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| Market Summary |
Stocks managed to end higher on Thursday after a volatile session fueled by soaring oil prices and uncertainty about the financial sector. Stocks rallied through the middle of the afternoon following news that Dow Chemical (DOW: Charts, News, Offers) plans to merge with rival Rohm and Haas (ROH: Charts, News, Offers). Stocks gave back most of those gains as oil spiked $5 to $141 a barrel on the New York Mercantile and Exchange. The tech sector helped the market reverse course and head back into positive territory after Intel (INTC: Charts, News, Offers) reported that it has not been hurt by the U.S. slowdown due to its global growth. Investors remained concerned about Fannie Mae (FNM: Charts, News, Offers) and Freddie Mac’s (FRE: Charts, News, Offers) ability to stay afloat if they are forced to sell more new shares than anticipated to compensate for losses from the housing slump. Additional declines in the financial sector came after Moody’s downgraded AIG (AIG: Charts, News, Offers) and PMI Group (PMI: Charts, News, Offers). In corporate news, Wal-Mart (WMT: Charts, News, Offers) reported stronger-than-expected June sales. General Electric (GE: Charts, News, Offers) announced that it will spin off its consumer and industrial businesses. The Labor Department reported that the number of American filing new claims for unemployment fell last week. Treasury prices fell, raising the yield on the benchmark 10-year note to 3.83% from 3.82% late Wednesday.
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| Market News |
Dow Chemical Co. (DOW: Charts, News, Offers) has agreed to buy rival Rohm and Haas Co. for more than $15 billion in cash in a deal that Dow hopes will fuel its growth in a more lucrative wing of the chemical-making business. "The addition of Rohm and Haas' portfolio is game-changing for Dow," Chairman and Chief Executive Andrew Liveris said Thursday in a statement announcing the deal. The $78 per-share deal includes money from a Kuwaiti sovereign wealth fund and Warren Buffett's Berkshire Hathaway. The price represents a 74 percent premium to Philadelphia-based Rohm and Haas' (ROH: Charts, News, Offers) closing share price of $44.83 on Wednesday. The Haas family, descendants of one of the company's founders, holds about 65 million shares, a 33 percent stake worth nearly $5.1 billion based on the purchase price. Chief Financial Officer Geoffery Merszei said the quality and reputation of Rohm and Haas' businesses, brands, products and technologies -- as well as its work force -- make the premium worth paying. (Source: Yahoo! Finance) Full Story
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Wachovia Corp. (WB: Charts, News, Offers), the nation's fourth-largest bank, named Treasury Undersecretary Robert Steel chief executive on Wednesday, ending a nearly six-week search for a new leader. The Charlotte-based bank also said it has set aside $4.2 billion pretax to cover bad loans for the quarter, leading to an estimated second-quarter loss of about $2.6 billion to $2.8 billion. The quarterly loss will equal $1.23 to $1.33 per share, excluding an expected write-down of goodwill. Analysts polled by Thomson Financial expected a profit. Wachovia is expected to release second-quarter earnings on July 22. Steel succeeds Ken Thompson, who was ousted by the bank's board in June after a series of missteps. Among them was Thompson's decision to buy mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation's housing boom. (Source: CNN Money) Full Story
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Wal-Mart Stores Inc (WMT: Charts, News, Offers) on Thursday reported a 5.8 percent rise in June sales at U.S. stores open at least a year, beating Wall Street estimates, and the discount retailer raised its second-quarter earnings forecast. Analysts, on average, had expected a same-store sales gain of 3.8 percent, according to Thomson Reuters Estimates, while the company itself had forecast a rise of 2 percent to 4 percent, excluding gasoline sales. Wal-Mart's monthly sales have been outpacing those of competitors as shoppers head to its stores for discounts on food, health-care items and electronics. Same-store sales rose 6.1 percent at its U.S. namesake discount stores and 4.6 percent at its Sam's Club warehouse division. (Source: Reuters) Full Story
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| Market Analysis |
The intense pain caused by the bursting of the housing bubble is beginning to ease. Really. That may be hard to believe, given the rapid increase in mortgage foreclosures, big year-over-year declines in home prices and housing starts, and continuing writedowns in the value of mortgage-backed securities. Yet a close look at the recent flow of housing data provides convincing evidence that the worst of the decline is over. Investors who are fleeing financial-institution stocks -- including those of Fannie Mae and Freddie Mac -- ought to think twice about the housing outlook. Take sales of existing homes, which account for about 85 percent of all U.S. housing sales. They peaked at an annual rate of 7.25 million in the fall of 2005 and fell to 4.89 million in January. In May, it was 4.99 million. The recent figures aren't a guarantee that such sales won't decline a bit more in coming months. Still, their relative stability probably indicates that home prices have dropped enough to encourage buyers to re-enter the market. And there's no reason to think the huge drop in sales since 2005 will be repeated. (Source: Bloomberg) Full Story
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Saudi Arabia's ability to calm panicky oil markets has been waning for years. With oil prices doubling since last summer, to more than $140 a barrel, Saudi King Abdullah on June 22 convened an extraordinary meeting (BusinessWeek.com, 6/22/08) of OPEC members, international oil industry CEOs, and foreign leaders in an effort to calm the markets. The kingdom's message was clear: Saudi fields can pump oil to market quickly, if demand warrants. However, it appears that for at least the next five years, and possibly longer, the Saudis are likely to produce less crude than promised, according to fresh data on the kingdom's oil fields obtained July 9 by BusinessWeek. Saudi officials have said they would increase production to 12.5 million barrels a day next year, from the current 9.5 million barrels a day, and could even ramp up to as much as 15 million barrels a day if the market demanded it. (Source: BusinessWeek) Full Story
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Rising fuel prices and surging imports are drying up demand for U.S.-made goods and services, destroying jobs and plunging the economy into an even deeper downturn. On Friday, the Commerce Department will report figures for the May trade deficit. It is expected to surge upward again, further sapping hopes of an early resolution to the jobs and growth crisis choking the American economy. With gasoline selling for $4.15 a gallon, Americans spend too much getting to work, and they visit shopping malls less. Most of the extra cash they fork over for fuel ends up in the hands of wealthy Middle Eastern and Latin American oil exporters, who don't spend comparable amounts on U.S. goods and services. When Americans do go to the malls, the television sets and T-shirts they buy too often come from factories in China, not America. (Source: Forbes.com) Full Story
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