Dow hits new high; Buffett likes banks

On a day when the Dow Jones industrials quietly hit a new high, Warren Buffett made news with disclosures he's become a fan of big banks.

The Oracle of Omaha's Berkshire Hathaway (BRK.A, news, msgs) disclosed a big stake in U.S. Bancorp (USB, news, msgs), the nation's sixth-largest bank, and a growing one in Wells Fargo (WFC, news, msgs).

Berkshire also reported reduced stakes in H&R Block (HRB, news, msgs) and Ameriprise Financial (AMP, news, msgs). News it has bought 1 million shares in health insurer UnitedHealth Group (UNH, news, msgs) sent that stock up nearly 4% to $53.61.

The Berkshire disclosures came as the Dow hit a record 12,765, a gain of 23 points, or 0.2%. The Standard & Poor's 500 Index jumped only 1.5 points to just under 1,457, and the Nasdaq Composite jumped 8.7 points, 0.4%, to 2,497.

U.S. Bancorp: A nice investment so far

Berkshire acquired a 1.3% stake in U.S. Bancorp that was worth $843.49 million as of Dec. 31 and boosted its stake in Wells Fargo to 6.5%, or 218.17 million shares, according to a filing with the U.S. Securities and Exchange Commission.

The filing showed that Berkshire had lowered its stake in H&R Block to 4.11 million shares by the end of 2006, down from 10.97 million shares Sept. 30. Berkshire decreased its stake in financial-services company Ameriprise to 8.27 million shares from 19.26 million shares over the same period.

Buffett started buying U.S. Bancorp shares in the first quarter of 2006 and has done fairly well so far. The stock was up 21.9% last year and is up slightly so far this year. His Wells Fargo stake is more problematic. The stock was up only 13% last year and 1.2% so far this year.

U.S. Bancorp was up 0.4% to $36.35 today. Wells Fargo finished unchanged at $36.01.

A modest rally after two big days

Investors largely seemed to be taking the day off today after two days of big gains, the second of which was set off by Federal Reserve Chairman Ben Bernanke's soothing comments to the Senate Banking Committee about the economy and inflation. Bernanke wrapped up his two-day testimony before Congress, this time before the House Financial Services Committee.

Bernanke was still calm and soothing, but he did pointedly say he would not hesitate to raise interest rates if inflation unexpectedly jumps.

Traders, meanwhile, were back to focusing on more mundane matters like commodity prices, interest rates, earnings and possible mergers.

Only 13 of the Dow stocks were higher, led by heavy equipment giant Caterpillar (CAT, news, msgs), up 2.2% to $67.72. The Dow's biggest decliner was General Electric (GE, news, msgs), but it was down only a modest 0.9% to $36.14. About 270 stocks in the S&P 500 were higher. Gainers were slightly ahead of decliners on the New York Stock Exchange but trailing decliners on Nasdaq.

Ballmer guidance knocks Microsoft shares down 1%

In after-hours trading, shares of Microsoft (MSFT, news, msgs) were down 1% to $29.13 after CEO Steve Ballmer told analysts in New York that some estimates of sales for Microsoft's Windows Vista operating system in fiscal might be "overly aggressive." Ballmer said Windows Vista would create a "small surge" in personal computer sales but would not generate a big increase over normal growth rates, Reuters reported.

Ballmer also said 2008 than growth in operating expenses will be slightly lower than expected.

Lower oil hurts energy stocks; Baker Hughes earnings disappoint

The price of oil was as much as 2% lower from yesterday but recovered to $57.99, down just a penny on the day.

Nonetheless, energy stocks were largely weaker, but none weaker than Baker Hughes (BHI, news, msgs). The big oil field services company slumped 9.4% to $65.19, the biggest decline among S&P 500 stocks, after forecasting a weak first quarter and missing Wall Street estimates on fourth-quarter earnings. Baker Hughes earned $1.02 a share in the quarter, up from 75 cents a year ago, but Wall Street was expecting earnings to hit $1.09 a share.

The company forecast first-quarter earnings at $1.08 to $1.10, lower than the Wall Street consensus of $1.19.

Revenue was lower than expected in the company's North American and Norway segments CEO Chad Deaton said on a conference call. The company is concerned that North American markets won't be as strong as hoped.

Energy prices -- New York close

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$57.99	$58.00	-$0.01	-5.01%	-5.01%
Heating oil (per gallon)	$1.6271	$1.6383	-$0.0112	1.83%	1.83%
Natural gas (per million BTU)	$7.2920	$7.2410	$0.0510	15.76%	15.76%
Unleaded gasoline (per gallon)	$1.5972	$1.6162	-$0.0190	-0.31%	-0.31%

Some froth for brewers

It hasn't happened often of late, but two brewers were among the top 15 stocks in the S&P 500.

Molson Coors (TAP, news, msgs) was up 5.5%, fifth among S&P 500 stocks, on the strength of a very strong earnings report. Profit was up to $1.24 a share before special items; Wall Street was expecting 94 cents. The year-ago earnings were 63 cents a share.

Molson Coors, formed from the 2005 merger of Molson, the big Canadian brewer and Colorado's Adolph Coors, saw about $33 million in acquisition and other cost savings during the quarter.

Meanwhile, Anheuser-Busch (BUD, news, msgs) added nearly 3% after a Brazilian financial newspaper said it was in talks with Belgium's InBev. InBev shares were up 4% in Brussels.

The report, published in Brazilian newspaper Valor Economico, said talks had started after InBev's market capitalization grew to $41.9 billion, bigger than Anheuser-Busch's $39.9 billion. Market capitalization measures the value of a corporation by multiplying the number of outstanding shares of stock by the current market price for a share.

InBev brews Stella Artois, Brahma and Beck's beers.

Analysts were skeptical, however, that a merger would happen, but they did concede they like Anheuser shares and say both companies could be involved in deals.

Winter storm's JetBlues

The big winter storm that swept across the Midwest and Northeast yesterday brought snow, sleet and ice, and left a lot of disgruntled JetBlue Airways (JBLU, news, msgs) passengers at New York City's JFK airport.

While Delta Air Lines (DALRQ, news, msgs) and JetBlue canceled a number of flights yesterday, some JetBlue passengers thought they had hit the jackpot when their planes headed to the runway.

But instead of taking off to warm destinations such as Aruba, Cancun and Phoenix, hundreds of passengers sat on the tarmac for hours -- some for 10 hours straight.

JetBlue blamed the winter storm for the delays and said customers would receive refunds and free round-trip tickets.

And after all that, Goldman Sachs Group -- whose analyst must not have been on those flights -- upgraded JetBlue today, to "buy" from "neutral," citing an increasingly diverse network- and revenue-management initiatives as factors that could help improve margins. JetBlue shares rose nearly 5% to $13.85 on the upgrade.

Goldman downgraded AMR Corp. (AMR, news, msgs), the parent of American Airlines. Shares fell 1% to $38.11.

Shake-up coming in high-risk loans

The Wall Street Journal reported today that big banks such as Merrill Lynch (MER, news, msgs), JPMorgan Chase (JPM, news, msgs) and HSBC (HBC, news, msgs) are unloading bad loans like hot cakes as more Americans fall behind on mortgage payments.

The banking giants, which had gone on loan-buying sprees in 2005 and 2006, are trying to force mortgage originators to buy back subprime loans, the newspaper said.

As defaults have increased over the past few months due to rising interest rates and slowing home appreciation, Merrill Lynch and other big financial institutions have exercised their contractual rights to demand that sellers take back the bad loans, the paper continued. The contracts force mortgage originators to repurchase loans that default early in their term or that come with mistakes, such as flawed property appraisals.

Last week, HSBC surprised analysts with news that its charge for bad debts would be more than $10.5 billion for 2006 -- 20% higher than it had expected. CEO Michael Geoghegan said he was taking action to change its lending policies.

Will subprime lenders stay afloat?

The surge in defaults is causing concern about whether lenders such as New Century Financial (NEW, news, msgs) and NovaStar Financial (NFI, news, msgs) will be able to manage losses. On the same day that HSBC made its announcement, New Century Financial warned about a fourth-quarter loss because of a rise in defaults.

Still, New Century shares were down 4.9% on the day; NovaStar Financial was off 3.8%. New Century is down nearly 41% on the year. NovaStar is down nearly 37%.

One mortgage broker told Market Dispatches that part of the problem was due to the disparity between household income and home value during the housing boom.

"The days of paying off mortgages as our parents used to are seemingly out the door," said Jim Goodwin, a mortgage broker at San Diego's MD Mortgage Group. "The mentality has changed. Homeowners are too concerned about keeping up with the Joneses rather than building equity in their home and increasing their savings."

Sweet move for Hershey investors, not for workers

U.S. candy giant Hershey (HSY, news, msgs) boosted shares with news of a restructuring. The maker of Hershey's Kisses and Reese's Peanut Butter Cups said will close more than one-third of its production lines and cut 1,500 jobs.

Hershey shares were up nearly 1.6% at $52.13 on the day.

"Hershey is under intense pressure," Marvin Roffman of Roffman Miller Associates told Bloomberg News. "If your costs are squeezing you, you have to find ways to save money."

The company has lost market share to rival Mars, which makes M&M's, Snickers and Milky Way candies.

Toyota to Chrysler: Sorry, not interested

Japanese auto maker Toyota Motor (TM, news, msgs) said late yesterday that it is not interested in acquiring any of DaimlerChrysler's (DCX, news, msgs) Chrysler Group assets. "We don't have any particular interest in acquiring companies," Toyota North America's president, Jim Press, said at a conference yesterday.

Press did acknowledge that Toyota would consider an alliance if it were a "win-win" for both companies.

Toyota's statement came after DaimlerChrysler announced a massive restructuring plan yesterday. The German-U.S. auto maker said it would cut 13,000 jobs, and the stock jumped on rumors that it could spin off its Chrysler Group, which has struggled from losses since the two car makers merged in 1998.

GM in design talks with Chrysler

General Motors (GM, news, msgs) is one auto maker that has reportedly been talking with DaimlerChrysler's Chrysler Group -- though not for its assets.

The two auto makers are in discussions to share the costs of designing and developing cars, Bloomberg News reported.

"GM has a lot Chrysler could gain from because they have the more modern technology," Global Insight analyst John Wolkonowicz told Bloomberg. He said GM would probably be the stronger party in any type of talks.

A teaming up of the two companies could help stave off Toyota, which has been gaining market share from both, as well as from Ford Motor (F, news, msgs). GM was down slightly on the day. Toyota, Ford and Daimler were all slightly higher.

NutriSystem's profits triple

Diet and health-food company NutriSystem (NTRI, news, msgs) said late yesterday that fourth-quarter earnings had tripled, rising to $19.6 million, or 53 cents per share, up from $6.27 million, or 17 cents per share, in the previous year's fourth quarter. Shares surged 13.5% to $49.79 by midday.

The company forecast first-quarter earnings between 88 and 92 cents per share, above analysts' current estimate of 85 cents per share. NutriSystem also said earnings for 2007 would be between $3 and $3.10 per share, above Wall Street's estimate of $2.89 per share.

Short hits from the markets -- 4 p.m.

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	5.020%	5.010%	0.010	0.90%	2.76%
5-year Treasury note yield	4.687%	4.716%	-0.029	-2.74%	-0.30%
10-year Treasury note yield	4.706%	4.730%	-0.024	-2.49%	-0.08%
30-year Treasury bond yield	4.804%	4.826%	-0.022	-2.48%	-0.29%
Currencies
U.S. Dollar Index	83.91	84.06	-0.15	0.58%	0.58%
British pound in dollars	$1.954	$1.964	-0.011	-0.31%	-0.31%
Dollar in British pounds	£0.512	£0.509	0.003	0.31%	0.31%
Euro in dollars	1.315	1.314	0.001	-0.37%	-0.37%
Dollar in euros	€ 0.7604	€ 0.7611	-0.001	0.37%	0.37%
Dollar in yen	¥119.17	¥120.71	-1.54	0.13%	0.13%
Commodities
Gold	$671.40	$672.00	-$0.60	5.24%	5.24%
Copper	$2.6790	$2.5915	$0.09	-6.69%	-6.69%
Silver	$14.0580	$13.9650	$0.09	8.68%	8.68%
Crude oil (NYMEX) (per barrel)	$57.99	$58.00	-$0.01	-5.01%	-5.01%

By Charley Blaine and Elizabeth Strott