Yahoo profits don't thrill; crude nears $120

By Charley Blaine and Elizabeth Strott

Internet company Yahoo (YHOO, news, msgs) reported better-than-expected earnings after today's market close and offered a bullish forecast.

But the stock fell about 0.5% to $28.39 in after-hours trading, suggesting that investors weren't impressed. That could increase pressure on the company to agree to a takeover offer from Microsoft (MSFT, news, msgs). Microsoft offered a bid of $31 a share, or $44.6 billion, on Jan. 31. (Microsoft is the publisher of MSN Money.)

Yahoo's earnings came after a disappointing day for stocks, which tumbled as crude oil nearly reached $120 a barrel. The Dow Jones industrials were down nearly 105 points to 12,720. The Standard & Poor's 500 Index was off 12 points, or 0.9%, to 1,376 and the Nasdaq Composite Index was down 31 points to 2,377.

Yahoo officials couldn’t get around the question of the company's future. During a conference call with analysts, CEO Jerry Yang said the company would entertain "any all offers, including a Microsoft deal."

"We are totally committed to maximize the value of the asset," Yang said. There were reports the company was continuing to discuss possible options with Time Warner (TWX, news, msgs) and News Corp. (NWS, news, msgs), the owner of The Wall Street Journal.

Microsoft has threatened a proxy fight and perhaps a lower price if Yahoo doesn't agree to a deal by this weekend.

"Microsoft's offer is still the best offer on the table," Jim Friedland, an analyst at Cowen & Co. told Reuters, adding that the software maker could "modestly raise" its cash-and-share bid just to close the deal.

Yahoo's first-quarter net income rose to $542.2 million, or 37 cents a share, helped by a $401 million gain from the stock sale of Chinese Internet company Alibaba.com.

• Top Stocks blog: Yahoo's good but not spectacular

Outside of that gain, Yahoo reported earnings of 11 cents a share (after one-time items). That was two cents better than the Wall Street consensus estimate but unchanged from a year ago. Revenue of $1.35 billion (net of payments made to partners) was also slightly ahead of estimates and up 14%.

The company said it expects revenue of $1.73 billion to $1.93 billion for the second quarter (before partner payments), a bit ahead of year-ago levels. When partner payments are included, the revenue projection would be about $1.28 billion to $1.43 billion. The Wall Street estimate is for $1.37 billion.

The numbers didn't impress some analysts. "They needed to show fabulous results, and these are good results," Paul Meeks, an analyst at LR Burtschy in Charleston, S.C., told Bloomberg Radio. "I don't know if they're what's necessary to prove to investors they can go it alone."

• Video: Looking at Yahoo's results

"Microsoft is breathing a sigh of relief," Cowen's Friedland said. "Even though these are solid results, given long- and short-term challenges, there's been no overall shift in Yahoo's business."

Before Yahoo announced its results, Microsoft CEO Steve Ballmer told Reuters that Yahoo's results wouldn't "affect the value of Yahoo to Microsoft."

"We think we can accelerate our strategy by buying Yahoo and will pay what makes sense for our shareholders," Ballmer said from Skhirat, Morocco, during the launch of the MSN Web portal for North Africa.

Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$119.37	$117.48	$1.89	17.51%	24.37%
Heating oil (per gallon)	$3.3169	$3.3114	$0.0055	8.78%	25.19%
Natural gas (per million BTU)	$10.6070	$10.7330	-$0.1260	5.01%	41.75%
Unleaded gasoline (per gallon)	$3.0164	$2.9791	$0.0373	15.29%	21.10%

Crude crushes airline stocks; euro hits $1.60

Crude oil closed at $119.37 a barrel in New York today, up 1.6% from Monday, after peaking at $119.90. It was crude's sixth new closing high in the last seven sessions.

Crude fell as the dollar moved lower against major currencies, particularly the euro. The dollar is now down 10% against the euro this year, which crossed $1.60 today for the first time.

In addition, traders bid crude higher because of supply problems in Nigeria and reduced output in Mexico.

Crude's big move crushed airline stocks, with the Amex Airline Index ($XAL.X) off 12% to 20.51. United Airlines parent UAL (UAUA, news, msgs) was off 37% to $13.55 after reporting $527 million loss, or $4.45 a share, for the first quarter. Analysts had expected a loss of $3.29.

Delta Air Lines (DAL, news, msgs) and Northwest Airlines (NWA, news, msgs), which have proposed merging, were down 17% to $6.80 and nearly 18% to $7.47, respectively.

Even Southwest Airlines (LUV, news, msgs), the most consistently profitable of U.S. airlines, was off 4.2% to $11.78.

Chevron (CVX, news, msgs) and ExxonMobil (XOM, news, msgs) were among the just seven Dow stocks higher on the day. Chevron was up 1.4% to $94.03. ExxonMobil was up slightly at $94.39.

"We are clearly headed over $120 a barrel and we are targeting $125," energy analyst John Kilduff of MF Global told Bloomberg News. "The last thing we need is another supply disruption."

Adding to the recent pressure were attacks in Nigeria on a Royal Dutch Shell (RDS.A, news, msgs) pipeline last week and Monday. Royal Dutch Shell said that it may not be able to deliver on contracts for 169,000 barrels of crude oil because of the attacks.

Stocks were pressured by disappointments in the earnings of a number of big companies, including McDonald's (MCD, news, msgs), DuPont (DD, news, msgs), UnitedHealth Group (UNH, news, msgs), all today, and Texas Instruments (TXN, news, msgs). TI's second-quarter guidance, included in its first-quarter earnings report on Monday, was a disappointment. The stock fell 5.8% to $28.82, the second-worst performance among stocks in the Philadelphia Semiconductor Index ($SOX.X). The index fell 3.3% to 371 on Tuesday.

Fewer than 80 S&P 500 stocks were showing gains on the day, and only 17 Nasdaq-100 ($NDX.X) stocks were higher.

Why McDonald's and DuPont shares fell

McDonald's reported better-than-expected earnings this morning, but shares fell 1.4% to $57.86 after the company said that U.S. sales fell in March.

DuPont also reported a jump in profit, but the chemical company said it was concerned about the slowing U.S. economy. Shares fell 4.4% to $49.97. The decline was the worst among the Dow stocks.

• Get free, real-time stock quotes on MSN Money

McDonald's earned $946 million, or 81 cents per share, up 24% from the $762 million, or 62 cents per share, last year. The Street had been looking for earnings of 69 cents per share.

Revenue rose 6% to $5.61 billion.

McDonald's shares fell 0.6% to $58.35 today, however, because March comparable-store sales fell 0.8%, the first decline since March 2003. McDonald's said April sales should "improve to 2% to 2.5%."

• Video: More on McDonald's

U.S. same-store sales rose 2.9% in the quarter, with sales in Europe jumping 11%. Sales in the Asia/Pacific, Middle East and Africa regions rose 9.4%, the fast-food company said.

DuPont also reported a jump in first-quarter profit -- but its wary outlook may dampen investor enthusiasm. DuPont earned $1.19 billion, or $1.31 per share, up from $945 million, or $1.01 per share, in the first quarter of 2007. Analysts had expected DuPont to earn $1.28 per share.

DuPont raised its second-quarter outlook to $1.20 per share, up from a previous forecast of $1.14 to $1.19, citing strong demand for its agriculture business products, including feedstock.

But while the chemical company reiterated its full-year forecast of $3.40 to $3.55 per share, it cautioned about the slowing U.S. economy. "For the remainder of 2008, the company expects that slowing demand in U.S. markets, including construction and motor vehicle, will offset growth in agriculture and other markets outside the U.S.," DuPont said in a press release.

Shares fell 4% to $50.16, the weakest Dow performance.

AT&T banks on wireless

AT&T (T, news, msgs), another Dow component, reported a 21% jump in profit, thanks in part to its strong wireless business. AT&T said this morning that it earned $3.46 billion, or 57 cents per share, up from $2.85 billion, or 45 cents per share, in the same quarter last year.

• Worried about your debt? Ask a credit counselor

Excluding items, AT&T's earnings were 74 cents per share, in line with analysts' expectations.

AT&T's revenue rose more than 6% to $30.7 billion in the quarter. Shares were up 0.6% to $37.81.

The company, the exclusive U.S. carrier for Apple's (AAPL, news, msgs) iPhone, added 1.3 million net wireless subscribers, in line with expectations.

• MSN's Stock Challenge: Win $15,000!

"The future of wireless has never been more promising," AT&T Chief Executive Officer Randall Stephenson said in a press release. AT&T has been focusing on its wireless business as more consumers are giving up their land lines.

Existing-home sales decline

It sounds like a broken record: There was more disappointing news coming out of the housing market this morning.

The number of existing homes sold in March fell 2% to an annual rate of 4.93 million, down from 5.03 million in February, according to the National Association of Realtors.

• Video: Existing-home sales drop

While the decline indicated that the housing slump is still ongoing, it was slightly better than the 2.3% drop economists had expected. Sales of existing homes fell 19% from March 2007.

The median sale price fell 7.7% to $207,000.

"Though mortgage rates are at historically low levels, some borrowers are facing restrictive lending practices in declining markets," NAR economist Lawrence Yun said in a press release. "At the same time, many buyers continue to bide their time with a larger number of homes to choose from, while other potential buyers remain on the sidelines."

UnitedHealth misses, cuts forecast

UnitedHealth Group plunged 9.7% to $34.15 today after the insurance giant missed analysts' expectations for the first quarter and slashed its forecast for the full year.

• Video: Farming . . . in the suburbs

UnitedHealth said it earned $994 million, or 78 cents per share. That's up from $927 million, or 66 cents per share, in the same period a year ago, but short of the consensus estimate of 80 cents per share.

The company also said it expects to earn $3.55 to $3.60 per share for the year, 40 cents lower than previously forecast. UnitedHealth blamed "broader economic challenges" and higher costs related to flu season.

Enrollment in UnitedHealth's plans fell by 390,000 members in the quarter to 5.5 million.

Reports: News Corp. will buy Newsday

Rupert Murdoch's News Corp. has reportedly reached an agreement to buy Long Island's Newsday newspaper from Tribune, according to published reports. Murdoch will pay $580 million for 95% of Newsday, with Tribune holding the remaining 5%, reports said.

• Video: Rupert Murdoch targets Newsday

Murdoch late last year paid $5 billion to acquire Dow Jones, the parent of The Wall Street Journal, after years of eyeing the company. Real-estate mogul Sam Zell bought Tribune in December for $8.2 billion and has since been trying to slash the company's debt.

Tribune would still run the Los Angeles Times, the Chicago Tribune and the Baltimore Sun.

News Corp. shares were down 2.3% to $18.50 on the day.

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

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.255%	1.270%	-0.015	-7.04%	-60.03%
5-year Treasury note yield	2.957%	2.926%	0.031	16.65%	-14.41%
10-year Treasury note yield	3.720%	3.712%	0.008	7.33%	-7.81%
30-year Treasury bond yield	4.475%	4.476%	-0.001	2.99%	0.36%
Currencies
U.S. Dollar Index	71.540	71.880	-0.340	-0.87%	-6.72%
British pound in dollars	$1.9956	$1.9798	0.0158	0.60%	0.32%
Dollar in British pounds	£0.5011	£0.5051	-0.0040	-0.60%	-0.32%
Euro in dollars	1.6003	1.5916	0.0087	1.60%	9.49%
Dollar in euros	€ 0.6249	€ 0.6283	-0.0034	-1.58%	-8.67%
Dollar in yen	¥102.78	¥103.22	-0.44	2.98%	-8.11%
Canadian dollar in U.S. dollars	$0.996	$0.995	$0.0018	1.91%	0.35%
U.S. dollar in Canadian dollars	$1.004	$1.005	-$0.0012	-1.90%	-0.35%
Commodities
Gold	$925.20	$917.60	$7.60	-0.19%	10.41%
Copper	$3.9585	$3.8665	$0.09	0.35%	30.17%
Silver	$17.8240	$17.4740	$0.35	0.76%	19.46%
Corn	$5.9125	$5.8025	$0.11	4.23%	29.80%
Crude oil (NYMEX) (per barrel)	$119.37	$117.48	$1.89	8.38%	24.37%