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| Weekly Wrap Up |
The rollercoaster ride of the U.S. stock market continued last week as equities weathered the ebbs and flows of investor wariness and weariness. Stocks fared better this week than the one prior as news of earnings and mergers came from multiple sectors and economic reports and oil prices made headlines daily. Monday investors were pleasantly greeted with a rising dollar and news from BlackBerry maker Research in Motion (RIMM: Charts, News, Offers) about the imminent release of their new version of the best-selling smartphone. Stocks slid on Tuesday, however, as statements from Federal Reserve Chairman Ben Bernanke and record oil prices brought investor enthusiasm to a halt. Bernanke confirmed that the financial markets have improved but their status is still far from normal. Tuesday also brought the announcement of Hewlett-Packard’s (HPQ: Charts, News, Offers) acquisition of Electronic Data Systems (EDS: Charts, News, Offers) to improve its position against IBM (IBM: Charts, News, Offers) in the outsourced IT market. Stocks rose on Wednesday and Thursday in a mid-week rally due to better-than-expected data on consumer prices, weaker oil prices, and a report showing improvement in regional manufacturing. Stocks ended the week down slightly with minor losses for the Dow Jones Industrial Average and the NASDAQ following a decline in consumer confidence figures and an increase in oil prices. Investors were also surprised by news from General Electric (GE: Charts, News, Offers) that the company is evaluating strategic options for its appliance division. No news yet whether they are seeking a spin-off, sale, or partnership for the 100 year old business. This week, investors will be treading cautiously as they await reports on April’s leading economic indicators. More Market News
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| Economic News |
Fannie Mae (FNM: Charts, News, Offers) is doing away with higher minimum down-payment requirements for borrowers in parts of the country where home prices are dropping. The government-sponsored mortgage finance company said Friday it will require minimum down payments of between 3 percent and 5 percent for all loans that it guarantees. That replaces a December policy that required a higher minimum if the loan was for a home in a zip code with declining real estate prices. Washington-based Fannie says the move is part of its effort to help resuscitate the flagging mortgage market. Fannie Mae and its smaller sibling, Freddie Mac, had been under intense pressure to relax lending policies that had been tightened in recent months as foreclosures and defaults skyrocketed. (Source: BusinessWeek) Full Story
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Construction of new homes posted the biggest increase in more than two years in April and applications for new building permits turned up for the first time in five months, a rare bit of good news in what has been the worst downturn in housing in more than two decades. The Commerce Department reported Friday that housing construction rose 8.2% in April to a seasonally adjusted annual rate of 1.03 million units. A big jump in apartment construction offset further weakness in single-family homes. The gain represents a recovery after a steep slump in March building that had pushed activity to the slowest pace in 17 years. Permits - a gauge of future housing activity - gained 4.9% to 978,000 a year from a revised 932,000 in March. The surprising rebound in April may be temporary, given the headwinds builders are confronting at the present - from slumping sales to soaring home foreclosures. (Source: USA Today) Full Story
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The Federal Reserve is supplying the financial system with more than $150 billion in cash, a liquidity cushion that has helped keep enough credit flowing to ensure the economy's growth. After another auction of term funds on May 19, the amount of cash from the Fed will probably top $175 billion. And if the system needs still more, Fed Chairman Ben S. Bernanke said in a May 13 speech, the Fed stands ready to supply it. The financial turmoil stemming from the subprime mortgage debacle has caused most banks to tighten their standards for lending to households and businesses. The 325-basis-point reduction in the Fed's target for the overnight lending rate and the unprecedented amount of cash pumped into the system have helped the economy defy predictions of a recession. (Source: Bloomberg) Full Story
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| Business News |
Media and entertainment company CBS Corp. (CBS: Charts, News, Offers) is buying CNet Networks Inc. (CNET: Charts, News, Offers), an online news and information provider, for $1.8 billion in cash in its latest bid to expand its reach on the Internet, the companies announced Thursday. The price of $11.50 per share represents a massive premium of 45 percent over CNet's closing stock price on Wednesday, and appears to get CNet out of a nasty battle with one of its largest shareholders, which had been agitating for a shakeup at the company after its stock slumped. CNet shares jumped $3.48, or 44 percent, to $11.43 in morning trading Thursday. Investors didn't see the deal as positively for CBS, and pushed that company's shares down 89 cents, or 3.6 percent, to $23.93. (Source: Yahoo! Finance) Full Story
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Hewlett-Packard Co (HPQ: Charts, News, Offers) plans to buy technology outsourcing company Electronic Data Systems Corp (EDS: Charts, News, Offers) to better compete against IBM (IBM: Charts, News, Offers), but Wall Street questioned whether the $12.6 billion deal for a slow-growing company was overpriced. HP shares fell nearly 7 percent after the deal was announced on Tuesday, on top of a 5 percent drop on Monday in anticipation of the news. The declines have wiped about $13 billion off HP's market value, taking it to $108 billion. Buying EDS would vault HP to second place in the global technology services industry, behind International Business Machines Corp. EDS brings HP a strong base in infrastructure outsourcing and the combined company would be better-equipped to go after large clients and cap costs, analysts said. (Source: Reuters) Full Story
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Mortgage finance company Freddie Mac (FRE: Charts, News, Offers) said Wednesday its first quarter loss widened to $151 million as the U.S. housing market worsened, though the results were not as poor as expected. Its shares jumped on the news. McLean, Va.-based Freddie Mac, the nation's second-largest buyer and backer of home loans, plans to raise $5.5 billion in new capital, following a similar move last week by Fannie Mae, its larger government sponsored sibling. It was the third-straight quarterly loss for Freddie Mac, which lost $4.5 billion in the second half of 2007. Moody's Investors Service downgraded the company's financial strength rating, projecting Freddie Mac will be hit with up to $7.5 billion in total losses from soured mortgages over the next two years. (Source: Yahoo! Finance) Full Story
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| Technology Focus |
Shares of Sony (SNE: Charts, News, Offers) were surging Wednesday after the company posted a profit in the most recent fourth quarter, reversing the loss it recorded in the previous year. The electronics seller said sales for the fourth quarter ended March 31 fell 6.5%, but were essentially flat when changes in exchange rates were taken out, totaling 1.95 trillion yen, or $19.53 billion. Sony had an operating loss of 4.7 billion yen ($47 million), down from the loss of 108.7 billion yen in the prior-year quarter. Fourth-quarter net income was 29 billion yen, compared with the 67.6 billion yen loss a year ago. For the fiscal year, Sony had revenue of about 8.87 trillion yen, or $88.71 billion, an increase of 6.9%. Net income nearly tripled to 369.4 billion yen, or $3.69 billion. (Source: TheStreet) Full Story
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Sprint Nextel Corp (S: Charts, News, Offers), the No. 3 U.S. wireless service provider, said on Monday it may seek changes to its credit agreements, raising questions about how long it will take to turn around the business. The company reported a wider loss as customers defected to larger rivals and forecast only marginal improvements in the current quarter. Sprint expects to have enough cash for operations and repayments of maturing debts through the end of 2009, but it said it may enter into discussions with creditors to obtain waivers or amendments on credit facilities. "This is a nightmare game of whack-a-mole where new problems keep popping up faster that you can address," said Bernstein analyst Craig Moffett. "The fact they're now talking openly about their available liquidity makes it clear this is not a short-term turn around." (Source: Reuters) Full Story
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Sean Knapp had it made. As a young computer scientist, he couldn't have had a better gig: working at Google (GOOG: Charts, News, Offers), the engineer's paradise. He had all the usual perks - a massage every other week, onsite laundry, free all-you-can-eat haute cuisine. Even better, he got to work on some of Google's highest-profile products, including the search technology that is the heart and soul of the company. And he made full use of his "20% time," that famous one day a week that Google gives its engineers to work on whatever project they want. A little over a year ago he and a couple of colleagues, brothers Bismarck and Belsasar Lepe, ages 28 and 21, respectively, did what many of the young geniuses do at Google: They came up with a cool idea, in this case a new way to handle Web video. (Source: CNN Money) Full Story
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| Your Money |
A senior Toyota executive said Monday that plans for a new auto assembly plant in Mississippi are being delayed by worries about slumping U.S. auto sales and a broader U.S. economic slowdown. The assembly plant being built in Blue Springs, near Tupelo, Miss., was to be up and running by late 2009 or early 2010, said Toyota Motor (TM: Charts, News, Offers) Executive Vice President Mitsuo Kinoshita. That has now been pushed back to mid-2010 after Toyota reviewed the plans and considered signs of a slowdown in the U.S. market, Kinoshita told a small group of reporters at a Tokyo hotel. "We made adjustments within a certain range of time," he said. "The change wasn't that critical." (Source: USA Today) Full Story
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As it did when the housing bubble began to burst, California is leading the way in the next leg: a consumer bust. Squeezed by rising unemployment, inflation in food and energy costs and plunging house prices, Californians are cutting back on spending. Besides causing woes for state and local government, this is giving California's economy another knock and makes further job losses, home repossessions and banking problems more likely. The figures are pretty bad. The median home price has fallen by 29 percent in the year to March, according to the California Association of Realtors, and repossessions are surging. Unemployment has risen by 24 percent, to 6.2 percent, in the same period. (Source: Reuters) Full Story
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