| Market Summary |
Equities declined sharply today, especially in the last couple of hours, as a number of traders choose to unwind their positions rather than carry them into the weekend. The blue chip heavy DJIA fell 2.09% and the broader S&P 500 shed 2.66%. The market was unnerved early in the trading session as the jobs report came in weaker than anticipated. The Labor Department disclosed that only 92,000 jobs were added last month (the street was expecting 130,000). But then worries about the credit market were sharply brought into focus again as the credit-rating agency Standard & Poors (S&P) cut its outlook on Bear Stearns (BSC: Charts, News, Offers) from 'stable' to 'negative'. The investment bank has suffered from some bad bets in the subprime mortgage market and some fear that its exposure to this sector is uncomfortably high. This is probably the case with other Wall Street banks too. The market rebounded a bit during mid-day trading but then went sharply lower during and after a Bear Stearns conference call which started at 2PM Eastern during which the company's CFO said that the current credit market conditions are the worst that he has seen in 22 years. Investors are nervous about the fact that deals are getting held up by the choppy credit conditions and are also concerned that investments backed by mortgage bonds could face further valuation pressures. Bond prices rose, as money flowed to fixed income from equities, while the dollar was weaker against the euro and the yen.
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| Market News |
Bear Stearns (BSC: Charts, News, Offers) said Friday that it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank's profits.
Bear Stearns' chief financial officer said the shockwaves hitting lending markets, triggered by rising mortgage losses, were as bad as crises such as the Internet bubble bursting in 2001 or the 1998 collapse of hedge fund Long-Term Capital Management.
"These times are pretty significant in the fixed-income market," CFO Sam Molinaro said on a conference call with analysts. "It's as been as bad as I've seen it in 22 years. The fixed-income market environment we've seen in the last eight weeks has been pretty extreme." (Source: USA Today) Full Story
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The U.S. unemployment rate rose to 4.6 percent in July as employers added jobs at the slowest rate in five months and the government actually reduced its workforce, the Labor Department said on Friday.
In another sign of slowing growth, the Institute for Supply Management reported the service sector grew more slowly in July as its index fell to 55.8 from 60.7 in June. (Source: Reuters) Full Story
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Ford Motor Co. (F: Charts, News, Offers) said Friday it is recalling 3.6 million passenger cars, trucks, sport utility vehicles and vans to address concerns about a cruise control switch that has led to previous recalls based on reports of fires.
Ford said the recall covered more than a dozen vehicle models built from 1992-2007. The company said it was responding to concerns from owners about the safety of their cars and questions about the speed control deactivation switch in the vehicles that is powered at all times. (Source: MSNBC) Full Story
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| Market Analysis |
Who says the U.S. has a trade deficit with the rest of the world?
Classical economic doctrine holds that nations compete by producing and exporting what they make best, while importing from other countries those goods where they lack comparative advantage. The tally of exports and imports results in either a trade surplus, thought to be good, or a deficit, considered bad.
Today that 200-year-old theory is flawed, misleading and overly simplistic. And when policymakers insist on reducing the way countries economically interact to a single figure -- the trade balance -- it is dangerous, especially when it unleashes the specter of protectionism. (Source: Bloomberg) Full Story
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After General Motors (GM: Charts, News, Offers) and Ford (F: Charts, News, Offers) posted better-than-expected quarterly profits through June 30 it was perhaps inevitable that Toyota Motor (TM: Charts, News, Offers) would announce similarly strong gains. After all, when it comes to beating expectations, few companies can match Toyota, the world's most profitable automaker.
Yet even by Toyota's high standards, the company's quarterly results, revealed Aug. 3 in Tokyo, were impressive. Despite weak sales in Japan, overall revenues increased 15.7%, to a record $55.7 billion. Earnings grew even faster. (Source: BusinessWeek) Full Story
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I'm glad Rupert Murdoch is buying Dow Jones (DJ: Charts, News, Offers). He is likely to be a far more responsive steward of the Wall Street Journal brand and a more aggressive marketer of its news than the paper has had. In the fundamentally-changed Internet era of media, the Journal has been waning, and without radical change would likely decline further in both quality and impact. But now radical change has come.
So why can Murdoch, apparently alone among moguls and media colossi, confidently pay so much for Dow Jones? Because he has run his own media company better than almost any other and has diligently worked to understand what it means to run a media property in the Internet age. His signature Web property, MySpace, is the most trafficked U.S. destination. News Corp. President Peter Chernin said this week that its revenues are on track to "approach one billion" in the just-begun News Corp. fiscal year. (Source: Fortune) Full Story
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