InvestorGuide Weekly Newsletter

Weekly Newsletter — 5/5/2008


Weekly Wrap Up	Economic News	Business News	Technology Focus

Weekly Wrap Up

Markets ended up for the second week in a row, all of the major indices remaining solidly in positive territory. The Dow gained 166 points, NYSE gained 106, and the NASDAQ gained 54. Economic news seems to have gotten better this week, pushing the markets upward. It started off rough, with the job outlook declining drastically and consumer confidence along with it, dragging down the major indices during the first 3 days of trading. But things turned around midweek, as investors were relieved when the Federal Reserve cut rates again on Wednesday. The Fed dropped the fed funds rate to 2%, although investors were warned there probably will not be another rate cut next month. In market news, companies were mixed, some experiencing unexpected bad news, while other announcing changes to their business. Mars Inc. announced plans to acquire Wrigley (WWY: Charts, News, Offers), and Time Warner (TWX: Charts, News, Offers) announced that they were spinning off their cable business. On the negative side, General Motors (GM: Charts, News, Offers) reported a steep profit loss, and Exxon Mobil (XOM: Charts, News, Offers) reported high sales but failed to meet expectations. Crude oil closed at $116 a barrel, less than its closing value at the end of last week. More Market News

Economic News

Consumer confidence fell to a five-year low this month as Americans confronted the grimmest jobs outlook since late 2004, while data also showed a record drop in home prices in February. Contributing to their slumping confidence in April, consumers expected that inflation would accelerate to a pace last seen in the early 1980s. The news cemented the prevailing view that the Federal Reserve, which is to open a two-day policy meeting later on Tuesday, would signal an end to its aggressive campaign of lowering interest rates. The private Conference Board's index of consumer sentiment fell to 62.3 in April, the lowest reading since March 2003, when the Iraq war was launched, from an upwardly revised 65.9 in March. The monthly survey's gauge of inflation expectations surged to 6.8 percent from 6.1 percent in March. It was the highest reading on inflation expectations since a matching 6.8 percent in September 2005. (Source: Reuters) Full Story

With the U.S. economy growing, financial markets recovering and the government sending out tax rebate checks, the reduction in the Federal Reserve's target for the overnight lending rate ought to be the last for now. There were hints in the statement yesterday issued by the Federal Open Market Committee that a majority may be willing to pause now that the target is down to 2 percent, 325 basis points below where it was last September. Two members preferred leaving the target at 2.25 percent yesterday. And fed funds futures contracts indicate that investors yesterday put a 78 percent probability the target won't be lowered at the June 24-25 FOMC meeting. (Source: Bloomberg) Full Story

Anybody who dreaded first-quarter earnings reports is probably relieved now. Ignoring the horrid numbers coming out of the financial services sector, companies did reasonably well during the quarter, and the mood on Wall Street appears to be one of satisfaction that earnings season wasn't a nightmare. The headline earnings number isn't inspiring. So far, 340 of the Standard & Poor's 500 companies have reported results for the January-March period, and overall earnings are down 14% from a year ago, says Howard Silverblatt of S&P. But kick out the financial sector, and earnings are up 12.2%. "Financials make everything look down," Silverblatt says. While earnings are down more than analysts had been predicting at the beginning of the quarter, investors are at least pleased there hasn't been a steady drumbeat of bad news. (Source: USA Today) Full Story

Business News

The Oracle of Omaha is betting that the country's candy jar is recession-proof. With financing from Warren Buffett, candy maker Mars Inc. on Monday said it is buying confectioner Wm. Wrigley Jr. Co. (WWY: Charts, News, Offers) for an estimated $23 billion in cash. The deal would marry brands that sweet-toothed Americans have munched on for decades: Mars owns Snickers and M&Ms; Wrigley's gum brands include Juicy Fruit, Orbit, Extra and Big Red. "A good time to buy a really great business is when you can do it," Warren Buffett said on CNBC Monday, adding that he understands Mars and Wrigley better than the balance sheets of most major banks. (Source: Yahoo! Finance) Full Story

Billionaire Kirk Kerkorian, a veteran investor in the troubled U.S. auto industry, has taken aim at Ford Motor Co (F: Charts, News, Offers), looking to acquire a stake of 5.6 percent stake through his investment vehicle Tracinda Corp. Kerkorian, 90, who previously held a nearly 10 percent stake in General Motors Corp (GM: Charts, News, Offers) and made a failed bid for Chrysler LLC last year, began amassing shares of Ford, the No. 2 U.S. automaker, on April 2. Analysts were left to speculate on what Kerkorian's "end-game" would be for the investment and whether he would push for additional asset sales by Ford, which has agreed to sell Jaguar Land Rover to Tata Motors Ltd. (Source: Reuters) Full Story

Exxon Mobil Corp. (XOM: Charts, News, Offers), the world's largest publicly traded oil company, said Thursday record crude prices helped its net income grow 17 percent in the first quarter, but the results came in below Wall Street forecasts.Its shares fell more than 3 percent in morning trading.As expected, margins at the company's refining operations dragged heavily on the bottom line as the big jump in prices on refined products such as gasoline, while a menace to consumers, failed to keep pace with the rapid increase in crude prices.Lower production to start the year hurt too.Exxon Mobil, based in Irving, Texas, said earnings for the first three months of the year rose to $10.9 billion, or $2.03 per share, up from $9.3 billion, or $1.62 per share, a year ago.(Source: BusinessWeek) Full Story

Technology Focus

Time Warner Inc. (TWX: Charts, News, Offers) said Wednesday it plans to spin off the rest of its cable TV business, answering investor pleas to further simplify the media conglomerate's sprawling corporate structure. The news came as Time Warner, which also owns Warner Bros., CNN, AOL and Time magazine, reported a 36 percent decline in first-quarter earnings from a year ago, when it had a gain from the sale of AOL's Internet access business in Germany. The results were mainly in line with expectations. Time Warner didn't offer details on how or when the split with its largest operating division would occur, but said it was close to an agreement with the board of Time Warner Cable and expected to make an announcement soon. (Source: Yahoo Finance) Full Story

Eastman Kodak Co.'s (EK: Charts, News, Offers) first-quarter loss narrowed thanks to continued growth in its digital businesses, but still fell far short of expectations because of higher raw material and new business start-up costs. The Rochester, N.Y.-based company reported a loss from continuing operations of $114 million, or 40 cents a share, compared to a loss of $175 million, or 61 cents a share, registered in the first three months of 2007. Excluding one-time items primarily related to what's been a wrenching corporate restructuring, Eastman Kodak would have had a loss of 39 cents a share for the latest quarter. Analysts polled by FactSet Research had expected, on average, a first-quarter loss of 8 cents a share. Analyst estimates generally exclude discontinued and one-time items. Eastman Kodak, which makes digital cameras, printers and film and provides related services, said sales in the recent quarter rose 1%, reaching $2.09 billion from $2.08 billion last year. (Source: MarketWatch) Full Story

Visa (V: Charts, News, Offers), reported earnings that easily outstripped expectations in its first ever results as a publicly traded company, but the company's shares declined in extended trading on a cautious outlook. On an adjusted basis, the company said it earned 52 cents a share in its fiscal second quarter on sales of $1.5 billion. Visa went public on March 19, only two weeks before the quarter ended. Analysts polled by Thomson Financial, on average, forecast earnings of 44 cents a share on revenue of $1.42 billion. The company projects earnings growth of 20 percent over the next three years. Analysts were looking for earnings-per-share growth of 28 percent in the year ending September 2009. (Source: CNBC) Full Story

Your Money

Consumers in the market for a new car this year may be able to drive some hard bargains with auto dealers. With car sales expected to be down this year, many dealerships will be desperate for any sale they can get, said Danny Chan, CEO of AutoBrag.com, a car-shopping comparison Web site that compiles price data from no-haggle dealerships. "Dealerships are hungry," Chan said. The slow conditions could prompt many of them to accept better deals as they struggle to keep their doors open, he added. J.D. Power and Associates is predicting that fewer than 15 million new cars will be sold this year, said Bob Schnorbus, the firm's chief economist. More than 16 million were sold in 2007, according to the firm's data. For many, economic conditions and low consumer confidence have largely put car purchases on hold. (Source: Marketwatch) Full Story

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