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| Weekly Wrap Up |
It was a strong week for the markets as the major indices posted sizeable gains each day following minor selloffs on Monday. The rally was incited by a string of positive earnings reports that helped investors regain confidence in the economy. An upbeat regional manufacturing report released on Tuesday also helped investors shake off some residual disappointment from the day before. The ongoing wheeling and dealing for a merger between major airline companies Delta (DAL: Charts, News, Offers) and Northwest (NWA: Charts, News, Offers) was settled on Tuesday as the carriers inked a deal to combine, creating the world’s largest airline. On Wednesday, stock surged after Coca-Cola (KO: Charts, News, Offers), JPMorgan (JPM: Charts, News, Offers), and Intel (INTC: Charts, News, Offers) all beat analyst expectations for their first-quarter earnings. Investors faced some less invigorating economic news as the Labor Department reported a rise of 0.3 percent in consumer prices and the Commerce Department reported a drop in new home construction, but this data was not enough to weigh down the markets on Wednesday. Mixed corporate news resulted in gains on both Thursday and Friday with Citigroup (C: Charts, News, Offers) leading the charge and giving a boost to other financial stocks. Citigroup reported that it will cut its cost base by up to 20% and CEO Vikram Pandit rejected calls for a breakup. Oil prices also made headlines last week as crude futures spiked at a new record of $117 a barrel.
Looking ahead, this week will feature more earnings reports, with Bank of America (BAC: Charts, News, Offers) set to release its data on Monday. More Market News
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| Economic News |
The onslaught of homes facing foreclosures has yet to ebb, a research report showed Tuesday, with bank repossessions skyrocketing last month as more troubled homeowners mailed in their keys and walked away. And the worst isn't over: the wave of adjustable-rate loans resetting to higher rates will crest in May and June. And that's expected to push more homeowners into default and foreclosure in the third and fourth quarters of this year, according to RealtyTrac Inc. of Irvine, Calif. "Once we're through that batch of loans, the worst will have been worked through the system," said Rick Sharga, RealtyTrac's vice president of marketing. The number of U.S. homes receiving at least one foreclosure filing jumped 57 percent in March to 234,685, compared with 149,150 properties a year earlier. Filings include default notices, auction sale notices and bank repossessions. (Source: BusinessWeek) Full Story
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Consumers, beset by a credit crunch, rising energy and food costs and a prolonged housing slump, stayed away from the malls in March. Retail sales posted only a small increase after a big drop in February. The Commerce Department reported Monday that retail sales edged up 0.2 percent in March after a 0.4 percent decline in February. The March gain primarily reflected higher costs for gasoline, which climbed to record highs. Excluding a big 1.1 percent rise in sales at gasoline service stations, retail sales would have been flat last month. The new report did nothing to dispel worries that consumers will cut back so sharply on spending that the country will tumble into a recession. Consumer spending accounts for two-thirds of total economic activity. (Source: Forbes.com) Full Story
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Now that most people agree the US is experiencing a recession (or at the very least a slow down) the following questions remain: how bad will it be and how long will it last? Ben Bernanke and many on the Street predict short and shallow. Popular media and other economists, such as Nouriel Roubini, believe we teeter on the brink on the next great depression. The data seems to lean to the Bernanke camp, but at this stage it’s impossible to know. Economists are trained to be Monday Morning Quarterbacks, not fortune tellers. Talk to me several years into and I will be full of insights about the implications of the “sub-prime crisis” and the “credit crunch” that followed it. (Source: The Economist) Full Story
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| Business News |
Citigroup (C: Charts, News, Offers) posted a big first-quarter loss on billions of dollars more in writedowns and announced thousands of planned layoffs, but shares rose as the damage did not appear as bad as some feared. The loss for the period was $5.1 billion, or $1.02 a share, including $12 billion in pretax writedowns and a $3.1 billion increase in credit costs in the global consumer business. Revenue dropped by half to $13 billion in the quarter. Citi's results factored in $6 billion in writedowns on subprime-related securities, $3.1 billion on leveraged finance commitments, a downward credit value adjustment of $1.5 billion, writedowns of $1.5 billion on auction rate securities. (Source: TheStreet) Full Story
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Delta Air Lines (DAL: Charts, News, Offers) and Northwest Airlines (NWA: Charts, News, Offers) on Monday night announced plans to merge their vast domestic and international networks, creating the world's largest airline. The proposed merger would be the largest U.S. airline deal ever, creating a global giant with more than 800 jets, 6,400 daily flights and nearly $32 billion in annual revenue. The carriers estimate the value of the new company at $17.7 billion dollars, far above their current market value. The proposal could also be a catalyst for further consolidation among the big airlines at a time when the industry is threatened by steep losses from high fuel prices and a weakening economy. If the merger closes, the new airline will be named Delta and headquartered in Atlanta, where Delta is based. Delta CEO Richard Anderson will be its CEO. (Source: USA Today) Full Story
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The Coca-Cola Co.'s (KO: Charts, News, Offers) first-quarter profit rose 19 percent due to acquisitions and overseas growth, offsetting unimpressive results in its home North America unit that were affected by fewer people going out to eat because of fuel prices and the slowing U.S. economy. The results beat Wall Street expectations, and its shares edged up in morning trading. The world's biggest beverage company said its profit was $1.50 billion, or 64 cents a share, in the three-month period ending March 28. That compared to a profit of $1.26 billion, or 54 cents a share, a year earlier. Excluding a one-time charge of 3 cents a share related to restructuring charges and asset write-downs, Atlanta-based Coca-Cola said it earned $1.58 billion, or 67 cents a share, in the quarter. (Source: Yahoo! Finance) Full Story
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| Technology Focus |
AT&T Inc. (T: Charts, News, Offers) on Friday said it plans to cut about 4,600 jobs, or 1.5 percent of its work force, to shift resources to growing parts of its business. The nation’s largest telecommunications provider said most of the layoffs will be among managers, particularly in wireline operations, including local phone service and service for large corporate customers. Jobs in corporate functions in like finance will also be cut. "Even with the reductions announced today, we expect our head count overall to remain stable this year as we hire additional employees to support growth areas like wireless and TV," said spokesman Michael Coe. (Source: MSNBC) Full Story
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Investors appear ready to embrace Google Inc. (GOOG: Charts, News, Offers) again after weeks of hand wringing over whether the faltering U.S. economy would bog down the Internet search leader's moneymaking machine. Google won back Wall Street with first-quarter earnings and revenue growth that surpassed analysts' predictions, propelled by an aggressive push outside the United States. The pleasant surprise, delivered late Thursday, lifted Google's recently sagging shares by nearly 17 percent, or $75.89, to $525.43 at the open of trade Friday. "This is mostly a relief rally," Stanford Group analyst Clayton Moran said. "People are relieved that things aren't as bad as they thought." The stock still has a long way to go to fully recover the $75 billion in shareholder wealth that evaporated as economic worries caused Google's market value to plunge by 35 percent since December. That left the company's shares at $449.54 at the end of Thursday's regular trading. (Source: Yahoo! Finance) Full Story
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Oh what a difference a quarter makes. Since its last earnings report, online auction king eBay (EBAY: Charts, News, Offers) has replaced its CEO, changed its fee structure and policies, and weathered a seller boycott. Now we're about to see what impact those changes will have on its first-quarter earnings, which will be reported after the close of trading on Wednesday. The company expects net revenue in the range of $2 billion to $2.05 billion, and earnings in the range of 37 cents to 39 cents. Analysts predict first-quarter revenue of $2.07 billion and earnings of 39 cents a share. For the year, eBay expects net revenue in the range of $8.5 billion to $8.75 billion, and earnings of $1.63 to $1.67 a share. Analysts forecast full-year revenue of $8.74 billion and earnings of $1.66 a share. (Source: TheStreet) Full Story
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| Your Money |
Increasing numbers of Americans are simply walking away from their houses and mortgages, increasing pressure on banks and the economy. Rapid house price falls in many parts of the United States will soon leave as many as one in five borrowers owing more on their loan than the house will fetch, removing at a stroke the single most powerful incentive to keep up with payments. The phenomenon of "walk aways" or "jingle mail," so called because of the noise the house keys make in the envelope mailed to the bank, is hard to measure but shows every sign of gathering pace and having a substantial impact. (Source: Reuters) Full Story
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It's possible to smite the alternative minimum tax and simplify the U.S. tax code in one swift blow. Under a new plan called the Simple, Exact, Transparent Tax or SET, at least taxpayers could hope to reclaim some sanity in figuring out how much they owe. Neither the monstrous tax code nor the AMT has been easy to slay. From 2005 through 2015, the alternative tax is forecast to generate $645 billion for the government, perhaps more, according to the U.S. Congressional Budget Office. Congress has put in place another short-term patch to exempt most taxpayers from paying it for the 2007 tax year. In 2008, though, all bets are off as 20 million may be subject to it. The mind-numbing tax code, with endless credits, exemptions and deductions, gets more complicated every time Congress tinkers with it, which is as often as three times a year. (Source: Bloomberg) Full Story
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