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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 |
President Bush's decision Friday to loan $17.4 billion to troubled General Motors (GM, news, msgs) and Chrysler Group may have been the political equivalent of a punt. No president wants to be known as the man who killed the U.S. auto industry.
But if the move enraged conservatives -- and it did -- it could actually set stocks up for a rally in January.
Wall Street desperately wants to see action to boost the slumping economy. Ensuring that the automakers, including Ford Motor (F, news, msgs), won't collapse in the next few weeks means that a stimulus package from President-elect Obama has a decent chance of improving the domestic mood about the economy.
Stocks finished Friday basically flat, even as the price of crude oil fell to its lowest level since April 2004. The Dow Jones industrials closed down 26 points to 8,579. The Standard & Poor's 500 Index was up 3 points to 888 and ended the week up 0.9%.
The Nasdaq Composite Index, however, gained 12 points to 1,564, thanks largely to strength in Research In Motion (RIMM, news, msgs) and Oracle (ORCL, news, msgs).
GM was the Dow leader, up 22.7% to $4.49; Ford was up 3.9% to $2.95.
The Dow finished the week down 0.7%. The S&P 500 was up 0.6%, and the Nasdaq rose 1.4%. For the year, the picture remains dreary, with the Dow, S&P 500 and Nasdaq down 35%, 40% and 41%, respectively.
There's still plenty of volatility in U.S. stocks. The Dow jumped 360 points on Tuesday thanks to the Federal Reserve's historic decision to cut its short-term rate effectively to zero. It lost 219 points on Thursday.
But trading seems to have settled into a range: 8,000 to 9,000 on the Dow, 800 to 900 on the S&P 500 and 1,400 to 1,600 on the Nasdaq.
This is probably due to the emergence of two big engines of support: the expected Obama stimulus package and the Federal Reserve's rate decision.
It would be foolish to presume that the range-bound trading means a bottom has been reached. But the range is now three months old -- the longest such stretch for the major indexes this year.
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Telecoms and techs lead the market
Telecom stocks, thanks to Research In Motion's report, were the market leaders, with AT&T (T, news, msgs) up 1.2% to $28.04. But Verizon Communications (VZ, news, msgs) was off 0.3% to $33.19.Crude oil for January fell again Friday, closing down 6.5% to $33.87 a barrel after falling nearly 10% on Thursday.
The January contract expired Friday, however, and last-minute selling to square positions may have exaggerated the price drop. The January contract dropped 27% on the week and was off 38% on the month.
The February contract closed at $42.36 a barrel, up 69 cents from Thursday but down 13.8% on the week. Weather forecasts are for cold weather across much of the country over the next week. Prices for heating oil were higher Friday.
The drop in January oil prices pulled ExxonMobil (XOM, news, msgs) and Chevron (CVX, news, msgs) lower. The Dow components were off 2.6% to $75.02 and 3% to $70.85, respectively. They subtracted 33 points from the blue-chip index.
Seventeen of the 30 Dow stocks were lower on the day, with Citigroup (C, news, msgs) the laggard, down 5.5% to $7.02, thanks to a downgrade of 12 big financial stocks.
But 299 S&P 500 stocks were higher, led by GM, along with 62 stocks in the Nasdaq-100 index ($NDX.X). The index was up 13 points, or 1%, to 1,217, with Research In Motion and Oracle contributing nearly 6 points to the gain.
| Close for week | Wk. ago close | % chg. | YTD. chg. | |
|---|---|---|---|---|
Dow Jones industrials | 8,579.11 | 8,629.68 | -0.59% | -35.32% |
S&P 500 | 887.88 | 879.73 | 0.93% | -39.53% |
Nasdaq Composite | 1,564.32 | 1,540.72 | 1.53% | -41.02% |
Russell 2000 | 486.26 | 468.43 | 3.81% | -36.52% |
Crude oil per barrel | $33.87 | $46.28 | -26.82% | -64.71% |
10-yr. Treasury yield | 2.13% | 2.59% | -0.46% | -47.19% |
Gold per troy ounce | $837.40 | $820.50 | 2.06% | -0.07% |
A March deadline looms for automakers
Under President Bush's program, GM and Chrysler are getting $13.4 billion in bridge loans and another $4 billion -- contingent on the companies' ability to demonstrate their financial viability by March 31. If they aren't able to do so, the loans will be called, with the funds returned.The deadline is not hard, however, a fact that many Republicans were quick to pounce on.
"It is important that the date-specific requirements on all the stakeholders be enforced," an annoyed Sen. Mitch McConnell, R-Kentucky, who did not support the administration move, told Politico.com.
But the president said, "In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action."
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The money for the aid for GM and Chrysler will come from the $700 billion Troubled Asset Relief Program, the president said, and the automakers will likely get an additional $4 billion in February.
GM responded to the announcement with appreciation, noting that the company knows it has "much work" to do to accomplish its turnaround plan. But CEO Rick Wagoner also acknowledged there was little negotiating on the deal. The administration's offer arrived at 2:30 a.m. ET. Wagoner signed off on it at 4:30 a.m. ET.
One sticking point: Unions and management would have to have compensation and work rules in place by Dec. 31, 2009, that will make the U.S. companies competitive with foreign automakers. The requirements could be modified by negotiations with the union and debt holders.
United Auto Workers president Ron Gettelfinger said the union was disappointed that Bush added "unfair conditions singling out workers." The union said it would work to get the terms modified.
- Top stocks blog: Bush bails out Detroit
The loan terms represent a major challenge for the automakers, Maryann Keller, an independent auto analyst and consultant in Greenwich, Conn., told Bloomberg Television.
"The restructuring they’re going to have to go through will be huge," Keller said. "I can’t see a way for GM to operate properly with the capital structure they have."
On Wednesday, Chrysler announced plans to halt production for a month, in an effort to save costs, while Ford tacked an additional two weeks onto its scheduled production halt. Ford has said that its cash position is okay -- for now.
The auto deal means the government will need more money for the TARP program.
Treasury Secretary Hank Paulson Friday said that Congress should release the remaining $350 billion of the TARP financial rescue package.
The $17.4 billion the Treasury has now committed to GM and Chrysler means that the government has fully "allocated" the first $350 billion of TARP funds, Paulson said.
A rotten year for all automakers
While critics of the U.S. manufacturers say their business models are broken, the deepening recession and severely tightening credit conditions have hurt any car maker doing business in the U.S.November sales suggested an industry that could only sell about 10 million vehicles, down 37% from a year earlier.
General Motors, Ford, Chrysler, Toyota (TM, news, msgs), Honda (HMC, news, msgs) and Nissan (NSANY, news, msgs) saw sales fall at least 30% in November from a year earlier, according to research firm Autodata, and December doesn't look much better.
Toyota was forced to put a new plant in Tupelo, Miss., on hold and the company is expected to report its first operating loss since 1949. Honda has halted sponsorship of a Formula 1 racing team.
| 2008 YTD | 2007 YTD | Chg. | |
|---|---|---|---|
General Motors | 2,734,789 | 3,502,775 | -21.9% |
Ford Motor | 1,842,641 | 2,288,857 | -19.5% |
Chrysler | 1,363,309 | 1,885,227 | -27.7% |
Toyota | 2,075,711 | 2,396,426 | -13.4% |
Honda | 1,342,680 | 1,419,750 | -5.4% |
Nissan | 889,248 | 978,683 | -9.1% |
Volkswagen | 288,847 | 299,537 | -3.6% |
Mazda | 245,984 | 271,177 | -9.3% |
Hyundai | 377,705 | 420,522 | -10.2% |
BMW | 281,942 | 302,372 | -6.8% |
Source: Autodata
Street likes Oracle, RIM and Palm
Oracle said late Thursday fiscal-second-quarter profit slipped to $1.27 billion from $1.3 billion in the same quarter last year.On a per-share basis, the software maker earned 25 cents; excluding items, the results were 34 cents a share, a penny shy of the consensus estimate.
Sales of new software licenses, a measure that indicates new business for Oracle, fell 3% to $1.6 billion.
Oracle shares were up 7% to $17.78.
Research In Motion had a rosier report for investors after Thursday's close, and shares were up 11.4% to $42.83.
The BlackBerry maker said fiscal-third-quarter earnings rose 7% to $396.3 million, or 69 cents a share. Excluding items, RIM earned 83 cents for the quarter.
Research In Motion is banking on two new products, the BlackBerry Bold and the BlackBerry Storm, to boost holiday sales.
The company said it expects revenue of between $3.3 billion and $3.5 billion for the current quarter, with earnings between 83 cents a share and 91 cents.
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"I think that, overall, people will take this as a positive given how much the stock has dropped of late," CIBC World Markets analyst Todd Coupland told MarketWatch.com. Research In Motion has fallen 71% since its June 9 peak.
Research In Motion rival Palm (PALM, news, msgs) had a much worse quarter.
The handheld-device maker late Thursday posted a bigger-than-expected fiscal-second-quarter loss of $506.2 million, or $4.64 a share. A year ago, Palm lost $9.63 million, or 9 cents a share.
On an adjusted basis, Palm lost 73 cents a share -- worse than the consensus estimate for a loss of 38 cents.
Still, Palm shares were up 13.2% to $2.49.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
Crude oil (NYMEX) (per barrel) | $33.87 | $36.22 | -$2.35 | -37.78% | -64.71% |
Heating oil (per gallon) | $1.3920 | $1.3729 | $0.0191 | -16.83% | -47.46% |
Natural gas (per million BTU) | $5.3340 | $5.5480 | -$0.2140 | -18.06% | -28.72% |
Unleaded gasoline (per gallon) | $0.9693 | $0.9629 | $0.0064 | -15.43% | -61.08% |
S&P hits banks with downgrades
Credit ratings company Standard & Poor's Friday lowered its ratings on a dozen major U.S. and European financial companies. Most of the stocks in the group were lower."The downgrades and revised outlooks reflect our view of the significant pressure on large, complex financial institutions' future performance due to increasing bank industry risk and the deepening global economic slowdown," S&P said in a statement.
S&P downgraded credit ratings for 11 financial giants: Bank of America (BAC, news, msgs), Barclays (BCS, news, msgs), Citigroup (C, news, msgs), Credit Suisse (CS, news, msgs), Deutsche Bank (DB, news, msgs), Goldman Sachs (GS, news, msgs), JPMorgan Chase (JPM, news, msgs), Morgan Stanley (MS, news, msgs), Royal Bank of Scotland (RBS, news, msgs), UBS (UBS, news, msgs) and Wells Fargo (WFC, news, msgs).
S&P also cut its outlook for HSBC (HBC, news, msgs).
Shares of six of the 12 institutions were lower Friday, with Royal Bank of Scotland and Credit Suisse the biggest losers, down 4.6% to $13.21 and 5% to $26.06, respectively. Citigroup was the worst performer of the group, down 5.5% to $7.02.
The best performer of the group: Barclays, up 3.6% to $8.75. The S&P Banking Index ($BIX.X) was off 0.9% at 135.
JP Morgan Chase, Citigroup execs give up bonuses
Top executives at JPMorgan Chase and Citigroup have agreed to forgo their bonuses, The New York Times reported Friday.JPMorgan CEO Jamie Dimon and Citigroup Vice Chairman Robert Rubin have agreed to go without bonuses this year: Both banks have seen steep losses and are receiving government relief funding.
Executives at many banks and financial companies have given up bonuses this year amid the market turmoil and huge losses.
Andrew Rosenbaum contributed to this report.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
Treasurys | |||||
13-week Treasury bill | 0.005% | 0.005% | 0.000 | -75.00% | -99.84% |
5-year Treasury note yield | 1.352% | 1.266% | 0.086 | -30.45% | -60.87% |
10-year Treasury note yield | 2.131% | 2.074% | 0.057 | -27.93% | -47.19% |
30-year Treasury bond yield | 2.562% | 2.546% | 0.016 | -26.53% | -42.54% |
Currencies | |||||
U.S. Dollar Index | 82.435 | 80.615 | 1.820 | -4.92% | 7.48% |
British pound in dollars | $1.4934 | $1.5042 | -0.0108 | -2.93% | -24.93% |
Dollar in British pounds | £0.6696 | £0.6648 | 0.0048 | 3.02% | 33.20% |
Euro in dollars | $1.3918 | $1.4271 | -0.0354 | 9.65% | -4.77% |
Dollar in euros | € 0.7185 | € 0.7007 | 0.0178 | -8.80% | 5.01% |
Dollar in yen | 89.43 | 89.52 | -0.09 | -6.44% | -20.04% |
Canadian dollar in U.S. dollars | $0.823 | $0.829 | -$0.0053 | 1.91% | -17.08% |
U.S. dollar in Canadian dollars | $1.215 | $1.207 | $0.0082 | -1.87% | 20.60% |
Commodities | |||||
Gold | $837.40 | $860.60 | -$23.20 | 2.25% | -0.07% |
Copper | $1.3265 | $1.3015 | $0.02 | -19.58% | -56.38% |
Silver | $10.8500 | $11.1200 | -$0.27 | 6.06% | -27.28% |
Corn | $3.8075 | $3.8950 | -$0.09 | 8.94% | -16.41% |
Crude oil (NYMEX) (per barrel) | $33.87 | $36.22 | -$2.35 | -37.78% | -64.71% |
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