Anxiety greets third-quarter profit reports

Banks were among the worst performers during the quarter.

Bank of America, JPMorgan Chase & Co. and Wells Fargo & Co. all reported sharp declines in profit as they took hits on investments and increased their credit reserves to prepare for troubles ahead.

While JPMorgan and Wells Fargo managed to beat Wall Street's expectations, Bank of America's results fell short. Citigroup Inc., meanwhile, was the only big bank to report a loss — its fourth straight quarterly loss to be exact.

Increasing deterioration in commercial and residential real estate portfolios was a common theme. Credit card and other consumer loan portfolios have also begun to show signs of stress.

Goldman Sachs Group Inc. analyst Richard Ramsden recently pegged the total cost of the credit crises for financial firms at $1.4 trillion. He estimated that so far, write-downs and provisions total roughly $770 billion.

"We are half way through," he said of the crisis.

Airlines were also hit hard during the quarter, as oil prices spiked in July at $147 a barrel and caused a near panic among the industry's executives.

Southwest Airlines Co. reported its first loss in 17 years — $120 million — ironically, because of fuel hedges that lost money when oil prices fell fast near the end of the quarter. Continental Airlines Inc. lost $236 million while Delta Air Lines Inc. lost $50 million.

An exception was American Airlines parent AMR Corp., which made $45 million during the period because of a $432 million gain from selling its investment business.

But most airline analysts are focused on the future, with JPMorgan's Jamie Baker even calling third quarter results "irrelevant."

Baker pointed out that jet fuel prices are now $1 per gallon cheaper than the third-quarter average, and the industry has already moved to cut capacity.

Delta CEO Richard Anderson said he'd rather have a strong economy and lower fuel prices — but forced to choose, he'll take the lower fuel prices he's getting now.

"When you think about what you would rather manage at an airline, you would rather deal with demand cessation rather than $150 fuel," he said.

Fuel prices "dropping like a rock is a big offset to what happens in the economy," he said.

Technology sector bellwethers — IBM Corp., chip maker Intel and Google — have been cautiously trudging along, with several posting better-than-expected third-quarter results this week. Even Advanced Micro Devices Inc. bested low expectations, though the company continues to lose money as it struggles against Intel. Excluding items, however, AMD posted an operating profit.

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Google, the online search leader, posted a 26 percent profit increase Thursday, reassuring jittery investors that advertisers will continue to turn to it to compete for consumers' tightening wallets. Google's shares, which have taken a beating this fall, added about 4 percent Friday, having recovered from a three-year-low a day earlier.

IBM, having posted partial results last week to reassure investors, also surpassed Wall Street's expectations with a nearly 20 percent profit increase.

The quarter was sweet for the likes of Coca-Cola and Hershey. The soda maker reported double digit growth as sales in emerging markets offset U.S. weakness, with net income of $1.89 billion.

Hershey doubled its earnings to $124.5 million on sales of $1.49 billion. The candy maker's revenue rose 6.4 percent, partly due to customers timing extra shipments ahead of a price increase announced Aug. 15.

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