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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.633720 |
| Euro to US Dollar | 1.398406 |
| Japanese Yen to US Dollar | 0.010414 |
| Canadian Dollar to US Dollar | 0.861846 |
Late Wednesday, the battle over the future of Yahoo (YHOO, news, msgs) appeared to be heating up in a big way and could affect markets today.
The Wall Street Journal reported that Yahoo was working on a deal to team up with Time Warner's (TWX, news, msgs) America Online to combine their Internet operations. The report came after The Journal said Yahoo had agreed to a test using Google (GOOG, news, msgs) ads.
The AOL deal, if it came to pass, would give Yahoo an alternative to Microsoft's (MSFT, news, msgs) $44 billion unsolicited takeover offer, the newspaper said. (Microsoft is the publisher of MSN Money.)
The paper said the plan also envisions Yahoo repurchasing billions of dollars of its shares.
In addition, The New York Times and The Journal both reported that Rupert Murdoch's News Corp. (NWS, news, msgs) was discussing joining Microsoft's Yahoo bid.
The Times said talks contemplate the creation of an Internet giant combining Yahoo, Microsoft's MSN service and News Corp.'s MySpace social-networking site.
Both newspapers' reports were based on conversations with sources who declined to be identified.
In the ad test with Google, Yahoo would carry a small number of ads from Google. If the arrangement worked, a broader deal might be struck. Microsoft criticized the test, saying it could lead to Google's total dominance of Internet advertising. It would probably draw close antitrust scrutiny.
Yahoo closed at $27.77 a share in regular Nasdaq trading and was little changed in after-hours trading. Microsoft closed up 0.5% at $28.89. News Corp. was down 1.9% to $19.53. Time Warner closed down 2% to $14.43, and Google ended down 0.8%at $464.19.
Crude's new highs push stocks lower
Before the late-breaking news, Wednesday's markets were all about record oil prices. Crude hit an intraday high of $112.25 a barrel, then fell back to $110.87, up 2.2% from Tuesday. The close was a record as well.Crude's big move clobbered airline and transportation stocks and, for a time, threatened to set off a big sell-off.
But then market bulls decided to defend their positions, and the day ended with a modest loss.
The Dow Jones industrials, down as much as 107 points, finished the day with a 49-point loss, or 0.4%, to 12,527. The Nasdaq Composite Index was off 27 points, or 1.1%, to 2,322.
Most importantly, the Standard & Poor's 500 Index was off 11 points, or 0.8%, to 1,354.
Airlines were, in fact, the market's canary. Shares of American parent AMR Corp. (AMR, news, msgs) finished down 11% to $9.18 because of all those flight cancellations and the higher oil prices. Continental Airlines (CAL, news, msgs) was off 7.6% to $20.24. JetBlue (JBLU, news, msgs) fell 6.4% to $5.25. Delta Air Lines (DAL, news, msgs) fell 4.6% to $8.91.
Stock Charts (Year)
AMR Corp.
United Parcel Service
The Amex Airline Index ($XAL.X) was down 5.2% to 25.70 and is off 25% this year and nearly 88% from its 1998 peak. The Dow Jones Transportation Average ($DJT) was off 3.5% to 4,803.
American, which operates about 2,300 flights a day, has been grounding planes to make sure that the wiring on some of its older MD-80 planes is up to FAA standards. Some 900 flights may be cancelled today, but the carrier expects the inspections to be completed by the weekend.
Southwest, Delta and United have all grounded planes in recent weeks as well to ensure that they are safe.
The oil-price problem affected package companies United Parcel Service (UPS, news, msgs) and FedEx (FDX, news, msgs). Shares of both fell Wednesday after UPS warned late Tuesday that lighter shipping volumes and higher fuel prices will trim first-quarter earnings. UPS was off 3.7% to $70.57. FedEx was down 3.1% to $93.11.
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Oil prices also hurt a number of tech stocks, which are more vulnerable to stresses in the domestic economy than, say, a Coca-Cola (KO, news, msgs). Amazon.com (AMZN, news, msgs) was off 3.8% to $74.39. Dell Inc. (DELL, news, msgs) was down 1.6% to $18.69. Apple (AAPL, news, msgs) was down 0.9% to $151.44.
Only nine of the 30 Dow stocks were higher Wednesday, along with just 102 S&P 500 stocks and 21 Nasdaq-100 ($NDX.X) stocks.
Gold, energy, metals and semiconductor stocks were among the market leaders. Financial and home building stocks were the laggards.
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $110.87 | $108.50 | $2.37 | 9.15% | 15.51% |
| Heating oil (per gallon) | $3.2345 | $3.1102 | $0.1243 | 6.08% | 22.08% |
| Natural gas (per million BTU) | $10.0560 | $9.6970 | $0.3590 | -0.45% | 34.38% |
| Unleaded gasoline (per gallon) | $2.7742 | $2.7504 | $0.0238 | 6.04% | 11.38% |
Boeing delays Dreamliner
While the immediate news for airlines was bad, Boeing (BA, news, msgs) confirmed Wednesday that its 787 Dreamliner jets would be delayed six more months. The stock, however, jumped 4.8% to $78.60 because the delay was in line with what analysts had expected. Boeing's gain was the best of the 30 Dow stocks Wednesday and second among S&P 500 stocks -- followed by Intel (INTC, news, msgs), up 1.6% to $21.42.The first delivery of the jetliner will now be in the third quarter of 2009, almost two years after Boeing first announced a delay for the 787.
Stock Chart (Year)
Boeing
Boeing also said the maiden flight for the Dreamliner will now take place toward the end of 2008 instead of the previous launch for this June.
Citigroup to sell risky securities
Investors took the news from Citigroup (C, news, msgs) as good news. Or at least not horrible news.The banking giant, which has been slammed by the subprime-mortgage meltdown, is close to a deal that would sell $12 billion of highly leveraged loans and bonds to private-equity firms Apollo Management, TPG Capital and Blackstone (BX, news, msgs), published reports said.
The buyers reportedly will pay just under 90 cents on the dollar for the securities. Citigroup shares were up most of the day but fell back to a 0.8% decline to $23.58 at the close.
Standard & Poor's data suggested that leveraged loans fetched an average of 86 cents on the dollar in February.
Citigroup CEO Vikram Pandit has been working to reduce the bank's exposure to risky securities; Citigroup reported a record loss in the fourth quarter as it wrote down debt associated with the mortgage mess.
"As a Citigroup investor you won't have to worry about more mark-to-market write-downs on these loans," said William Smith, senior portfolio manager at Smith Asset Management, to Bloomberg News. "There's now a consortium of private-equity firms saying what they're worth."
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UPS' warning is more evidence of a slowing economy
United Parcel Service's earnings warning confirms the reality of a slowing economy.The shipping company said it will earn 86 to 87 cents per share in the first quarter, below a previous forecast of 94 to 98 cents per share and lower than the consensus estimate of 93 cents per share.
"The U.S. economy has continued to weaken, causing a reduction in domestic package volume and a shift away from premium products. Significantly increased fuel costs in the quarter also contributed to the lower-than-expected results," the company said in a press release.
Earlier this week, Alcoa (AA, news, msgs) reported a drop in profit for the first quarter, setting a grim tone for earnings season. Alcoa fell 0.9% to $36.84 Wednesday.
Washington Mutual (WM, news, msgs) on Tuesday warned it would report a worse-than-expected loss for the quarter. WaMu fell 3.1% to $11.45.
A concerned Fed
The rescue of Bear Stearns (BSC, news, msgs) by the Federal Reserve and JPMorgan Chase (JPM, news, msgs) took place against a backdrop of concern about the economy, according to the minutes of the Fed's March 18 meeting. The minutes showed that "many participants thought some contraction in economic activity" would take place in the first half of 2008.- Video: Finding love can cost you
The Fed is now trying to come up with further measures to cushion the economy should the credit crunch get worse, The Wall Street Journal reported.
Options, according to The Journal, include:
- Issuing debt through the Federal Reserve itself, not the Treasury Department.
- Having the Treasury borrow more money than necessary with the extra cash held on deposit at the Fed.
- Asking Congress for the authority to pay interest on bank reserves now instead of waiting until the law allows it in 2011.
Fed officials do not want to rely solely on interest-rate adjustments in the event of a new crisis, The Journal said.
"The Fed has done an awful lot, and I think the lack of patience is one of their biggest enemies. We have to give monetary policy some time to work," Peter Yastro, a market strategist with MF Global, told CNBC Wednesday.
Yastro said that there is talk in the credit markets that the Fed cannot cut the federal funds rate below 2%.
The Fed lowered the federal funds rate by three-quarters of a percentage point to 2.25% at the March meeting.
"Stresses in financial markets had intensified noticeably since the January meeting," the March minutes said. "Some members viewed the downside risks to economic growth as having increased. Indeed, some believed that a prolonged and severe economic downturn could not be ruled out given the further restriction of credit availability and ongoing weakness in the housing market."
Did the Fed's Bear Stearns move cross the line?
Meanwhile, former Fed chief Paul Volcker said he was concerned about the Fed's move to help out Bear Stearns.In a speech to the Economic Club of New York late Tuesday, Volcker questioned whether Fed's move crossed into "moral hazard" -- Wall Street's term for protecting parties from the consequences of their own reckless behavior.
"The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices," Volcker said.
Volcker also cautioned that the Fed's move could cause problems down the road. "The extension of lending directly to nonbanking financial institutions -- while under the authority of nominally 'temporary' emergency powers -- will surely be interpreted as an implied promise of similar action in times of future turmoil," he said.
Mortgage applications rise
Mortgage activity rose 5.4% in the first week of April, compared with the last week of March, the Mortgage Bankers Association said in its weekly report Wednesday. Activity was up 10.9% from the same week last year.Home-purchase applications rose a seasonally adjusted 8.1%, thanks to lower interest rates on 30-year and 15-year fixed rates. Rates fell below 6% last week, to an average of 5.78% and 5.39%, respectively.
Refinancing filings rose 3.4%, the MBA said.
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.275% | 1.350% | -0.075 | -5.56% | -59.39% |
| 5-year Treasury note yield | 2.582% | 2.718% | -0.136 | 1.85% | -25.27% |
| 10-year Treasury note yield | 3.466% | 3.558% | -0.092 | 0.00% | -14.10% |
| 30-year Treasury bond yield | 4.306% | 4.383% | -0.077 | -0.90% | -3.43% |
| Currencies | |||||
| U.S. Dollar Index | 72.120 | 72.530 | -0.410 | -0.06% | -5.97% |
| British pound in dollars | $1.9763 | $1.9697 | 0.0066 | -0.38% | -0.65% |
| Dollar in British pounds | £0.5060 | £0.5077 | -0.0017 | 0.38% | 0.66% |
| Euro in dollars | 1.5835 | 1.5711 | 0.0124 | 0.54% | 8.35% |
| Dollar in euros | € 0.6315 | € 0.6365 | -0.0050 | -0.54% | -7.70% |
| Dollar in yen | 101.77 | 102.54 | -0.77 | 1.96% | -9.01% |
| Canadian dollar in U.S. dollars | $0.982 | $0.987 | -$0.0047 | 0.43% | -1.11% |
| U.S. dollar in Canadian dollars | $1.020 | $1.013 | $0.0061 | -0.40% | 1.17% |
| Commodities | |||||
| Gold | $937.50 | $918.00 | $19.50 | 1.90% | 11.87% |
| Copper | $4.0000 | $3.8905 | $0.11 | 11.94% | 31.54% |
| Silver | $18.2000 | $17.6750 | $0.52 | 8.01% | 21.98% |
| Crude oil (NYMEX) (per barrel) | $110.87 | $108.50 | $2.37 | 8.87% | 15.51% |
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