FedEx, Morgan Stanley, Fifth Third Bank Contribute To Market Gloom

FedEx reported a fourth quarter loss of $241 million on rising fuel costs and a write down of its Kinko's unit.  The company provided a bleak outlook for the rest of the year, lowering its estimates for first quarter and stating that earnings would be difficult to predict due to sagging demand coupled with volatile energy prices.  Somebody please call Bernake and let him know that when companies start mentioning volatile commodity prices as a reason for lack of predictability in earnings, he has not achieved his goal of "price stability" regardless of what the core rate of inflation indicates.  

Meanwhile, in banking news, Morgan Stanley reported a 57% decline in earnings on a 60% drop in revenues and Firth Third Bancorp announced it will raise $2 billion of convertible preferred shares and slash its dividend to raise its tier 1 capital ratio to 8.5%.  It is becoming apparent to the market that Goldman's earnings report yesterday was a aberration.  Somehow through savvy trading (and apparently an increase in risk according to the Financial Times Lex column today), Goldman has managed to avoid suffering major losses.  On the same day that Goldman proved its trading prowess through its earnings report, analysts from the firm released a research note claiming that banks may need to raise another $65 billion in capital.  Perhaps Goldman's good earnings proved to the market that those guys know what they are talking about, and bank stocks promptly took a beating.  The sell-off looks likely to continue today as investors become more and more aware that the worst is not over for US banks.  Delinquencies are rising, assets are deteriorating, and continued weakness in the housing sector shows no signs of abating.  The Fed's hands are tied now that inflation is rearing its ugly head.  I offer a small suggestion to the remaining banks who need to raise capital: you may want to get that offering circulating ASAP.  I have a sneaking suspicion that if you wait for the other $60 billion in capital to be raised before you get your act together, there may not be any left for you.