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| Weekly Wrap Up |
Relatively light trading volume resulted in moderate losses for the major indices during the shortened holiday week. The news that influenced the trading that did occur came from various sectors including housing, automobile manufacturing, finance, and retail. A report released Tuesday indicated that both new and existing home purchases dropped 7.6% to an annual rate of 4.43 million, which is the largest decline in nearly a decade. Automakers continued to make headlines as GMAC, the financial services division of General Motors (GM: Charts, News, Offers) announced that it would be receiving government aid. Commercial-finance company, CIT Group (CIT: Charts, News, Offers), also moseyed up to the government’s breadline and entered into talks with the U.S. Treasury Department to tap $2.33 billion in Troubled Assets Relief Program funds. Earlier in the week the company won federal approval to convert into a bank holding institution. Also in financial news, shareholders of Wells Fargo (WFC: Charts, News, Offers) and Wachovia (WB: Charts, News, Offers) voted to approve Wells Fargo's $11.8 billion purchase of Wachovia, creating one of the nation's largest banks. A bright spot this week was online retailer Amazon (AMZN: Charts, News, Offers) which called their 2008 holiday season the "best ever," with a 17% increase in sales on its peak shopping day. Investors face another short week for the New Year’s holiday but will be keeping an eye on additional reports from the retail sector to get a glimpse of consumer confidence levels following the holiday shopping season. More Market News
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| Economic News |
The Federal Reserve has granted a request by the financing arm of General Motors (GM: Charts, News, Offers) to tap the government's $700 billion rescue fund, bolstering GM's ability to survive. The Fed announced Wednesday that it had approved GMAC Financial Services' request to become a bank holding company. That designation makes GMAC eligible to receive a portion of the bailout fund and get emergency loans directly from the Fed. Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down, dealing a serious blow to GM's own chances for survival. The Fed cited "emergency conditions" in justifying its decision. (Source: TheStreet) Full Story
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U.S. retailers' sales fell as much as 4 percent during the holiday season, as the weak economy and bad weather created one of the worst holiday shopping climates in modern times, according to data released on Thursday by SpendingPulse. The figures, from the retail data service of MasterCard Advisors, show the 2008 holiday shopping season was the weakest in decades, as U.S. consumers cut spending as they confront a yearlong recession, mounting job losses and tighter credit. "It's probably one of the most challenging holiday seasons we've ever had in modern times," said Michael McNamara, vice president of Research and Analysis at MasterCard Advisors. (Source: Reuters) Full Story
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Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing speculation the market was close to a bottom. Purchases of both new and existing houses dropped 7.6 percent, the biggest decline since January 1989, to an annual rate of 4.43 million, government and industry figures showed today. A 13 percent drop in the median resale price was the most since records began in 1968 and was likely the largest since the 1930s, the National Association of Realtors said. (Source: Bloomberg) Full Story
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| Business News |
Online retailer Amazon.com Inc. (AMZN: Charts, News, Offers) called this holiday season its "best ever," saying Friday that it saw a 17 percent increase in orders on its busiest day -- a rare piece of good news in a season that has been far from merry for most retailers, including online businesses. Amazon customers ordered more than 6.3 million items on Dec. 15, compared with roughly 5.4 million on its peak day last year, the company said. It shipped more than 5.6 million products on its best day, a 44 percent surge over 2007, when it shipped about 3.9 million on its busiest day. Amazon's best-sellers included the Nintendo Wii game console, Samsung's 52-inch LCD HDTV and Apple Inc.'s iPod touch. Analysts agreed Amazon's report was good news for the online shopping giant, but they were divided over whether the results indicate strength in online commerce in general. (Source: Yahoo Finance) Full Story
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Wells Fargo (WFC: Charts, News, Offers) and Wachovia (WB: Charts, News, Offers) shareholders on Tuesday voted to approve Wells Fargo's $11.8 billion purchase of Wachovia. The combination creates one of the nation's largest banks. A combined Wells Fargo and Wachovia will have more than $1.42 trillion in assets and nearly $800 million in deposits, with operations in 39 states and Washington, D.C. Shareholder approval of the Wachovia and Wells Fargo deal was the second major banking combination vote Tuesday. Earlier in the day, shareholders of PNC Financial Services Group Inc. and National City Corp. agreed to Pittsburgh-based PNC's acquisition of Cleveland-based National City. (Source: Businessweek.com) Full Story
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American Express (AXP: Charts, News, Offers) announced Tuesday that it had received preliminary approval for a $3.9 billion government bailout investment. The capital injection will come from the Treasury Department's $700 billion Troubled Assets Relief Program, which in part provides capital to banks in exchange for preferred shares and high-paying dividends. If approved, American Express would be the ninth biggest capital investment of the more than 100 Treasury has made in banks so far."Treasury's investment will help bolster our capital position in an uncertain economic environment," said a spokeswoman for American Express. "The added flexibility will help the company, in the near term, to stay profitable and continue to invest selectively for growth." (Source CNN Money) Full Story
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| Technology Focus |
It hardly matters what sector of the economy you're in - it's none too soon for 2008 to be over. In the advertising business, the pain has proved especially acute, compounded by the latest estimates of where ad budgets are heading in 2009.
Just last week, Barclays Capital (BCS: Charts, News, Offers) lowered its projections for U.S. ad spending to a negative 10% next year and a positive 1% in 2010. Every one of the traditional media platforms is getting hit, with newspapers (no surprise) taking the brunt of the pressure, with a drop of 17%, followed by TV (minus 15.5%), magazines (minus 15%), and radio (minus 13%). While other researchers aren't offering prophesies quite so dire, one thing is clear: This is already no typical ad recession. In 1991, ad spending dropped a mere 1.9% from the prior year, while in 2001 it fell only 6.2%.
The only bright spot this time is online advertising, which, despite a series of downward revisions, is still expected to grow between 6% and 10% next year over 2008 levels. (Source: BusinessWeek.com) Full Story
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Say what you will about Larry Ellison's style, but the in-your-face founder of Oracle (ORCL: Charts, News, Offers) knows how to manage a company through a recession, at least so far.
In an economic climate where other companies are heading for the lifeboats, Ellison is skippering Oracle into a position of strength. And it comes down to selling software that relies on a growing stream of corporate data, rather than a growing number of employees.
During a recent conference call, Ellison and his management team were practically optimistic, projecting that overall revenue for Oracle's fiscal third quarter ending in February will be up from 8% to 11% adjusting for currency exchange. (Source CNN Money) Full Story
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| Your Money |
There should be certain things you can take for granted about wealthy people. They like big yachts. They play golf. And they are usually smart with their finances. After all, if they weren’t good at handling money, they wouldn’t have managed to accumulate so much of it. And yet one of the interesting angles on the credit crunch is just how hopeless the wealthy have been at managing their cash. Examples are everywhere of how some tycoons have come badly unstuck during the market meltdown of the past few months. (Source: Bloomberg) Full Story
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Americans give more to charity, per capita and as a percentage of gross domestic product, than the citizens of other nations. But why? It would be nice to believe that as a group they are just more generous. Of course, it's more complicated than that. For instance in the U.S., which is notably religious among wealthy Western nations, about a third of all charitable giving goes to houses of worship. Some of that money, in turn, goes to projects that have an obvious benefit to the needy, like soup kitchens. But some does not, rather going toward paying the church secretary and the rent. (Source: Forbes) Full Story
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