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| Weekly Wrap Up |
Equities, for the most part, had a down week as traders and investors are coming to grips with the fact that the recent rally which started in March was probably overdone and that the economy is not going to progress as fast as many on the street were projecting. The blue-chip heavy DJIA and the broader S&P 500 were both in the red for the week losing 1.2% and 0.5% respectively while the tech laden NASDAQ was the only index to eke out a small gain for the week. The week started with a substantial sell-off as financials were hit due to fears over the new Obama regulatory framework and commodities sold off on demand fears. The World Bank also reduced its global growth forecast for the year. This set the tone for the rest of week during which stocks mostly traded in a flat range except for Thursday when the DJIA jumped 172.54 points on the back of window dressing before the end of the quarter, optimism about retail stocks and a positive revision to first quarter GDP. There was a Fed meeting mid-week during which the central bank chose to keep interest rates at current levels and also decided not to expand its Treasury debt buyback program. This disappointed some but pleased those with inflation worries. Boeing (BA: Charts, News, Offers) was hit hard all week after it had to postpone the delivery schedule for its Dreamliner jet and Palm (PALM: Charts, News, Offers) had a great week thanks to the performance of the Pre smartphone and better than expected quarterly numbers.
Looking ahead to the holiday-shortened week, Bernie Madoff will be sentenced on Monday, the Case Shiller home price index is due out Wednesday and jobless claims will be released Thursday. Apollo (APOl: Charts, News, Offers), H&R Block (HRB: Charts, News, Offers) and General Mills (GIS: Charts, News, Offers) are some of the major names reporting earnings this week. More Market News
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| Economic News |
The recession and pay: The quiet Americans
Back when times were better and the newspaper industry wasn’t fighting for dear life, reporters at the Cleveland Plain Dealer would regularly grumble at the measly pay increases their union negotiated. Last month, when the union announced it had negotiated a 12% pay cut in exchange for a promise of no lay-offs, there was applause. "It took me aback," says Harlan Spector, a medical reporter and one of the negotiators.
Like many long-standing economic relationships, "wage stickiness" is being tested by the savagery of the recession. Ordinarily, when unemployment shoots up wages do not tend to fall: they simply grow more slowly. Why the price of labour responds less to demand than that of other commodities is a bit of a puzzle. In the 1990s Truman Bewley of Yale University interviewed hundreds of employers and discovered that, faced with a slump in demand, they would rather lay some workers off than cut the pay or hours of everybody. The sackings devastated those directly affected, but broad cuts to pay and hours hurt everybody’s morale. "The main drawback of pay cuts is that they fill the air with disappointment and an impression of breach of promise, which dissolve the glue holding the organisation together," he wrote in 1997. (Source: The Economist) Click here to read the full article
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Beijing warms up to the greenback--because it has to
Last Tuesday, Brazil, Russia, India, and China--the so-called BRIC nations--met in Yekaterinburg, Russia, for what was supposed to be an anti-American gabfest. The main agenda item for the first formal meeting of the four largest developing economies was the future of the dollar. In recent months, Beijing and Moscow have led a global charge against the greenback, and Brasilia has been a willing co-conspirator in the effort. The BRIC post-summit communique referred to the world's currency problems but, to the surprise of observers, did not attack the dollar head on.
What happened? Beijing, apparently, stopped the other nations cold. The Chinese called the tune at the Moscow meeting--their economy is almost as large as the other three combined--and so the surprisingly nonconfrontational tone of the BRIC official statement mirrored Beijing's recent climbdown on the currency issue. (Source: The Weekly Standard) Click here to read the full article
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No Exit: FOMC Remains on Hold
The Federal Reserve is not providing hints about any exit strategy from its policy easing.
Following its two-day policy meeting, the Federal Open Market Committee Wednesday reaffirmed its rock-bottom 0%-0.25% federal-funds rate target and its plans to purchase up to $1.75 billion of Treasury, agency and mortgage-backed securities.
But for bond-market vigilantes looking for Bernanke & Co. to set a timetable to begin to reverse their policy of aggressive credit easing, it was a disappointment. Treasury yields ticked higher.
Since the FOMC's previous meeting on April 29, the Fed's policy-setting panel noted, "Conditions in financial markets have generally improved in recent months," a nod to the sharp rallies in the equity and corporate fixed-income markets, both investment-grade and high-yield. (Source: Barrons) Click here to read the full article
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| Business News |
Welcome To The Bankruptcy Inn
It looks like we'll have another bankruptcy of a former LBO in the hospitality space. The WSJ is reporting that Red Roof Inns has defaulted on $332 million of mortgage debt.
It was only last week that Extended Stay filed for bankruptcy after the crushing debt from its $8 billion LBO in the spring of 2007. Of course, it's not just that business is bad for these companies. It is largely because they were saddled with debt loads that were many multiples of the cash flow the businesses produced that they are now going or about to go bankrupt. (Source: CNBC) Click here to read the full article
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Boeing's 787 Delay Stokes Airbus Rivalry
Boeing's (BA: Charts, News, Offers) fresh delay for its long-awaited Dreamliner--its sixth in two years--could not come at a worse time for the Chicago planemaker.
Customers are complaining publicly about the company's inability to meet its commitments, as some did at last week's Paris Air Show. And some are going so far as to move their business to Boeing's archrival, Airbus. The new holdup, announced on June 23, which Boeing says it decided on last week but apparently kept under wraps until after the big aviation show, seems likely to cost the carrier both business and credibility. Its stock sank on the news, down $3, to $43.90, in early trading Tuesday. (Source: BusinessWeek) Click here to read the full article
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KKR unveils latest plan to go public
Kohlberg Kravis Roberts, famous for taking companies private in leveraged buyouts, may be nearing the end of a two--year quest to take itself public.
New York-based KKR unveiled its latest plan Wednesday, revising an agreement to combine with KKR Private Equity Investors, a limited partnership that's already listed on the Amsterdam stock exchange run by NYSE Euronext.
Several private-equity and hedge-fund firms went public at the peak of the credit market boom in 2007, including Blackstone Group, Fortress Investment Group and Och--Ziff Capital Management Group. (Source: MarketWatch) Click here to read the full article
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| Technology Focus |
IPOs return: Facebook and Twitter next?
If you're looking for signs that the market and economy are slowly returning to normal, it is somewhat encouraging that demand for new stocks is finally perking up again.
Medidata Solutions, a software company for big drug companies, went public Thursday and its stock was up more than 20% in midday trading.
Medidata's initial public offering comes one day after two Chinese firms, chemical manufacturer Chemspec International and water treatment equipment maker Duoyuan Global Water, also had successful debuts as public companies. (Source: CNN Money) Click here to read the full article
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Has Apple won the smart-phone wars?
The recession was supposed to impose a new era of frugality. But when it comes to mobile phones, consumers are still eager to open their wallets for the latest thing.
That's made the market for smart phones -- handheld devices that allow people to surf the Internet, check e-mail, play music and games, shoot photos and video, organize their calendars and, yes, make phone calls -- the hottest consumer battlefield around.
Score the latest round for Apple (AAPL: Charts, News, Offers), which sold a million of its new iPhone 3G S phones last weekend. In a bid to frugality, the company has cut the price on its older models, but who wants anything but the latest thing? (Source: MSN Money) Click here to read the full article
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MySpace Faces More Cutbacks
The employment picture at MySpace isn't getting any brighter. Just one week after MySpace announced it would cut 30 percent of its work force, the social network said 300 people from its international offices would be let go. That means MySpace will cut its international work force by a full two-thirds, as MySpace currently employs 450 people outside the United States.
MySpace also says it will be closing at least four of its non-U.S. offices. (Source: PC World) Click here to read the full article
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| Your Money |
New program helps manage student loan debt
Repaying a student loan could soon be a little less painful.
Starting this week, anyone with a federal student loan can apply for a program, run by the Department of Education, that caps monthly payments based on income, and forgives remaining balances after 25 years. Those choosing to work in public service could have their loans forgiven after just 10 years.
Eligibility for income-based repayment (IBR) is determined by a person’s income and loan size. A calculator at www.ibrinfo.org can help borrowers determine their eligibility for the plan, which becomes available Wednesday. (Source: MSNBC) Click here to read the full article
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It can make more sense to lease a car, but beware of drawbacks
With the auto industry in free fall, the deals on new cars seem too good to be true sometimes. Often, they are.
Lease deals, in fact, may be better than they have ever been. But does that mean it's time for consumers to cast away concerns about leasing vs. buying?
Many auto experts say no -- and maybe.
"A lease is always more expensive than an equivalent loan," says Anthony Giorgianni, associate editor for Consumer Reports Money Adviser newsletter. "I'm not opposed to leasing. I just think that people need to understand what they're doing."
"For most people most of the time, they are better off purchasing a car," says Jack Nerad, editorial director of Kelley Blue Book and kbb.com. (Source: USA Today) Click here to read the full article
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