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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.665834 |
| Euro to US Dollar | 1.510346 |
| Japanese Yen to US Dollar | 0.011562 |
| Canadian Dollar to US Dollar | 0.952472 |
Stocks finished the week with a big gain as crude oil had its biggest one-day drop in percentage terms since 2004 and financial stocks rallied.
The Dow Jones industrials closed up 198 points, or 1.7%, on Friday to 11,628. The Standard & Poor's 500 Index rose 14 points, or 1.1%, to 1,292, and the Nasdaq Composite Index added 34 points, or 1.4%, to 2,415.
The gains for the three indexes were their best since Aug. 8. For the week, the Dow finished with a small loss, because of 100-plus-point losses on Monday and Tuesday. The S&P 500 was off 0.5%, and the Nasdaq Composite was off 1.5%.
Crude in New York closed down $5.69, or 4.4%, to $114.59 a barrel. The decline took back Thursday's gain of $5.62 to $121.18. The dollar decline in crude was its largest since Jan. 17, 1991, when it fell $10.56 a barrel to $21.48.
Crude is now down more than 22% from its intraday high of $147.27 on July 11, and the retail price of gasoline now averages $3.692 a gallon, according to AAA's Fuel Gauge Report released Friday. That's down 10.3% from a high of $4.114 on July 17.
The U.S. dollar was the biggs reason that oil dropped. The greenback was up more than 1% against the British pound and the Japanese yen and 0.5% against the euro.
Berkshire Hathaway's (BRK.A, news, msgs) Warren Buffett told CNBC Friday that he is no longer betting against the dollar. He also said he thought U.S. stocks were more attractively priced.
- Top Stocks Blog: Berkshire Hathaway won't bet against dollar
The bullish close for stocks -- the market's third daily gain in a row -- should put traders and investors in a good mood for next week, but the market faces some strong headwinds, including important reports on existing- and new-home sales on Monday and Tuesday.
In addition, the Federal Reserve will release the minutes of the Federal Open Market Committee's Aug. 5 meeting, and the government will release a revision of its estimates for second-quarter gross domestic product.
However, trading volume is likely to be even lighter than this week because so many money managers and traders will disappear ahead of the Labor Day weekend. New York Stock Exchange volume was 888 million shares on Friday; 1.6 billion is normal. Nasdaq volume was 1.4 billion shares; 2 billion is normal.
| Close for week | Wk. ago close | % chg. | YTD. chg. | |
|---|---|---|---|---|
| Dow Jones industrials | 11,628.06 | 11,659.90 | -0.27% | -12.34% |
| S&P 500 | 1,292.20 | 1,298.20 | -0.46% | -12.00% |
| Nasdaq Composite | 2,414.71 | 2,452.52 | -1.54% | -8.96% |
| Russell 2000 | 737.60 | 753.37 | -2.09% | -3.71% |
| Crude oil per barrel | $114.59 | $113.77 | 0.72% | 19.39% |
| 10-yr. Treasury yield | 3.87% | 3.85% | 0.39% | -4.16% |
| Gold per troy ounce | $833.50 | $792.10 | 5.23% | -0.54% |
Financials shine, add fuel to rally
While crude was the biggest reason for Friday's rally, banks and investment banks were sharply higher on speculation that Lehman Bros. (LEH, news, msgs) may be a takeover target. One purported bidder was the state-owned Korea Development Bank.In addition, four of the five financial stocks in the Dow -- JPMorgan Chase (JPM, news, msgs), Bank of America (BAC, news, msgs), Citigroup (C, news, msgs) and American Express (AXP, news, msgs) -- were the leaders of the blue chip index.
Twenty-eight of the 30 Dow stocks were higher, led by General Motors (GM, news, msgs), up 5.2% to $10.44.
ExxonMobil (XOM, news, msgs) and Chevron (CVX, news, msgs), the Dow's energy components, were the laggards, down 0.1% to $80.30 and 0.5% to $88.10, respectively.
Banking company KeyCorp (KEY, news, msgs) was the S&P 500 leader with an 8.9% gain to $11.47.
Freddie Mac (FRE, news, msgs) was the S&P 500 loser, down 11.1% to $2.81 as speculation grew that the Treasury Department may move to bolster the capital of Freddie Mac and rival Fannie Mae (FNM, news, msgs).
Meanwhile, the Select Sector SPDR-Energy (XLE, news, msgs) exchange-traded fund was the worst performing ETF of the 10 that track the sectors of the S&P 500. It was down 2.3% to $74.62. Apache (APA, news, msgs) was down 3.7% to $111.57. Schlumberger (SLB, news, msgs) was off 1.7% to $97.26.
Airline shares rallied strongly. Continental Airlines (CAL, news, msgs) was up 10.6% to $15.86; American Airlines parent AMR Corp. (AMR, news, msgs) was up 8.7% to $10.52.
Yahoo (YHOO, news, msgs) was up 2.2% to $19.53. The stock closed Wednesday and Thursday below $19.18, its closing price on Jan. 31, the day before Microsoft (MSFT, news, msgs) launched its unsuccessful $44.6 billion bid for the company.
- Top Stocks blog: Yahoo shares are back to pre-Microsoft levels
Will Washington give the automakers a lifeline?
Shares of Ford Motor (F, news, msgs) moved up 1.1% to $4.47 in tandem with General Motors shares on reports that GM, Ford and privately held Chrysler will launch a campaign for up to $50 billion in government loans to help them survive one of their darkest periods.The Detroit Free-Press reported that the campaign will kick off after Labor Day and will likely face heavy opposition.
In an editorial Thursday, The Wall Street Journal branded the idea as a sop to unions in an election year. "American taxpayers can't save everyone," The Editorial said. "The only way to stop this parade of supplicants is to start saying no -- and Detroit is as good a place as any."
The automakers believe that getting the loans is their top priority for now and will accelerate the development and production of fuel-efficient vehicles that could reduce U.S. dependence on foreign oil.
"The market has shifted dramatically and the companies are transforming to keep pace," said Ziad Ojakli, Ford's group vice president for government and community relations. "But what we need to do to complete the transformation is to have access to capital."
If successful, the plan would dwarf the Chrysler bailout of 1979, when the government backed $1.2 billion in loans to keep Chrysler out of bankruptcy, and the $15 billion aid package for airlines following the Sept. 11, 2001, terror attacks.
Bernanke bets inflation will ease
The Fed chairman continues to believe that a higher dollar will help commodity prices ease later this year and early in 2009.He needs inflation to moderate, he conceded in his Jackson Hole speech, because the credit crunch that erupted when housing collapsed last summer is so strong. "The financial storm that reached gale force some weeks before our last meeting here in Jackson Hole has not yet subsided, and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment."
Bernanke said that as the central bank deals with the current turmoil, officials must also consider how to overhaul regulations to minimize the risk of future crises. He reiterated his endorsement of the Treasury getting power to resolve failing investment banks, and he signaled a need for a new, comprehensive supervision of systemic risk.
The most important part of his speech appeared to be a call on Congress to craft legislation that would define when assistance to non-bank institutions could be made available.
A legally-prescribed process for intervening with institutions such as Bear Stearns, which collapsed last winter, Bernanke said, would let the Fed "resolve failing firms in a way that is orderly but also wipes out equity holders and haircuts some creditors." In other words, the Fed doesn't want to bail out all creditors.
Warren Buffett, in his CNBC interview, said the U.S. economic slowdown will extend into 2009 and be deeper than many people think.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $114.59 | $113.01 | -$6.59 | -7.65% | 19.39% |
| Heating oil (per gallon) | $3.1311 | $3.3006 | -$0.1695 | -8.95% | 18.18% |
| Natural gas (per million BTU) | $7.8430 | $8.2520 | -$0.4090 | -13.99% | 4.81% |
| Unleaded gasoline (per gallon) | $2.8686 | $3.0452 | -$0.1766 | -5.89% | 15.17% |
Is Lehman now a takeover target?
That's what Wall Street thinks, after a spokesman for the Korea Development Bank said the bank might try to acquire Lehman Bros.A Reuters report quoted a spokesman saying that the Korean bank is open to possibilities, including an acquisition of Lehman, the smallest of the New York investment banks.
But an outright takeover by the state-owned lender is unlikely, Rupert Della-Porta, chief operating officer of research firm Atlantic Equities in London, told Bloomberg News.
"It would be too big an acquisition for them," Della-Porta said. Plus, Lehman CEO Richard Fuld "has made it very clear that he doesn't want to sell the operation. They have many other options before they would consider something like this one."
Lehman, the largest underwriter of mortgage bonds before the subprime market collapsed, lost the confidence of investors in the past year as it struggles to pare debt holdings. The bank has reported write-downs and credit losses of $8.2 billion in the past 12 months, according to data compiled by Bloomberg.
Verizon may partner with Google on mobile search
Verizon Communications (VZ, news, msgs) shares moved 2.1% higher to $35.29 Friday after The Wall Street Journal said the telecom company is close to an agreement with Google (GOOG, news, msgs) on a wide-ranging partnership.The deal, if it happens, would be a much-needed jolt for the anemic mobile search business.
It's the latest sign that telecom companies are finally conceding that their homegrown search services have stalled -- and that they need help from the Internet's big guns.
A deal would make Google the default search provider on Verizon devices and give it a share of ad revenue, the newspaper said.
It's aimed at dramatically simplifying what's now a confusing set of search options for cell phone users. Friday, users have to go to different places to look up services such as ringtones, restaurants and Web pages. Verizon wants to create a new search platform that would be a one-stop shop.
Google rose 0.8% to $490.15.
Freddie Mac is looking for new capital
Freddie Mac executives are trying to convince private-equity firms and other investors about the possibility of buying new common or preferred shares in the mortgage company.But that effort is running up against what may be an insurmountable hurdle: Many investors fear any money they invest now in Freddie or rival Fannie Mae will be lost later if the U.S. Treasury bails out the companies through a purchase of equity in them.
Fannie Mae and Freddie Mac are the nation's largest suppliers of mortgage capital.
Investors believe such a purchase would likely involve terms that would wipe out the value of previously issued shares.
While Freddie was down sharply, Fannie Mae finished up 3.1% to $5.
Fannie Mae raised $7.4 billion in May but has said it may need to tap the market again, depending on how large losses turn out to be in coming quarters.
Gap earnings cheer; Alpharma shares jump
Gap (GPS, news, msgs) climbed 4.6% to $19.88, its highest price since April and led gains by retailers. The largest U.S. clothing chain said second-quarter profit rose 51%, beating estimates, after discounting fewer jeans and T- shirts.Shares of drug maker Alpharma (ALO, news, msgs) jumped 43.6% to $34.51. Fellow pharmaceutical maker King Pharmaceuticals (KG, news, msgs) disclosed Alpharma rejected a takeover offer of $1.43 billion, or $33 a share, earlier in August.
King Pharmaceuticals jumped 8.5% to $12.19, second-best among S&P 500 stocks.
AnnTaylor Stores' (ANN, news, msgs) fiscal second-quarter net income fell 7.7% to $29.3 million on sales weakness and restructuring costs, though margins improved as the apparel retailer held inventories and costs in check. The company also cut its sales outlook for the year. But the stock was up 1% to $24.54.
Boeing may walk away from tanker contract
Boeing (BA, news, msgs) may bail out of its effort to win a $40 billion refueling-tanker contract for the Air Force unless the Pentagon agrees to give it six months to submit a new bid, the Wall Street Journal reported.The threat of leaving the government with no competition at all for a high-profile defense contract is perhaps the biggest weapon Boeing has in the latest chapter of the long-running tanker saga.
Jim Albaugh, head of Boeing's defense unit, told the newspaper that Boeing has taken a hard look at the latest requirements and concluded that they call for a plane that can haul more fuel than the plane Boeing originally bid.
The Journal said that the government is leaning toward adding another 15 days for Boeing and rival Northrop Grumman (NOC, news, msgs) to respond to the latest request for proposals, giving the competitors a total of 60 days to submit new bids. Boeing says it needs an additional four months to prepare a competitive proposal.
Boeing was up 3.2% to $65.55 Friday. Northrop Grumman was up 0.9% to $70.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.665% | 1.685% | -0.020 | 1.83% | -46.97% |
| 5-year Treasury note yield | 3.132% | 3.067% | 0.065 | -4.10% | -9.35% |
| 10-year Treasury note yield | 3.867% | 3.838% | 0.029 | -2.81% | -4.16% |
| 30-year Treasury bond yield | 4.463% | 4.465% | -0.002 | -3.04% | 0.09% |
| Currencies | |||||
| U.S. Dollar Index | 76.895 | 76.330 | 0.565 | 4.73% | 0.26% |
| British pound in dollars | $1.8529 | $1.8786 | -0.0258 | -6.56% | -6.86% |
| Dollar in British pounds | £0.5397 | £0.5323 | 0.0074 | 7.02% | 7.36% |
| Euro in dollars | $1.4789 | $1.4901 | -0.0112 | -5.21% | 1.18% |
| Dollar in euros | € 0.6762 | € 0.6711 | 0.0051 | 5.49% | -1.17% |
| Dollar in yen | 109.97 | 108.45 | 1.52 | 1.94% | -1.68% |
| Canadian dollar in U.S. dollars | $0.955 | $0.958 | -$0.0027 | -2.25% | -3.78% |
| U.S. dollar in Canadian dollars | $1.047 | $1.044 | $0.0029 | 2.31% | 3.86% |
| Commodities | |||||
| Gold | $833.50 | $839.00 | -$5.50 | -9.67% | -0.54% |
| Copper | $3.4595 | $3.5385 | -$0.08 | -5.52% | 13.76% |
| Silver | $13.5900 | $13.8430 | -$0.25 | -23.61% | -8.91% |
| Corn | $5.8650 | $5.8650 | -$0.11 | -0.17% | 28.76% |
| Crude oil (NYMEX) (per barrel) | $114.59 | $121.18 | -$6.59 | -7.65% | 19.39% |
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