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| Weekly Wrap Up |
Investors returned to the U.S. stock market from the three-day holiday weekend on Monday feeling refreshed, reinvigorated, and ready for business. Stocks surged across all major indices on news that JP Morgan Chase (JPM: Charts, News, Offers) agreed to increase its bid for Bear Stearns (BSC: Charts, News, Offers) from $2 per share to $10 per share and a stronger-than-expected housing report kept investors in good spirits. Also announced on Monday was approval by the Justice Department for the merger of satellite radio companies Sirius (SIRI: Charts, News, Offers) and XM (XMSR: Charts, News, Offers), a move some didn’t believe would happen. The rest of the week, however, did not play out as strongly as it had started. Tuesday presented investors with more economic data, and this time the findings were not as encouraging. Disappointing consumer confidence and weak housing readings weighed on investors and kicked off the declines that would only increase as the week went on. The weekly oil inventory report released Wednesday showed a continued surge in oil prices prompting a selloff early in the day that was not recovered. Wednesday also brought the release of economic reports revealing weaker than expected factory orders and a Commerce Department study showing a 1.8 percent decline in February new home sales. Corporate news including weak earnings reports and profit warnings from companies like JC Penney (JCP: Charts, News, Offers) and Oracle (ORCL: Charts, News, Offers) brought down not only their own shares, but also those of other companies in their respective industries. This week, investors can look forward to the start of a new quarter but will be carefully analyzing the results of 2008’s first quarter which will end Monday. More Market News
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| Economic News |
The embattled financial sector took another hit on Tuesday as JPMorgan Chase and UBS AG cut their earnings forecasts for Merrill Lynch & Co Inc (MER: Charts, News, Offers) and said they expect the Wall Street firm to disclose more write-downs. In turn, Merrill downgraded regional banks Bank of America (BAC: Charts, News, Offers), PNC Financial (PNC: Charts, News, Offers) and SunTrust Banks Inc (STI: Charts, News, Offers), saying the bursting of the housing bubble will continue to hurt lending and home equity. The sharply lowered earnings expectations for Merrill stood out, though, dashing whatever confidence had been restored last week after the Federal Reserve helped arrange for JPMorgan (JPM: Charts, News, Offers) to take over Bear Stearns Cos Inc (BSC: Charts, News, Offers), avoiding a systemic meltdown among banks. (Source: Yahoo! Finance) Full Story
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Many analysts and public officials have said that foreclosures of subprime adjustable-rate mortgages would soar this year as owners' monthly payments jumped when interest rates reset to a higher level. Not only is that unlikely to happen, this year's resets of earlier vintages of subprime mortgages may even reduce some payments that increased in 2007. The reason? The index to which many ARMs are tied is the six-month London inter-bank offered rate, or Libor, and that rate has fallen from more than 5.3 percent last fall to about half that level. The Federal Reserve's cuts in its target for the overnight lending rate -- the last to 2.25 percent on March 18 -- from 5.25 percent in mid-September, plus actions to increase liquidity in the inter-bank lending market, have caused the Libor to fall. (Source: Bloomberg) Full Story
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The past four months have been quite a ride. Wasn't it just October when we were basking in the warmth of a seemingly robust U.S. economy? The U.S. consumer was looking pretty resilient, despite reports predicting the untimely demise of his spending power as well as a housing downturn, higher energy costs and a looming credit crisis. Then, the holiday retail season showed up, and consumers hesitated. It was back in August 2007, in my company's annual holiday consumer study, when I saw the first signs that consumers were shifting their purchasing for this holiday season. I dubbed it the "Hesitation Holiday." Hesitation seemed to be consumers' conditioned response to the deeper discounts on the horizon if they held off on purchasing until closer to the holidays. (Source: Forbes.com) Full Story
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| Business News |
Ford Motor Co. (F: Charts, News, Offers) announced Wednesday that it has agreed to sell British automakers Jaguar and Land Rover to India's Tata Motors Ltd. in a deal that will net the struggling U.S. automaker about $1.7 billion - roughly a third of the price it paid for the two luxury brands. Tata Motors said the acquisitions would extend its reach around the globe. The agreement had been in the works for months as cash-strapped Ford sought money to fund its turnaround plan. Ford said the sale would close by the end of next quarter, at which point Tata Motors would hand over $2.3 billion in cash. However, at the close of the sale, Ford said it would contribute about $600 million to pension plans. (Source: CNN Money) Full Story
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J.C. Penney Co. (JCP: Charts, News, Offers), the big middle-market department store chain, warned Friday of disappointing first-quarter profits in another sign that consumers are cutting discretionary spending in the face of higher gasoline prices and falling confidence. Penney's shares tumbled nearly 14 percent before regaining some ground, and the stock of other retailers also fell. The company said it now anticipates first-quarter net income of about 50 cents per share, down from its prior forecast for a profit of 75 cents to 80 cents per share. Analysts had been expecting 75 cents per share, according to a survey by Thomson Financial. Chief Executive Myron Ullman said higher energy costs, a drop in hiring and weak housing and credit markets were weighing down consumers. (Source: Yahoo! Finance) Full Story
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Citigroup (C: Charts, News, Offers) agreed Wednesday to pay $1.66 billion to creditors of Enron who lost money when the energy trader collapsed in 2001. Citigroup was the last remaining defendant in what was known as the "Mega Claims" lawsuit, filed in 2003 against 11 banks and brokerages. The filer, called Enron Creditors Recovery Corp., alleges that with the help of banks like Citigroup, Enron kept creditors in the dark about the company's financial troubles by using shady accounting. Wednesday's settlement - plus previous bank settlements and Enron's subsequent release of $1.7 billion held in reserves - gives those creditors more than $5 billion, Enron said. That amounts to 37.4 cents on each dollar the creditors had tied up in Enron, according to Enron. (Source: USA Today) Full Story
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| Technology Focus |
Shares of Google (GOOG: Charts, News, Offers) were dropping Thursday afternoon after a report showed another month of slowing paid-advertising clicks for the Internet giant. Research firm comScore found that the number of times users clicked on ad-supported links -- known as paid clicks -- grew by only 3% in February from a year ago in the same period. That was a modest improvement over January, when paid clicks were essentially flat, but a steep decline from the 13% growth comScore reported for Google in December. Yahoo!'s (YHOO: Charts, News, Offers) paid clicks in February were up 5% while Microsoft's (MSFT: Charts, News, Offers) MSN paid clicks were down 13%. Last month, Microsoft made a public offer to buy Yahoo! In an effort to better compete with Google, but so far Yahoo! Has refused. (Source: TheStreet) Full Story
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Software giant Oracle (ORCL: Charts, News, Offers) announced fiscal third-quarter earnings rose 30% from a year ago, in line with Wall Street expectations. But sales missed forecasts, a possible sign that big businesses may be starting to pull back on tech spending. Shares of Oracle plunged more than 8% in after-hours trading. The company said in a conference call Wednesday that it expected a strong fourth quarter. Net income for the three months ending in February rose 30% to $1.3 billion, or 26 cents per share. Excluding certain one time items, the company reported a profit of 30 cents per share, meeting analysts' forecasts, according to estimates from Thomson Financial. (Source: CNN Money) Full Story
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Motorola Inc. (MOT: Charts, News, Offers) announced plans to separate its struggling handset business from other operations Wednesday, forming two separate, publicly traded companies after months of agitation from frustrated investors. The suburban Chicago-based cell phone maker has been under pressure from billionaire investor Carl Icahn for changes meant to revitalize its cell-phone business. The cell phone unit has seen its sales and stock price plummet with the company unable to produce second act to the once-popular Razr phone. Motorola said the handset business will operate separately from another company that will encompass its home and networks business, which sells TV set-top boxes and modems, and its enterprise mobility solutions, which sells computing and communications equipment to businesses. (Source: Yahoo! Finance) Full Story
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| Your Money |
Amy Welling would like to buy a house. And why not? She just got married last month, and what better way to start life as newlyweds than to move into a house you own together? However, Welling and her husband, Michael, are so wary of the uncertain economy that after weeks of house hunting they have decided to continue to rent. The Wellings saw firsthand how many houses are on the market, some for as many as 20 months. And besides, they may be ready to pick up and relocate soon anyway: Welling, who is working two jobs, will graduate later this year with a master's degree in exercise physiology from Southern Illinois University in Carbondale, Ill., and she hopes that by next year her husband's PhD will be complete. "We don't want to be stuck with a house we can't sell," says Welling. (Source: BusinessWeek) Full Story
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The combination of slowing growth and rising inflation has raised the specter of "stagflation," a pernicious problem in the U.S. in the 1970s and early 1980s. Stagflation is puzzling to economists because slowing growth should mean weakening demand for labor, lower wage inflation, and softer product demand. This, in turn, should mean falling inflation--not rising inflation. The year 1980 epitomized the stagflation process. Real GDP fell by a sharp 1.6%, meaning that a serious recession was taking place. The unemployment rate jumped to 7% in 1980 from 5.8% the year before. Yet on top of this economic weakness, consumer price index (CPI) inflation accelerated to 13.5% from 11.3% the year before. (Source: Forbes.com) Full Story
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