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| Weekly Wrap Up |
The major U.S. indices survived a volatile week marred by dismal economic reports and disappointing earnings releases as we entered the final month of the first quarter of 2009. If Monday’s trading session was an indication of the week to come, investors would likely have stayed away from their computers, TV, and radios as to avoid news of the plunges in stock prices. A major selloff leading to the Dow’s lowest close in 12 years was kicked off after AIG (AIG: Charts, News, Offers) reported a $62 billion fourth-quarter loss, the largest in U.S. corporate history. The slide continued amid fears of the future of financial companies even though the U.S. government said that their bailout plan would be revised so that an additional $30 billion could be injected into the ailing AIG. Other financial stocks slipped on AIG’s news and continued to weigh heavily on the markets throughout the week. Economic reporting also sparked fluctuations in the markets as the Institute for Supply Management's manufacturing index rose in February from January’s figure while another report showed that construction spending fell 3.3 percent in January, more than double what analysts predicted. A rally Wednesday helped stem the losses from the first part of the week as investors were encouraged by details about President Obama's $75 billion foreclosure prevention plan. The hope that consumer spending would increase once homeowners facing foreclosure get some help inspired confidence and gave stocks a boost. Optimism subsided on Friday, however, as the February jobs report was released. Even though disappointing news was expected, the report that 651,000 jobs were eliminated in February pushed stocks to new lows. Investors are hoping that this week’s reports on retail figures and corporate earnings will give stocks the boost they need to overcome last week’s losses. More Market News
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| Economic News |
A private measure of the services sector shrank in February for the fifth straight month as layoffs mounted, the recession deepened and the outlook for any recovery this year grew darker. The Institute for Supply Management, a Tempe, Arizona-based trade group of purchasing executives, said Wednesday that its services index fell to 41.6 last month from 42.9 in January. The February reading was slightly above economists' expectations. But any reading above 50 signals growth, while a reading below 50 indicates contraction. The index has fallen steadily since August as the economy deteriorated. (Source: MSNBC) Full Story
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Economic policy, especially macro, is made under iffy circumstances--it's done as if more things were known than actually are known. Or even can be known. But the current situation is different. We know a lot. Most particularly, we know why and how we got into this mess. Just off the top of my head: We know Fed policy was too loose for too long. And we know consumers spent too much, driving the savings rate to zero, and they took on too much debt. (Source: Forbes.com) Full Story
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Even as the economy sheds jobs at an alarming rate, some economists say the worst may be over for consumer spending. That doesn't mean a return to the shop-till-you-drop, borrow-like-no-tomorrow days of just two years ago, but it may represent a stabilization in one key area of the economy. "We had a shock to the system from last September," says Chris Rupkey, chief financial economist at the Bank of Tokyo-Mitsubishi, referring to the collapse of Lehman Brothers. "Consumers put away their credit cards. As we get past the shock, they will start spending. There's pent up demand. Whether it is long lasting is another story." (Source: Yahoo! Finance) Full Story
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| Business News |
General Electric's (GE: Charts, News, Offers) gilt-edged triple-A credit rating could be in jeopardy, but concerns about the short-term liquidity of its finance arm are "overdone," the conglomerate's chief financial officer said Thursday. Shares of the world's largest maker of jet engines and electricity-producing turbines rose in early trading after three consecutive days of sharp declines and volatile trading. On Wednesday the stock fell as low as $5.73 -- a level not reached since 1991. (Source: USA Today) Full Story
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Shares of Citigroup (C: Charts, News, Offers), once the nation's most powerful bank, fell below $1 a share Thursday. The stock fell over 10 percent on the New York Stock Exchange from Wednesday. New York-based Citi has lost more than 85 percent of its value so far this year, and is down more than 95 percent from a year ago as the bank was pummeled by the financial market crisis. Citigroup's shares will remain on the New York Stock Exchange. Last week, the NYSE relaxed its listing rules to allow stocks that fall under $1 to still be listed and traded on the exchange. (Source: CNBC) Full Story
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American International Group is further proof that the global financial conglomerate model can lead to disastrous results. The struggling insurance company, which reported a staggering $62 billion fourth-quarter loss Monday, is abandoning that structure, which has grown too unwieldy and opaque, according to Edward Liddy, AIG's (AIG: Charts, News, Offers) chief executive. Instead, it will reorganize around smaller, separately managed businesses that can survive independently. On Monday it announced plans to combine its U.S. and foreign property-casualty insurance operations into a new unit, AIU Holdings, and separate management led by Kristian Moor, current head of the company's property and casualty business. About 20% of the new company could eventually be sold to the public. It also plans to securitize its U.S. life insurance operations. (Source: Forbes.com) Full Story
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| Technology Focus |
The microblogging service Twitter has caught on with everyone from celeb Ashton Kutcher to CEOs. Yet for all the buzz, Twitter has always seemed more novelty than business. Many of the 140-character posts, or "tweets," that people send out on Twitter are about topics as mundane as what they had for lunch or when they're going to sleep. Is there any real value in that? It turns out there is. In fact, there's growing evidence that Twitter, a company with no revenues today, could be worth several hundred million dollars. (Source: BusinessWeek) Full Story
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MySpace, the News Corp.-owned (NWS: Charts, News, Offers) social networking site, is off to a rough year. Growth has slowed (the number of U.S. visitors has hovered around 75 million for the last seven months), top talent is leaving the company, and like other media companies, it is feeling the effects of the slowing economy: a MySpace executive this week told FORTUNE that ad sales dipped in January and February.
This all comes after a disappointing 2008, in which analysts estimate MySpace posted revenue of about $600 million - far short of the $1 billion target set by its parent company. (Source: Fortune) Full Story
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Microsoft Corp (MSFT: Charts, News, Offers) is developing a feature in its new operating system that allows users to turn off Internet Explorer and other key Microsoft programs.
The new feature is a major step for the world's largest software company, which has been accused by competitors and regulators of forcing consumers to run its own software, squeezing rivals' offerings out of the marketplace.
"In addition to the features that were already available to turn on or off in Windows Vista, we've added the following features to the list in Windows 7," said a Microsoft blog published on Friday, listing Internet Explorer 8, Windows Media Player and a host of other Microsoft programs. (Source: Reuters.com) Full Story
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| Your Money |
The Federal Reserve on Tuesday rolled out a much-awaited $200 billion program to spur lending for cars, credit cards, education and small businesses. The Fed said the program has the potential to generate up to $1 trillion of lending for businesses and households starved for credit, which is the lifeblood of the economy. "We should see immediate benefits" from the program, Fed Chairman Ben Bernanke told Congress Tuesday. The bold program, dubbed the Term Asset-Backed Securities Loan Facility (TALF), was first announced late last year and originally scheduled to start in February. (Source: MSNBC) Full Story
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The Dow Jones Industrial Average seems to be on a permanent downward track. The nation’s GDP has plunged into negative territory. And something once considered unthinkable--a depression--is now a real possibility. That’s the finding of Harvard economists Robert Barro and Jose Ursua, who studied the long-term data for stock market crashes and depressions from 25 countries, including the U.S. In a recently published paper, the economists conclude there’s a 20% chance that U.S. GDP and consumption will fall by 10% or more, something not seen since the early 1930s--in other words, a depression. (Source: CNN Money) Full Story
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The Obama administration kicked off a new program Wednesday that's designed to help up to 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments. The Treasury Department released detailed guidelines designed to let the lending industry know how to enroll borrowers in the program announced last month. (Source: Forbes.com) Full Story
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