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| Weekly Wrap Up |
The slew of earnings reports released this past week left investors unsure as to the overall state of the markets. Overall, the DOW remained steadier than in previous weeks shedding just over 123 for the week while the New York Stock Exchange closed down just less than 84 points and the Nasdaq gained 27.75 points for the week. Bad news continued for the residential housing sector as The National Association of Realtors said existing home sales tumbled 2.6 percent in June, well beyond the 1 percent drop economists had forecast. Furthermore, the U.S. Labor Department reported that new unemployment claims rose 34,000 to 406,000, the highest since September 2005. The U.S Transportation Department announced that there was a 2.4 percent drop in fuel usage and travel this past month. Oil continued to fall, closing the week around $125 a barrel marking the second straight week of decline. Oil has plunged nearly 15 percent since its July 11 high of $147.27 price. In business news, Ford Motor Co. (F: Charts, News, Offers) posted its worst quarterly performance in history this past Thursday losing $8.67 billion in the second quarter. Many large banks continue to suffer under the credit crunch. Washington Mutual Inc (WM: Charts, News, Offers) shares fell 23.4 percent on Friday when they reported an unexpectedly large $3.33 billion second-quarter loss. However, both Bank of America (BAC: Charts, News, Offers) and Citigroup (C: Charts, News, Offers) share prices have risen since reporting lower-than-expected losses for the second quarter. There was further good news for Arch Coal (ACI: Charts, News, Offers) and Amazon (AMZN: Charts, News, Offers) which reported tremendous profit boosts. The dollar rose just over a point this week and gold futures edged lower. More Market News
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| Economic News |
Breaking with an 18-year ban imposed by his father, President George W. Bush recently lifted an executive order prohibiting oil exploration in U.S. coastal waters. With that act, Bush said on July 15 at a Rose Garden news conference, "the only thing standing between the American people and these vast oil resources is action from the U.S. Congress." Meanwhile, an organization led by former U.S. House Speaker Newt Gingrich, American Solutions, is promoting a "Drill Here. Drill Now. Pay Less." campaign, collecting more than 1 million signatures to petition Congress to "act immediately to lower gasoline prices" by allowing exploration off America's coasts. (Source: BusinessWeek) Full Story
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The financial crisis won't be over until U.S. house prices stop falling, which in short means it won't be over any time soon. Despite a long fall that has brought down several major financial institutions and taken the economy as a whole to the brink of recession, housing in the United States is still too expensive relative to incomes, rent and the availability of mortgage money with which to buy it. And that's before you factor in rising unemployment or oil price inflation that is crimping budgets and making long commutes, and the houses built at the end of those commutes, no longer affordable. The implications are pretty dire; rising levels of writedowns at banks, more failures of financial firms and lousy economic growth, if any, until six months or so after a base is found. (Source: Reuters) Full Story
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Standard & Poor's downgraded the debt of some of the nation's largest carriers on Friday, saying high fuel prices are likely to cause heavy losses this year at American, United and Northwest Airlines. S&P airline analyst Philip Baggaley said that in general, carriers face "perhaps a bit greater risk of liquidation" although he quickly added, "We think the airlines we've reviewed here are large and viable airlines." He said the airlines have enough cash for the next several quarters. But he is more concerned about later next year because some of that cash is likely to be gone, and because the relief on lending covenants won by American, United and Northwest will be expiring. "If we're still in this weak environment a year from now, it could begin to get more uncomfortable," he said on a conference call. (Source: CNN Money) Full Story
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| Business News |
Wachovia (WB: Charts, News, Offers)dropped nearly 10% Friday after an analyst downgrade and news its CFO was leaving. Robert Patten of Morgan Keegan slapped a sell rating on the Charlotte, N.C.-based bank following its miserable second-quarter earnings results and concern that the company might have to raise more capital. Wachovia reported a staggering second quarter loss $8.9 billion earlier this week and said it was cutting its dividend by 86% to 5 cents a share, among other things to preserve capital. Investors had reacted favorably to new CEO Robert Steel's first public comments as Wachovia's head when he said that the bank would not have to raise additional capital in light of the company's internal initiatives it was undertaking. (Source: TheStreet) Full Story
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Ford Motor Co. (F: Charts, News, Offers) posted the worst quarterly performance in its history Thursday, losing $8.67 billion in the second quarter. The company also said it will retool two more North American truck and sport utility vehicle plants to build small, fuel-efficient vehicles, and it announced plans to bring six new small vehicles to North America from Europe by the end of 2012. The net loss includes $8.03 billion worth of write-offs because the sharp decline in U.S. truck and SUV sales has reduced the value of Ford's North American truck plants and Ford Motor Credit Co.'s lease portfolio. Even excluding those items, Ford lost 62 cents per share, worse than Wall Street expected. Twelve analysts surveyed by Thomson Financial, on average, expected a 27 cent loss per share. (Source: Yahoo! Finance) Full Story
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Washington Mutual Inc (WM: Charts, News, Offers) shares fell as much as 23.4 percent and the cost to insure its debt against default rose after an analyst said some creditors reduced their exposure to the largest U.S. savings and loan. Citing the Seattle-based thrift's financial statements for the period ending June 30, Gimme Credit analyst Kathleen Shanley wrote that "many creditors have quietly been pulling funds" from the company. Washington Mutual had no immediate comment on the report, but said it planned to issue a statement soon. On Tuesday, Washington Mutual reported an unexpectedly large $3.33 billion second-quarter loss and said residential mortgage losses through 2011 would likely be toward the high end of the $12 billion to $19 billion range it forecast. (Source: Reuters) Full Story
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| Technology Focus |
Microsoft (MSFT: Charts, News, Offers) has all but shut the door on the prospect of resuming talks to buy all or part of Yahoo! (YHOO: Charts, News, Offers)Speaking at the company's annual meeting for analysts on July 24, Chief Financial Officer Chris Liddell said a Yahoo deal at this point "essentially makes no sense." If Yahoo is no longer the remedy for Microsoft's ailing online operations, what is? The software giant spent part of the day trying to persuade analysts that it's got something better in mind. Yet with Wall Street growing increasingly impatient to see results from its online operations, Microsoft gave only a glimpse into what to expect in terms of ongoing spending and returns. Chief Executive Steve Ballmer said the company plans to continue spending 5% to 10% of operating income, a modest amount relative to the potential returns, he argued. And those returns could hit 20% to 40% if Microsoft is successful, Liddell said, though he didn't disclose a time frame for when that might happen. (Source: BusinessWeek) Full Story
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A start-up led by former star Google engineers on Sunday unveiled a new Web search service that aims to outdo the Internet search leader in size, but faces an uphill battle changing Web surfing habits. Cuil Inc (pronounced "cool") is offering a new search service at www.cuil.com that the company claims can index, faster and more cheaply, a far larger portion of the Web than Google, which boasts the largest online index. The would-be Google rival says its service goes beyond prevailing search techniques that focus on Web links and audience traffic patterns and instead analyzes the context of each page and the concepts behind each user search request. (Source: Yahoo Finance) Full Story
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Sirius Satellite Radio Inc. (SIRI: Charts, News, Offers) and XM Satellite Radio Holdings Inc. (XMSR: Charts, News, Offers) rose in early trading after their $3.3 billion combination was approved by the U.S. Federal Communications Commission, the final regulatory hurdle.
Sirius, which is offering 4.6 of its shares for each of XM's, rose 5 cents to $2.30 at 9:08 a.m. New York time in early Nasdaq Stock Market trading. Washington-based XM jumped 66 cents, or 7.1 percent, to $9.94. (Source: Bloomberg) Full Story
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| Your Money |
After watching bank shares drop by almost a third this year, most European investors probably consider the idea of buying insurance stocks a sick joke. Banks’ balance-sheets may be difficult to understand but insurers can be mind-bogglingly complex. Insurers also have a track record of fouling up when the economic environment worsens. In the downturn in 2002 they got things badly wrong. The big European life insurers owned far too many equities. When stockmarkets fell, their capital positions were whacked, forcing many to issue new shares. “Once bitten, twice shy” is the market’s motto today. The share prices of Europe’s insurers have dropped by almost a quarter this year and trade on the lowest multiple of earnings of any sector, battered banks included. Is that fair? Insurance companies are certainly not immune to economic slowdown. People buy fewer equity-linked savings products in difficult times, for example. But concerns about what lurked on insurers’ balance-sheets have probably been overdone. (Source: The Economist) Full Story
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| Trivia Question |
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This famous person's political involvement came with its share of controversy. Most notably, in 1975 he spent six days giving lectures on public policy in Chile and had one brief meeting with the right-wing dictator Augusto Pinochet. The result was a storm of protest. When he was awarded the Nobel Prize the next year, public objections came from all directions, including previous prize winners Linus Pauling and David Baltimore. Who?
(answer below) |
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| Market Overview |
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| DJIA |
11,370.69 |
-125.88 |
| S&P |
1,257.76 |
-2.92 |
| NYSE |
8,369.91 |
-83.94 |
| NASDAQ |
2,310.53 |
+27.75 |
| 10Yr |
4.11% |
+0.03 |
| Dollar |
72.8 |
+0.92 |
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| Trivia Answer |
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| Milton Friedman, one of the best-known economists of the twentieth century |
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