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| Weekly Wrap Up |
The U.S. markets struggled again this past week as disappointing earnings data, continued fallout from the weak credit sector, and worrisome economic reports weighed on investors. The major indices faced falling closing prices throughout the week, aside from some modest gains on Wednesday, and finished Friday’s session substantially below where it had started on Monday. Among the headlines for the week were new records for crude oil futures which have spiked to $105.97 a barrel, creating a ripple effect that has trickled to consumers at the gas pumps. A series of economic reports including The Fed's Beige Book report on regional economies affirmed that growth at the start of the year has been slow and is being joined by rising price pressures. The government’s job report released on Friday further emphasized the toll that the state of the economy has taken on Americans as it revealed that U.S. employers slashed 63,000 jobs in February, the largest monthly cut in five years. In corporate news, financial stocks had a choppy week as Thornburg Mortgage (TMA: Charts, News, Offers) continued to fall after announcing that the company would have to restate its 2007 financial results and Ambac (ABK: Charts, News, Offers), a troubled bond insurer, announced that it would be raising $1.5 billion through a common stock offering in an attempt to safeguard its "AAA" credit rating. More corporate data due out this week will help investors understand the full impact of the economic slowdown. More Market News
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| Economic News |
Crude oil futures rose to another record close Thursday after earlier spiking to a record of $105.97 a barrel, boosted once more by the dollar's continuing slide to new lows against the euro. At the pump, meanwhile, gas prices extended their advance toward record levels. The national average price of a gallon of gas rose 0.7 cents overnight to $3.185, according to AAA and the Oil Price Information Service. Gas prices are following oil higher, and are expected to peak this spring well above last May's record of $3.227 a gallon. (Source: USA Today) Full Story
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You can't escape the R-word these days. The question of whether the U.S. is in a recession—or in the process of sliding into one—dominates economic analysis and financial reporting, as well as conversations at work and around the kitchen table. The signs seem to be everywhere. The National Association of Business Economists' latest survey had 45% of its members predicting a recession this year—over double the percentage of three months ago. The investing legend Warren Buffett grabbed headlines on Mar. 3 when he remarked on cable network CNBC "I would say, by any commonsense definition, we are in a recession." Wall Street took note when economist Edward Yardeni, head of his own economic forecasting firm and a well-known perma-bull, threw in the towel that same day. "I think we are falling into a consumer-led recession," he wrote in his daily newsletter. (Source: BusinessWeek) Full Story
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Ever since the Federal Reserve created a Term Auction Facility in December to ease the strains in the interbank-lending market, the TAF has been a source of agitation in certain conspiracy-prone circles. The thrust of that argument goes something like this: The Fed, which is first and foremost a counterfeiter, printing money at will, is now accepting low-quality collateral as security for 28-day loans to banks whose anonymity is protected. In the process, the central bank assumes credit risk and lays it at the feet of the U.S. taxpayer. Maybe it's time to take a look at some of the facts. The Fed had already taken steps in August to encourage banks to borrow directly from its discount window, compressing the spread of the discount rate over the federal funds rate to 50 basis points from 100 and expanding both the type of collateral it would accept and the terms of the loans to 30 days. (Source: Bloomberg) Full Story
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| Business News |
Retailer Kmart, looking to lift sales as the slowing U.S. economy hurts traffic, is planning to offer aspirin and other common medications made under its private label brand for $1 with the purchase of new or refilled prescriptions at its stores. Kmart, a unit of Sears Holdings Corp (SHLD: Charts, News, Offers), said that the program is launching in Florida this month and will spread to other states in April. The program will initially include 10 over-the-counter drugs sold under Kmart's American Fare brand, but that number could increase in the future, the company said. Medications in the program include ibuprofen, children's pain reliever, nasal decongestant, cough suppressant and cold and allergy tablets. The retail price of the 10 products in the program ranges from $1.49 to $4.49. (Source: Reuters) Full Story
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Goldman Sachs Group Inc (GS: Charts, News, Offers) said on Friday its Chairman and Chief Executive Lloyd Blankfein was awarded about $53.97 million of compensation in its 2007 fiscal year, when the Wall Street bank largely skirted subprime mortgage losses that plagued many rivals. Blankfein also realized $45.76 million from the vesting of stock, bringing his compensation and other awards to about $100 million, according to Goldman's proxy filing with the U.S. Securities and Exchange Commission. The compensation amount reflects a methodology used by many executive pay consultants. It differs from Goldman's calculation of Blankfein's "approved 2007 compensation" of $68.5 million, which incorporates a $67.9 million "year-end bonus" payable in cash, restricted stock and stock options. (Source: Yahoo! Finance) Full Story
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Ambac Financial Group Inc. (ABK: Charts, News, Offers) said Wednesday it will try to sell $1.5 billion in stock in a bid to safeguard its critical "AAA" financial-strength rating. The New York-based bond insurer plans to raise $1 billion through a public offering of common stock and an additional $500 million through the sale of equity units that would be exchangeable for common stock in May 2011. The equity unit offering is contingent upon completing the common stock offering. The sale is part of a plan to shelter the company's top-notch financial-strength rating, which is vital to win new business. Ambac writes insurance policies promising to repay bondholders when bond issuers default. The company, which insures $524 billion in debt, insures two main types of bonds: "public" finance, or bonds issued by government bodies, and "structured" finance, or bonds funneling payments from other sources like mortgages or car loans. (Source: BusinessWeek) Full Story
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| Technology Focus |
U.S. network equipment maker Juniper Networks Inc (JNPR: Charts, News, Offers) said on Thursday it was targeting annual revenue growth of 20 percent for the long term, slightly lower than its performance in 2007, dragging the shares down more than 6 percent. Juniper reported $2.84 billion in revenue in 2007, up 23 percent from a year earlier. Analysts on average expect 23 percent revenue growth in 2008, according to Reuters Estimates. Juniper shares fell 6 percent to $25.49 in afternoon trading. They had already fallen around 3 percent before Juniper's Chief Financial Officer, Robyn Denholm, gave her outlook at the company's analyst day event, with investors showing little enthusiasm for an earlier share buyback announcement. (Source: Reuters) Full Story
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Shares of Diebold (DBD: Charts, News, Offers) soared more than 60 percent at the open of trade Monday following a $2.63 billion takeover bid from United Technologies for the ballot and cash machine company. Parent company of jet engine-maker Pratt & Whitney, Otis elevator and Sikorsky Aircraft, United Technologies Corp. said it made the unsolicited offer after attempting to negotiate a deal with Diebold for two years. Diebold shares rose $14.94 to $39.06 as soon as the market opened Monday. UTC offered $40 per outstanding share for Diebold, about two-thirds more than Diebold's closing stock price Friday of $24.12. United Technologies said the total enterprise value of the deal was about $3 billion. (Source: BusinessWeek) Full Story
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Top U.S. phone company AT&T Inc (T: Charts, News, Offers) said on Wednesday it will invest $1 billion worldwide this year to build four undersea cables and expand its global network in response to growing Internet traffic. The bulk of the investment will be spent overseas, and will be 33 percent higher than the $750 million AT&T spent in 2007 on similar operations, part of its total capital spending of $18 billion, the company said. San Antonio, Texas-based AT&T said investment in undersea fiber optic cables to Japan and the rest of Asia will aim to diversify communications lines to the region, where earthquakes occasionally disrupt Internet traffic. (Source: Reuters) Full Story
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| Your Money |
"Many small- and medium-sized businesses are not complaining about credit conditions," Boston Federal Reserve Bank President Eric Rosengren said in a speech last week. Tell that to Tim Arnett in Minneapolis. About a year ago, the 53-year-old set up a company called In-Season Mechanical LLC, which installs heating and cooling systems in buildings and homes. His bank, Wells Fargo & Co., said he would need to be in business for about nine months to qualify for a loan. His revenue in the second half of last year was about $179,000. "They're now saying we need two years of credit history before they will even consider us for a line of credit," says Arnett, who employs four people and estimates that revenue this year has soared to $900,000. "Every financial institution we have talked to has used the same excuse, that banking regulators are scrutinizing loans, they're tightening up the restrictions. What they're saying is, we did some dumb things, we're not being penalized for it, but now you're going to get penalized." (Source: Bloomberg) Full Story
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Americans of all income levels face some tricky times ahead when it comes to their personal finances. What steps would the men and women vying to be the next President take to help bolster your bottom line? Below, in alphabetical order, we lay out some of the stances the current candidates have taken on investing, saving, and other "pocketbook" issues. New York Senator Hillary Clinton would automatically sign up U.S. workers for 401(k)-like plans, which she would call American Retirement Accounts. The government would provide tax incentives to encourage more saving, matching the investment of low- and middle-income workers in those accounts. (Source: Yahoo! Finance) Full Story
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