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| Weekly Wrap Up |
The hits just kept on coming last week as the U.S. stock market suffered major declines during a dismal stretch on Wall Street. The Dow Jones Industrial Average finished the week nearly 465 points lower than it started on Monday, dipping below the 12,000 mark at the market’s close on Friday. The other major indices did not fare well either, as the New York Stock Exchange lost about 234 points on the week and the tech-heavy Nasdaq slid more than 48 points. Fueling the week’s sell-offs was lackluster economic data, a series of disappointing results from the financial sector, and rising oil prices. Recession fears were revived through a number of economic reports released throughout the week including news from the Association of Home Builders that the housing market index fell 1 point and data from the Labor Department showing a higher-than-expected rise in wholesale inflation as indicated by May’s Producer Price Index (PPI). The financial sector was featured heavily in news headlines last week as several major financial institutions released profit warnings for Q2 results because of mortgage-related write-downs. Two former Bear Stearns hedge fund managers were arrested and indicted last week for charges of securities fraud after allegedly lying about the prospects of two funds they managed. The collapse of the funds, which were tied to subprime mortgage loans, prompted a federal criminal investigation. Also plaguing investors was the continued rise of oil and energy prices. In meetings over the weekend, the Saudi Arabian government has announced that they will increase output of crude oil by an additional 200,000 barrels a day. Investors will be keeping a close eye on the oil markets over the coming week to see if this additional supply helps quench demand and stabilize prices. More Market News
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| Economic News |
The number of newly laid-off workers filing applications for unemployment benefits dropped slightly last week but remained at a level showing the strains of a weak economy. The Labor Department reported Thursday that jobless claims fell by 5,000 last week to 381,000 after having surged by 27,000 the previous week. The small improvement was not enough to keep the four-week average from rising to 375,250, pushing it close to the level reached in early April, when the average hit highs not seen since the wave of layoffs following the 2005 Gulf Coast hurricanes. The nation's unemployment rate soared to 5.5% in May, up from 5% in April. (Source: CNN Money) Full Story
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Wholesale prices bolted ahead in May at the fastest pace in six months as energy and food costs marched higher. The Labor Department reported Tuesday that its Producer Price Index, which measures the costs of goods before they reach store shelves, shot up 1.4 percent in May. That was up from a modest 0.2 percent rise in April and marked the biggest increase since November. However, stripping out energy and food prices, which can swing widely from month to month, the “core” rate of inflation rose 0.2 percent in May, an improvement from the prior month’s 0.4 percent increase. That suggested that other prices were better behaved. The overall inflation rate of 1.4 percent was higher than the 1 percent rise many economists were forecasting. But the increase in core prices matched their expectations. (Source: MSNBC) Full Story
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The threat of inflation to the global economy, coupled with slowing economic growth, has created a conflicting situation for economic policy responses. The complexity of the ensuing situation was exemplified in last weekend's G8 finance ministers' failure to reach consensus on the causes and solutions for rising inflation. The G8 communique expressed "strong concern" over the sharp rise in oil prices, which ministers noted have surpassed past peaks both in nominal and real terms, and the impact on global macro-economic stability, human welfare and development prospects. U.K. Chancellor of the Exchequer Alastair Darling, among the ministers gathered in Osaka, sounded a warning that price rises could trigger wage inflation on the same scale as occurred in the 1970s and 1980s in the wake of previous oil shocks. (Source: Forbes.com) Full Story
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| Business News |
General Electric (GE: Charts, News, Offers) shares fell for a fourth day Monday after J.P. Morgan cut its rating on them to "neutral" from "overweight." The shares fell 2% to $28.55, after touching a 4-1/2 year low early in the session on the New York Stock Exchange. J.P. Morgan said the second-largest U.S. company by market capitalization needed to sell off wide swaths of its operations to restore investor confidence. With operations ranging from manufacturing jet engines, to producing television shows, to making consumer loans in emerging Asian economies, the conglomerate has become too complicated for investors to understand with any degree of confidence, analyst Stephen Tusa wrote in a note to clients. GE shares have tumbled 22% since the company stunned Wall Street in April with an unexpected drop in first-quarter profit that it blamed on weakness in its financial and real estate operations. (Source: USA Today) Full Story
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UAL Corp.'s (UAUA: Charts, News, Offers) United Airlines and Continental Airlines Inc. (CAL: Charts, News, Offers) agreed on a wide-ranging marketing alliance that could provide many of the revenue benefits of a full-blown merger -- but without the financial and operational risks made larger by surging oil prices and the credit crunch. The pact between the two airlines, the nation's No. 2 and No. 4 in terms of traffic, should help them forge close domestic ties and act in concert on international routes. Such a deal also avoids the labor tensions, service disruptions and high upfront costs of merging. As part of the plan, Continental will join the Star Alliance, a global marketing group of 20 airlines anchored by United and Deutsche Lufthansa AG. (Source: Wall Street Journal) Full Story
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FedEx issued a nasty surprise to Wall Street this morning. The package shipping giant, largely viewed as a barometer for the overall economy, said that its results for fiscal 2009, which ends next May, would be much lower than analysts were forecasting. Alan B. Graf, Jr., FedEx's executive vice president and chief financial officer said in a statement that the next year is expected to be "very difficult due to the weak U.S. economy and extremely high fuel prices." Investors predictably did not like the news. Shares of FedEx (FDX: Charts, News, Offers) tumbled about 3% Wednesday morning and shares of top rival UPS (UPS: Charts, News, Offers) fell more than 2%. The dismal guidance from FedEx, coupled with a sales miss from investment bank Morgan Stanley (MS: Charts, News, Offers), helped drag the broader market down Wednesday morning. But it's the weak outlook from FedEx that could potentially be the most troubling. (Source: CNN Money) Full Story
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| Technology Focus |
Shares of Yahoo Inc (YHOO: Charts, News, Offers) fell more than 3 percent on Friday as reports of a brain drain raised fresh worries about the future of the Web company after it chose to partner with Google Inc (GOOG: Charts, News, Offers) instead of Microsoft Corp (MSFT: Charts, News, Offers). TechCrunch and other technology blogs on Thursday reported that three executives were leaving Yahoo, including Brad Garlinghouse, known for a 2006 "Peanut Butter Manifesto" memo that called for a radical overhaul of the company. Yahoo President Sue Decker is considering a reorganization that would centralize Yahoo mail, search and homepage divisions into a global product organization, the Wall Street Journal reported, quoting people familiar with the matter. (Source: Reuters) Full Story
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The proposed merger of the nation's two satellite radio broadcasters -- bogged down in the regulatory process for over a year -- has cleared a major hurdle: The Federal Communications Commission chief is recommending approval of the $3.8 billion deal. FCC Chairman Kevin Martin made his recommendation Sunday in exchange for a number of concessions, including turning 24 channels over to noncommercial and minority programming. That sets the stage for a final vote that could occur any time after Martin's recommendation is circulated among his fellow commissioners. The provision on noncommercial and minority programming along with several others -- including a three-year price freeze for customers -- persuaded Martin to support Sirius Satellite Radio Inc.'s (SIRI: Charts, News, Offers) buyout of rival XM Satellite Radio Holdings Inc. (XMSR: Charts, News, Offers). The deal would affect millions of subscribers who pay to hear music, news, sports and talk programming, largely free from advertising, in homes and vehicles. (Source: Yahoo! Finance) Full Story
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Practically every U.S.-owned search engine has caved to the Chinese government's demands that they censor political Web sites in China. But none of them seem to agree on just what sites need censoring. Google (GOOG: Charts, News, Offers), at times, blocks Chinese users' access to the BBC while Yahoo! (YHOO: Charts, News, Offers) permits it. Yahoo! sometimes filters out Voice of America--Google doesn't. And Microsoft (MSFT: Charts, News, Offers) removes entries from the Chinese version of Wikipedia from its results while every other search engine includes them--even the dominant Chinese search engine Baidu.com (BIDU: Charts, News, Offers). Confused? So are the search engines themselves, says Nart Villeneuve, a researcher at the University of Toronto's Open Net Initiative. In a study released on Wednesday, he points to the wild variation in search engine censorship in China as a sign that the Chinese government isn't handing companies a uniform list of censored sites but leaving them to guess at which sites are contraband. (Source: Forbes.com) Full Story
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| Your Money |
Ford Motor Co (F: Charts, News, Offers) said on Friday it would slash output and delay a new version of its top-selling F-150 pickup truck due to a deepening slump in U.S. sales it warned would weigh on results this year and next. Ford said it would post a deeper loss for its auto business this year and warned it would be difficult to avoid a loss in 2009. That was a weaker outlook than Ford offered just last month when it abandoned a long-held goal of returning to profit by next year in the face of record gas prices and plummeting sales for trucks and SUVs. The warning weighed on Ford stock and bonds. Ford shares dropped 7 percent on the New York Stock Exchange. The risk of continued losses raises the prospect Ford could be forced to raise liquidity, possibly through a deal with billionaire Kirk Kerkorian, who owns almost 6.5 percent of Ford and has offered more capital for its restructuring. (Source: Yahoo! Finance) Full Story
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The headlines look grim for summer travel. Gasoline prices are near record highs. Airlines are cutting back and raising fares. Should you stay at home? Don't stow your luggage just yet. This is a good time to find bargains as the economy slows and tour operators discount. Some of the best ways of locating travel deals are unconventional. You may have to track down a rare beast these days: a travel agent who answers the phone. Another route is to bypass the bountiful services on the Internet and go directly to hotels to get the cheapest packages. If you are diligent, you can probably get a better summer or fall travel bargain than last year. Airlines and hotels are feeling the pinch. You may even be able to find a great deal through the art of negotiation. (Source: Bloomberg) Full Story
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| Trivia Question |
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What animal appeared on the nickel for 35 years, beginning in 1938?
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| Market Overview |
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| DJIA |
11,842.69 |
-464.66 |
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1,317.92 |
-42.11 |
| NYSE |
8,829.25 |
-233.98 |
| NASDAQ |
2,406.09 |
-48.41 |
| 10Yr |
4.137%% |
-0.124 |
| Dollar |
73.09 |
-1.08 |
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