Yahoo and AOL are reportedly on the verge of announcing a surprise merger plan, as part of a brilliant Yahoo counter-attack. And now Andrew Ross Sorkin and Miguel Helft of the NYT report that Microsoft and News Corp (NWS) are in talks to make a joint bid for Yahoo:
Rupert Murdoch’s News Corporation (NWS) is in talks with Microsoft (MSFT) about joining in its contested bid for Yahoo, according to people involved in the discussions. The pairing, which would combine Yahoo (YHOO), Microsoft’s MSN and News Corporation’s MySpace, would create a behemoth that would upend the Internet landscape.
If News Corporation throws its weight behind Microsoft’s offer, it could allow Microsoft to raise its bid, putting even more pressure on Yahoo and its shareholders. At the same time, the alignment of Microsoft and News Corporation would remove a possible alternative for Yahoo, leaving it with fewer opportunities to escape Microsoft’s grasp.
The talks between Microsoft and News Corporation are at a sensitive stage, people involved in the discussions said. “There’s a long way to go before anything is definite,” one person involved in the talks said.
Would this combination make sense? Sure it would make sense. Owning MySpace standalone isn't doing Rupert any good--he's getting his clock cleaned by Facebook. MSN's dead in the water. But throw all that together with Yahoo and you could build a pretty honkinging global communications, social networking, and advertising platform.
Rupert's got some cash, too, which means that the two might be able to pay more without infuriating their own shareholders bases.
In any event, at this point, you gotta believe Yahoo's stock is going up.
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AOL and Yahoo May Announce Merger Next Week
Showing posts with label Microsoft Corp. Show all posts
Showing posts with label Microsoft Corp. Show all posts
Thursday, April 10, 2008
Monday, April 7, 2008
Hewehi Market Updates
The major indices are holding near their best levels of the session. Financials (+1.9%) led the recent buying interest, taking the leadership spot from the energy sector (+1.5%).
Market breadth leans bullish. Advancers outpace decliners by more than 2-to-1 on the NYSE and by 4-to-3 on the Nasdaq. New 52-week highs outpace new lows by 61-to-1 on the NYSE, and are even on the Nasdaq. Volume is on the light side.DJ30 +93.30 NASDAQ +14.61 SP500 +12.43 NASDAQ Dec/Adv/Vol 1180/1616/802 mln NYSE Dec/Adv/Vol 951/2097/530 mln
The stock market has maintained last week’s bullish bias. At midday, the stock market is posting a substantial gain, with all ten economic sectors in positive territory. Market moving news has been relatively slow this session, with only one economic report set for release later in the afternoon, and no earnings reports.
Shares of Washington Mutual (WM 23.99, +2.44) have soared 24% on reports that it is close to a deal that will supply the struggling company with $5 billion in capital. The Wall Street Journal reports the deal will be funded by private-equity firm TPG and other investors.
Meanwhile, UBS (UBS 35.29, +1.64) is posting a healthy gain after being upgraded to Buy from Neutral at Merrill Lynch.
As a result, the financials sector has climbed 1.7%, and is providing leadership.
Microsoft (MSFT 29.27, +0.11) sent Yahoo! (YHOO 27.81, -0.55) a letter, warning that if Yahoo does not accept its Jan. 31 $44.6 billion offer, Microsoft will take its offer hostile by going directly to shareholders, according to reports. Yahoo responded that it is open to a deal with Microsoft, but feels the current offer undervalues the company.
In other deal news, Novartis (NVS 50.82, -1.30) is paying $11 billion to acquire a 25% stake in Alcon (ACL 153.61, +5.17) from Nestle.
Crude oil has rallied 2.9% to $109.25 per barrel. There does not appear to be a specific catalyst for the gains. As a result, the energy sector (+1.7%) has been a standout.
DJ30 +86.87 NASDAQ +13.81 SP500 +11.96 NASDAQ Dec/Adv/Vol 1138/1641/710 mln NYSE Dec/Adv/Vol 914/2095/471 mln
The stock market is trying to recover back to its session highs. The recent gains have been broad-based, with all ten economic sectors making it back to positive territory. Treasuries are facing some selling interest, with the 10-year note shedding 24 ticks.DJ30 +68.55 NASDAQ +10.16 SP500 +9.25 NASDAQ Dec/Adv/Vol 1140/1608/601 mln NYSE Dec/Adv/Vol 927/2046/396 mln
The Nasdaq fell to the unchanged mark, but has since recovered a bit as it posts a modest gain. All sectors have slipped off their best levels. Materials is now up only 0.8%, after being up as much as 1.9%. It remains the only sector in positive territory year-to-date, with a 3.7% advance.DJ30 +47.17 NASDAQ +8.46 SP500 +7.75 NASDAQ Dec/Adv/Vol 1167/1555/505 mln NYSE Dec/Adv/Vol 921/2005/328 mln
The major indices continue to post a gain, but are off their best levels of the morning. Four of the ten economic sectors are in negative territory, although their losses are modest.
The stock market is now up 9.6% from its 52-week low that was reached on March 17, with financials rebounding 17.8%.DJ30 +34.36 NASDAQ +7.02 SP500 +6.55 NASDAQ Dec/Adv/Vol 1190/1409/364 mln NYSE Dec/Adv/Vol 954/1903/235 mln
After dipping a bit, the major indices are trading near their opening highs. Washington Mutual (WM 11.95, +1.78) is spiking 17.5% on the capital infusion report.
The energy sector (+1.7%) is showing strength as crude rallies 2.1% to $108.45 per barrel. There is not a specific catalyst for the gain in crude oil prices. The materials sector (+1.8%) is providing leadership, as the fertilizer & agricultural chemicals group extends its rally.
Defensive oriented utilities (-0.2%), consumer staples (flat) and healthcare (+0.2%) are underperforming on a relative basis.
This session's economic calendar is light, with only the February consumer credit report at 15:00 ET.DJ30 +56.18 NASDAQ +13.14 SP500 +8.26 NASDAQ Dec/Adv/Vol 937/1516/229 mln NYSE Dec/Adv/Vol 780/2002/159 mln
The major indices open on a high note. Financials (+0.9%) are outperforming after the Wall Street Journal reported Washington Mutual (WM) is close to getting a $5 billion capital infusion from a private equity group and other investors.
Also topping headlines, is news that Microsoft (MSFT) sent Yahoo! (YHOO) a letter that stated Yahoo has three weeks to accept Microsoft's offer. Yahoo responded it is not against a deal with Microsoft, but the current offer is not in the best interest for Yahoo's shareholders.
DJ30 +43.90 NASDAQ +9.97 SP500 +6.91
S&P futures vs fair value: +9.7. Nasdaq futures vs fair value: +6.2.
S&P futures vs fair value: +9.4. Nasdaq futures vs fair value: +6.0.
S&P futures vs fair value: +11.9. Nasdaq futures vs fair value: +10.8. Current indications suggest a positive start to trading. In commodity trading, crude oil is up 1.1% to $107.38 per barrel. Gold is up 0.7% to $915.40 per ounce.
S&P futures vs fair value: +11.3. Nasdaq futures vs fair value: +10.3. Futures suggest a higher open to the trading day. Washington Mutual (WM) is close to completing a deal to get a $5 billion capital infusion from private-equity firm TPG and other investors, according to the Wall Street Journal. Microsoft (MSFT) has threatened a hostile takeover of Yahoo!(YHOO), if Yahoo does not agree to a merger within the next three weeks, according to the Wall Street Journal. Yahoo responded that it is not opposed to a deal with Microsoft, but feels the current offer undervalues Yahoo. In other deal news, pharmaceutical company Novartis AG (NVS) is buying a 25% stake in eye-care product maker Alcon (ACL), and may purchase another 52%.
06:13 am : S&P futures vs fair value: +12.0. Nasdaq futures vs fair value: +12.0.
06:13 am : FTSE...5990.30...+43.20...+0.7%. DAX...6826.34...+62.34...+0.9%.
06:13 am : Nikkei...13450.23...+157.01...+1.2%. Hang Seng...24578.76...+314.13...+1.3%.
Saturday, February 9, 2008
Yahoo Board to Spurn $44B Microsoft Bid
Yahoo Inc.'s board will reject Microsoft Corp.'s $44.6 billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, a person familiar with the situation said Saturday.
The decision could provoke a showdown between two of the world's most prominent technology companies with Internet search leader Google Inc. looming in the background. Leery of Microsoft expanding its turf on the Internet, Google already has offered to help Yahoo avert a takeover and urged antitrust regulators to take a hard look at the proposed deal.
If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer -- originally valued at $31 per share -- directly to the shareholders. Pursuing that risky route probably will require Microsoft to attempt to oust Yahoo's current 10-member board.
Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock.
Yahoo's board reached the decision after exploring a wide variety of alternatives during the past week, according to the person who spoke to The Associated Press. The person didn't want to be identified because the reasons for Yahoo's rebuff won't be officially spelled out until Monday morning.
Microsoft and Yahoo declined to comment Saturday on the decision, first reported by The Wall Street Journal on its Web site.
Yahoo's board concluded Microsoft's offer is inadequate even though the company couldn't find any other potential bidders willing to offer a higher price.
Without other suitors on the horizon, Yahoo has had little choice but to turn a cold shoulder toward Microsoft if the board hopes to fulfill its responsibility to fetch the highest price possible for the company, said technology investment banker Ken Marlin.
"You would expect Yahoo's board to reject Microsoft at first," Marlin said. "If they didn't, they would be accused of malfeasance."
But by spurning Microsoft, Yahoo risks further alienating shareholders already upset about management missteps that have led to five consecutive quarters of declining profits.
The downturn caused Yahoo's stock price to plummet by more than 40 percent, erasing about $20 billion in shareholder wealth, in the three months leading up to Microsoft's bid.
Seizing on an opportunity to expand its clout on the Internet, Microsoft dangled a takeover offer that was 62 percent above Yahoo's stock price of just $19.18 when the bid was announced Feb. 1. Yahoo shares ended the past week at $29.20.
Led by company co-founder and board member Jerry Yang, Yahoo now will be under intense pressure to lay out a strategy that will prevent its stock price from collapsing again. What's more, Yang and the rest of the management team must convince Wall Street that they can boost Yahoo's market value beyond Microsoft's offer.
Yahoo's shares traded at $31 as recently as November, but have eroded steadily amid concerns about the slowing economy and frustration with the slow pace of a turnaround that Yang promised last June when he replaced former movie studio mogul Terry Semel as Yahoo's chief executive officer.
This isn't the first time that Yahoo has spurned Microsoft. The Redmond, Wash.-based company offered $40 per share to buy Yahoo a year ago only to be shooed away by Semel, according to a person familiar with the matter. The person didn't want to be identified because that bid was never made public.
Yahoo now may want that Microsoft to raise its price to at least $40 per share again. That would force Microsoft to raise its current offer by about $12 billion -- a high price that might alarm its own shareholders.
Microsoft's stock price already has slid 12 percent since the company announced its Yahoo bid, reflecting concerns about the deal bogging down amid potential management distractions, sagging employee morale and other headaches that frequently arise when two big companies are combined.
Although it isn't involved directly in the deal, Google is the main reason Yahoo is being pursued by Microsoft.
Yahoo has struggled largely because it hasn't been able to target online ads as effectively as Google.
Microsoft believes Yahoo's brand, engineers, audience and services will provide the company with valuable weapons in its so far unsuccessful attempt to narrow Google's huge lead in the lucrative Internet search and advertising markets.
As it examined ways to thwart Microsoft, Yahoo considered an advertising partnership with Google -- an alliance long favored by analysts who believe it would boost the profits of both companies. It was unclear Saturday if Yahoo's plans for boosting its stock price include a Google partnership, which would probably face antitrust issues.
A Microsoft takeover of Yahoo would also be scrutinized by antitrust regulators in the United States and Europe. The antitrust uncertainties could be cited as one of the reasons that Yahoo's board decided to spurn Microsoft.
The decision could provoke a showdown between two of the world's most prominent technology companies with Internet search leader Google Inc. looming in the background. Leery of Microsoft expanding its turf on the Internet, Google already has offered to help Yahoo avert a takeover and urged antitrust regulators to take a hard look at the proposed deal.
If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer -- originally valued at $31 per share -- directly to the shareholders. Pursuing that risky route probably will require Microsoft to attempt to oust Yahoo's current 10-member board.
Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock.
Yahoo's board reached the decision after exploring a wide variety of alternatives during the past week, according to the person who spoke to The Associated Press. The person didn't want to be identified because the reasons for Yahoo's rebuff won't be officially spelled out until Monday morning.
Microsoft and Yahoo declined to comment Saturday on the decision, first reported by The Wall Street Journal on its Web site.
Yahoo's board concluded Microsoft's offer is inadequate even though the company couldn't find any other potential bidders willing to offer a higher price.
Without other suitors on the horizon, Yahoo has had little choice but to turn a cold shoulder toward Microsoft if the board hopes to fulfill its responsibility to fetch the highest price possible for the company, said technology investment banker Ken Marlin.
"You would expect Yahoo's board to reject Microsoft at first," Marlin said. "If they didn't, they would be accused of malfeasance."
But by spurning Microsoft, Yahoo risks further alienating shareholders already upset about management missteps that have led to five consecutive quarters of declining profits.
The downturn caused Yahoo's stock price to plummet by more than 40 percent, erasing about $20 billion in shareholder wealth, in the three months leading up to Microsoft's bid.
Seizing on an opportunity to expand its clout on the Internet, Microsoft dangled a takeover offer that was 62 percent above Yahoo's stock price of just $19.18 when the bid was announced Feb. 1. Yahoo shares ended the past week at $29.20.
Led by company co-founder and board member Jerry Yang, Yahoo now will be under intense pressure to lay out a strategy that will prevent its stock price from collapsing again. What's more, Yang and the rest of the management team must convince Wall Street that they can boost Yahoo's market value beyond Microsoft's offer.
Yahoo's shares traded at $31 as recently as November, but have eroded steadily amid concerns about the slowing economy and frustration with the slow pace of a turnaround that Yang promised last June when he replaced former movie studio mogul Terry Semel as Yahoo's chief executive officer.
This isn't the first time that Yahoo has spurned Microsoft. The Redmond, Wash.-based company offered $40 per share to buy Yahoo a year ago only to be shooed away by Semel, according to a person familiar with the matter. The person didn't want to be identified because that bid was never made public.
Yahoo now may want that Microsoft to raise its price to at least $40 per share again. That would force Microsoft to raise its current offer by about $12 billion -- a high price that might alarm its own shareholders.
Microsoft's stock price already has slid 12 percent since the company announced its Yahoo bid, reflecting concerns about the deal bogging down amid potential management distractions, sagging employee morale and other headaches that frequently arise when two big companies are combined.
Although it isn't involved directly in the deal, Google is the main reason Yahoo is being pursued by Microsoft.
Yahoo has struggled largely because it hasn't been able to target online ads as effectively as Google.
Microsoft believes Yahoo's brand, engineers, audience and services will provide the company with valuable weapons in its so far unsuccessful attempt to narrow Google's huge lead in the lucrative Internet search and advertising markets.
As it examined ways to thwart Microsoft, Yahoo considered an advertising partnership with Google -- an alliance long favored by analysts who believe it would boost the profits of both companies. It was unclear Saturday if Yahoo's plans for boosting its stock price include a Google partnership, which would probably face antitrust issues.
A Microsoft takeover of Yahoo would also be scrutinized by antitrust regulators in the United States and Europe. The antitrust uncertainties could be cited as one of the reasons that Yahoo's board decided to spurn Microsoft.
Saturday, February 2, 2008
Microsoft Eyes Yahoo to Topple Google
Unable to topple Google Inc. on its own, Microsoft Corp. is trying to force crippled rival Yahoo Inc. into a shotgun marriage, with a wager worth nearly $42 billion that the two companies together will have a better chance of tackling the Internet search leader
Microsoft's audacious attempt to buy Yahoo, spelled out in an unsolicited offer announced Friday, shows just how much Google threatens the world's largest software maker's grip on how people interact with computers.
For Yahoo, the bid represents another painful reminder of how missed opportunities and mismanagement combined to open the door for Google to supplant it as the Internet's main gateway, decimating its stock price in the process.
Redmond, Wash.-based Microsoft is trying to avoid a similar fate at Google's hands as more people access services and computer programs online instead of relying on packaged software applications.
Although Microsoft remains the world's most valuable technology company, its position will become more precarious unless it can cultivate a more loyal Internet audience and generate more online ad revenue to subsidize the free services taken for granted on the Internet.
Microsoft is acutely aware of the upheaval that can be caused by a pivotal shift in technology, having been the biggest beneficiary during the 1980s and 1990s of a transition from mainframe computers to personal computers that knocked IBM Corp. off its pedestal.
"Microsoft has to do this deal. It's a battle that Microsoft needs to win," said AMR Research analyst Jonathan Yarmis.
But there's no guarantee that Yahoo will be willing to sell to Microsoft -- or that the deal will win the necessary approvals from antitrust regulators in the United States and Europe if Yahoo capitulates.
Sunnyvale-based Yahoo had little to say Friday beyond a terse statement assuring its shareholders that its board will "carefully and promptly" study the bid.
In a conference call Friday, Microsoft Chief Executive Steve Ballmer indicated he won't take no for an answer after Yahoo rebuffed takeover overtures a year ago.
"This is a decision we have -- and I have -- thought long and hard about," Ballmer said. "We are confident it's the right path for Microsoft and Yahoo."
Yahoo will likely face intense pressure to accept, given its steadily sliding profits and a murky 2008 outlook that caused its stock price to drop to a four-year low earlier this week.
Microsoft's $31-per-share offer -- originally valued at $44.6 billion -- represented a 62 percent premium to Yahoo's closing price late Thursday, although it's below Yahoo's 52-week high of $34.08 reached less than four months ago. On Friday, the total value of the cash-and-stock deal fell to $41.7 billion, or $28.95 per share, because Microsoft's shares declined on the news.
Yahoo shares soared to a split-adjusted high of $118.75 in 2000 before the dot-com bust. That peak coincidentally also was just before Yahoo gave Google its first big break by hiring it to run its search engine.
Search engines are crucial tools because they have become a central hub in hugely profitable ad networks.
Advertisers around the world are expected to double their spending on the Internet during the next three years as more people get their news and entertainment on the Web instead of television, radio, newspapers and magazines. The trend is expected to create an $80 billion online ad market in 2010, up from an estimated $40 billion last year.
After realizing how much money Google was making from search, Yahoo introduced its own technology in 2004, but by then it was too little, too late.
Forrester Research analyst Charlene Li expects Yahoo to resist, predicting the company "will do everything possible to stay independent," even if it means swallowing its pride and rehiring Google to run its search engine and sell ads on its site.
Other analysts still think Yahoo might try to line up a white knight rather than fall into Microsoft's clutches. Analysts mentioned several other potential suitors, including News Corp. and InterActiveCorp.
Dinosaur Securities analyst David Garrity even thinks it's possible that China's search leader, Baidu.com Inc., or Chinese e-commerce conglomerate Alibaba.com Inc. might bid for Yahoo. Alibaba.com is 40 percent owned by Yahoo.
In what most analysts regard as a long shot, there was even some chatter that longtime Microsoft rival Apple Inc. and its CEO, Steve Jobs, might come to Yahoo's rescue.
If push comes to shove, most analysts believe Microsoft will raise its cash-and-stock bid.
Investors appear confident an agreement eventually will be reached. Yahoo shares climbed $9.20, or nearly 48 percent, to $28.38 while Microsoft shares fell $2.15, or 6.6 percent, to $30.45 -- a sign that Wall Street is skeptical about whether the acquisition makes sense.
"It's a classic case of a buyer overbidding to blow any potential competitors out of the water," said James Owers, a Georgia State University professor of corporate finance.
Shortly after Microsoft disclosed its intentions, the U.S. Justice Department said it is "interested" in reviewing antitrust issues. European Union officials declined to comment, but analysts said Microsoft probably will face more challenges getting a Yahoo acquisition approved in Europe than the United States.
Microsoft made its offer a few hours after Yahoo's chairman, Terry Semel, stepped down, removing a potential stumbling block. Semel had rejected Microsoft's takeover overtures a year ago while he was still Yahoo's chief executive, according to a letter released Friday.
Yahoo co-founder Jerry Yang replaced Semel as CEO nearly eight months ago while another Yahoo director, Roy Bostock, is now chairman.
Yang, a billionaire who is one of Yahoo's largest shareholders, isn't believed to have warm and fuzzy feelings about Microsoft. He has openly expressed his admiration for Jobs and last year even invited the Apple CEO to Yahoo's headquarters for a pep talk with employees.
Microsoft believes its technological expertise will be a good fit with Yahoo's knack for providing content and services that keep people coming back to its site. Combined, the two companies would reach a U.S. online audience of 142 million compared with 124 million for Google, according to Nielsen Online.
But Yahoo and Microsoft are so far behind Google in the lucrative search market that they still will have a lot of ground to make up even if they joined forces.
Google already controls 62 percent of the worldwide search market, and has been widening its lead, according to the latest data from comScore Media Metrix. By combining, Microsoft and Yahoo would have a 16 percent share of the worldwide search market, the Web traffic tracking company said.
Google shares fell $48.40, or 8.6 percent, to close at $515.90 Friday, but the downturn appeared to be driven more by a disappointing fourth-quarter earnings report than by Microsoft's bid for Yahoo.
Besides helping to boost its online ad revenue, Microsoft believes it could mine more profit from Yahoo by jettisoning workers and eliminating overlapping operations.
Microsoft said it sees at least $1 billion in cost savings if it buys Yahoo. Microsoft executives deflected questions about how many jobs might be lost, but the company emphasized retention packages will be offered to Yahoo engineers and other key employees, including some executives.
The fate of Yahoo's brand also is unclear if Microsoft takes over. Both Ballmer and Kevin Johnson, president of Microsoft's platforms and services division, hailed Yahoo's strong brand value but did not commit to keeping the name alive.
Microsoft's audacious attempt to buy Yahoo, spelled out in an unsolicited offer announced Friday, shows just how much Google threatens the world's largest software maker's grip on how people interact with computers.
For Yahoo, the bid represents another painful reminder of how missed opportunities and mismanagement combined to open the door for Google to supplant it as the Internet's main gateway, decimating its stock price in the process.
Redmond, Wash.-based Microsoft is trying to avoid a similar fate at Google's hands as more people access services and computer programs online instead of relying on packaged software applications.
Although Microsoft remains the world's most valuable technology company, its position will become more precarious unless it can cultivate a more loyal Internet audience and generate more online ad revenue to subsidize the free services taken for granted on the Internet.
Microsoft is acutely aware of the upheaval that can be caused by a pivotal shift in technology, having been the biggest beneficiary during the 1980s and 1990s of a transition from mainframe computers to personal computers that knocked IBM Corp. off its pedestal.
"Microsoft has to do this deal. It's a battle that Microsoft needs to win," said AMR Research analyst Jonathan Yarmis.
But there's no guarantee that Yahoo will be willing to sell to Microsoft -- or that the deal will win the necessary approvals from antitrust regulators in the United States and Europe if Yahoo capitulates.
Sunnyvale-based Yahoo had little to say Friday beyond a terse statement assuring its shareholders that its board will "carefully and promptly" study the bid.
In a conference call Friday, Microsoft Chief Executive Steve Ballmer indicated he won't take no for an answer after Yahoo rebuffed takeover overtures a year ago.
"This is a decision we have -- and I have -- thought long and hard about," Ballmer said. "We are confident it's the right path for Microsoft and Yahoo."
Yahoo will likely face intense pressure to accept, given its steadily sliding profits and a murky 2008 outlook that caused its stock price to drop to a four-year low earlier this week.
Microsoft's $31-per-share offer -- originally valued at $44.6 billion -- represented a 62 percent premium to Yahoo's closing price late Thursday, although it's below Yahoo's 52-week high of $34.08 reached less than four months ago. On Friday, the total value of the cash-and-stock deal fell to $41.7 billion, or $28.95 per share, because Microsoft's shares declined on the news.
Yahoo shares soared to a split-adjusted high of $118.75 in 2000 before the dot-com bust. That peak coincidentally also was just before Yahoo gave Google its first big break by hiring it to run its search engine.
Search engines are crucial tools because they have become a central hub in hugely profitable ad networks.
Advertisers around the world are expected to double their spending on the Internet during the next three years as more people get their news and entertainment on the Web instead of television, radio, newspapers and magazines. The trend is expected to create an $80 billion online ad market in 2010, up from an estimated $40 billion last year.
After realizing how much money Google was making from search, Yahoo introduced its own technology in 2004, but by then it was too little, too late.
Forrester Research analyst Charlene Li expects Yahoo to resist, predicting the company "will do everything possible to stay independent," even if it means swallowing its pride and rehiring Google to run its search engine and sell ads on its site.
Other analysts still think Yahoo might try to line up a white knight rather than fall into Microsoft's clutches. Analysts mentioned several other potential suitors, including News Corp. and InterActiveCorp.
Dinosaur Securities analyst David Garrity even thinks it's possible that China's search leader, Baidu.com Inc., or Chinese e-commerce conglomerate Alibaba.com Inc. might bid for Yahoo. Alibaba.com is 40 percent owned by Yahoo.
In what most analysts regard as a long shot, there was even some chatter that longtime Microsoft rival Apple Inc. and its CEO, Steve Jobs, might come to Yahoo's rescue.
If push comes to shove, most analysts believe Microsoft will raise its cash-and-stock bid.
Investors appear confident an agreement eventually will be reached. Yahoo shares climbed $9.20, or nearly 48 percent, to $28.38 while Microsoft shares fell $2.15, or 6.6 percent, to $30.45 -- a sign that Wall Street is skeptical about whether the acquisition makes sense.
"It's a classic case of a buyer overbidding to blow any potential competitors out of the water," said James Owers, a Georgia State University professor of corporate finance.
Shortly after Microsoft disclosed its intentions, the U.S. Justice Department said it is "interested" in reviewing antitrust issues. European Union officials declined to comment, but analysts said Microsoft probably will face more challenges getting a Yahoo acquisition approved in Europe than the United States.
Microsoft made its offer a few hours after Yahoo's chairman, Terry Semel, stepped down, removing a potential stumbling block. Semel had rejected Microsoft's takeover overtures a year ago while he was still Yahoo's chief executive, according to a letter released Friday.
Yahoo co-founder Jerry Yang replaced Semel as CEO nearly eight months ago while another Yahoo director, Roy Bostock, is now chairman.
Yang, a billionaire who is one of Yahoo's largest shareholders, isn't believed to have warm and fuzzy feelings about Microsoft. He has openly expressed his admiration for Jobs and last year even invited the Apple CEO to Yahoo's headquarters for a pep talk with employees.
Microsoft believes its technological expertise will be a good fit with Yahoo's knack for providing content and services that keep people coming back to its site. Combined, the two companies would reach a U.S. online audience of 142 million compared with 124 million for Google, according to Nielsen Online.
But Yahoo and Microsoft are so far behind Google in the lucrative search market that they still will have a lot of ground to make up even if they joined forces.
Google already controls 62 percent of the worldwide search market, and has been widening its lead, according to the latest data from comScore Media Metrix. By combining, Microsoft and Yahoo would have a 16 percent share of the worldwide search market, the Web traffic tracking company said.
Google shares fell $48.40, or 8.6 percent, to close at $515.90 Friday, but the downturn appeared to be driven more by a disappointing fourth-quarter earnings report than by Microsoft's bid for Yahoo.
Besides helping to boost its online ad revenue, Microsoft believes it could mine more profit from Yahoo by jettisoning workers and eliminating overlapping operations.
Microsoft said it sees at least $1 billion in cost savings if it buys Yahoo. Microsoft executives deflected questions about how many jobs might be lost, but the company emphasized retention packages will be offered to Yahoo engineers and other key employees, including some executives.
The fate of Yahoo's brand also is unclear if Microsoft takes over. Both Ballmer and Kevin Johnson, president of Microsoft's platforms and services division, hailed Yahoo's strong brand value but did not commit to keeping the name alive.
Friday, February 1, 2008
Microsoft Offers $44.6B for Yahoo
Microsoft Corp. has pounced on slumping Internet icon Yahoo Inc. with an unsolicited takeover offer of $44.6 billion in its boldest bid yet to challenge Google Inc.'s dominance of the lucrative online search and advertising markets. The Justice Department says it is interested in reviewing antitrust issues associated with it.
The surprise offer of $31 per share, made late Thursday and announced Friday, seizes on Yahoo's weakness while Microsoft tries to muscle up in a high-stakes battle with Google likely to define the technology landscape for years to come.
In a statement Friday, Yahoo said it will "carefully and promptly" study Microsoft's bid.
With its profits steadily sliding, Yahoo's stock slipped to a four-year low earlier this week and a new management team has been trying to steer a turnaround but sees more turbulence through 2008.
The announcement lifted Yahoo's share price by almost 50 percent in morning trading, while Google fell almost 8 percent, dragged down by a fourth-quarter earnings report that missed Wall Street expectations.
In conference call Friday morning, Microsoft Chief Executive Steve Ballmer indicated he won't take no for an answer after Yahoo rebuffed takeover overtures a year ago.
"This is a decision we have -- and I have -- thought long and hard about," Ballmer said. "We are confident it's the right path for Microsoft and Yahoo."
To underscore its resolve, Microsoft is offering a 62 percent premium to Yahoo's closing stock price Thursday. If the deal is consummated, it would be by far the largest acquisition in Microsoft's history, eclipsing last year's $6 billion purchase of online ad service aQuantive.
Since reaching a 52-week high of $34.08 in October, Yahoo shares have fallen 46 percent. Yahoo climbed $9.41 a share, or 49 percent, to $28.59 in morning trading. Microsoft shares fell $1.43, or 4.4 percent, to $31.17.
Microsoft publicly disclosed its cash-and-stock offer in hopes of rallying support from Yahoo's shareholders, making it more difficult for Yahoo's board to turn down the bid.
In a letter released Friday, Ballmer pointedly noted Yahoo's financial performance has deteriorated since Microsoft was spurned a year ago. At that time, Ballmer said he was told Yahoo believed it was better off on its own.
"A year has gone by, and the competitive situation has not improved," Ballmer wrote in his letter.
Microsoft's previous offer was rebuffed by Terry Semel, who stepped aside last year as chief executive under shareholder pressure.
Microsoft sent its latest takeover offer to Yahoo late Thursday, shortly after Semel resigned as the company's chairman. The letter is addressed to Semel's successors, new Chairman Roy Bostock and the current CEO, co-founder Jerry Yang, who is one of Yahoo's largest shareholders.
In a prepared statement, Yahoo said its board "will evaluate this proposal carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."
Microsoft views Yahoo as its best chance to thwart Google, which has leveraged its leadership in Internet search and advertising to emerge as an increasingly serious threat to the world's largest software maker's persuasive influence on how people interact with computers.
Google already controls nearly 60 percent of the U.S. search market, and has been widening its lead, despite concerted efforts by both second-place Yahoo and third-place Microsoft. By combining, Microsoft and Yahoo would have a 33 percent share of the U.S. search market, according to the latest data from comScore Media Metrix.
By joining forces, Microsoft and Yahoo also would widen their narrowing advantage over Google in providing free e-mail accounts -- a service that helps foster more loyalty with users and create more advertising opportunities.
Advertisers around the world are expected to double their spending on the Internet during the next three years as more people get their news and entertainment on the Web instead of television, radio, newspapers and magazine. The trend is expected to create an $80 billion online ad market in 2010, up from an estimated $40 billion last year.
Despite an aggressive push in recent years, Microsoft's online advertising expansion hasn't paid off. Last week, the Redmond, Wash.-based company reported a 79 percent jump in its overall profit, but its online division's loss widened to $245 million.
And Yahoo has been struggling to attract more advertising even though its Web site attracts one of the biggest audiences. The Sunnyvale-based company's profit has declined for five consecutive quarters, prompting plans to cut 1,000 jobs later this month, a 7 percent reduction of its 14,300-employee work force.
Besides helping to boost its online ad revenue, Microsoft believes it could mine more profit from Yahoo by jettisoning workers and eliminating overlapping operations.
Microsoft said it sees at least $1 billion in cost savings if it buys Yahoo. Microsoft executives deflected questions about how many jobs might be lost, but the company emphasized retention packages will be offered to Yahoo engineers and other key employees, including some executives.
The fate of Yahoo's brand also is unclear if Microsoft takes over. Both Ballmer and Kevin Johnson, president of Microsoft's platforms and services division, hailed Yahoo's strong brand value but didn't commit to keeping the name alive.
The surprise offer of $31 per share, made late Thursday and announced Friday, seizes on Yahoo's weakness while Microsoft tries to muscle up in a high-stakes battle with Google likely to define the technology landscape for years to come.
In a statement Friday, Yahoo said it will "carefully and promptly" study Microsoft's bid.
With its profits steadily sliding, Yahoo's stock slipped to a four-year low earlier this week and a new management team has been trying to steer a turnaround but sees more turbulence through 2008.
The announcement lifted Yahoo's share price by almost 50 percent in morning trading, while Google fell almost 8 percent, dragged down by a fourth-quarter earnings report that missed Wall Street expectations.
In conference call Friday morning, Microsoft Chief Executive Steve Ballmer indicated he won't take no for an answer after Yahoo rebuffed takeover overtures a year ago.
"This is a decision we have -- and I have -- thought long and hard about," Ballmer said. "We are confident it's the right path for Microsoft and Yahoo."
To underscore its resolve, Microsoft is offering a 62 percent premium to Yahoo's closing stock price Thursday. If the deal is consummated, it would be by far the largest acquisition in Microsoft's history, eclipsing last year's $6 billion purchase of online ad service aQuantive.
Since reaching a 52-week high of $34.08 in October, Yahoo shares have fallen 46 percent. Yahoo climbed $9.41 a share, or 49 percent, to $28.59 in morning trading. Microsoft shares fell $1.43, or 4.4 percent, to $31.17.
Microsoft publicly disclosed its cash-and-stock offer in hopes of rallying support from Yahoo's shareholders, making it more difficult for Yahoo's board to turn down the bid.
In a letter released Friday, Ballmer pointedly noted Yahoo's financial performance has deteriorated since Microsoft was spurned a year ago. At that time, Ballmer said he was told Yahoo believed it was better off on its own.
"A year has gone by, and the competitive situation has not improved," Ballmer wrote in his letter.
Microsoft's previous offer was rebuffed by Terry Semel, who stepped aside last year as chief executive under shareholder pressure.
Microsoft sent its latest takeover offer to Yahoo late Thursday, shortly after Semel resigned as the company's chairman. The letter is addressed to Semel's successors, new Chairman Roy Bostock and the current CEO, co-founder Jerry Yang, who is one of Yahoo's largest shareholders.
In a prepared statement, Yahoo said its board "will evaluate this proposal carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."
Microsoft views Yahoo as its best chance to thwart Google, which has leveraged its leadership in Internet search and advertising to emerge as an increasingly serious threat to the world's largest software maker's persuasive influence on how people interact with computers.
Google already controls nearly 60 percent of the U.S. search market, and has been widening its lead, despite concerted efforts by both second-place Yahoo and third-place Microsoft. By combining, Microsoft and Yahoo would have a 33 percent share of the U.S. search market, according to the latest data from comScore Media Metrix.
By joining forces, Microsoft and Yahoo also would widen their narrowing advantage over Google in providing free e-mail accounts -- a service that helps foster more loyalty with users and create more advertising opportunities.
Advertisers around the world are expected to double their spending on the Internet during the next three years as more people get their news and entertainment on the Web instead of television, radio, newspapers and magazine. The trend is expected to create an $80 billion online ad market in 2010, up from an estimated $40 billion last year.
Despite an aggressive push in recent years, Microsoft's online advertising expansion hasn't paid off. Last week, the Redmond, Wash.-based company reported a 79 percent jump in its overall profit, but its online division's loss widened to $245 million.
And Yahoo has been struggling to attract more advertising even though its Web site attracts one of the biggest audiences. The Sunnyvale-based company's profit has declined for five consecutive quarters, prompting plans to cut 1,000 jobs later this month, a 7 percent reduction of its 14,300-employee work force.
Besides helping to boost its online ad revenue, Microsoft believes it could mine more profit from Yahoo by jettisoning workers and eliminating overlapping operations.
Microsoft said it sees at least $1 billion in cost savings if it buys Yahoo. Microsoft executives deflected questions about how many jobs might be lost, but the company emphasized retention packages will be offered to Yahoo engineers and other key employees, including some executives.
The fate of Yahoo's brand also is unclear if Microsoft takes over. Both Ballmer and Kevin Johnson, president of Microsoft's platforms and services division, hailed Yahoo's strong brand value but didn't commit to keeping the name alive.
Friday, January 25, 2008
Latest Updates
4:25 pm : Microsoft (MSFT 32.94, -0.31) gave the market everything it was looking for when it reported its fiscal second quarter results after Thursday's close. The software giant topped expectations and raised its revenue and earnings per share guidance for the fiscal year, which ends in June, noting broad-based strength in its business.
The market chewed up the report, liking the taste of it in early trading, and then promptly spit it back out, hitting both Microsoft and the broader averages with losses to close a remarkable week of trading.
The inability of Microsoft's stock to hold its opening gains, which were as much as 5.3%, spurred a disappointment trade that then took most stocks lower on the day. Dow components Caterpillar (CAT 65.93, +0.68) and Honeywell (HON 58.25, +2.05) managed to buck the trend after sharing reassuring earnings news.
Selling efforts were compounded by renewed concerns surrounding the likelihood of further credit losses for the financial sector, worries that a rescue plan of some sort for the bond insurers was no sure thing, and rumors that a hedge fund was in trouble.
On top of that, Merck (MRK 47.79, -1.77) and fellow drug company Schering-Plough (SGP 19.02, -1.15) got hit on a seemingly benign announcement from the FDA that it is still awaiting more results on the study of the efficacy of their joint cholesterol drug, Vytorin, and that an eventual review could take up to six months. Both stocks made up some lost ground, but still finished lower and acted as a weight on the market.
Strikingly, the financial (-2.5%) and consumer discretionary (-2.0%) sectors, which were the leaders in the rebound off Wednesday's low, were the hardest hit areas Friday. Although both areas were prime for some profit-taking, their weakness Friday is apt to stir concerns for some participants that the rally try this week will be short-lived.
A late-day report that New York officials sued Countrywide's (CFC 6.02, -0.09) underwriters for fraud triggered a final wave of selling interest that left the major indices near their lows of the session when the closing bell rang.
Every sector ended the day with a loss, although the materials sector (-0.2%) held up the best, aided in part by strength in certain gold stocks like Newmont Mining (NEM 53.26, +0.29) which followed reports of a shutdown of some South African mines due to a power shortage. Gold futures closed the week up 0.9% at a new high of $919.10 per troy ounce.
Weakness in the stock market once again benefited the Treasury market. The 10-year note jumped more than a point and its yield fell back to 3.56%.DJ30 -171.44 NASDAQ -34.72 NQ100 -2.1% R2K -0.6% SP400 -0.9% SP500 -21.46 NASDAQ Dec/Adv/Vol 1611/1394/2.64 bln NYSE Dec/Adv/Vol 1807/1365/1.88 bln
3:30 pm : The major indices pare a portion of their losses in a broad-based move. The stock market is now trading at its best level since 1:00 ET. It has been a volatile week of trading, although the S&P is set end the week near the unchanged mark.
The following is the best and worst performing industry groups of the week as we head into a final half hour of trading. Best: 1. Homebuilding (+30.9%) 2. Coal & Consumable Fuels (+17.1%) 3. Apparel & Accessories (+16.8%). Worst: 1. Wireless services (-14.3%) 2. Health Care Services (-9.7%) 3. Managed Healthcare (-8.6%)DJ30 -114.08 NASDAQ -21.79 SP500 -15.01 NASDAQ Dec/Adv/Vol 1716/1279/2.13 bln NYSE Dec/Adv/Vol 1870/1270/1.40 bln
3:00 pm : The major indices are trading near their session lows. Buyers remain on the sidelines after being disappointed that the stock market was unable to hold onto its opening gains. At current levels, the S&P and Nasdaq are set to end the week with a modest loss, while the Dow is set to end slightly higher.
There have been quite a few headlines crossing the wires regarding bond insurers. Standard & Poor's analysts said bond insurers must resolve business viability and other issues in order to retain their "AAA" ratings, according to Reuters. Reuters also reports that a bond insurers group said the industry is "financially strong" and is intent on defending its top credit ratings.DJ30 -159.16 NASDAQ -29.13 SP500 -20.01 NASDAQ Dec/Adv/Vol 1583/1388/1.99 bln NYSE Dec/Adv/Vol 1818/1318/1.27 bln
2:35 pm : The stock market is off its worst level, but continues to trade with a substantial loss.
Barclays Capital said banks may need to raise another $143 billion in capital if bond insurers get their credit ratings cut, according to Bloomberg.com. The article states banks have already raised $72 billion. If bond insurers get their ratings cut, it will lower the value of the $2.4 trillion in bonds they insure. Bond insurer Ambac (ABK 11.61, +0.28) is posting a slight gain on reports that it may be bought by vulture fund investor Wilbur Ross.
Merck (MRK 47.41, -2.15) and Schering-Plough (SGP 18.53, -1.64) just came under selling pressure after the FDA said the Vytorin study will take six months to review.DJ30 -133.80 NASDAQ -21.43 SP500 -17.56 NASDAQ Dec/Adv/Vol 1501/1426/1.85 bln NYSE Dec/Adv/Vol 1808/1328/1.18 bln
2:00 pm : The stock market comes under a fresh wave of selling pressure, sending it to new intraday lows. Meanwhile, Treasuries contine to rally as stocks weaken. The 10-year note is up 32 ticks, pushing its yield down to 3.58%.
All sectors are trading in the red. The financial sector (-2.7%) has extended its losses. Consumer discretionary (-1.9%) is the second worst perform sector.
Tech (-1.5%) is also posting a large loss as Apple (AAPL 131.40, -4.20) again comes under selling pressure. The stock is down 34% in 2008 compared to the tech sector's 14% decline.DJ30 -145.99 NASDAQ -26.67 SP500 -19.48 NASDAQ Dec/Adv/Vol 1509/1417/1.67 bln NYSE Dec/Adv/Vol 1619/1489/1.04 bln
1:30 pm : Stocks are trading near their recently reached session lows. The materials sector (+0.1%) has recovered into the green, although it remains well off its session high.
Financials have been hit the hardest, now down 1.9%. 18 of its 19 industry groups are lower. Thrifts & mortgages is the main laggard with a 4.2% loss. Investment banks & brokerages comes in as the second worst-performing group with a 3% loss. Residential REITs are managing to hold onto a 1.4% gain.DJ30 -107.11 NASDAQ -13.79 SP500 -13.70 NASDAQ Dec/Adv/Vol 1251/1648/1.53 bln NYSE Dec/Adv/Vol 1548/1532/951
1:00 pm : The major indices fall to fresh lows. All ten of the sectors are now in negative territory. In the past half-hour, Standard and Poor's lowered its ratings on 93 classes of mortgage pass-through certificates from 25 different U.S. subprime residential mortgage-backed securities transactions from nine issuers.
Meanwhile, disappointment that Microsoft (MSFT 33.21, -0.04) has slipped into negative territory is adding to the selling pressure.DJ30 -92.75 NASDAQ -9.98 SP500 -11.92 NASDAQ Dec/Adv/Vol 1094/1790/1.38 bln NYSE Dec/Adv/Vol 1143/1923/843 mln
12:35 pm : Stocks are fluctuating around the unchanged mark. The materials sector (+1.1%) continues to provide leadership.
Despite the market's decline, market breadth remains positive due to the outperformance of small-cap and mid-cap stocks. The Russell 2000 Index is up 1.1% and the S&P 400 Mid-Cap Index is up 0.5%. Advancers outpace decliners by 9-to-5 on the NYSE and by 8-to-5 on the Nasdaq.DJ30 -22.60 NASDAQ +6.05 SP500 -3.29 NASDAQ Dec/Adv/Vol 1053/1761/1.21 bln NYSE Dec/Adv/Vol 1174/1884/738 mln
12:00 pm : Stocks opened with significant gains, lifted by strong earnings and outlook from a tech giant and a report that a struggling bond insurer may be acquired. The stock market then drifted lower as investors remain uneasy and traders take some profits. At midday, stocks are off their lows as they trade at the unchanged mark.
Microsoft (MSFT +33.51, +0.26) fell off its highs and is now only posting a small gain despite the company's strong earnings report. Microsoft reported a second quarter net income of $0.50 per share, 92% higher than its $0.26 per share earnings in the year ago period. The company's results also topped the consensus estimate that called for a profit of $0.46 per share. Microsoft raised its outlook for the full year, estimating earnings of $1.85 to $1.88 per share, beating analysts' forecast of $1.81 per share.
There were a large number of companies that reported earnings, and most were better than expected. Dow components Honeywell (HON 59.55, +3.35) and Caterpillar (CAT 66.44, +1.20) are standouts after investors were pleased with their in-line earnings reports.
The Evening Standard reported that billionaire vulture fund investor Wilbur Ross is in talks to take over bond insurer Ambac (ABK 12.00, +0.67). Its stock is off its highs, but is managing to post a gain while other financials (-0.8%) struggle this session.
There was not a specific catalyst to account for the stock market's decline. Profit taking is certainly playing a role, as traders trim positions after the market's 7.8% surge from Wednesday's low to this session's high.
The market turned south as CNBC reported that Goldman Sachs (GS 196.47, -2.38) is cutting 5% of its workforce. Goldman Sachs quickly refuted the report, saying it is cutting the bottom 5% of performers, as it always does during its annual review. There are also rumors that European banks may be facing further write-downs and that a hedge fund is liquidating its assets.
Six of the ten sectors are higher, led by a 1.2% gain in materials. Financials are the main laggard with a 0.8% decline. DJ30 +6.10 NASDAQ +8.89 SP500 +0.19 NASDAQ Dec/Adv/Vol 1061/1736/1.14 bln NYSE Dec/Adv/Vol 1140/1892/693 mln
11:30 am : Stocks remain in negative territory. The Dow has dropped to fresh session lows. The market has had wild swings of late, as investors remain nervous. Treasury bonds have rallied as stocks decline in a flight-to-quality bid.
There does not appear to a specific catalyst for the stock market's recent downturn, but several factors may be contributing. 1) The reports of Goldman Sachs (GS 195.07, -3.78) job cuts may have unnerved the market even though the company said it was a "misrepresentation." 2) There is talk that another big European bank may face another write-down 3) There is talk that a hedge fund is liquating. 4) Traders are participating in some profit taking after the S&P's impressive 7.8% surge from Wednesday's low to this session's opening high.DJ30 -46.33 NASDAQ -1.64 SP500 -5.60 NASDAQ Dec/Adv/Vol 1096/1626/940 mln NYSE Dec/Adv/Vol 1205/1803/556 mln
11:00 am : Stocks fall into the red, led by financials, as CNBC reports that Goldman Sachs (GS 195.23, -3.62) is laying off 5% of its workforce. Stocks then recovery some after Goldman Sachs told CNBC the story is a "misrepresentation." They are laying off the bottom 5% of performers as part of their regular annual review process. Stocks have since crossed back into negative territory led by a 1.1% drop in financials.
Goldman Sachs has been able to navigate through the subprime turmoil relatively unscathed. The market's negative response showed investor fear that if Goldman needed to cut jobs much worse was to come from firms that have been hit hard such as Citigroup (C 29.96, -0.37) and Merrill Lynch (MER 56.66, -0.79).
Meanwhile, Fannie Mae (FNM 32.75, -1.44) and Freddie Mac (FRE 31.02, -0.98) fall to session lows as Reuters reports that Fannie's mortgage delinquencies rose to 0.90% in November from 0.83% in October.DJ30 -27.88 NASDAQ +2.16 SP500 -3.17 NASDAQ Dec/Adv/Vol 1056/1629/733 mln NYSE Dec/Adv/Vol 1029/1954/428 mln
10:30 am : The stock market drops to its lowest levels of the session, but continues to post a modest gain. There has been notable selling interest within the tech sector (+0.5%), which was up as high as 1.9%. There has been a drop in shares of Apple (AAPL 135.82) and Intel (INTC 20.67, -0.02) after providing leadership at the open.
Microsoft (MSFT 33.98, +0.73) is off its opening high, but continues to post a solid gain in the wake of its earnings report. Microsoft reported a second quarter net income of $0.50 per share, 92% higher than its $0.26 per share earnings in the year ago period. The company's results also topped the consensus estimate that called for a profit of $0.46 per share. Microsoft raised its outlook for the full year, estimating earnings of $1.85 to $1.88 per share, beating analysts' forecast of $1.81 per share.DJ30 +44.14 NASDAQ +20.04 SP500 +7.24 NASDAQ Dec/Adv/Vol 849/1731/480 mln NYSE Dec/Adv/Vol 668/2162/206 mln
10:00 am : Stocks give up a portion of their opening gains as the financial sector (+0.4%) slips off its highs. The sector managed to advance yesterday, but underperformed the stock market.
Nine sectors are trading higher, led by the materials (+2.1%) and energy (+1.4%) sectors. Consumer staples (-0.03%) is in the red, but is basically flat.DJ30 +63.57 NASDAQ +27.28 SP500 +9.84 NASDAQ Dec/Adv/Vol 488/1862/177 mln
09:40 am : Stocks start on a high note, with the Nasdaq set to outperform for the second straight day. The buying interest is being fueled by a strong earnings report and outlook from Microsoft (MSFT) and an Evening Standard report that billionaire vulture fund investor Wilbur Ross is in talks to take over bond insurer Ambac (ABK). Since yesterday's close the majority of earnings reports have been better than expected.
There are no economic reports or scheduled Fed speakers this session.
DJ30 +86.00 NASDAQ +40.56 SP500 +14.78
09:16 am : S&P futures vs fair value: +11.5. Nasdaq futures vs fair value: +33.5.
09:00 am : S&P futures vs fair value: +11.0. Nasdaq futures vs fair value: +34.0. Futures gain
some ground and point to a strong start. In commodity trading, gold hit an all-time high of $924.30 per ounce in overnight trade on news that companies stopped mining in South Africa due to power outage concerns. Crude oil is up 1.2% to $90.50 per barrel.
08:31 am : S&P futures vs fair value: +7.6. Nasdaq futures vs fair value: +26.8. Stock futures continue to point to a higher start. The majority of earnings reports from last night and this morning have been better than or inline with expectations. There are no economic releases or Federal Reserve speakers today.
08:00 am : S&P futures vs fair value: +8.1. Nasdaq futures vs fair value: +24.0. Futures point to a higher start, with the Nasdaq set to outperform. A strong earnings report and outlook from Microsoft (MSFT) is the main catalyst for the buying interest. Also lending support is a report that billionaire investor Wilbur Ross is in talks to take over struggling bond insurer Ambac (ABK). In overseas markets, Hong Kong’s Hang Seng closed up 6.7% and France’s CAC 40 and Germany’s DAX are currently up more than 1%.
06:23 am : S&P futures vs fair value: +6.0. Nasdaq futures vs fair value: +23.0.
06:23 am : FTSE...5927.00...+51.20...+0.9%. DAX...6915.09...+94.02...+1.4%.
06:23 am : Nikkei...13629.16...+536.38...+4.1%. Hang Seng...25122.37...+1583.10...+6.7%.
The market chewed up the report, liking the taste of it in early trading, and then promptly spit it back out, hitting both Microsoft and the broader averages with losses to close a remarkable week of trading.
The inability of Microsoft's stock to hold its opening gains, which were as much as 5.3%, spurred a disappointment trade that then took most stocks lower on the day. Dow components Caterpillar (CAT 65.93, +0.68) and Honeywell (HON 58.25, +2.05) managed to buck the trend after sharing reassuring earnings news.
Selling efforts were compounded by renewed concerns surrounding the likelihood of further credit losses for the financial sector, worries that a rescue plan of some sort for the bond insurers was no sure thing, and rumors that a hedge fund was in trouble.
On top of that, Merck (MRK 47.79, -1.77) and fellow drug company Schering-Plough (SGP 19.02, -1.15) got hit on a seemingly benign announcement from the FDA that it is still awaiting more results on the study of the efficacy of their joint cholesterol drug, Vytorin, and that an eventual review could take up to six months. Both stocks made up some lost ground, but still finished lower and acted as a weight on the market.
Strikingly, the financial (-2.5%) and consumer discretionary (-2.0%) sectors, which were the leaders in the rebound off Wednesday's low, were the hardest hit areas Friday. Although both areas were prime for some profit-taking, their weakness Friday is apt to stir concerns for some participants that the rally try this week will be short-lived.
A late-day report that New York officials sued Countrywide's (CFC 6.02, -0.09) underwriters for fraud triggered a final wave of selling interest that left the major indices near their lows of the session when the closing bell rang.
Every sector ended the day with a loss, although the materials sector (-0.2%) held up the best, aided in part by strength in certain gold stocks like Newmont Mining (NEM 53.26, +0.29) which followed reports of a shutdown of some South African mines due to a power shortage. Gold futures closed the week up 0.9% at a new high of $919.10 per troy ounce.
Weakness in the stock market once again benefited the Treasury market. The 10-year note jumped more than a point and its yield fell back to 3.56%.DJ30 -171.44 NASDAQ -34.72 NQ100 -2.1% R2K -0.6% SP400 -0.9% SP500 -21.46 NASDAQ Dec/Adv/Vol 1611/1394/2.64 bln NYSE Dec/Adv/Vol 1807/1365/1.88 bln
3:30 pm : The major indices pare a portion of their losses in a broad-based move. The stock market is now trading at its best level since 1:00 ET. It has been a volatile week of trading, although the S&P is set end the week near the unchanged mark.
The following is the best and worst performing industry groups of the week as we head into a final half hour of trading. Best: 1. Homebuilding (+30.9%) 2. Coal & Consumable Fuels (+17.1%) 3. Apparel & Accessories (+16.8%). Worst: 1. Wireless services (-14.3%) 2. Health Care Services (-9.7%) 3. Managed Healthcare (-8.6%)DJ30 -114.08 NASDAQ -21.79 SP500 -15.01 NASDAQ Dec/Adv/Vol 1716/1279/2.13 bln NYSE Dec/Adv/Vol 1870/1270/1.40 bln
3:00 pm : The major indices are trading near their session lows. Buyers remain on the sidelines after being disappointed that the stock market was unable to hold onto its opening gains. At current levels, the S&P and Nasdaq are set to end the week with a modest loss, while the Dow is set to end slightly higher.
There have been quite a few headlines crossing the wires regarding bond insurers. Standard & Poor's analysts said bond insurers must resolve business viability and other issues in order to retain their "AAA" ratings, according to Reuters. Reuters also reports that a bond insurers group said the industry is "financially strong" and is intent on defending its top credit ratings.DJ30 -159.16 NASDAQ -29.13 SP500 -20.01 NASDAQ Dec/Adv/Vol 1583/1388/1.99 bln NYSE Dec/Adv/Vol 1818/1318/1.27 bln
2:35 pm : The stock market is off its worst level, but continues to trade with a substantial loss.
Barclays Capital said banks may need to raise another $143 billion in capital if bond insurers get their credit ratings cut, according to Bloomberg.com. The article states banks have already raised $72 billion. If bond insurers get their ratings cut, it will lower the value of the $2.4 trillion in bonds they insure. Bond insurer Ambac (ABK 11.61, +0.28) is posting a slight gain on reports that it may be bought by vulture fund investor Wilbur Ross.
Merck (MRK 47.41, -2.15) and Schering-Plough (SGP 18.53, -1.64) just came under selling pressure after the FDA said the Vytorin study will take six months to review.DJ30 -133.80 NASDAQ -21.43 SP500 -17.56 NASDAQ Dec/Adv/Vol 1501/1426/1.85 bln NYSE Dec/Adv/Vol 1808/1328/1.18 bln
2:00 pm : The stock market comes under a fresh wave of selling pressure, sending it to new intraday lows. Meanwhile, Treasuries contine to rally as stocks weaken. The 10-year note is up 32 ticks, pushing its yield down to 3.58%.
All sectors are trading in the red. The financial sector (-2.7%) has extended its losses. Consumer discretionary (-1.9%) is the second worst perform sector.
Tech (-1.5%) is also posting a large loss as Apple (AAPL 131.40, -4.20) again comes under selling pressure. The stock is down 34% in 2008 compared to the tech sector's 14% decline.DJ30 -145.99 NASDAQ -26.67 SP500 -19.48 NASDAQ Dec/Adv/Vol 1509/1417/1.67 bln NYSE Dec/Adv/Vol 1619/1489/1.04 bln
1:30 pm : Stocks are trading near their recently reached session lows. The materials sector (+0.1%) has recovered into the green, although it remains well off its session high.
Financials have been hit the hardest, now down 1.9%. 18 of its 19 industry groups are lower. Thrifts & mortgages is the main laggard with a 4.2% loss. Investment banks & brokerages comes in as the second worst-performing group with a 3% loss. Residential REITs are managing to hold onto a 1.4% gain.DJ30 -107.11 NASDAQ -13.79 SP500 -13.70 NASDAQ Dec/Adv/Vol 1251/1648/1.53 bln NYSE Dec/Adv/Vol 1548/1532/951
1:00 pm : The major indices fall to fresh lows. All ten of the sectors are now in negative territory. In the past half-hour, Standard and Poor's lowered its ratings on 93 classes of mortgage pass-through certificates from 25 different U.S. subprime residential mortgage-backed securities transactions from nine issuers.
Meanwhile, disappointment that Microsoft (MSFT 33.21, -0.04) has slipped into negative territory is adding to the selling pressure.DJ30 -92.75 NASDAQ -9.98 SP500 -11.92 NASDAQ Dec/Adv/Vol 1094/1790/1.38 bln NYSE Dec/Adv/Vol 1143/1923/843 mln
12:35 pm : Stocks are fluctuating around the unchanged mark. The materials sector (+1.1%) continues to provide leadership.
Despite the market's decline, market breadth remains positive due to the outperformance of small-cap and mid-cap stocks. The Russell 2000 Index is up 1.1% and the S&P 400 Mid-Cap Index is up 0.5%. Advancers outpace decliners by 9-to-5 on the NYSE and by 8-to-5 on the Nasdaq.DJ30 -22.60 NASDAQ +6.05 SP500 -3.29 NASDAQ Dec/Adv/Vol 1053/1761/1.21 bln NYSE Dec/Adv/Vol 1174/1884/738 mln
12:00 pm : Stocks opened with significant gains, lifted by strong earnings and outlook from a tech giant and a report that a struggling bond insurer may be acquired. The stock market then drifted lower as investors remain uneasy and traders take some profits. At midday, stocks are off their lows as they trade at the unchanged mark.
Microsoft (MSFT +33.51, +0.26) fell off its highs and is now only posting a small gain despite the company's strong earnings report. Microsoft reported a second quarter net income of $0.50 per share, 92% higher than its $0.26 per share earnings in the year ago period. The company's results also topped the consensus estimate that called for a profit of $0.46 per share. Microsoft raised its outlook for the full year, estimating earnings of $1.85 to $1.88 per share, beating analysts' forecast of $1.81 per share.
There were a large number of companies that reported earnings, and most were better than expected. Dow components Honeywell (HON 59.55, +3.35) and Caterpillar (CAT 66.44, +1.20) are standouts after investors were pleased with their in-line earnings reports.
The Evening Standard reported that billionaire vulture fund investor Wilbur Ross is in talks to take over bond insurer Ambac (ABK 12.00, +0.67). Its stock is off its highs, but is managing to post a gain while other financials (-0.8%) struggle this session.
There was not a specific catalyst to account for the stock market's decline. Profit taking is certainly playing a role, as traders trim positions after the market's 7.8% surge from Wednesday's low to this session's high.
The market turned south as CNBC reported that Goldman Sachs (GS 196.47, -2.38) is cutting 5% of its workforce. Goldman Sachs quickly refuted the report, saying it is cutting the bottom 5% of performers, as it always does during its annual review. There are also rumors that European banks may be facing further write-downs and that a hedge fund is liquidating its assets.
Six of the ten sectors are higher, led by a 1.2% gain in materials. Financials are the main laggard with a 0.8% decline. DJ30 +6.10 NASDAQ +8.89 SP500 +0.19 NASDAQ Dec/Adv/Vol 1061/1736/1.14 bln NYSE Dec/Adv/Vol 1140/1892/693 mln
11:30 am : Stocks remain in negative territory. The Dow has dropped to fresh session lows. The market has had wild swings of late, as investors remain nervous. Treasury bonds have rallied as stocks decline in a flight-to-quality bid.
There does not appear to a specific catalyst for the stock market's recent downturn, but several factors may be contributing. 1) The reports of Goldman Sachs (GS 195.07, -3.78) job cuts may have unnerved the market even though the company said it was a "misrepresentation." 2) There is talk that another big European bank may face another write-down 3) There is talk that a hedge fund is liquating. 4) Traders are participating in some profit taking after the S&P's impressive 7.8% surge from Wednesday's low to this session's opening high.DJ30 -46.33 NASDAQ -1.64 SP500 -5.60 NASDAQ Dec/Adv/Vol 1096/1626/940 mln NYSE Dec/Adv/Vol 1205/1803/556 mln
11:00 am : Stocks fall into the red, led by financials, as CNBC reports that Goldman Sachs (GS 195.23, -3.62) is laying off 5% of its workforce. Stocks then recovery some after Goldman Sachs told CNBC the story is a "misrepresentation." They are laying off the bottom 5% of performers as part of their regular annual review process. Stocks have since crossed back into negative territory led by a 1.1% drop in financials.
Goldman Sachs has been able to navigate through the subprime turmoil relatively unscathed. The market's negative response showed investor fear that if Goldman needed to cut jobs much worse was to come from firms that have been hit hard such as Citigroup (C 29.96, -0.37) and Merrill Lynch (MER 56.66, -0.79).
Meanwhile, Fannie Mae (FNM 32.75, -1.44) and Freddie Mac (FRE 31.02, -0.98) fall to session lows as Reuters reports that Fannie's mortgage delinquencies rose to 0.90% in November from 0.83% in October.DJ30 -27.88 NASDAQ +2.16 SP500 -3.17 NASDAQ Dec/Adv/Vol 1056/1629/733 mln NYSE Dec/Adv/Vol 1029/1954/428 mln
10:30 am : The stock market drops to its lowest levels of the session, but continues to post a modest gain. There has been notable selling interest within the tech sector (+0.5%), which was up as high as 1.9%. There has been a drop in shares of Apple (AAPL 135.82) and Intel (INTC 20.67, -0.02) after providing leadership at the open.
Microsoft (MSFT 33.98, +0.73) is off its opening high, but continues to post a solid gain in the wake of its earnings report. Microsoft reported a second quarter net income of $0.50 per share, 92% higher than its $0.26 per share earnings in the year ago period. The company's results also topped the consensus estimate that called for a profit of $0.46 per share. Microsoft raised its outlook for the full year, estimating earnings of $1.85 to $1.88 per share, beating analysts' forecast of $1.81 per share.DJ30 +44.14 NASDAQ +20.04 SP500 +7.24 NASDAQ Dec/Adv/Vol 849/1731/480 mln NYSE Dec/Adv/Vol 668/2162/206 mln
10:00 am : Stocks give up a portion of their opening gains as the financial sector (+0.4%) slips off its highs. The sector managed to advance yesterday, but underperformed the stock market.
Nine sectors are trading higher, led by the materials (+2.1%) and energy (+1.4%) sectors. Consumer staples (-0.03%) is in the red, but is basically flat.DJ30 +63.57 NASDAQ +27.28 SP500 +9.84 NASDAQ Dec/Adv/Vol 488/1862/177 mln
09:40 am : Stocks start on a high note, with the Nasdaq set to outperform for the second straight day. The buying interest is being fueled by a strong earnings report and outlook from Microsoft (MSFT) and an Evening Standard report that billionaire vulture fund investor Wilbur Ross is in talks to take over bond insurer Ambac (ABK). Since yesterday's close the majority of earnings reports have been better than expected.
There are no economic reports or scheduled Fed speakers this session.
DJ30 +86.00 NASDAQ +40.56 SP500 +14.78
09:16 am : S&P futures vs fair value: +11.5. Nasdaq futures vs fair value: +33.5.
09:00 am : S&P futures vs fair value: +11.0. Nasdaq futures vs fair value: +34.0. Futures gain
some ground and point to a strong start. In commodity trading, gold hit an all-time high of $924.30 per ounce in overnight trade on news that companies stopped mining in South Africa due to power outage concerns. Crude oil is up 1.2% to $90.50 per barrel.
08:31 am : S&P futures vs fair value: +7.6. Nasdaq futures vs fair value: +26.8. Stock futures continue to point to a higher start. The majority of earnings reports from last night and this morning have been better than or inline with expectations. There are no economic releases or Federal Reserve speakers today.
08:00 am : S&P futures vs fair value: +8.1. Nasdaq futures vs fair value: +24.0. Futures point to a higher start, with the Nasdaq set to outperform. A strong earnings report and outlook from Microsoft (MSFT) is the main catalyst for the buying interest. Also lending support is a report that billionaire investor Wilbur Ross is in talks to take over struggling bond insurer Ambac (ABK). In overseas markets, Hong Kong’s Hang Seng closed up 6.7% and France’s CAC 40 and Germany’s DAX are currently up more than 1%.
06:23 am : S&P futures vs fair value: +6.0. Nasdaq futures vs fair value: +23.0.
06:23 am : FTSE...5927.00...+51.20...+0.9%. DAX...6915.09...+94.02...+1.4%.
06:23 am : Nikkei...13629.16...+536.38...+4.1%. Hang Seng...25122.37...+1583.10...+6.7%.
Stocks Fall, Giving Up Early Gains
Wall Street ended a tumultuous week with a sharp decline Friday, backtracking following two days of stunning gains as investors turned cautious and cashed in some of their winnings. The Dow Jones industrial average still managed to record its first weekly advance of 2008, even as it fell more than 170 points on the day.
The week, which started with a 465-point drop in the Dow soon after the market opened Tuesday, showed that the stock market is still fractious but may be going through healthy process of trying to establish a bottom following weeks of sharp declines.
Investors had an initial burst of enthusiasm Friday, sending each of the major indexes up more than 1 percent, after upbeat profit reports from big names like Microsoft Corp. and word of a possible buyout of a trouble bond insurer. But the advance proved short-lived and the eventual decline wasn't surprising given that investors putting down bets ahead of the weekend were coming off two days of big gains -- including 400 points in the Dow.
"People may be looking to take some profits off the table in this volatile market. And there's a lot of activity that's coming up next week," Scott Fullman, director of investment strategy for I. A. Englander & Co., said during the day's back-and-forth trading.
President Bush is scheduled to deliver his State of the Union address Monday. Meanwhile, the Federal Reserve is expected to hold its first regularly scheduled meeting of the year on Tuesday and Wednesday, and then the Labor Department will weigh in on the state of the job market on Friday.
Despite the pullback, Wall Street's tone Friday stood in sharp contrast to the intensely dour mood that hung over the market when the week began. While U.S. markets were closed Monday for Martin Luther King Jr. Day, stocks in Asia and Europe plunged amid fears of a precipitous slowdown in the U.S. economy. To stave off a similar sell-off in the U.S. over recession fears, the Fed stepped in before the opening bell Tuesday with an emergency interest rate cut.
The central bank's move to lower rates by a big 0.75 percentage point to 3.5 percent helped shore up investors' confidence and led stocks to end the day well off their lows, although they still closed down. A day later, on Tuesday, Wall Street had an astonishing about-face, with the Dow swinging more than 630 points and turning a sharp sell-off into huge gains. Stocks then extended their advance Thursday.
The Fed is widely expected to cut rates again at next week's meeting; many analysts expect a half-point cut.
With Friday's decline, the market might well be following the pattern of past corrections, when huge gains were often followed by some retrenchment. Many market watchers consider such backing and filling a sign of health. However, with much economic uncertainty ahead, investors may need months before they can decide whether to take the market solidly higher.
The Dow fell 171.44, or 1.38 percent, to 12,207.17. The Dow had been up more than 100 points in the early going.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 21.46, or 1.59 percent, to 1,330.61. The technology-heavy Nasdaq composite index fell 34.72, or 1.47 percent, to 2,326.20.
Despite the huge moves seen during the week, stocks finished not far beyond where they began, with the Dow adding 108 points, or 0.89 percent. The S&P 500 ended the week up 0.41 percent and the Nasdaq lost 0.59 percent.
Declining issues outpaced advancers by about 3 to 2 Friday on the New York Stock Exchange. Consolidated volume came to 4.78 billion shares, down from 5.48 billion shares traded Thursday.
Government bond prices jumped as stocks declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.56 percent from 3.71 percent late Thursday.
The dollar was mixed against other major currencies, while gold prices rose. Light, sweet crude oil advanced $1.30 to settle at $90.71 a barrel on the New York Mercantile Exchange.
Investors are looking for clues about whether the market is due to add to its gains after a brief hiatus or whether another pullback is in the offing. Despite the increases logged this week, stocks are still down sharply in the new year.
"The market is extremely sensitive to any news that's out there. A year ago, it brushed off a lot of stuff. Now, it's just the opposite, and we're seeing reactions nearly immediately when things come out," Fullman said.
Despite giving up the early gains, Wall Street still appeared pleased by reports from U.K. newspapers that billionaire Wilbur Ross was in talks to acquire bond insurer Ambac Financial Group Inc. Financial woes at many U.S. bond insurers have caused headaches in recent weeks for investors worldwide who have worried that tightness in the credit markets could worsen should one of the companies buckle under an inability to draw new business.
Ambac rose 21 cents to $11.54.
Word of Ross' interest follows comments this week by New York State regulators that indicated they would consider lending support to shore up the struggling bond insurance industry. While uncertainty remains over what role regulators might play, the comments initially helped reassure Wall Street and made room for stocks to rally.
Other corporate news appeared to offer investors mixed readings on the economy.
Microsoft finished down 31 cents at $32.94 after spending much of the session higher. The company raised its forecast for the rest of its fiscal year, which ends in June, and said its quarterly earnings jumped 79 percent. Microsoft cited the growing importance of its sales outside the U.S.
The Russell 2000 index of smaller companies fell 4.12, or 0.59 percent, to 688.60.
Overseas, Britain's FTSE 100 closed down 0.12 percent, Germany's DAX index finished off 0.06 percent, and France's CAC-40 fell 0.76 percent. Japan's Nikkei stock average jumped 4.10 percent after falling sharply earlier in the week. Hong Kong's Hang Seng index likewise surged 6.73 percent by the close.
The Dow Jones industrial average ended the week up 107.87, or 0.89 percent, at 12,207.17. The Standard & Poor's 500 index finished up 5.42, or 0.41 percent, at 1,330.61. The Nasdaq composite index ended down 13.82, or 0.59 percent, at 2,326.20.
The Russell 2000 index finished the week up 15.42, or 2.29 percent, at 688.60.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 13,423.62, up 115.17 points, or 0.87 percent, for the week. A year ago, the index was at 14,358.67.
The week, which started with a 465-point drop in the Dow soon after the market opened Tuesday, showed that the stock market is still fractious but may be going through healthy process of trying to establish a bottom following weeks of sharp declines.
Investors had an initial burst of enthusiasm Friday, sending each of the major indexes up more than 1 percent, after upbeat profit reports from big names like Microsoft Corp. and word of a possible buyout of a trouble bond insurer. But the advance proved short-lived and the eventual decline wasn't surprising given that investors putting down bets ahead of the weekend were coming off two days of big gains -- including 400 points in the Dow.
"People may be looking to take some profits off the table in this volatile market. And there's a lot of activity that's coming up next week," Scott Fullman, director of investment strategy for I. A. Englander & Co., said during the day's back-and-forth trading.
President Bush is scheduled to deliver his State of the Union address Monday. Meanwhile, the Federal Reserve is expected to hold its first regularly scheduled meeting of the year on Tuesday and Wednesday, and then the Labor Department will weigh in on the state of the job market on Friday.
Despite the pullback, Wall Street's tone Friday stood in sharp contrast to the intensely dour mood that hung over the market when the week began. While U.S. markets were closed Monday for Martin Luther King Jr. Day, stocks in Asia and Europe plunged amid fears of a precipitous slowdown in the U.S. economy. To stave off a similar sell-off in the U.S. over recession fears, the Fed stepped in before the opening bell Tuesday with an emergency interest rate cut.
The central bank's move to lower rates by a big 0.75 percentage point to 3.5 percent helped shore up investors' confidence and led stocks to end the day well off their lows, although they still closed down. A day later, on Tuesday, Wall Street had an astonishing about-face, with the Dow swinging more than 630 points and turning a sharp sell-off into huge gains. Stocks then extended their advance Thursday.
The Fed is widely expected to cut rates again at next week's meeting; many analysts expect a half-point cut.
With Friday's decline, the market might well be following the pattern of past corrections, when huge gains were often followed by some retrenchment. Many market watchers consider such backing and filling a sign of health. However, with much economic uncertainty ahead, investors may need months before they can decide whether to take the market solidly higher.
The Dow fell 171.44, or 1.38 percent, to 12,207.17. The Dow had been up more than 100 points in the early going.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 21.46, or 1.59 percent, to 1,330.61. The technology-heavy Nasdaq composite index fell 34.72, or 1.47 percent, to 2,326.20.
Despite the huge moves seen during the week, stocks finished not far beyond where they began, with the Dow adding 108 points, or 0.89 percent. The S&P 500 ended the week up 0.41 percent and the Nasdaq lost 0.59 percent.
Declining issues outpaced advancers by about 3 to 2 Friday on the New York Stock Exchange. Consolidated volume came to 4.78 billion shares, down from 5.48 billion shares traded Thursday.
Government bond prices jumped as stocks declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.56 percent from 3.71 percent late Thursday.
The dollar was mixed against other major currencies, while gold prices rose. Light, sweet crude oil advanced $1.30 to settle at $90.71 a barrel on the New York Mercantile Exchange.
Investors are looking for clues about whether the market is due to add to its gains after a brief hiatus or whether another pullback is in the offing. Despite the increases logged this week, stocks are still down sharply in the new year.
"The market is extremely sensitive to any news that's out there. A year ago, it brushed off a lot of stuff. Now, it's just the opposite, and we're seeing reactions nearly immediately when things come out," Fullman said.
Despite giving up the early gains, Wall Street still appeared pleased by reports from U.K. newspapers that billionaire Wilbur Ross was in talks to acquire bond insurer Ambac Financial Group Inc. Financial woes at many U.S. bond insurers have caused headaches in recent weeks for investors worldwide who have worried that tightness in the credit markets could worsen should one of the companies buckle under an inability to draw new business.
Ambac rose 21 cents to $11.54.
Word of Ross' interest follows comments this week by New York State regulators that indicated they would consider lending support to shore up the struggling bond insurance industry. While uncertainty remains over what role regulators might play, the comments initially helped reassure Wall Street and made room for stocks to rally.
Other corporate news appeared to offer investors mixed readings on the economy.
Microsoft finished down 31 cents at $32.94 after spending much of the session higher. The company raised its forecast for the rest of its fiscal year, which ends in June, and said its quarterly earnings jumped 79 percent. Microsoft cited the growing importance of its sales outside the U.S.
The Russell 2000 index of smaller companies fell 4.12, or 0.59 percent, to 688.60.
Overseas, Britain's FTSE 100 closed down 0.12 percent, Germany's DAX index finished off 0.06 percent, and France's CAC-40 fell 0.76 percent. Japan's Nikkei stock average jumped 4.10 percent after falling sharply earlier in the week. Hong Kong's Hang Seng index likewise surged 6.73 percent by the close.
The Dow Jones industrial average ended the week up 107.87, or 0.89 percent, at 12,207.17. The Standard & Poor's 500 index finished up 5.42, or 0.41 percent, at 1,330.61. The Nasdaq composite index ended down 13.82, or 0.59 percent, at 2,326.20.
The Russell 2000 index finished the week up 15.42, or 2.29 percent, at 688.60.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 13,423.62, up 115.17 points, or 0.87 percent, for the week. A year ago, the index was at 14,358.67.
Thursday, January 24, 2008
Stocks Extend Their Gains Following Employment Report, Hopes for Stimulus Plan
Wall Street scored its second straight big advance Thursday after economic figures suggested the job market is holding up and as lawmakers agreed on measures that could ease concerns about consumer spending. The Dow Jones industrials rose more than 100 points, bringing its two-day gain to more than 400.
While stocks fluctuated throughout the session, trading was decidedly more calm than on Wednesday, when Wall Street executed a stunning turnaround that transformed a sharp sell-off into big gains for stocks. Thursday's rise was notable, however, as investors will often move in a day after a rally or plunge to take profits or scoop up bargains. That the buying largely continued was a positive sign, observers said.
Investors were clearly interested in buying, but despite the size of the advance, there didn't appear to be much conviction to it -- the market is still searching for clues about the economy in hopes of determining whether it will soon pick up or will continue to slow and tip into recession.
In addition, the market wobbled during the session after Fitch Ratings lowered its rating on bond insurer Security Capital Assurance Ltd. Bond insurers have been hurt in the fallout from the mortgage and credit crises, and news of their problems has shaken the market.
But those seeking good news found some in a Labor Department report that said the number of people seeking unemployment benefits last week fell for a fourth straight week. Applications for benefits dropped 1,000 to 301,000, pushing claims down to the lowest level in four months.
Investors also appeared pleased by a widely anticipated agreement between congressional leaders and the White House on an economic stimulus package. The agreement calls for most tax filers to be given refunds of $600 to $1,200, and more if they have children.
Bill Dwyer, chief investment officer at MTB Investment Advisors in Baltimore, said Wall Street found some relief from word of the economic stimulus plan as well as the efforts of regulators to help bond insurers. He said the Federal Reserve's decision to lower interest rate this week could also help some struggling homeowners hold on to their properties. The efforts, he said, could ultimately help stave off recession.
"People have that 'R' word stuck on the front of their forehead. It's really just a dramatic slowing of growth. We may not have a recession," Dwyer said.
The Dow Jones industrial average rose 108.44, or 0.88 percent, to 12,378.61, following a nearly 300 point surge on Wednesday. The Dow has not finished higher for two straight sessions since Jan. 9-10.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 13.47, or 1.01 percent, to 1,352.07, and the Nasdaq composite index advanced 44.51, or 1.92 percent, to 2,360.92.
Advancing issues outnumbered decliners by 4 to 3 on the New York Stock Exchange. Consolidated volume came to 5.48 billion shares, down from 7.3 billion Wednesday.
The Dow on Wednesday swung 631.86 points from its low point to its high -- its largest single-day reversal in more than five years.
Stephen Carl, principal and head of equity trading at The Williams Capital Group, said Thursday's overall trading reflected a continuation of the bounce that first began on Tuesday, when the Fed lowered its federal funds rate by a steep 0.75 percentage point, or 75 basis points, to 3.5 percent.
He said investors were also encouraged that the government's rebate plan, while not perfect, appeared to be progressing. Still, despite some investors' mostly upbeat mood, uncertainty remained. The market's about-face Wednesday, while certainly a relief for many investors, illustrated the fractiousness that has settled into Wall Street in recent months.
"We still have a long way to go in getting the economy on track," Carl said. "Whether we dip into a recession or not, a lot of things need to be fleshed out in the markets."
Bond prices fell as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 percent from 3.55 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose
.
Light, sweet crude oil for March delivery rose $2.42 to settle at $89.30 a barrel on the New York Mercantile Exchange after the agreement on the economic stimulus plan. Traders wagered the plan to put money in consumers' pockets could increase demand for oil.
Some of Wall Street's most recent concerns relate to the downgrade from Security Capital and broader unease about the stability of bonds. However, investors also looked to New York state regulators in hopes they can hatch a plan to shore up the bond insurance industry. New York Insurance Superintendent Eric Dinallo said in a statement Thursday it likely will take time to draw up measures to help the industry.
After the Fitch downgrade, Security Capital fell $1.16, or 30.6 percent, to $2.63.
Beyond bond insurers, investors have been concerned about the health of corporate profits.
Microsoft Corp. rose more than 4 percent in after-market trading from its Thursday close of $33.25 following the release of its fiscal second-quarter earnings. The company posted a 79 percent jump in profit, surpassing Street expectations, thanks to strong sales of Windows-based personal computers.
The Russell 2000 index of smaller companies dipped 0.71, or 0.10 percent, to 692.72.
Overseas, Japan's Nikkei stock average closed up 2.06 percent and Hong Kong's Hang Seng index fell 2.29 percent. Britain's FTSE 100 finished ahead by 4.75 percent, Germany's DAX index surged 5.93 percent, and France's CAC-40 jumped 6.01 percent.
While stocks fluctuated throughout the session, trading was decidedly more calm than on Wednesday, when Wall Street executed a stunning turnaround that transformed a sharp sell-off into big gains for stocks. Thursday's rise was notable, however, as investors will often move in a day after a rally or plunge to take profits or scoop up bargains. That the buying largely continued was a positive sign, observers said.
Investors were clearly interested in buying, but despite the size of the advance, there didn't appear to be much conviction to it -- the market is still searching for clues about the economy in hopes of determining whether it will soon pick up or will continue to slow and tip into recession.
In addition, the market wobbled during the session after Fitch Ratings lowered its rating on bond insurer Security Capital Assurance Ltd. Bond insurers have been hurt in the fallout from the mortgage and credit crises, and news of their problems has shaken the market.
But those seeking good news found some in a Labor Department report that said the number of people seeking unemployment benefits last week fell for a fourth straight week. Applications for benefits dropped 1,000 to 301,000, pushing claims down to the lowest level in four months.
Investors also appeared pleased by a widely anticipated agreement between congressional leaders and the White House on an economic stimulus package. The agreement calls for most tax filers to be given refunds of $600 to $1,200, and more if they have children.
Bill Dwyer, chief investment officer at MTB Investment Advisors in Baltimore, said Wall Street found some relief from word of the economic stimulus plan as well as the efforts of regulators to help bond insurers. He said the Federal Reserve's decision to lower interest rate this week could also help some struggling homeowners hold on to their properties. The efforts, he said, could ultimately help stave off recession.
"People have that 'R' word stuck on the front of their forehead. It's really just a dramatic slowing of growth. We may not have a recession," Dwyer said.
The Dow Jones industrial average rose 108.44, or 0.88 percent, to 12,378.61, following a nearly 300 point surge on Wednesday. The Dow has not finished higher for two straight sessions since Jan. 9-10.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 13.47, or 1.01 percent, to 1,352.07, and the Nasdaq composite index advanced 44.51, or 1.92 percent, to 2,360.92.
Advancing issues outnumbered decliners by 4 to 3 on the New York Stock Exchange. Consolidated volume came to 5.48 billion shares, down from 7.3 billion Wednesday.
The Dow on Wednesday swung 631.86 points from its low point to its high -- its largest single-day reversal in more than five years.
Stephen Carl, principal and head of equity trading at The Williams Capital Group, said Thursday's overall trading reflected a continuation of the bounce that first began on Tuesday, when the Fed lowered its federal funds rate by a steep 0.75 percentage point, or 75 basis points, to 3.5 percent.
He said investors were also encouraged that the government's rebate plan, while not perfect, appeared to be progressing. Still, despite some investors' mostly upbeat mood, uncertainty remained. The market's about-face Wednesday, while certainly a relief for many investors, illustrated the fractiousness that has settled into Wall Street in recent months.
"We still have a long way to go in getting the economy on track," Carl said. "Whether we dip into a recession or not, a lot of things need to be fleshed out in the markets."
Bond prices fell as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 percent from 3.55 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose
.
Light, sweet crude oil for March delivery rose $2.42 to settle at $89.30 a barrel on the New York Mercantile Exchange after the agreement on the economic stimulus plan. Traders wagered the plan to put money in consumers' pockets could increase demand for oil.
Some of Wall Street's most recent concerns relate to the downgrade from Security Capital and broader unease about the stability of bonds. However, investors also looked to New York state regulators in hopes they can hatch a plan to shore up the bond insurance industry. New York Insurance Superintendent Eric Dinallo said in a statement Thursday it likely will take time to draw up measures to help the industry.
After the Fitch downgrade, Security Capital fell $1.16, or 30.6 percent, to $2.63.
Beyond bond insurers, investors have been concerned about the health of corporate profits.
Microsoft Corp. rose more than 4 percent in after-market trading from its Thursday close of $33.25 following the release of its fiscal second-quarter earnings. The company posted a 79 percent jump in profit, surpassing Street expectations, thanks to strong sales of Windows-based personal computers.
The Russell 2000 index of smaller companies dipped 0.71, or 0.10 percent, to 692.72.
Overseas, Japan's Nikkei stock average closed up 2.06 percent and Hong Kong's Hang Seng index fell 2.29 percent. Britain's FTSE 100 finished ahead by 4.75 percent, Germany's DAX index surged 5.93 percent, and France's CAC-40 jumped 6.01 percent.
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