| Market Summary |
Stocks surged on Monday after JP Morgan Chase agreed to boost its bid for Bear Stearns and a stronger-than-expected housing report pleased investors. Stocks rose after JP Morgan Chase said that it will boost its offer to $10 per share from $2. Bear Stearns (BSC: Charts, News, Offers) shares surged 105%, while JP Morgan Chase (JPM: Charts, News, Offers) shares rose 2%. Mortgage stocks rose after the government said the Federal Home Loan Bank system can boost their purchases of Fannie Mae and Freddie Mac mortgage-backed securities by $100 billion over two years. Investors were also pleased by a report that showed that existing home sales rose 2.9% in February from the previous month, topping forecasts. In corporate news, the U.S. Justice Department approved the merger between satellite radio companies Sirius (SIRI: Charts, News, Offers) and XM (XMSR: Charts, News, Offers). Seed-producing giant Monsanto (MON: Charts, News, Offers) soared to $104.83 after UBS upped the stock to buy from neutral. Oil and gold prices fluctuated after sliding earlier in the session. U.S. light, crude oil for May delivery fell 98 cents to settle at $100.86 a barrel. Gold for April delivery fell $1.30 to settle at $918.70 an ounce.
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| Market News |
Canadian drug maker Biovail Corp. (BVF: Charts, News, Offers) on Monday agreed to pay a $10 million fine to resolve federal regulators' charges of civil accounting fraud and deceiving investors and analysts. The Securities and Exchange Commission announced the settlement with Biovail, which neither admitted nor denied the allegations in a civil lawsuit filed in federal court in Manhattan, but did agree to refrain from future violations of federal securities laws. Toronto-based Biovail also agreed to hire an independent consultant to oversee its accounting. The SEC's charges remain pending against Biovail's founder and former chairman and CEO, Eugene Melnyk; former chief financial officer Brian Crombie; and two current executives: Chief Financial Officer Kenneth Howling and Controller John Miszuk. (Source: CNN Money) Full Story
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Tiffany & Co (TIF: Charts, News, Offers) posted higher-than-expected quarterly profit on Monday as increased sales overseas and new stores helped offset the effect of a weaker U.S. economy that has strained consumer spending. The shares of the jewelry company jumped more than 13 percent after it also gave a strong earnings outlook for the current fiscal year and forecast robust sales growth in overseas markets other than Japan. Still, Tiffany maintained a cautious stand on U.S. sales, as it continued to expect earnings to be pressured in the first and second quarters. (Source: Reuters) Full Story
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Walgreen Co.'s (WAG: Charts, News, Offers) shares rose sharply Monday after the company said second-quarter profits rose 5 percent with improved cost controls offsetting sluggish holiday sales. Walgreen reported earnings of $685.9 million, or 69 cents per share, compared with $651.9 million, or 65 cents per share, a year ago. Sales rose 11 percent to $15.39 billion, from $13.93 billion. Same-store sales gained 4.7 percent. Same-store sales, or sales at stores open at least a year, is a key indicator of retailer performance since it measures growth at existing stores. Analysts polled by Thomson Financial expected profits of 67 cents per share on revenue of $15.43 billion. (Source: Yahoo! Finance) Full Story
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| Market Analysis |
How will we know when it's time to call a bottom to the mortgage mess? Here's one benchmark: As long as Wachovia Corp. (WB: Charts, News, Offers) hasn't cleaned up its books, there's probably still more to come. The fourth-largest U.S. bank ended last year with a book value, or assets minus liabilities, of $76.9 billion. By comparison, the company's current market capitalization is $60.9 billion, following a 19 percent decline in its stock price this year to $30.72. The $16 billion gap shows the market doesn't believe the company's balance sheet is holding up. It's probably right, too. I started my research for this column with a simple question: Why has the growth in Wachovia's loan-loss allowance not kept pace with the growth in the bank's nonperforming assets? It turns out the company hasn't been using its allowance to stay ahead of bad loans, so much as it has been taking its time in recognizing expenses. (Source: Bloomberg) Full Story
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Since last December, when President Bush signed an energy bill that requires auto companies to achieve a 35-mpg fuel economy standard by 2020, with substantial improvements by 2015, auto executives have been gnashing their teeth while environmentalists have been flashing the V sign for victory. Three months later, it has become evident the road to greater fuel efficiency is full of potholes. For one thing, the new legislation adds a new level of complexity to the 35-year-old CAFE system (sounds like French for "coffee," but stands for Corporate Average Fuel Economy). (Source: BusinessWeek) Full Story
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The combination of slowing growth and rising inflation has raised the specter of "stagflation," a pernicious problem in the U.S. in the 1970s and early 1980s. Stagflation is puzzling to economists because slowing growth should mean weakening demand for labor, lower wage inflation, and softer product demand. This, in turn, should mean falling inflation--not rising inflation. The year 1980 epitomized the stagflation process. Real GDP fell by a sharp 1.6%, meaning that a serious recession was taking place. The unemployment rate jumped to 7% in 1980 from 5.8% the year before. Yet on top of this economic weakness, consumer price index (CPI) inflation accelerated to 13.5% from 11.3% the year before. (Source: Forbes.com) Full Story
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