| Market Summary |
Wall Street rallied for the third consecutive day after a surprisingly strong January retail sales report helped calm worries that a weakening consumer market could send the already struggling economy into a recession. The market received momentum early on in the session after the government reported that retail sales unexpectedly rose 0.3% in January. Economists expected a 0.3% decline, which would have fallen in line with the dismal same-store sales results individual retailers posted last week. Several stronger-than-anticipated earnings reports also helped the market. Coca-Cola (KO: Charts, News, Offers) exceeded the Thomson First Call average estimate for fourth-quarter earnings on an adjusted basis, posting a 79% jump in fourth-quarter profit compared to a year ago. Applied Materials (AMAT: Charts, News, Offers) reported lower quarterly sales and earnings that nonetheless topped forecasts in a report released late Tuesday. Shares gained 8%. Oil for March delivery rose 49 cents to $93.27 a barrel on the New York Mercantile Exchange, gyrating after a weaker-than-expected weekly oil inventories report. The dollar gained versus the yen and was little changed versus the euro.
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| Market News |
Yahoo Inc. (YHOO: Charts, News, Offers) is discussing a possible partnership with News Corp. in its latest effort to repel Microsoft Corp. or prod its unsolicited suitor into raising its current takeover bid, according to a person familiar with the talks. The specifics of the joint venture still hadn't been worked out, said the person who didn't want to be identified because of the sensitivity of the matter. Both The Wall Street Journal and a prominent blog, TechCrunch, reported that News Corp. is interested in folding its popular online social network, MySpace.com, and other Internet assets into Yahoo -- an idea that first came up last year. News Corp. owns The Wall Street Journal. News Corp. and a private equity firm also would buy significant stakes in Yahoo in a complex deal designed to boost the Sunnyvale-based company's market value above Microsoft's initial bid of $44.6 billion, or $31 per share. (Source: Yahoo! Finance) Full Story
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Morgan Stanley (MS: Charts, News, Offers) will slash 1,000 jobs, scale back its U.S. home-lending business and shut down a British mortgage unit as new management takes a hard look at the continued deterioration in mortgage markets. The cuts announced on Wednesday affect Morgan Stanley employees who generate home loans through brokers and other third parties, as well as bankers who packaged these loans into bonds. The bank declined to detail cuts for specific areas. Including the latest moves, Morgan Stanley has laid off 2,900 people in mortgages, wealth management, investment banking and capital markets since October. That's 6 percent of Morgan Stanley's 48,256 employees at the end of November. (Source: Reuters) Full Story
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Shoppers put aside worries about the slumping economy to go to the malls and auto dealerships in January. That propelled retail sales to a surprising rebound following a dismal December. The Commerce Department reported Wednesday that retail sales rose by 0.3 percent last month. Sales had fallen by 0.4 percent in December as retailers suffered through their worst Christmas shopping season in five years. The increase was led by strong demand for new cars and a big jump in sales at gasoline service stations, which reflected higher pump prices. The January performance came as a surprise to analysts who had been forecasting a 0.3 percent decline for the month. However, the January rebound may not last given all the problems facing consumers from the steep slump in housing to job losses and a severe credit squeeze. (Source: Forbes.com) Full Story
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| Market Analysis |
The fix is in. Last week the U.S. Congress passed a $168 billion fiscal stimulus bill, including tax rebates for households and tax breaks for business. President George W. Bush plans to sign it today. The Internal Revenue Service should start issuing tax rebates to 130 million Americans in May, according to the Treasury. Members of both parties seemed pleased with themselves and their bipartisan effort. That in itself should tell you the package is pretty benign: It won't help, or hurt, very much. If nothing else, the initiative is certain to help the incumbent re-election effort. This got me thinking about the misuse, and often abuse, of tax policy. There is no agreement on what tax cuts should do (provide relief to cash-strapped consumers? stimulate business investment and job creation?), not to mention the effectiveness of temporary cuts. (Source: Bloomberg) Full Story
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Warren Buffett is offering monoline bond insurers just enough of a financial lifeline to hang themselves, but a handful of alternatives to his so-called bailout may provide financial guarantors and the broader market more attractive options. Buffett's plan proposes to reinsure some $800 billion of municipal bonds backed by Financial Guaranty Insurance Co., Ambac Financial (ABK: Charts, News, Offers) and MBIA (MBI: Charts, News, Offers), three of the more cash-strapped insurance entities. The proposal will have the effect of siphoning away valuable municipal bond revenue from the companies, while offering comparatively little relief in the form of fresh cash to stave off future losses in some of the riskier, more esoteric debt that has bedeviled them. (Source: TheStreet) Full Story
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On Sunday, Feb. 10, after he found out he'd won that day's Democratic Presidential primary in Maine, but before his appearance on CBS's 60 Minutes, Senator Barack Obama (D-Ill.) sat down at the keyboard of his computer to write an e-mail. Not to a media consultant or a delegate counter, but to banker Robert Wolf, CEO of UBS Americas (UBS). The two men exchanged notes about the Senate-passed economic stimulus package and that weekend's G-7 economic summit, Wolf says. A banker as Obama's pen pal? Hard to believe, given the senator's liberal image. But in between rallies and airp*** flights on the campaign trail, Obama has also taken time to consult on the economy with billionaire Warren Buffett, whose support of rolling back the Bush tax cuts Obama often cites in his stump speeches. (Source: BusinessWeek) Full Story
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