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| Weekly Wrap Up |
Equities had a relatively stable run for the first 4 days of last week before taking a decisively lower turn on Friday. The stock market started off the week with its focus on corporate earnings as opposed to the economic data reports which have been the center of attraction on Wall Street over the past few weeks. As earnings season got underway, the sentiment among analysts was bearish as they expected earnings of S&P 500 companies to drop by an average of 12% with the financial sector expected to post an earnings shortfall of as much 60%. This kept stocks from making a sharp move upward for much of the week. Washington Mutual (WM: Charts, News, Offers), another victim of the subprime mortgage mess, announced a highly dilutive private equity cash infusion of $7 billion on Monday. Keeping with tradition, Alcoa (AA: Charts, News, Offers) kicked off the earnings season after the bell on Monday by posting a 54% drop in net income. AMD (AMD: Charts, News, Offers) exacerbated fears about weak earnings by reporting a reporting a shortfall in its Q1 sales numbers on Tuesday. It also announced a 10% reduction in its workforce. By mid-week, the battle for Yahoo (YHOO: Charts, News, Offers) started to heat up with a number of different scenarios coming into the picture. These include Yahoo teaming up with AOL and Microsoft (MSFT: Charts, News, Offers) and News Corp. (NWS: Charts, News, Offers) making a joint bid for the Sunnyvale, Calif. Company. Thursday saw somewhat of a mini-rally after 3 lackluster trading days as the DJIA rose 54 points led mainly by tech stocks. Most retailers turned in disappointing same-store sales numbers on Thursday as consumer’s wallets remain pressured. Gap (GPS: Charts, News, Offers) reported a 18% drop in same-store sales (i.e. stores open at least a year). Traders were shocked on Friday as General Electric (GE: Charts, News, Offers); a bellwether for US economy missed its earnings targets, a rarity for the industrial conglomerate. Earnings came in at 43 cents a share well-below the company’s own guidance of 50-53 cents a share. This led to a 256 sell-off in the Dow on Friday reflecting nervousness about the strength of corporate America and the consumer. The University of Michigan’s consumer sentiment declined to its lowest level in 26 years.
Looking ahead, this week will see a report on the producer price index on Tuesday as inflation becomes bigger of an issue, the parent company of American Airlines, AMR (AMR: Charts, News, Offers), reports earnings on Wednesday while Google (GOOG: Charts, News, Offers) will provide an insight into whether rumors about a slowdown in its ad business are justified by reporting on Thursday. Friday will see results from Citigroup (C: Charts, News, Offers) as the company reports on its first full quarter under Vikram Pandit. More Market News
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| Economic News |
Americans are unaccustomed to recessions, particularly ones that involve shopping less. During the past quarter-century, the world's most powerful economy has suffered only two official downturns, in 1990-91 and 2001. Both were short and shallow. In 2001 consumer spending barely skipped a beat; a decade earlier it fell, but only briefly. Buoyed by rising asset prices and financial innovations that allowed ever more people to tap ever more debt, the collective American wallet has not snapped shut in almost two decades.
That may be about to change. Evidence is mounting that the economy has slipped into recession--and this time consumer weakness is to the fore. (Source: Economist) Full Story
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The weakening dollar and rising inflation has investors worried that the U.S. economy is in or near a recession, but consumers seem to have already hunkered down for the worst.
The Reuters/University of Michigan Surveys of Consumers reported Friday that its preliminary index of confidence fell to its lowest point in 26 years in early April. The index fell to 63.2 from 69.5 in March. Economists surveyed by Thomson Financial expected 68.0.
The survey revealed that consumers believe the economy has already slipped into a recession. The sagging housing market, coupled with rising food and gas prices, a tightening credit market, and a slowing job market have caused consumers to hold tight to their wallets. (Source: Forbes) Full Story
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Import prices surged in March and some of the price jumps are a record for modern trading history. Even the Labor Department's reputation for under-reporting inflation statistics can't mask the high inflation. Oil is only part to blame as non-petroleum costs broke many records.
Overall import prices rose by +2.8% in March, after increasing an unrevised 0.2% in February. Economists were expecting import prices to be up by +2.1% in March.
But it just goes from bad to worse. The year over year readings show that since March 2007, import prices have risen by a whopping +14.8%. Last year's "year over year" levels showed that prices rose by +2.8%. (Source: 24/7 Wall Street) Full Story
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| Business News |
General Electric Co. (GE: Charts, News, Offers) CEO Jeff Immelt was expected to tell the world Friday how the conglomerate's global strategy had paid off and allowed it to ride out the credit crisis.
Instead, he found himself defending the company's business model after GE shocked investors with lower-than expected earnings and a profit warning that wiped $46.9 billion off GE's value and sent the overall market slumping. Fairfield-based GE, which typically hits its targets, reported that profit fell 6 percent, to $4.3 billion, or 43 cents per share, from $4.57 billion a year earlier. Earnings from continuing operations came to $4.4 billion, or 44 cents per share, down 8 percent. (Source: Yahoo Finance) Full Story
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Now that private-equity firm TPG and a group of investors are putting $7 billion into Washington Mutual Inc. (WM: Charts, News, Offers), it is clear that there are life preservers available for companies drowning in the mortgage crisis. But it also is clear that a rescue may come at a steep price.
WaMu, as expected, announced a deal that would allow it to bolster its capital levels and remain independent and under the direction of Chief Executive Kerry Killinger, at least for the foreseeable future.
The $7 billion raised by WaMu includes $1.54 billion from selling common shares and $5.5 billion from selling convertible preferred shares. (Source: Salt Lake Tribune) Full Story
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The completion of a merger between Northwest Airlines Corp. (NWA: Charts, News, Offers) and Delta Air Lines Inc. (DAL: Charts, News, Offers) is a near certainty, analysts at Credit Suisse said Friday, due to the potential for crude oil prices to hit $120 this year.
Shares of Northwest and Delta rose on the report. Northwest traded up 3.5% to $11.25 a share and Delta gained 4.6% to $10.20 in recent trading. Other airline stocks were up several percentage points, including Continental Airlies Inc. (CAL: Charts, News, Offers) and UAL Corp. (UAUA: Charts, News, Offers), which are rumored to be considering a merger in response to a Northwest/Delta deal.
Credit Suisse analyst Daniel McKenzie upgraded Northwest and Delta to outperform, saying there's a 98% probability for a deal. (Source: Fortune) Full Story
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| Technology Focus |
Yahoo (YHOO: Charts, News, Offers) CEO Jerry Yang apparently will do anything to avoid being taken over by Microsoft (MSFT: Charts, News, Offers).
How else to explain his proposal last week to acquire AOL--the has-been of the Internet space, which has been dying a slow death since Time Warner (TWX: Charts, News, Offers) acquired it in 2000 at the peak of the dotcom bubble. One technology blogger likened Mr. Yang's move to smearing yourself with feces in hopes of dissuading a wild animal from eating you.
Alright, AOL is not excrement and Microsoft is not a wild animal, but the analogy is apt. With News Corp.'s (NWS: Charts, News, Offers) Rupert Murdoch vowing he wouldn't get into a bidding war with Steve Ballmer, and even indicating he may join forces with Microsoft in its pursuit of Yahoo, Mr. Yang has few options. Doing a bad deal--or at least threatening to do one--may be his best defense. (Source: Financial Week) Full Story
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A petition to "Save Windows XP" has drawn more than 111,000 supporters -- and continued shots across the Microsoft XP vs. Vista bow, a battle that began with Vista’s release last year.
The operating system succeeded XP, which came on the market in October 2001. Despite Vista's much-improved security measures, it has met with criticism and some reluctance by consumers and businesses that don't want to make the switch.
Among the concerns about Vista are the amount of computer memory and space it requires, its seemingly slower speed and frustration over the fact that third-party drivers for some printers and other devices are still not available from the companies that make those devices. (Source: MSNBC) Full Story
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Microchip maker Advanced Micro Devices Inc. (AMD: Charts, News, Offers) will continue to face difficulties in the consumer product market, a UBS analyst warned after the company posted a disappointing sales outlook and said it is cutting 10 percent of its global work force.
Analyst Uche Orji said in an interview that the economy-led drop in demand for desktop computers will continue to weigh on AMD's chance of improving its sagging performance.
The big question is whether the company's job cuts will be enough to rescue it from a year of delays, poor results and market-share loss to Intel's Pentium B computer chips, Orji said. (Source: BusinessWeek) Full Story
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| Your Money |
Beating the Standard & Poor's 500-stock index used to be the holy grail of money management. In the 1990s, many fund managers tried and failed to beat the mighty S&P 500.
Over the past 12 months, though, you could have outperformed the S&P 500 with a lowly Treasury bill. Or a gold coin. Or a barrel of oil. The average loaf of bread, for that matter, has risen in value more than the beleaguered big-cap index, which has fallen 4.9% over the past 12 months and 12.3% since its October high. Even lowly money market funds have beaten the average stock fund. The average money fund gained 4.2% for the 12 months that ended March 31, according to iMoneyNet.com. (Source: USA Today) Full Story
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Tax filing day is just around the corner, but some Americans may not be ready to submit their returns by April 15. Others may not have the cash to pay the tax they owe.
Ignoring the deadline can cost workers plenty in penalties and interest. And this year, it also could delay their rebates, because the government's promised stimulus program checks are being calculated off federal tax returns.
"People know April 15 is the deadline," said Greg Rosica, co-author of The Ernst & Young Tax Guide 2008. "But sometimes they don't have their information together, or they might be missing some information or they just haven't had time." (Source: MSNBC) Full Story
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| Trivia Question |
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What has been the longest-listed company on the NYSE?
(answer below) |
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| Market Overview |
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| DJIA |
12,325.42 |
-283.35 |
| S&P |
1,332.83 |
-37.57 |
| NYSE |
8,936.11 |
-221.42 |
| NASDAQ |
2,290.24 |
-80.74 |
| 10Yr |
3.471% |
-0.01 |
| Dollar |
72.065 |
-0.0295 |
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| September 19, 2008 |
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| Mar 31-Apr 4 |
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| Trivia Answer |
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| Con Edison, which was listed in 1824 as the New York Gas Light Company. |
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