Fertilizer Markets and Finance

Potash Corp. of Saskatchewan Inc. reported a 21% drop in third quarter profit due to weaker sales to China and India, which are both pushing for lower prices in contract talks.

The disappointing earnings were in line with the reduced guidance the company announced last week. The world’s largest fertilizer company said it earned US$645-million, or US$0.74 a share, near the low end of its guidance of US$0.70 to US$0.90 a share. The consensus analyst estimate was US$0.75.

Potash supply contracts with China and India expired early in the fall, and those countries are determined to pay less in the next set of contracts, which are taking longer than expected to settle. China paid US$490 a tonne in the last contract, while India paid about US$470 a tonne. The potash market has also undergone a general slowdown in recent weeks, putting pressure on spot prices (though they remain close to US$500 a tonne).

Potash Corp. noted that Latin American shipments in the third quarter were better than the same period a year ago, but that was more than offset by the reduced Asian sales.

Read more at Ottawa Citizen.

NEW YORK (AP) — A growing belief that the U.S. economy may be headed toward recession gave the stock market its fourth straight week of losses.

The anxiety in the market was obvious Friday as the major indexes went from moderate gains early in the day to another sharp loss. The Dow Jones industrial average had its 10th move of more than 100 points in 15 trading days this month.

“We just don’t know whether we’re going to have a recession,” said John Burke, head of Burke Financial Strategies.

There was little news to help investors determine their next moves. However, JPMorgan Chase & Co. joined other financial firms and cut its forecast for economic growth during the fourth quarter. It’s now predicting growth at annual rate of just 1 percent, down from an earlier forecast of 2.5 percent. That added to the recession fears.

Investors disliked the news late Thursday that Hewlett-Packard Co. is planning to exit most of its consumer businesses, including PCs. HP fell 20 percent to a six-year low. HP plans to transform itself into a company that caters to corporations.

After the market rose early, some investors sold in case bad news comes out of Europe over the weekend. European investors were also cautious — banking stocks fell near two-and-a-half-year lows, dragged down by rumors about banks’ potential losses on bonds issued by heavily indebted governments.

“These things usually break out over the weekend and then you have a mad dash Monday to react to them,” said Mike McGervey, the head of McGervey Wealth Management.

The drop late in the day recalled the 2008 financial crisis. Then, many investors stepped up their selling in the afternoon out of fears about news that might break overnight — or on weekends. Lehman Brothers failed on Sunday, Sept. 15. The government took over mortgage companies Fannie Mae and Freddie Mac the previous weekend.

The Dow lost 172.93, or 1.6 percent, and closed at 10,817.65. It was down 4 percent for the week. Since July 21 — four weeks and one day — the Dow is down 15 percent.

Companies that rely on an expanding economy for higher revenue fell. Caterpillar Inc., International Business Machines and Alcoa Inc. each fell more than 2 percent.

The Standard & Poor’s 500 stock index fell 17.12, or 1.5 percent, to 1,123.53. It was down 4.7 percent for the week. All 10 industry groups that make up the index fell.

The Nasdaq composite fell 38.59, or 1.6 percent, to 2,341.84. It was down 6.6 percent for the week.

Although stocks fell, investors did not continue pushing the price of Treasurys, as they have the last three weeks. The yield on the benchmark 10-year Treasury note was almost unchanged at 2.07 percent, compared with late Thursday’s 2.06 percent. It had been up to 2.11 percent earlier in the day. The yield fell below 2 percent Thursday for the first time as heavy demand sent its price sharply higher.

Investors began the week confident after last week’s volatility, the worst the market has had since the 2008 financial crisis. The Dow rose nearly 215 points on Monday when Google, Time Warner Cable and Cargill were among companies announcing multi-billion deals. The market remained relatively calm the next two days. But on Thursday, a stream of bad economic news in the U.S. combined with worries about Europe’s debt problems and sent the Dow plunging 419 points.

Since July 21, the market has gone from one crisis to another, and the weakening U.S. economy has been at the heart of the selling. In late July, the concern was the debt debate going on in Washington. In early August, it was the downgrade of the U.S. debt rating by Standard & Poor’s. Since then, worries about the impact of the downgrade have faded, and growing evidence that the economy is slowing has driven stocks down.

Signs of a slower economy around the world have only made investors more pessimistic about the U.S. Earlier this week, Germany said its economy grew just 0.1 percent in the second quarter. And Germany is the strongest economy in Europe.

Stocks fell Thursday on news of another drop in home sales, weaker manufacturing in the mid-Atlantic states and an increase in the number of people who applied for unemployment benefits.

The stock market tends to reflect the expectations that investors have for the economy and company earnings six to nine months in the future. So traders are interpreting the numbers they’re seeing as part of a slide in the economy that will continue for some time.

Fears of a new global banking crisis moved to the foreground Wednesday and are driving investors out of stocks and into safe-haven Treasurys, gold and Swiss francs.

The catalyst was an idea that’s been circling markets for several weeks-that France is next in line to lose its triple-A credit rating now that the U.S. has been downgraded.

Even though the three major rating agencies affirmed France’s rating this week, the speculation still took a toll on the French banking sector, hurt by rumors of collateral funding issues.

Societe Generale, at the heart of the market talk, denied rumors that it is having problems and reaffirmed that it has low exposure to the weaker eurozone countries. But its shares remained under pressure, as did global bank stocks. German and French stock markets closed down 5 percent.

Analysts are quick to point out that U.S. banks have become much better capitalized than they were during the financial crisis of 2008.

In the U.S., shares of major banks moved sharply lower. Bank of America (NYSE: bac) held an investor conference call Wednesday afternoon to try and reassure nervous investors that it doesn’t need more capital.But the market didn’t seem impressed.

Meanwhile, JPMorgan Chase (NYSE: jpm) CEO Jamie Dimon told CNBC Wednesday that he is comfortable with the bank’s exposure in Europe.

“We’ve been in Europe for hundreds of years,” he said. “We have manageable exposures to all the banks. We’re not going to cut and run.”

Bank stocks were down about 3 percent in late afternoon trading after being down 5 percent earlier in the day. They now are down more than 5 percent for the week and 14 percent for the month.

Fed Chairman Ben Bernanke was expected to meet with President Obama and Treasury Secretary Tim Geithner to discuss the economy at the White House Wednesday.

Europe’s sovereign debt crisis, which has moved from country to country, has been seen as the potential spark for a European banking crisis but European officials have bailed out Ireland, Portugal and Greece and are working to trying to stem the contagion from spreading to bigger countries.

Standard and Poor’s, which cut the U.S. credit rating last week, Wednesday said the French sovereign rating is not at risk and that the French government has been more serious than the United States in addressing fiscal issues.

In France, French president Nicolas Sarkozy ordered finance and budget ministers to develop a new deficit reduction program.

The European Central Bank this week was able to slow the spiral of speculation surrounding Italy and Spain by stepping in to buy the debt of those countries. Credit default swaps, which are like an insurance against bond default, rose sharply on Italy, France and Spain Wednesday.

“Everybody in the world is saying it’s not real, but to me it’s got to be real…We know what the French banks’ exposure is just to Greece alone,” said one trader.

Rochdale banking analyst Richard Bove said there is little chance of a French bank default.

“If a bank in Europe went under, it would cause huge counterparty risk. It wouldn’t be that bad for 99 percent of the banks in the country. It would be bad for the biggest banks…Why are all the banks falling in price? The deeper issue is what the Federal Reserve did yesterday,” said Bove.

The Fed , in an unusual move Tuesday, revealed that its “extended period” to hold rates at zero runs until the middle of 2013. The Fed also downgraded its view of the economy to a picture of slow growth.

“The Federal Reserve told me, number one, that the economy is weakening and my loan losses just went up,” Bove said. “The ability to make new loans is hampered by the weaker economy, and on top of that, the Federal Reserve said they were going to keep margins on my product down,” he said, explaining banks need higher rates to make profits on lending and deposits.

“…FDIC insurance on deposits in many cases may be higher than the yield the bank gets on deposits,” he said.

“The low rate structure ‘helicopter Ben’ (Bernanke) put in for us helps out a lot of companies but doesn’t help the banks,” said Fred Cannon, KBW chief equity strategist on “Fast Money” Wednesday.

NEW YORK (AP) — Gripped by fear of a new recession, the stock market suffered its worst day Thursday since the financial crisis in the fall of 2008. The Dow Jones industrial average fell more than 500 points, its ninth-steepest decline.

The sell-off wiped out the Dow’s remaining gains for 2011. It put the Dow and broader stock indexes into what investors call a correction — down 10 percent from their highs in the spring.

“We are continuing to be bombarded by worries about the global economy,” said Bill Stone, the chief investment strategist for PNC Financial.

Across the financial markets, the day was reminiscent of the wild swings that defined the financial crisis in September and October three years ago. Gold prices briefly hit a record high. Oil fell even more than stocks — 6 percent, or $5.30 a barrel. And frightened investors were so desperate to get into some government bonds that they were willing accept almost no return on their money.

It was the most alarming day yet in the almost uninterrupted selling that has swept Wall Street for two weeks. The Dow has lost more than 1,300 points, or 10.5 percent. By one broad measure kept by Dow Jones, almost $1.9 trillion in market value has disappeared.

For the day, the Dow closed down 512.76 points, at 11,383.68. It was the steepest point decline since Dec. 1, 2008.

Thursday’s decline was the ninth-worst by points for the Dow. In percentage terms, the decline of 4.3 percent does not rank among the worst. On Black Monday in 1987, for example, the Dow fell 22 percent.

Two weeks ago, investors appeared worried about the deadlocked negotiations in Washington over raising the ceiling on government debt. As soon as the ceiling was raised, investors focused on the economy, and the selling accelerated.

On Thursday, growing fear about the weakening U.S. economy was joined by concern in Europe that the troubled economies of Italy and Spain might need help from the European Union.

The European Union has already given financial assistance to Greece and Ireland, two countries that have struggled to pay their debts. A financial rescue package for Italy or Spain might be more than the group of countries can handle.

Traders also unloaded stocks before Friday’s release of the government’s unemployment report for July, which is expected to show weak job growth and perhaps a rise in the unemployment rate, which is 9.2 percent.

Together, they produced “a perfect storm of selling,” said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management.

Until a week ago, Wall Street had mostly convinced itself that the U.S. economy would improve in the second half of the year. Gas prices were falling, and Japanese factories were resuming production after disruptions from the March earthquake.