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| Weekly Wrap Up |
In spite of a late rally on Thursday, the major U.S. indices suffered some serious blows last week as economic woes continue to weigh heavily on investors. Daily reports on disappointments in the financial sector, surging oil prices, and mixed economic data kept investors’ eyes fixed on the markets. Early in the week the S&P cut its debt rating on a number of financial firms and major economic reports showing a decline in the Institute for Supply Management's manufacturing index for May and decreased spending on construction in April resulted in major sell-offs. Equities recovered slightly mid-week on the mixed news of weakness in the financial sector that was overshadowed by an encouraging report on productivity and unemployment. It was reported that 40,000 non-farm private jobs were added last month, which was a welcome surprise to the analysts who expected job losses. Stocks continued the positive momentum on Thursday with a huge 213 point rally for the Dow Jones Industrial Average after the number of applications for unemployment benefits dropped by 18,000 from the prior week. Better-than-expected retail sales figures from Wal-Mart (WMT: Charts, News, Offers) and Costco (COST: Charts, News, Offers) also fueled the rally. Friday was a dismal day on Wall Street, however, as the Dow plummeted nearly 400 points after a string of bad news. The government reported the largest one-month spike in the unemployment rate in over 20 years as the May number hit 5.5% from 5.0% in April, even though the number of U.S. jobs decreased by a smaller-than-expected amount. Oil prices also plagued investors as the price per barrel hit $139 on the New York Mercantile Exchange, a $10 increase from the day before. Treasury prices benefited from the massive bailouts in the market as the yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.92 percent from 4.04 percent late Wednesday. Analysts expect the markets to rebound this week as oil prices show signs of sliding back down. More Market News
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| Economic News |
More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that number will continue to climb. The Mortgage Bankers Association's first quarter report showed that a record 2.5% of all loans being serviced by its members are now in foreclosure, which works out to about 1.1 million homes. That's up from the 2% of loans, or about 938,000 homes, that were in foreclosure at the end of 2007. The report also showed that 448,000 homes, or about 1% of loans being serviced, began the foreclosure process during the first quarter. That's up from about 382,000 homes, or 0.83%, that entered foreclosure in the last three months of 2007. (Source: CNN Money) Full Story
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Worker productivity increased at a faster pace in the first three months of this year than previously estimated, while wage pressures moderated. The Labor Department reported Wednesday that productivity rose at an annual rate of 2.6 percent in the January-March period, faster than the government's initial estimate of 2.2 percent made a month ago. Wage pressures, meanwhile, moderated from the final three months of last year with unit labor costs rising at an annual rate of 2.2 percent in the first quarter. That was a marked slowdown from a 4.7 percent surge in labor costs in the final three months of last year. (Source: MSNBC) Full Story
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Gasoline held steady near an average $3.98 a gallon at the pump Monday as a recent slide in oil futures stalled gas' advance to the $4 mark. Oil prices, meanwhile, rose on concerns about heating oil supplies and after an OPEC official said there's no need for the cartel to pump more oil. At the pump, the national average price of a gallon of regular gas was unchanged at $3.975, according to a survey of stations by AAA and the Oil Price Information Service, matching a record set Sunday. Light, sweet crude for July delivery rose 42 cents to $127.77 a barrel on the New York Mercantile Exchange. Earlier Monday, oil futures fell nearly $10 below a trading record of $135.09 reached May 22. (Source: Yahoo! Finance) Full Story
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| Business News |
Intel Corp. (INTC: Charts, News, Offers) and its much smaller rival Advanced Micro Devices Inc. (AMD: Charts, News, Offers) have been subpoenaed by the Federal Trade Commission about possible anticompetitive behavior in the microprocessor market, the companies said Friday. The move by the FTC to escalate its probe to a formal investigation is the latest in a series of legal challenges facing Intel, the world's largest computer chip maker. Antitrust investigations of Intel have been launched in several countries, including the U.S., based on complaints by AMD of unfair business practices that have stunted its growth. The dispute centers on incentives Intel offers computer makers for buying Intel chips -- and the fierce retaliation AMD says those companies are threatened with if they offer products using AMD's chips. (Source: Yahoo! Finance) Full Story
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Ford Motor Co (F: Charts, News, Offers) said on Thursday it will cut expenses for its white-collar work force by 15 percent over the next two months through job cuts, attrition and other actions. The cuts, telegraphed by Ford in May, when it warned it would not meet its long-standing goal of returning to profitability in 2009, will come as the automaker adjusts to a deeper-than-expected slump in U.S. vehicle sales, led by declines in sales of pickup trucks and SUVs. "We told employees today we are going to cut salaried work force-related expenses by 15 percent and complete the actions by August 1," said Ford spokeswoman Marcey Evans. (Source: Reuters) Full Story
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A fresh round of merger and acquisition headlines has brought home a clear point: Many U.S. industries are consolidating. With the prospect of fewer, and more powerful, players in many sectors, shouldn't antitrust alarm bells be going off in Washington? The "deal flow," as financial pros like to call it, is regaining momentum after a brief credit crunch-induced hiatus. In the beleaguered airline industry, both management and Wall Street see salvation from horrendous cost pressures with mergers. The pending deal between Northwest Airlines (NWA: Charts, News, Offers) and Delta Air Lines (DAL: Charts, News, Offers) is expected to be the first in a new round of megadeals. (Source: BusinessWeek) Full Story
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| Technology Focus |
IBM (IBM: Charts, News, Offers) landed a large outsourcing contract that bolsters IBM's lead as a high-end systems integrator. Big Blue's Global Services unit won a 10-year contract with Bristol-Myers Squibb (BMY: Charts, News, Offers) Thursday valued at $324 million. Shares of IBM were up $1.41, or 1.1%, to $128.96 on the news, as it neared its 52-week high of $129.99 set just a week ago. The stock has appreciated 32% since early January, when macroeconomic fears pushed it down to $97.59. It now trades at 15 times 2008 earnings and 13.5 times 2009 earnings. "This is a good win for IBM and a great extension of the relationship with BMY," Technology Business Research analyst Eugene Zakharov said in an email response to questions Thursday. (Source: TheStreet) Full Story
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Verizon Wireless (VZ: Charts, News, Offers) is close to buying Alltel in a $28 billion deal that would create the nation's biggest cell phone provider with more than 80 million users, vaulting past AT&T's (T: Charts, News, Offers) customer base of 71.4 million, according to a person familiar with the talks. There's a better than 50% chance that an agreement could be announced within 24 hours, though the talks could stretch into next week, this person says. Cost savings from the potential deal could reach $1 billion in the first year, with the savings coming in part from job cuts and a reduction in the roaming fees that Verizon Wireless pays when its customers use their phones on Alltel's network. (Source: BusinessWeek) Full Story
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Videogame publisher Take-Two Interactive Software Inc. (TTWO: Charts, News, Offers) said Thursday it swung to a fiscal second-quarter profit well above Wall Street's expectations as revenue more than doubled, driven by strong sales of "Grand Theft Auto IV." For the three months ended April 30, New York-based Take-Two earned $98.2 million, or $1.29 per share, compared with a loss of $51.2 million, or 71 cents per share, in the same period a year earlier. Excluding stock options costs and legal expenses from larger rival Electronic Arts Inc.'s $2 billion buyout offer - whose outcome is still pending - Take-Two earned $1.52 per share in the latest quarter. (Source: CNN Money) Full Story
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| Your Money |
One of the things that made the American subprime crisis a crisis was the availability of mortgages to borrowers with dubious credit histories. Turns out that some of the middlemen arranging the mortgages were -- and still are -- temporarily boosting borrowers' credit scores, passing off risky bets as worthy investments for the ultimate lenders. Unlike years past, many of those lenders are not banks or savings-and-loan associations, but international investors who buy bundles of mortgages. The mortgages are securitized -- turned into bonds -- that pay a little more interest than government issues but are supposed to be nearly as safe, often sporting triple-A ratings. (Source: Forbes.com) Full Story
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The airline industry will lose $2.3 billion this year because of hikes in oil prices, the world airlines group said Monday, revising its earlier forecast of a collective industry profit. The loss forecast by the International Air Transport Association, which represents more than 240 airlines around the world, contrasted with a projected profit of $4.5 billion announced in March. It was the second time IATA has lowered its forecast this year. The forecast uses a consensus oil price of $106.50 per barrel of crude, up from the $86 per barrel used in the March forecast, IATA said. "For every dollar that the price of fuel increases, our costs go up by $1.6 billion," said Giovanni Bisignani, IATA director general and chief executive. (Source: MSNBC) Full Story
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| Trivia Question |
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Which three companies have made the "Dogs of the Dow" list for each of the past 10 years?
(answer below) |
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| Market Overview |
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| DJIA |
12,209.81 |
-428.51 |
| S&P |
1,360.68 |
-39.69 |
| NYSE |
9,152.51 |
-248.57 |
| NASDAQ |
2,474.56 |
-48.10 |
| 10Yr |
3.938%% |
-0.108 |
| Dollar |
72.34 |
-0.61 |
| More market statistics |
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| September 19, 2008 |
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| May 26-30 |
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| Trivia Answer |
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| Altria, J.P. Morgan Chase, and duPont |
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