BROAD MARKET SUMMARY:
Other than a couple of nice size M&A announcements this week, it is hard to identify the reason the markets held their prices as well as they did. The major indices gained between 1.5% to 3.5% with the Nasdaq faring the best of the three, but news and earnings reports did little to support the rise. The best headlines involved reports of controlled inflation at the consumer level and reversals in news about housing starts and building permits.
INDEX
5/16 Close
5/09 Close
% Chg
DJIA
12,986.80
12,745.88
+1.89%
S&P 500
1,425.35
1,388.28
+2.67%
NASDAQ
2,528.85
2,445.52
+3.41%
West Texas Intermediate Crude closed at $126.29/bbl. Gold Futures closed at $899.90/oz
Next FOMC Meeting:June 24 & 25, 2008 - Tuesday/Wednesday
Notable Economic Data This Week:
• Housing starts and Building Permits in April rose and were higher than expectations.
• The University of Michigan Preliminary Consumer Sentiment for May can in with a pessimistic reading of 59.5.
• CPI and Core CPI both fell in April and were below expectations.
• Crude oil inventory grew by less than was projected.
• Industrial production measures fell by more than economists had hoped.
ECONOMIC PULSE: Another all-time trading high was set on Friday as oil hit an intraday of $127.82. As of this week, the price of the commodity is up 85% year to date. The University of Michigan reading for May came in at 59.5 reflecting the most depressed consumer reflection since June 1980. These two are directly correlated as consumers feel the pinch from higher heating oil and gasoline prices take a continually larger bite out of expendable income.
HEADLINES OF INTEREST: A large private equity legal dispute has been settled where the lenders funding the buyout of Clear Channel Communications (CCU) will go through with their commitments. It has been almost two years since the deal was spoke of, but only now does the light of day shine for CCU shareholders who stand to receive about $36 per share equal to $17.9 billion. The stock was below $30 per share last week, but this week jumped to more accurately reflect the deal.
General Electric (GE) is selling its business. Not the whole thing though. It’s just the century-old appliance division that brought about the household name status to the company through nearly every American home. This is a continuation of what analysts are calling a transformation of the excessively diverse conglomerate that sold its plastics division last year for $11.6 billion and will likely be a very different company in coming years. Strategic moves continue to be considered and discussed in an effort mostly driven by continued downward pressure on the stock.
DEVELOPING TECHNOLOGY: Hewlett Packard (HPQ) steps up in a blockbuster deal to buy Electronic Data Systems (EDS) for $13.2 billion. A 33% premium to the going price at the time, HPQ will shell out $25 per share in the acquisition. Analysts mention cost-cutting opportunities, stronger competition against Dell, but also a significant integration hurdle.
Billionaire Carl Icahn wants to bring ten of his closest friends to a Yahoo (YHOO) board of directors meeting. Then he wants his friends to take the chairs away from all the existing board members, sit down, and tell the previous board to exit the room. Icahn is not very happy that Yahoo didn’t work out a deal with Microsoft (MSFT) and has scribed a strongly worded letter threatening a proxy fight. While current board members at Yahoo say Icahn is misunderstanding the details, Icahn sure does like a corporate scuffle.
CBS Corp. (CBS) will acquire CNET Networks (CNET) for $1.8 billion. The online news and information company commands $11.50 per share from CBS as an attractive way to increase their internet presence. Analysts feel CNET offers a very strong internet platform that was being underutilized and that CBS will have a great opportunity to implement the necessary changes to harness the power.
Apple (AAPL) put news out this week that the iPhone supply is quickly drying up. Confirmations came from online stores in the U.S. and the U.K., along with physical Apple stores reporting the phones are already gone. Only a few AT&T stores report still having some inventory, but this press is all aimed at building up some buzz for the already anticipated 3G model. The updated version will supposedly hit stores soon.
CONTINUING FINANCIAL STORIES: It’s easier to win when you tinker with the rules, is what Freddie Mac (FRE) put out to the street this week. The first quarter loss of 66 cents a share soundly beat estimates for losses of 92 cents, but this was mostly due to the alteration to methods of accounting for interest rate derivatives. That being said, the fact that this large U.S. based mortgage finance company beat earnings estimates did little to diminish concerns on any level at all about the domestic subprime and housing situation.
What is there not to like about Goldman Sachs (GS), Lehman Brothers (LEH), Merrill Lynch (MER), and Morgan Stanley (MS)? Well, if you ask Oppenheimer & Co analyst Meredith Whitney, you will find she’s not a big fan of each of these brokers current stock price. She cut her price targets across the board citing the outlook for the industry is bleaker than is reflected in the market. Her earnings estimates for the group were slashed by nearly 50% for fiscal 2008. Last fall Whitney earned her stripes by correctly predicting the dividend at Citigroup (C) would be cut, which the financial behemoth did do within weeks of her prognostication.
The financial market deterioration claimed another victim this week as bond insurer MBIA Inc. (MBI)posted a $2.41 billion loss in Q1. This loss was equal to a whopping $13.03 per share compared to a profit a year ago of $1.46 per share. The shares of the company’s stock surprising held on fairly well due to the fact the company explained most of the loss is an unrealized loss and would only actually occur if the derivates were sold, which is not anticipated.
ALFONSE
StockwireAdmin
Another all-time trading high was set on Friday as oil hit an intraday of $127.82. As of this week, the price of the commodity is up 85% year to date. The University of Michigan reading for May came in at 59.5 reflecting the most depressed consumer reflection since June 1980. These two are directly correlated as consumers feel the pinch from higher heating oil and gasoline prices take a continually larger bite out of expendable income.
A large private equity legal dispute has been settled where the lenders funding the buyout of Clear Channel Communications (CCU) will go through with their commitments. It has been almost two years since the deal was spoke of, but only now does the light of day shine for CCU shareholders who stand to receive about $36 per share equal to $17.9 billion. The stock was below $30 per share last week, but this week jumped to more accurately reflect the deal.
General Electric (GE) is selling its business. Not the whole thing though. It’s just the century-old appliance division that brought about the household name status to the company through nearly every American home. This is a continuation of what analysts are calling a transformation of the excessively diverse conglomerate that sold its plastics division last year for $11.6 billion and will likely be a very different company in coming years. Strategic moves continue to be considered and discussed in an effort mostly driven by continued downward pressure on the stock.
Hewlett Packard (HPQ) steps up in a blockbuster deal to buy Electronic Data Systems (EDS) for $13.2 billion. A 33% premium to the going price at the time, HPQ will shell out $25 per share in the acquisition. Analysts mention cost-cutting opportunities, stronger competition against Dell, but also a significant integration hurdle.
Billionaire Carl Icahn wants to bring ten of his closest friends to a Yahoo (YHOO) board of directors meeting. Then he wants his friends to take the chairs away from all the existing board members, sit down, and tell the previous board to exit the room. Icahn is not very happy that Yahoo didn’t work out a deal with Microsoft (MSFT) and has scribed a strongly worded letter threatening a proxy fight. While current board members at Yahoo say Icahn is misunderstanding the details, Icahn sure does like a corporate scuffle.
CBS Corp. (CBS) will acquire CNET Networks (CNET) for $1.8 billion. The online news and information company commands $11.50 per share from CBS as an attractive way to increase their internet presence. Analysts feel CNET offers a very strong internet platform that was being underutilized and that CBS will have a great opportunity to implement the necessary changes to harness the power. 
Apple (AAPL) put news out this week that the iPhone supply is quickly drying up. Confirmations came from online stores in the U.S. and the U.K., along with physical Apple stores reporting the phones are already gone. Only a few AT&T stores report still having some inventory, but this press is all aimed at building up some buzz for the already anticipated 3G model. The updated version will supposedly hit stores soon.
It’s easier to win when you tinker with the rules, is what Freddie Mac (FRE) put out to the street this week. The first quarter loss of 66 cents a share soundly beat estimates for losses of 92 cents, but this was mostly due to the alteration to methods of accounting for interest rate derivatives. That being said, the fact that this large U.S. based mortgage finance company beat earnings estimates did little to diminish concerns on any level at all about the domestic subprime and housing situation.
What is there not to like about Goldman Sachs (GS), Lehman Brothers (LEH), Merrill Lynch (MER), and Morgan Stanley (MS)? Well, if you ask Oppenheimer & Co analyst Meredith Whitney, you will find she’s not a big fan of each of these brokers current stock price. She cut her price targets across the board citing the outlook for the industry is bleaker than is reflected in the market. Her earnings estimates for the group were slashed by nearly 50% for fiscal 2008. Last fall Whitney earned her stripes by correctly predicting the dividend at Citigroup (C) would be cut, which the financial behemoth did do within weeks of her prognostication.
The financial market deterioration claimed another victim this week as bond insurer MBIA Inc. (MBI) posted a $2.41 billion loss in Q1. This loss was equal to a whopping $13.03 per share compared to a profit a year ago of $1.46 per share. The shares of the company’s stock surprising held on fairly well due to the fact the company explained most of the loss is an unrealized loss and would only actually occur if the derivates were sold, which is not anticipated.