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| Weekly Wrap Up |
Equities had a fairly lackluster week as the major indices ended the week lower. The confluence of high commodity prices (especially record-high oil prices) combined with continued worries about the strength of the overall economy and persistent nervousness about the balance sheet of financial companies sent stocks into the red. The blue chip Dow Jones Industrial Average shed 2.39% last week and the broader S&P 500 lost 1.81%. Some of the major newsworthy items during the week included Microsoft's (MSFT: Charts, News, Offers) withdrawal of its takeover offer for Yahoo (YHOO: Charts, News, Offers), the news sent the latter's stock down 15% on Monday (though many analysts were expecting it to fall further than that), the rally in crude oil which continued to hit record levels throughout the week, and concern that Bank of America (BAC: Charts, News, Offers) will try to walk away from its planned purchase of Countrywide Financial (CFC: Charts, News, Offers) as more and more reports emerge indicating financial irregularities at the mortgage lender. Analysts are suggesting that Sprint (S: Charts, News, Offers) may jettison its Nextel unit in the form of a spin-off or outright sale. In unrelated news, the wireless company also announced the launch of a Wi-Max initiative supported by industry titans such as Google (GOOG: Charts, News, Offers) and Intel (INTC: Charts, News, Offers). Fannie Mae (FNM: Charts, News, Offers) reported another set of disappointing results. In a comforting sign on the inflation front, labor productivity rose greater than expected and labor costs were up lower than forecast. AIG (AIG: Charts, News, Offers) surprised Wall Street again late Thursday night by posting a $7.8 billion quarterly loss driven by writedowns and announced a multi-billion dollar capital raising plan. This kept a lid on stocks on Friday. More Market News
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| Economic News |
US worker productivity unexpectedly accelerated in the first quarter and helped curb inflation as companies showed no loss of output with fewer employees.
more stories like this
Productivity, a measure of worker efficiency, rose at a 2.2 percent annual rate after a 1.8 percent gain the prior quarter, the Labor Department said yesterday.
A separate report showed pending sales of existing homes fell for the fourth time in five months, signaling no end in sight to the housing recession. (Source: Boston Globe) Full Story
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Wal-Mart Stores (WMT: Charts, News, Offers) and Costco Wholesale (COST: Charts, News, Offers) reported April sales yesterday that rose more than analysts estimated, as U.S. consumers, contending with gasoline at a record average $3.65 a gallon, sought discounts on clothing and food.
Wal-Mart, the world's largest retailer, said sales at stores open at least a year climbed 3.2 percent, beating its forecast. Industry sales climbed 3.6 percent, the most since March 2007, the International Council of Shopping Centers said. (Source: Washington Post) Full Story
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House prices are falling, food and energy prices are rising and consumers are gloomier than they’ve been in decades. But the latest data on the U.S. economy shows it still has a feeble pulse.
So which is it? Are we in the early stages of a full-blown recession? Or is this a brief downturn before the economy gets up another head of steam later in the year?
Though the start of a recession can only be seen in the rear-view mirror, many economists now believe the U.S. economy is close to recession or in one. (Source: MSNBC) Full Story
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| Business News |
Martin Sullivan, the chief executive of American International Group (AIG: Charts, News, Offers), picked the right time to build what he calls a "fortress balance sheet," because bad bets in the mortgage markets have him and his board under siege.
AIG shares tumbled 9% Friday after the insurance giant posted a $7.8 billion first-quarter loss that was driven by another round of mark-to-market writedowns of mortgage-related positions. AIG said the latest quarter included a $5.9 billion pretax writedown of the value of the credit default swap portfolio held by its AIG Financial Products unit, and a $3.6 billion impairment of its mortgage-backed securities holdings. (Source: CNN Money) Full Story
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Crude oil's rise is seemingly unstoppable, with supply worries triggering a fresh record of $126 per barrel on Friday. Without a major intervention to tackle either one of the two main causes--tight supply or the U.S. dollar's weakness--it does not look like anyone is going to call a top to the price of oil.
"Something has to give," said Edward Meir, analyst with MF Global, who warned that it simply was "not healthy" to see oil now comfortably above $120 per barrel and heading for $200. He told Forbes.com that on the supply side, there would now be even more pressure on the oil exporters of OPEC to turn on the taps and relieve market pressures. (Source: Forbes.com) Full Story
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Countrywide Financial Corp., (CFC: Charts, News, Offers) the largest U.S. mortgage lender, declined the most in two months of New York trading after Friedman, Billings, Ramsey & Co. said Bank of America Corp. (BAC: Charts, News, Offers) should abandon its takeover.
Bank of America, the second-biggest U.S. bank, may have to write down the value of Countrywide's loans by as much as $30 billion because of declining home prices, analyst Paul Miller of Friedman, Billings said in a report today. He cut his rating on Countrywide to "underperform" from "market perform" and lowered his price target to $2 a share from $7. (Source: Bloomberg) Full Story
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| Technology Focus |
Rather as John McCain cannot be displeased to have seen Hillary Clinton and Barack Obama fighting it out, Google (GOOG: Charts, News, Offers) has for the past three months enjoyed watching its only two serious rivals, Yahoo! (YHOO: Charts, News, Offers) and Microsoft (MSFT: Charts, News, Offers), tear each other to pieces. Yahoo!, once an internet pioneer, has fallen far behind Google in web search and related advertising. Microsoft still dominates desktop computing but lags behind Google as software moves online. So Steve Ballmer, Microsoft's boss, dared ask Yahoo!: what would be wrong with making, if not exactly a dream team, at least a joint effort out of it? (Source: Economist) Full Story
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It is the burning question in tech circles, and Mike Murphy answers it before it is completed.
"I hear it every time I'm on a (tech) panel," Murphy, Facebook's vice president of media sales, says with a wry smile. He's referring to the inevitable question on when Facebook and other social-networking sites will turn their steep market valuations into mounds of currency. (Invariably, Murphy answers that Facebook has a long list of major advertisers.) (Source: USA Today) Full Story
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The rise of gadgets like the iPhone, Blackberry and Xbox threatens to unravel the decades of innovation that helped to build the Internet, a leading academic has warned in a new book. Professor Jonathan Zittrain says the latest must-have devices are sealed, "sterile" boxes that stifle creativity and turn consumers into passive users of technology. Unlike home computers, new Internet-enabled gadgets don't lend themselves to the sort of tinkering and collaboration that leads to technological advances, he says. (Source: Yahoo! News) Full Story
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| Your Money |
The theoretical purpose of the Berkshire Hathaway (BRK.B: Charts, News, Offers) annual meeting is to update Berkshire shareholders on, well, Berkshire Hathaway. Over the years, however, the "meeting" has turned into what can be best described as an extravaganza, complete with jovial videos, a showcase of Berkshire operating companies, and thousands upon thousands of Berkshire faithful ready to listen to everything Warren Buffett and Charlie Munger have to say.
Even those who don't own Berkshire stock can get a lot out of what's said at the annual gathering, since the topics can range from general investing know-how, to corporate governance, to environmental issues. (Source: MSNBC) Full Story
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If you've ever been trapped in traffic and 40 minutes late for a meeting, you know that the wrong question to ask is, "How can things get any worse?" That's usually when the raccoon in the back seat wakes up.
In investing, matters can always get worse, so if you're considering a move into junk-bond funds, you might take a moment to ponder what else could go wrong - such as a burst of inflation. (Source: USA Today) Full Story
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