cents a share in the quarter ended January 31, compared with 92 cents a year earlier, but this quarter’s figure was a penny above expectations, so Nordstorm shares started to go up in after-hours trading. The company also reported a same-store sales decline for the quarter of 9 percent, and it expects annual same-store sales to decrease at least 10 percent for fiscal 2009 compared with 2008. As a measure of the times, only a year ago the retailer was planning to open five regular-price department stores and two Nordstorm Rack discount stores in 2009. Those plans have been revised, according to the company: this year will see the opening of three regular stores and 10 Rack stores. Cheap, the new chic.