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| Weekly Wrap Up |
Aside from a major upswing in Thursday’s trading, U.S. stocks were on the decline last week as investors digested reports and earnings statements that kept their fears of recession alive. Corporate news including a bankruptcy filing by Circuit City (CC: Charts, News, Offers), a $29 billion quarterly loss by Fannie Mae (FNM: Charts, News, Offers), and a third quarter loss of $24.5 billion loss by AIG (AIG: Charts, News, Offers) started the week on a sour note and the hits kept coming on Tuesday. Citigroup (C: Charts, News, Offers) announced a plan to extend $20 billion in mortgages as a method of assisting 130,000 distressed borrowers. News of similar measures came from other lenders throughout the week in an effort to give the credit markets a boost. On Wednesday, stocks tumbled even further after Treasury Secretary Henry Paulson said that the government’s $700B bailout plan will no longer be used to purchase troubled assets from banks, but rather to make direct investments in financial institutions. The change in plans further unsettled already jittery traders. Thursday brought a major boost to the markets as investors scooped up bargains in spite of a disappointing report from the Labor Department that showed that the number of individuals seeking unemployment benefits jumped to a 7-year high. Friday mostly reversed those gains, however, as dismal October retail figures were released by the Commerce Department and more corporate layoffs were announced. Investors will be keeping a close eye on foreign markets to start this new week as traders in those markets react to the outcome of this past week’s G-20 summit. More Market News
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| Economic News |
Publicly breaking with the Bush administration's official stance, the Federal Deposit Insurance Corp. proposed Friday to use $24 billion in government funding to help 1.5 million American households avoid foreclosure. Where to find that money, though, is in dispute. FDIC officials want to use part of the $700 billion bailout of the financial industry to pay for it. But the Treasury Department is opposed to that idea. Testifying on Capitol Hill Friday, Neel Kashkari, the Treasury Department's assistant secretary for financial stability, said the aim of the $700 billion plan was to make investments with the hope of getting the money back. That he said, was "fundamentally different from just having a government spending program" that would disburse money with no chance of ever seeing any returns. (Source: Yahoo! Finance) Full Story
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The number of homeowners caught in the wave of foreclosures in October grew 25 percent nationally over the same month in 2007, data released Thursday showed. More than 279,500 U.S. homes received at least one foreclosure-related notice in October, an increase of 5 percent over September, according to RealtyTrac Inc. One in every 452 housing units received a foreclosure filing, such as a default notice, auction sale notice or bank repossession. A nasty brew of strict lending standards, falling home values and a tough economy is filtering through the housing market. By the end of the year, the company expects more than a million bank-owned properties to have piled up on the market, representing around a third of all properties for sale in the U.S. (Source: MSNBC) Full Story
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Citigroup (C: Charts, News, Offers) says it will expand its foreclosure prevention efforts and try to keep 130,000 troubled borrowers with $20 billion in mortgages in their homes. The news follows similar initiatives announced earlier this year by IndyMac Bank, which was seized by the Federal Deposit Insurance Corp. last summer, as well as Bank of America (BAC: Charts, News, Offers) and JPMorgan Chase (JPM: Charts, News, Offers) each of which heralded enhanced housing rescue efforts. Banks are undoubtedly feeling pressured to be more aggressive in aiding home owners, given how many billions of taxpayer dollars have poured into the industry to stem the credit crisis. The Citi effort, dubbed the Citi Homeownership Assistance Program, targets 500,000 Citi borrowers. CitiMortgages CEO Sanjiv Das said he expects that more than a quarter of these people, with mortgages worth about $20 billion, will take advantage of the program over the next six months. (Source: CNN Money) Full Story
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| Business News |
Wal-Mart Stores Inc. (WMT: Charts, News, Offers) reported a 10 percent increase in third-quarter profit Thursday but trimmed its profit outlook because of the troubled global economy and the renewed strength of the dollar. The world's largest retailer said its renewed focus on low prices was attracting financially squeezed shoppers and that it was pleased with the results of early holiday price promotions. The Bentonville, Ark.-based retailer said it earned $3.14 billion, or 80 cents per share, in the quarter ended Oct. 31. That's up from $2.86 billion, or 70 cents per share, a year earlier. Earnings from continuing operations were 77 cents per share. Total sales for the quarter rose 7.4 percent to $98.64 billion from $91.86 billion a year earlier. Analysts surveyed by Thomson Reuters expected earnings of 76 cents per share on sales of $98.28 billion. (Source: Yahoo! Finance) Full Story
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Shareholders of Anheuser-Busch Cos. Inc. (BUD: Charts, News, Offers) on Wednesday approved the $52 billion sale of the nation’s largest brewer to Belgium-based InBev SA, a deal that is set to create the world’s largest brewer. The vote was the latest step necessary to form the company that will be known as Anheuser-Busch InBev and combine brands such as Bud Light and Budweiser with Stella Artois and Beck's. The deal, reached in July, is expected to close by the end of the year. It is subject to regulatory approval in the U.S., Britain and China. August A. Busch IV, Anheuser-Busch's president and chief executive, said the decision to sell was a difficult one. "Every alternative was considered," he told shareholders at the meeting just outside of New York. "In the end, we all agreed the InBev proposal was in the best interest of you, the shareholders." (Source: MSNBC) Full Story
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Freddie Mac (FRE: Charts, News, Offers) reported a $25 billion quarterly loss Friday that forced the mortgage finance giant to tap $100 billion in bailout money set aside by the government. The loss triggered a $13.8 billion Treasury Department investment in Freddie. The firm is likely to get the money by the end of the month; Treasury will receive preferred shares in return. A Treasury spokeswoman did not have any immediate comment. Treasury and regulator Federal Home Finance Authority announced on Sept. 7 that they had taken control of Freddie and Fannie Mae (FNM: Charts, News, Offers), the other giant mortgage finance company, when it became clear that mounting losses on bad mortgages would cause them to run out money. At the time, the Treasury committed $100 billion apiece to back up the two firms. Friday's announcement is the first major investment of taxpayer cash into the firms during the current crisis. Freddie's third-quarter loss came to $19.44 a share, far larger than the $1.2 billion, or $2.07 a share it lost in the year-earlier period. Much of that loss came from a $14 billion non-cash charge to write down the value of tax credits it had built up. (Source: CNN Money) Full Story
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| Technology Focus |
Sun Microsystems Inc. (JAVA: Charts, News, Offers) plans to cut up to 6,000 jobs, or 18 percent of its global work force, as sales of its high-end computer servers have collapsed. The drastic move announced Friday highlights Sun's desperation to cut costs and survive as an independent company. Sun's shares have fallen so steeply they’ve crossed an ominous threshold, driving the company’s market value below its cash on hand. That means investors believe the company itself is essentially worthless. After eight years of devastating financial problems and multiple attempts at restructuring, Sun's latest woes have ramped up speculation that one of the most storied names in computing could be snapped up dirt-cheap by a bigger rival. Hewlett-Packard Co. (HPQ: Charts, News, Offers), IBM Corp. (IBM: Charts, News, Offers) and Dell Inc. (DELL: Charts, News, Offers) are all possible suitors. (Source: MSNBC) Full Story
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Sprint Nextel (S: Charts, News, Offers) is offering voluntary buyout packages to some employees as part of the wireless company's cost-cutting measures. Sprint spokesman James Fisher said the company will allow groups of employees that don't deal directly with customers the ability to apply for the packages. Sprint will grant the buyouts on a group-by-group basis based on current staffing levels and company needs. Not everyone seeking a buyout will get one, Fisher said. "We have been looking at cutting costs all of this year," Fisher said. "In the third quarter, that really helped us in terms of our cash flow and our cash position. Labor costs are a big part of that." (Source: TheStreet) Full Story
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Sirius XM Radio Inc. (SIRI: Charts, News, Offers) said its losses totaled $4.88 billion in the third quarter after the satellite-radio provider booked a hefty charge related to a drop in its stock. Sirius XM was created by the combination of satellite-radio companies Sirius and XM in July. It reported results Monday after the closing bell. For the quarter ended Sept. 30, the New York-based company's losses totaled $4.88 billion, or $1.93 per share, compared with losses of $120.1 million, or 8 cents per share, a year earlier. The company's actual results include only two months of operations of XM. They also include a $4.8 billion write-down mostly related to a drop in the company's share price since its merger agreement in February 2007. (Source: Yahoo! Finance) Full Story
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| Your Money |
The odds of landing a part-time job at department store operator Bealls Outlet Stores Inc. this holiday season are slimmer than getting into Harvard: It's one out of every 45. Don't think the chances are any better at 7-Eleven. One California store received more than 100 applicants in a week and a half for jobs that pay $8.50 per hour -- and the retailer doesn't even usually hire holiday workers. From department stores and convenience chains to call centers, managers who only a year ago had to scramble to fill holiday jobs are seeing a surge in the number of seasoned applicants -- many of them laid off in other sectors and desperate for a way to pay the bills. The flood of jobseekers comes even as the retail industry drastically cuts back on holiday hiring because of the drop-off in consumer spending, and the applicants -- who differ from the usual pool, teens or stay-at-home moms looking for extra spending money -- reflect the nation's fast-deteriorating job market. (Source: MSNBC) Full Story
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Circuit City Stores Inc. (CC: Charts, News, Offers) filed for bankruptcy protection Monday, heading into the busy holiday season hoping the move will help the nation's second-biggest electronics retailer will be able to survive. The company said it made the filing because it was facing pressure from vendors who threatened to withhold products during the holiday period. The company also said it cut 700 more jobs at its headquarters, after announcing a week ago that it would close 20 percent of its stores and lay off thousands of workers. Circuit City filed for Chapter 11 protection, which will allow it to keep operating while it develops a reorganization plan. Its Canadian operations also filed for similar protection. In court documents, Chief Financial Officer Bruce H. Besanko cited three factors: erosion of vendor confidence, decreased liquidity and the global economic crisis. (Source: Yahoo! Finance) Full Story
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The technology industry has, by all counts, matured. Not only are billions of people users of technology today, we have even started discussing the possibility of the last billion joining this march and benefiting from its benevolence. Yet this dramatic shift toward technological ubiquity comes at a price. The producers of technology are today faced with the pressure to drive costs down--and down, and down--so that more people can afford it. From PCs to cellphones to wireless routers, every consumer product is going through a process by which margins are getting squeezed out until businesses are almost forced to operate as nonprofits. Even technology for businesses is going through a similar cost squeeze, making it possible for small businesses to afford sophisticated offerings like networking equipment, video conferencing and business applications in the form of software-as-a-service. (Source: Forbes.com) Full Story
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