Stocks end lower in wild trading

By Charley Blaine and Elizabeth Strott

Stocks ended lower in a volatile day of trading that saw the Dow Jones industrials give up a 111-point gain, rebound from a 167-point loss and finally end lower.

The Dow finished down 57 points to 11,232. The Standard & Poor's 500 Index was off 11 points to 1,252. The Nasdaq Composite Index was off 2 points to 2,243.

The S&P 500's close was its lowest since July 21, 2006; the Dow's was its lowest finish since August 15, 2006.

The volatility on the first trading day after the July Fourth holiday started when crude oil fell sharply from a record $145.29 on Thursday to under $140 a barrel briefly this morning. Crude ended down $3.92 a barrel to $141.37 as many traders took profits.

Financial stocks then took a huge dive in the middle of day as heavy selling hit Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs), the nation's biggest suppliers of mortgage capital to the housing industry. Lehman Bros. suggested the two companies might be required to raise as much as $75 billion in new capital to comply with some proposed accounting rules.

Fannie Mae closed down 16.2% to $15.74. Freddie Mac was off 17.9% to $11.91. The stocks of both companies have fallen more than 60% this year.

Their weakness pulled nearly all financials lower. Citigroup (C, news, msgs) fell 2.5% to $16.40. JPMorgan Chase (JPM, news, msgs) fell 3.6% to $34.04.

The Amex Securities Broker/Dealer Index ($XBD.X) fell 2.7% to 140; it's down more than 32% this year. The Standard & Poor's Banking Index($BIX.X) fell nearly 5% to 160; its 2008 decline is about 42%.

The financial beating was, as The New York Time said today, Wall Street's way of saying "the worst is yet to come."

That worry appeared to be reflected in early Tokyo trading for Tuesday. The Nikkei 225 Index ($N225) was down 1.9% to 13,122.

But there is skepticism the companies would actually have to raise the capital. To do so would severely crimp the ability of both companies to provide new mortgage money to the beleaguered housing industry, The Wall Street Journal noted late today. (Registration required.) At the very least, mortgage rates could rise sharply.

Freddie Mac announced plans in May to raise about $5.5 billion of capital by selling common and preferred shares. But the company still hasn't made those offerings and now says they are unlikely before it announces second-quarter results in August.

Fannie raised $7.4 billion in capital in April and May. Investors fear both companies may have to raise much more capital in the months ahead.

Much of the recovery was short-covering as traders who had made substantial profits selling stocks short as the market fell covered their positions.

But the S&P 500's close and its hitting a new intraday low at 1,240.68 as well are worth being concerned about.

But there are many market watchers who believe that a big short-term rally is getting ready to erupt.

Financial stocks have been the weakest sector of the stock market for about 18 months as companies have struggled to cope with the credit crunch and the subprime mortgage collapse.

Investors are in a panic about the sector, Dick Bove, the respected bank analyst with Ladenburg Thalmann, told MSN Money. As a result, investors no longer believe executives at financial companies who insist the worst of their problems is over.

It's not that the CEOs and chief financial officers are lying, he added. "I believe these people don't understand the depths of the problem."

It was a rocky day

Only thirteen of the 30 stocks in the index were higher, led by Alcoa (AA, news, msgs), up 1.9% to $33.39; IBM Corp. (IBM, news, msgs), up 1.6% to $121.50; and Hewlett-Packard (HPQ, news, msgs), up 1.3% to $44.

In addition, 169 S&P 500 stocks managed gains, along with 58 Nasdaq-100 Index ($NDX.X) stocks. The Nasdaq-100 closed up 11 points to 1,827.

Meanwhile, Merck (MRK, news, msgs) was the Dow loser today, falling 4.8% to $36.60 after UBS downgraded the stock from "buy" to "neutral" because of reports that Gardasil, a vaccine that's supposed to prevent cervical cancer, caused paralysis in a 13-year-old girl. Two lawsuits have been filed also alleging that Gardasil was causing paralysis.

Oil's fall hit ExxonMobil (XOM, news, msgs) and Chevron (CVX, news, msgs), which fell 1.5% to $86.95 and 1.8% to $96.82, respectively.

The Dow had moved out of bear market territory at the open but ended the day 20.7% below its Oct. 9 closing high (a 20% decline is the popular definition of a bear market). At Friday's close of 11,289, the Dow was down 20.3% from its October high. The S&P briefly joined the bear market club today but ended the day off 19.988% since last October. The Nasdaq is also down 21.5% from its Oct. 31 high.

Although the Nasdaq was lower, key tech stocks such as Apple (AAPL, news, msgs), Qualcomm (QCOM, news, msgs), Research In Motion (RIMM, news, msgs) and Google (GOOG, news, msgs) were all higher. Apple closed up 3% to $175.16. Google added 1.3% to $543.91. RIMM was up 0.5% to $115.66. Qualcomm was up 0.7% to $45.36.

Tuesday's market may be affected by a report on pending home sales for May from the National Association of Realtors. Alcoa kicks off the second-quarter earnings season after Tuesday's close. The aluminum giant is expected to report earnings of 66 cents a share, down from 81 cents a share in 2007's second quarter. Revenue is projected at $7.24 billion, down from $8.07 billion a year ago.

Energy prices -- New York close

	Mon.	Thur.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$141.37	$145.29	-$3.92	0.98%	47.29%
Heating oil (per gallon)	$3.9696	$4.1060	-$0.1364	1.71%	49.83%
Natural gas (per million BTU)	$12.9770	$13.5770	-$0.6000	-2.82%	73.42%
Unleaded gasoline (per gallon)	$3.4827	$3.5710	-$0.0883	-0.54%	39.82%

Microsoft is still interested in Yahoo

Shares of Yahoo (YHOO, news, msgs) jumped today after disclosures that Microsoft (MSFT, news, msgs) would be interested in buying all or part of the Yahoo -- if the Yahoo board is replaced. (Microsoft is the publisher of MSN Money.)

Microsoft said it may renew talks for a transaction with Yahoo if investors back Carl Icahn's attempt to oust the board and Chief Executive Officer Jerry Yang.

In a letter to Yahoo shareholders, Icahn said Microsoft CEO Steve Ballmer "made it abundantly clear" that Microsoft will not negotiate any deal with Yahoo's current board.

Yahoo, for its part, said it would be glad to discuss a deal with Microsoft but cautioned that a deal involving only combining the companies' search business would work only if Microsoft would guarantee $2.5 billion in annual revenue. It also said it was no longer talking to News Corp. about any deal.

At the close, Yahoo's shares were up 12% to $23.81. Microsoft, down as much as 1.5%, closed up 0.2% to $26.03.

Icahn is building momentum ahead of a Yahoo shareholder vote on his board slate next month. Kara Swisher of The Wall Street Journal reported today that Gordon Crawford of Capital Research, Yahoo's largest shareholder, told Yahoo executives last week that he was "seriously considering" voting against Yahoo's board.

Crawford’s Capital Research Global Investors fund -- one of two separately managed at Capital Research & Management -- owns 6.5% of Yahoo, according to recent filings. Capital World Investors, which is not run by Crawford, owns 9.8%.

Icahn, who said the companies need to combine to compete with Google, has already won backing from such high-profile shareholders as T. Boone Pickens, chairman of BP Capital, and hedge-fund manager John Paulson.

Microsoft's backing "really strengthens Icahn's position," Stanford Group's Clay Moran told Bloomberg News. "A deal is very much back on the table."

GM may cut brands and more jobs

Things are so bad at General Motors (GM, news, msgs) that the auto giant is considering chopping its white-collar work force substantially and possibly killing or selling some of its brands.

That news helped the stock move up 1.2% to $10.24; it had been up as much as 7%.

GM executives and its board are now engaged in a broad re-evaluation of GM's strategy and of its ability to meet an internal projection of returning to profitability in 2010, The Wall Street Journal said today.

• Top Stocks blog: The slow descent of GM

Just about every brand that GM markets -- except its core Chevrolet and Cadillac brands -- could be affected, sources told The Journal. That could mean bad news for Pontiac, Buick and Saturn. And the company could sell Saab, the Swedish automaker. GM bought 51% of the company in 1990 and the rest in 2000.

The problem is that GM has spent billions developing new models for its domestic brands but isn't attracting buyers. Saab sold 35,000 cars in the United States last year. By contrast, Honda (HMC, news, msgs) sells that many Accord sedans in a month.

GM hit a 54-year low of $9.98 on Thursday after a Merrill Lynch analyst suggested the company faced such deep problems that bankruptcy was a possibility.

NBC Universal-led group to buy the Weather Channel

In one of the largest leveraged buyouts this year, General Electric's (GE, news, msgs) NBC Universal and two financial partners will buy the Weather Channel and its related businesses for a price that people familiar with the situation pegged at nearly $3.5 billion.

The agreement comes after a long and challenging auction; several bidders have fallen by the wayside and the price has fallen below the $5 billion that owner Landmark Communications originally hoped the channel might fetch.

NBC Universal ultimately won out by bringing two partners on board, Bain Capital and Blackstone Group (BX, news, msgs). Terms of the deal weren't officially disclosed, but people familiar with the situation said the trio will hold roughly equal stakes in the Weather Channel.

Despite its high visibility -- nearly every cable-television home in the U.S. receives the Weather Channel -- the difficulty of the sale speaks to how depressed media assets have become, as well as highlighting the challenges of current market conditions.

GE shares were up 0.7% to $27.10; Blackstone was down 2.7% to $16.77. GE shares are down 27% this year. Blackstone is down 53% since it went public in June 2007.

InBev wants to remove Anheuser-Busch board

Belgian-Brazilian brewer InBev (BE:INB, news, msgs) raised the pressure on top managers at Anheuser-Busch (BUD, news, msgs) today by moving to oust the U.S. brewer's board.

InBev filed a consent solicitation statement with the U.S. Securities and Exchange Commission seeking to remove each member of the board of directors.

A consent solicitation is a request to the shareholders for the consent of a material change within the company. If the majority of stakeholders consent, then the issuer can go ahead with the changes.

Anheuser-Busch was up 7 cents to $61.74.

InBev, the Belgium-based maker of Stella Artois and Labatt Blue, said the move would give Anheuser-Busch shareholders an opportunity to have a direct say in the proposed merger of InBev and Anheuser-Busch.

InBev filed to replace the Anheuser-Busch board with its own list of directors, including Adolphus Busch IV -- the uncle of the Anheuser-Busch CEO August Busch IV -- as well as James Healey, former senior financial chief of Nabisco Group Holding, and former Pfizer (PFE, news, msgs) CEO Henry McKinnell.

The presence of Adolphus Busch IV, named for the founder of Anheuser-Busch, in the competing slate signals a rift within the Busch family. Indeed, Adolphus Busch IV sent a letter to the company's board on June 20 arguing that the $65-a-share offer was better for shareholders and offered the chance for Anheuser-Busch to compete globally.

Biggest LBO still on track

Canadian phone company BCE Inc. (BCE, news, msgs), the parent of Bell Canada, struck a compromise with its private-equity buyers and their lenders, keeping the world's largest leveraged buyout on track and giving a lift to the moribund takeover market.

A group led by Ontario Teachers' Pension Plan will close the C$52 billion ($51 billion U.S.) purchase by Dec. 11, BCE said Friday. The three-month delay gives the banks more time to sell debt used to finance the LBO, while a decision by BCE not to pay common stock dividends effectively lowers the buyers' costs by more than C$900 million.

BCE shares were up 11% to $38.65 today.

Merrill expected to sell Bloomberg, BlackRock stakes

Investment house Merrill Lynch (MER, news, msgs), already reeling from the subprime mortgage crisis and seriously disrupted financial markets, is getting ready to sell stakes in BlackRock, the money-management company, and information provider Bloomberg LP, as the Wall Street firm scrambles to raise cash to make up for $6 billion in coming write-downs, say people familiar with the matter.

Merrill is likely to seek about $5 billion for its 20% stake in Bloomberg, founded by New York City Mayor Michael Bloomberg. The financial information service has the right of first refusal over the stake sale, which means it could be difficult to attract rival buyers.

Merrill, which bought the stake in Bloomberg years ago, will make billions off the sale, subject to taxes. Merrill and Bloomberg declined comment.

Merrill also is expected to sell a part of its stake in BlackRock, the money manager in which it owns a 49% stake -- currently valued at more than $12 billion. Merrill would maintain a strategic alliance with the firm.

Merrill Lynch shares are down 43% this year after falling another 42% in 2007. The stock was down 2.4% to $30.36.

Store closings hurt strip-mall owners

U.S. store closings and cutbacks turned the second quarter into the worst in 30 years for strip-mall owners, as budget-conscious consumers flocked to low-cost warehouse-style grocery centers, according to a report by real estate research firm Reis.

Strip malls, which are usually anchored by grocery or drug stores, saw average vacancies spike 0.5 percentage points to 8.2%, a level unseen since 1995, according to the report released today.

Vacancies at regional malls rose 0.4 percentage points to 6.3%, the highest level since the first quarter of 2002, according to the preliminary results.

"They definitely came up weaker than our expectations and we've been pretty bearish on our outlook for retail for some time," Reis Chief Economist Sam Chandan said. "In the market in general there have been a lot of store closings."

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

	Mon.	Thur.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.775%	1.810%	-0.035	4.11%	-43.47%
5-year Treasury note yield	3.219%	3.270%	-0.051	-3.65%	-6.83%
10-year Treasury note yield	3.930%	3.973%	-0.043	-1.23%	-2.60%
30-year Treasury bond yield	4.504%	4.531%	-0.027	-0.60%	1.01%
Currencies
U.S. Dollar Index	72.970	72.990	-0.020	0.23%	-4.86%
British pound in dollars	$1.9771	$1.9833	-0.0063	-0.81%	-0.61%
Dollar in British pounds	£0.5058	£0.5042	0.0016	0.82%	0.62%
Euro in dollars	$1.5733	$1.5704	0.0030	-0.11%	7.65%
Dollar in euros	€ 0.6356	€ 0.6368	-0.0012	0.11%	-7.10%
Dollar in yen	107.14	106.77	0.37	0.89%	-4.21%
Canadian dollar in U.S. dollars	$0.983	$0.982	$0.0016	0.36%	-0.95%
U.S. dollar in Canadian dollars	$1.018	$1.018	-$0.0009	-0.34%	0.98%
Commodities
Gold	$928.80	$933.60	-$4.80	0.05%	10.84%
Copper	$3.8490	$3.9490	-$0.10	-0.86%	26.57%
Silver	$17.9200	$18.3700	-$0.45	2.34%	20.11%
Corn	$7.1650	$7.4600	-$0.30	-1.14%	57.30%
Crude oil (NYMEX) (per barrel)	$141.37	$145.29	-$3.92	0.98%	47.29%