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| Weekly Wrap Up |
Equities had a strong week as the market started the second quarter of 2008 on a bullish note and then largely managed to hold on that sentiment in the wake of weak economic news later on. The blue chip DJIA gained close to 400 points (3.21%) this week while the broader S&P 500 rose about 55 points or 4.2%. The markets got off to a weak start on Monday as investors reflected on the Treasury Department’s sweeping proposal to overhaul the US financial regulatory system. Merck (MRK: Charts, News, Offers) and Schering Plough (SGP: Charts, News, Offers) both got hammered after a panel of cardiologists recommended that physicians curtail prescriptions for drugs Vytorin and Zetia over concerns about their effectiveness. Tuesday, the first day of the second quarter, was a day filled with optimism on Wall Street as traders took the news of another large UBS (UBS: Charts, News, Offers) write-down to mean that the credit crisis is coming to end and sent the Dow up over 400 points. In a positive sign, markets held on to the bulk of Tuesday’s gains over the rest of week, as opposed to selling-off after a big rally, something that we have seen a lot of recently. On Wednesday, the Fed Chairman hinted that he believes there is a good chance the US economy is in a recession, a view that has come to be widely held by investors over the last couple of weeks. Research in Motion (RIMM: Charts, News, Offers) vowed the street by releasing a strong earnings report while Dell (DELL: Charts, News, Offers), on the other hand, failed to generate investor enthusiasm for its restructuring plans during its analyst meeting. Friday saw the release of the highly anticipated employment report which showed that non-farm payrolls fell a larger than expected 80,000 in March, the biggest decline in five years. The markets managed to take the news in its stride without a major sell-off. Microsoft (MSFT: Charts, News, Offers) raised the ante on Yahoo (YHOO: Charts, News, Offers) on Saturday threatening a proxy fight if the latter does not agree to the proposed merger within 3 weeks. Looking ahead, the focus will shift from economic data to corporate data as the earnings season gets underway this week. More Market News
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| Economic News |
The full benefit of recent Federal Reserve interest rate cuts has not yet been felt, Fed Chairman Ben Bernanke said on Thursday, nodding to a policy lag that may reduce the need for many more rate moves ahead.
"Further actions will have to depend on how the economy evolves and we are looking of course at both sides of our mandate, growth and inflation," Bernanke told a U.S. Senate Banking Committee hearing on the rescue of troubled investment bank Bear Stearns (BSC: Charts, News, Offers). (Source: Reuters) Full Story
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After last Friday's announcement of the third consecutive drop in US employment figures, following hot on the heels of Ben Bernanke's admission that the American economy is already in recession - or more precisely that "a recession is possible ... there's a chance that for the first half as a whole, there might be a slight contraction" - I am probably the only economist left in the world who still believes that a US recession is likely to be avoided.
Obviously, I drew some encouragement for this view from the surprisingly decent ISM index, which triggered the huge rally in global stock markets on Tuesday (with some help from UBS (UBS: Charts, News, Offers) and Lehman (LEH: Charts, News, Offers) and the news of further regulatory moves to ease the credit crunch). (Source: Times Online) Full Story
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Recessions are part of capitalism. They happen every so often. We've had two in the last super-prosperous 25 years. And it looks like we're entering a third one after Friday's jobs-loss report.
The unemployment rate went up to 5.1 percent, which is still a low number in historical terms. But the March labor report showed a loss of 80,000 payroll jobs, while payrolls in the prior two months were downwardly revised by 67,000. Non-farm payrolls have fallen for three straight months after peaking last December. Private-sector jobs have dropped four consecutive months. (Source: National Review Online) Full Story
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| Business News |
Wondering how Lehman Brothers (LEH: Charts, News, Offers) staved off the panic that brought down Bear Stearns (BSC: Charts, News, Offers) last month? Here's a clue: While former Bear Stearns chief Jimmy Cayne was off playing bridge, Lehman Brothers was busy putting together a hand that allowed the firm to trump bearish investors when the market turned.
Lehman's success in sailing through last month's liquidity crisis involved both pluck and luck. Closing on Tuesday's overnight $4 billion convertible preferred offering and securing a $2.5 billion credit facility from a 40-bank syndicate, as the New York brokerage did last month, took pluck. Getting access to the Federal Reserve's discount window - an unprecedented move that, when the Fed made it in March 17, allowed the broker-dealer to borrow cash like a commercial bank - was a bit of luck. (Source: Fortune) Full Story
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In the turmoil swirling around the cholesterol medication Vytorin this week, an important message has been lost: This is not a bad drug.
But its manufacturers - Schering-Plough (SGP: Charts, News, Offers) and Merck (MRK: Charts, News, Offers) - have handled its development badly, undermining confidence in the industry and a drug that could yet prove to be an important addition to doctors' heart disease arsenal.
It's hard to miss the clever Vytorin ad campaign about diet and family history influencing cholesterol levels. Vytorin's pitch is that it's two drugs in one pill and treats both. In 2006, U.S. doctors wrote 34 million prescriptions for it.
The trouble is, Vytorin isn't ready to be a blockbuster drug. (Source: Salt Lake Tribune) Full Story
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Could Bear Stearns (BSC: Charts, News, Offers) have survived if the Federal Reserve had opened its discount window to it sooner? The answer: Doubtful. Was it right to rescue Bear Stearns? The answer: Yes.
The dramatic details of the collapse of Bear Stearns, an 85-year old institution, will be taught in business schools for years to come. It's a tale still unfolding-it's a story that's a must read for investors.
And it's a story loaded with controversy. Here’s one of the biggest points of contention.
Bear Stearn's chief executive officer Alan Schwartz said in testimony before Congress that the Federal Reserve could have stopped the fifth-largest U.S. securities firm from collapsing if the central bank had opened up its discount window sooner to lend money directly to investment banks, including Bear. (Source: FOX Business) Full Story
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| Technology Focus |
Yahoo (YHOO: Charts, News, Offers) on Monday reiterated its rejection of a takeover offer from Microsoft, again calling it too low.
The company was responding to a letter from Microsoft (MSFT: Charts, News, Offers) that threatened to lower the price of its buyout offer and take it directly to Yahoo shareholders.
Although Microsoft's offer was initially valued at $31 a share, a drop in the price of Microsoft shares has reduced the offer to just more than $29 a share.
Microsoft's chief executive, Steven A. Ballmer, raised the pressure on Yahoo’s directors on Saturday in a letter warning that Microsoft would begin a proxy fight seeking to oust them if the two companies did not reach a negotiated deal in the next three weeks. (Source: New York Times) Full Story
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On a screen at the front of a classroom, Gene Fishel flashed an online social-networking profile of "hotlilflgirl," which said she was 15, enjoys being around boys and wants to meet new people.
The next image revealed the real "hotlilflgirl" - a mug shot of a 31-year-old man who was convicted of sexually abusing 11 children he met online and was sentenced to 45 years in prison.
"Not little, not fly and not a girl," said Fishel, a Virginia assistant attorney general. He warned his audience about the dangers of sharing personal information on the Internet and agreeing to meet Web acquaintances in person. (Source: MSNBC) Full Story
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Shares of Research In Motion Ltd. (RIMM: Charts, News, Offers) rose Thursday as analysts applauded the BlackBerry maker's fourth-quarter earnings and revenue, which beat Wall Street estimates.
RIM shares rose $6.79, or 5.9 percent, to close at $122.58. In the past year, the stock has traded between $42.93 and $137.01.
Analysts responded positively to the report, with a number raising price targets on the stock and estimates for future profit. (Source: Forbes) Full Story
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| Your Money |
The credit crunch will make it harder for many families to pay for college this fall, particularly if their children plan to attend high-cost private or out-of-state schools.
Federal student loans remain available, but the caps on how much students can borrow have lagged far behind college costs. Freshmen, for instance, can't borrow more than $3,500 in federal loans. And other sources of funding are drying up:
Private loans. In a recent survey, 43% of private colleges said one or more lenders on their "preferred lender" list have stopped offering private student loans, according to the National Association of Independent Colleges and Universities, which represents private colleges. (Source: USA Today) Full Story
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Over the past year and a half, Shane Gledhill has seen the value of his home drop as his family’s gas budget and grocery tabs have risen. Meanwhile, the construction industry he works in has slowed.
So when the government announced a plan to offer Americans a tax rebate check, the 42-year-old father of two knew exactly what he would do with his money.
"We’ve got to stick that in savings because who knows what’s going to happen? " Gledhill said. "The last thing I want to do is go out and spend it on something." (Source: MSNBC) Full Story
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| Trivia Question |
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| Market Overview |
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| DJIA |
12,608.77 |
+392.37 |
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1,370.40 |
+55.2 |
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9,157.53 |
+395.41 |
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2,370.98 |
+109.8 |
| 10Yr |
3.481% |
+0.015 |
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