advertisement
Article Tools
| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.705321 |
| Euro to US Dollar | 1.341382 |
| Japanese Yen to US Dollar | 0.009962 |
| Canadian Dollar to US Dollar | 0.850702 |
Interest rates moved higher, oil prices fell, and stocks took a big hit today despite a sizable gain for shares of Home Depot (HD, news, msgs).
The Dow Jones industrials fell 146 points, or 1.1%, to 13,489. It was the biggest loss for the blue-chip index since falling nearly 199 points on June 7.
So far in June, the Dow has experienced four days of losses greater than 100 points and two days of 100-plus point gains.
The Standard & Poor's 500 Index tumbled nearly 21 points, 1.4%, to just under 1,513, and the Nasdaq Composite Index slipped 26.8 points, 1%, to just under 2,600.
The market started to fall back when the yield on the 10-year Treasury note started moving higher just before 1 p.m. ET. The yield hit as high as 5.142% before slipping back to 5.12%. But the move higher was a surprise after yield had fallen for several days.
The decline accelerated in the last hour of trading and turned what had been a gain of nearly 3% for investment banking giant Morgan Stanley (MS, news, msgs) into a loss of 0.6% to $87.32. Morgan Stanley had reported a 40% profit gain for its fiscal second quarter.
At the same time, CNBC's Bob Pisani reported, concern mounted that the probable closing of two hedge funds operated by Bear Stearns (BSC, news, msgs) were only the beginning of problems emerging from problems in the subprime mortgage market.
Dow Jones directors take control
Directors of Dow Jones (DJ, news, msgs) assumed control of negotiations with Rupert Murdoch's News Corp. (NWS, news, msgs), The Wall Street Journal reported today.Directors had become frustrated by the Bancroft family's foot-dragging in its negotiations with the Murdoch company, which has bid $5 billion for Dow Jones, The Journal said.
Dow Jones shares were up 3.3% to $60.65 at the close. The stock was down 0.7% to $60.20 in after-hours trading.
Stock Charts (Year)
Dow Jones
At the same time, Brad Greenspan, founder of the social networking site MySpace, offered $60 a share for a 25% stake in Dow Jones, Bloomberg News said. A Greenspan statement said he had formed an investor group that will buy up to $1.25 billion of Dow Jones' shares.
If he succeeds at building the stake, his statement said, it would guarantee the newspaper's editorial independence.
Rate-sensitive stocks get hit
Stocks that are vulnerable to shifting interest rates were hard hit today. The Dow Jones Utilities Index ($UTIL) was down 2.6% to 490.20. The MSCI U.S. REIT Index ($RMZ.X) was down 2.4% to 1,016.At the same time, crude oil fell 1.3% to $68.19 and knocked the wind out of energy stocks, a group that had seen some of the biggest gains among all stocks this year.
ExxonMobil (XOM, news, msgs) fell 3.5% to $82.82, easily the worst performer among the 30 stocks in the Dow. The Amex Oil Index ($XOI.X) was down 2.5% to just under 1,398, and the Philadelphia Oil Service Sector Index ($OSX.X) fell 2.3% to 262.09.
Twenty-five of the 30 Dow stocks saw losses, along with more than 430 S&P 500 stocks.
While market bulls will argue the economy appears to be strong, they know the market is heading into the July-September period, traditionally the weakest time of the year for U.S. stocks. And there are few catalysts for the market tomorrow or Friday to turn the situation around.
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $68.19 | $69.10 | -$0.91 | 6.53% | 11.70% |
| Heating oil (per gallon) | $2.0339 | $2.0268 | $0.0071 | 8.03% | 27.29% |
| Natural gas (per million BTU) | $7.3910 | $7.5190 | -$0.1280 | -6.86% | 17.34% |
| Unleaded gasoline (per gallon) | $2.2281 | $2.2346 | -$0.0065 | -1.03% | 39.07% |
Investors love Morgan Stanley's earnings
The loss for Morgan Stanley shares had nothing to do with its profitability. In fact, things are looking pretty good for the investment house.The company reported fiscal-second-quarter earnings of $2.45 per share, above analysts' expectations of $2.01 per share. Net income rose to $2.58 billion from $1.84 billion in last year's second quarter. Revenue jumped 32% to $11.5 billion.
Despite today's loss, Morgan Stanley shares are still up more than 50% over the past year.
The company's earnings grew faster than rival Goldman Sachs Group's (GS, news, msgs) for the second quarter in a row, according to Bloomberg News.
It has been a mixed quarter for the big Wall Street investment houses. Last week, Goldman Sachs reported earnings growth that disappointed investors; Bear Stearns reported a drop in profit, largely due to fallout from the mortgage slump.
Last week, Lehman Bros. (LEH, news, msgs) reported a jump in profit.
Home Depot to sell HD Supply
Home Depot shares were leading both the Dow and the S&P 500 after the home-improvement retailer said late yesterday that it was selling its HD Supply business to a consortium of private-equity players and using the cash to expand a stock buyback program to $22.5 billion.The stock was up 4.6% to $40.03. The gain was worth 14.3 points to the Dow.
Bain Capital, the Carlyle Group and Clayton, Dubilier & Rice are buying the building-supply unit for $10.3 billion. The deal is expected to close in Home Depot's fiscal third quarter, which ends in late October.
- Video: Buyout ballyhoo
Today's earnings news
Shipping company FedEx (FDX, news, msgs) is reporting fiscal-fourth-quarter earnings of $1.96 per share, a 7% increase from its year-ago quarter and in line with analysts' estimates.Shares jumped even though the company lowered its earnings guidance for the first quarter. FedEx now expects to earn $1.45 to $1.60 per share for the quarter and $7 to $7.40 for all of fiscal 2008. Analysts had expected $1.60 for the first quarter.
"Earnings growth is expected to be below the company's long-term 10% to 15% earnings-growth target due to continued soft economic growth," CEO Fred Smith said in a statement.
Shares of FedEx were up 1.6% to $109.80 today.
Battered electronics retailer Circuit City (CC, news, msgs) reported a loss of 33 cents for the first quarter, a penny worse than the consensus estimate but not as bad as some had feared. Sales fell 4% to $2.49 billion in the quarter.
Result: The stock was up 0.2% to $16.10 today.
- Video: Circuit City slips
Just yesterday, rival Best Buy (BBY, news, msgs) reported a disappointing 18% drop in profit. The consumer-electronics giants have continued to suffer as Wal-Mart Stores (WMT, news, msgs)has cut prices pricing -- and therefore profit margins -- for flat-screen TVs and other popular items in the sector.
Kerkorian bails on MGM
Shares of MGM Mirage (MGM, news, msgs) took a beating today on word that billionaire investor Kirk Kerkorian has dropped plans to bid for the Bellagio casino and the $7.4 billion Project CityCenter, two of MGM Mirage's key assets.Last month, Kerkorian's investment company, Tracinda, which is already a majority stakeholder in MGM Mirage, had announced that Kerkorian was interested in purchasing the two assets.
Kerkorian's decision to abandon the plan comes after MGM agreed to a joint venture with Kerzner International to build a casino and resort on the Las Vegas Strip.
Shares of MGM Mirage were off 6.8% to $80.60. The shares had been down as much as 10%, to $77.70.
Microsoft will change Vista
Microsoft (MSFT, news, msgs) said it would change the way its new Windows Vista operating system works after Google (GOOG, news, msgs) complained that the system violated an antitrust settlement. (Microsoft is the publisher of MSN Money.)In April, Google filed a charge with the Justice Department complaining that Vista doesn't allow Google's search function to work properly.
Vista has a built-in "Instant Search" to automate any searches on a computer's hard drive. Microsoft will now build in an option that will allow users to choose which program to use for desktop searches.
Google was down 0.8% to $509.97. Microsoft was down 1.5% to $30.01.
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 4.600% | 4.515% | 0.085 | 0.22% | -5.83% |
| 5-year Treasury note yield | 5.040% | 5.002% | 0.038 | 3.85% | 7.21% |
| 10-year Treasury note yield | 5.123% | 5.086% | 0.037 | 4.76% | 8.77% |
| 30-year Treasury bond yield | 5.234% | 5.198% | 0.036 | 4.45% | 8.63% |
| Currencies | |||||
| U.S. Dollar Index | 82.48 | 82.48 | 0.00 | 0.28% | -1.14% |
| British pound in dollars | $1.9936 | $1.9889 | 0.0048 | 0.66% | 1.73% |
| Dollar in British pounds | £0.5016 | £0.5028 | -0.0012 | -0.65% | -1.70% |
| Euro in dollars | 1.3412 | 1.3434 | -0.0022 | -0.39% | 1.61% |
| Dollar in euros | € 0.7456 | € 0.7444 | 0.0012 | 0.39% | -1.58% |
| Dollar in yen | ¥123.50 | ¥123.36 | 0.14 | 1.50% | 3.76% |
| Commodities | |||||
| Gold | $660.00 | $664.70 | -$4.70 | -1.00% | 3.45% |
| Copper | $3.4410 | $3.3995 | $0.04 | 1.34% | 19.85% |
| Silver | $13.2500 | $13.3250 | -$0.07 | -1.63% | 2.44% |
| Crude oil (NYMEX) (per barrel) | $68.19 | $69.10 | -$0.91 | 6.53% | 11.70% |
Bear funds are seized
Two 10-month-old hedge funds run by Bear Stearns are now in the process of being shut down.Merrill Lynch (MER, news, msgs), one of the hedge funds' lenders, reportedly has begun to auction off $800 million in assets from the struggling funds after a last-ditch rescue effort by Bear Stearns failed.
It may be some time before results are known because the assets -- mostly collateralized debt obligations -- are very complicated and difficult to value, The Wall Street Journal said this afternoon.
More from MSN Money
One of the two funds has lost 20% since the fund's inception, according to Bloomberg.
Just a few weeks ago, the funds had held more than $20 billion in investments, most of which were bonds backed by subprime mortgages, loans made to high-risk borrowers. But rising interest rates and falling home prices have caused defaults on those mortgages to soar.
The funds' meltdown is another indication that the trouble in the subprime market is starting to spill over to other industries.
"The real fear has to do with just how many other funds and warehouses could be in trouble," Jeremy Shor, who oversees about $3 billion in asset-backed bonds as a portfolio manager at Brown Brothers Harriman & Co. in New York, told Bloomberg News. A warehouse is a credit line extended to CDO managers to buy the assets that they plan to repackage into new securities.
A slump in the U.S. housing market is leading to rising delinquencies on home loans, especially so-called subprime mortgages, made to homebuyers with poor credit or heavy debt loads. That's pushing down the value of related securities. The fallout has forced lenders such as New Century Financial Corp into bankruptcy, and caused the closure or sale of dozens more. There are estimates that the losses from the securities may top $100 billion.
Bear Stearns was off 2.5% to $143.20.
Blackstone sees IPO pricing at $29 to $31
The price is looking right for the Blackstone Group's $4.75 billion initial public offering: between $29 and $31 per share.The IPO is expected to price on Thursday, according to Morgan Stanley, the underwriter of the offering.
Blackstone is looking to sell 133.3 million shares, which would make the company a whopping $4.13 billion in proceeds at a $31 price tag per share.
Blackstone is planning to list its shares on the New York Stock Exchange under the ticker "BX."
By Charley Blaine and Elizabeth Strott
Rate this Article
High