Microsoft is banking on Windows 7 to breathe new life into a PC world where most computer users are running XP — an operating system that was released in the early days of the Bush administration.
Experts expect that PC users will change their operating system for the first time in about eight years when Microsoft (MSFT, Fortune 500) launches Windows 7 on Oct. 22.
Microsoft’s last operating system, Windows Vista, was a disaster when it was released in 2007. Vista was plagued by bugs, software incompatibilities, sluggishness and annoying security alerts. The episode nearly destroyed the tech giant’s reputation with consumers.
"The stakes for Microsoft are astronomically high after the Vista debacle," said Scott Anthony, managing director of Innosight Ventures, a venture capital and consulting firm. "There is a lot of hunger for computing power around the world, and this release will be a real test for Microsoft."
Positive reviews for Windows 7 have been pouring in. Computer experts say that Windows 7 is good — if not perfect — and has a shot at eventually usurping XP as the world’s most prevalent operating system.
Right now 71.5% of PCs are still running XP, according to OS market share tracker netmarketshare.com, while 18.6% of PCs are running Windows Vista.
"There was lots of negativity around Vista, and Microsoft lost a lot of goodwill with its customers," said Ken Allen, a portfolio manager at T. Rowe Price who manages a tech fund that includes Microsoft as one of its holdings.
Microsoft has aggressively been rolling out products and services (think Bing and Zune HD) to boost its sales, which have declined in the previous two quarters. Its third quarter ended March 31 marked the first time sales fell in Microsoft’s 23-year history as a public company.
"The ‘bad will’ that Microsoft engendered could be reversed if Windows 7 is well received," said Allen.
It appears Microsoft is on the right road. Demand for new computers is starting to heat up again, and many users are looking for an operating system upgrade. Windows 7’s release coincides with holiday season shopping. With the economy showing signs of recovery, consumers may be more willing to loosen their purse strings.
What XP users can expect: Windows 7 is faster, more secure and easier to network with other computers than XP. Microsoft has also added a number of features to simplify tasks.
For instance, Windows 7 unveils a more efficient task bar allowing users to switch more easily between programs than the current Alt-Tab function in Windows XP. It also allows users to preview programs by hovering over icons on the taskbar.
Users will also be able to simply shake their mouse to unclutter their desktop rather than having to minimize multiple windows.
"Windows 7 is a far superior product than previous versions, and no one will be disappointed if they use it," said Vishal Dhar, co-founder of iYogi, a global tech support company for consumers. "At the right price point, [consumers] will upgrade for the new features."
Dhar said people used to XP will be most pleased with Windows 7’s video editing capabilities, which XP did not accommodate, and speed. He also said the $119 upgrade price is likely low enough to lure people to upgrade.
But there’s one hitch and it’s a biggie: upgrading is far from easy. XP users who choose to upgrade their computers to Windows 7 will have to either wipe their hard drives or re-install all of their applications. That means finding the product keys and old CDs. As a result, some experts say XP users interested in Windows 7 are better off just buying a new computer.
Slow boost to PC sales: While many experts expect a brief pop in PC sales from Windows 7, most anticipate the bulk of those sales to occur next year.
"Adoption of Windows 7 may take a while longer than some expect," said Scott Anthony, managing director of Innosight Ventures, a venture capital and consulting firm. "A lot of consumers are going to wait because they heard about people getting burned on Windows Vista."
Tech analysts also expect businesses to delay adoption of Windows 7 until next year.
"We don’t expect the release of Windows 7 to significantly influence PC demand at year-end," said George Shiffler, analyst at Gartner. "At best, Windows 7 may generate a modest bump in home demand and possibly some added demand among small businesses."
Shiffler said he doesn’t expect most larger businesses to start switching to Windows 7 en masse until late 2010, and believes vendors have overestimated how many people will be interested in the product right off the bat.
Even Microsoft CEO Steve Ballmer said earlier this month that the rise in PC sales as a result of 7’s release "will probably not be huge."
Experts say it will be difficult to judge the success of Windows 7 for a year or maybe more, but what’s clear is that Microsoft has a lot riding on the latest update to the world’s favorite operating system.
Stocks dipped Tuesday as a stronger dollar and some disappointment about DuPont and Coca-Cola’s results gave investors a reason to retreat from the recent rally.
A weaker-than-expected housing market report added to the downward pressure.
The Dow Jones industrial average (INDU) lost 50 points, or 0.5%, according to early tallies, after ending the previous session at the highest finish since Oct. 3, 2008.
The S&P 500 (SPX) index lost 7 points, or 0.6%, after ending Monday’s session at the highest point since Oct. 2, 2008. The Nasdaq composite (COMP) fell 13 points, or 0.6%, after ending the previous session at the highest point since Sept. 26, 2008.
After the close, Yahoo (YHOO, Fortune 500) reported higher quarterly earnings that beat forecasts on weaker revenue that also beat forecasts.
Also after the close, Sun Microsystems (SUN, Fortune 500) said it was cutting 3,000 jobs related to its purchase by Oracle (ORCL, Fortune 500).
Tuesday brought quarterly results from five Dow components: DuPont, Pfizer, Coca-Cola, Caterpillar and United Technologies. Apple and Texas Instruments were among the names who reported after the closing bell Monday.
Stocks gained Monday, with the Dow reclaiming 10,000 in response to a weak dollar, higher commodity prices and some earnings optimism. But the path higher over the last week has been choppy as investors have sifted through a mix of profit reports. That choppiness put pressure on stocks Tuesday.
"I’m impressed we’ve managed to stay above 10,000 as I would have expected a bigger pullback after the last few days," said Gary Webb, CEO at Webb Financial Group.
Webb said that after better-than-expected quarterly results last week from the likes of Goldman Sachs (GS, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Intel (INTC, Fortune 500) raised investors’ expectations for the reports this week. As such, even companies that have reported strong results this week have seen a mixed stock reaction.
"When we see an economy that’s going in the right direction at a stronger pace, we’ll see a more positive reaction to the profit reports," he said.
Since bottoming at a 12-year low on March 9, the S&P 500 has risen more than 62%. But some worry that the Dow’s move above 10,000 has been a ruse and that investors should beware.
"We’ve traded up on some optimism about the global recovery and there are technical reasons why the market could keep rallying," said Brian Battle, vice president at Performance Trust Capital Partners.
However, he said that a lot of the improvement in the economy and profits is being clouded by the enormous amounts of government stimulus. "Once you remove all the stimulus, the underlying economy is not as strong."
Wednesday brings reports on crude inventories, state-by-state unemployment rates and the release of the Fed’s "beige book" report on the economy. Fed Governor Daniel Tarullo speaks about the economy in Washington D.C., starting around 1 p.m. ET.
Wells Fargo (WFC, Fortune 500) and eBay (EBAY, Fortune 500) are the biggest companies reporting quarterly results Wednesday.
Blue-chip results: DuPont (DD, Fortune 500) reported higher third-quarter earnings that topped estimates on weaker revenue that missed forecasts. The chemical maker used cost-cutting to temper the impact of weak sales and surging crude and energy costs.
Looking forward, DuPont narrowed its full-year earnings guidance to a per-share range of between $1.95 and $2.05. Shares fell 2.2%.
Coca-Cola (KO, Fortune 500) reported modestly higher third-quarter earnings that met estimates on weaker revenue that missed forecasts. The company was hit by weaker sales amid the impact of the recession.
Coke was also hurt by the comparatively strong dollar, at least versus a year ago. A stronger dollar hurts companies like Coke because the majority of its profit comes from sales overseas. Those sales then convert back to less U.S. dollars. Coke shares fell 1.3%.
Pfizer (PFE, Fortune 500) reported higher third-quarter earnings and weaker revenue, both of which surpassed analysts’ estimates 24 hour payday loan. Although the maker of Lipitor, Viagra and other drugs saw a decline in sales due to the recession, that was offset by aggressive cost-cutting. Shares fell 0.3%.
Caterpillar (CAT, Fortune 500) reported weaker quarterly earnings that topped estimates on weaker quarterly revenue that missed forecasts, due to lower sales. But the heavy-equipment maker also lifted its full-year earnings forecast to a range of $1.10 to $1.30 per share, versus its previous guidance of 95 cents per share. Caterpillar gained 3%.
United Technologies (UTX, Fortune 500) reported weaker quarterly earnings and revenue that missed estimates. Looking forward, the company said it expects earnings of $4.10 per share, in the middle of its previous guidance. UTX runs jet engine maker Pratt & Whitney, Otis elevators and other businesses. Shares were little changed.
Tech results: Late Monday, Apple (AAPL, Fortune 500) reported fiscal fourth-quarter revenue and earnings that easily beat analysts’ estimates, thanks to strong sales of Macintosh computers and iPhones.
Apple also forecast current-quarter revenue in a range of between $11.3 billion and $11.6 billion, versus the $11.4 billion analysts are forecasting. Apple forecast earnings per share of between $1.70 and $1.78 versus the $1.91 analysts’ predict.
Shares rallied as high as $204 in after-hours trading Monday, an all-time high. On Tuesday, shares gained $8.90 or 4.7% to close at $200.60 per share.
Texas Instruments (TXN, Fortune 500) also reported results after the close Monday. The chipmaker reported weaker quarterly earnings and revenue that topped estimates. Shares gained 0.6% Tuesday.
Other results: Boston Scientific (BSX, Fortune 500) reported a profit versus a year-ago loss, but results were shy of forecasts. The medical device maker also cut its full-year 2009 earnings forecast due to slower sales of defibrillators and other products.
Shares fell 15.7% in very active NYSE trading.
Economy: Housing starts rose to a 590,000 unit annual rate in September, versus a revised 587,000 in the previous month. Economists expected starts at a 610,000 unit annual rate.
Building permits, a measure of builder confidence, rose to a 573,000 unit annualized rate in September from a revised 580,000 unit annualized rate in August. Economists surveyed by Briefing.com thought starts would rose to 595,000 unit annualized rate.
The Producer Price Index (PPI), a measure of wholesale inflation. PPI slipped 0.6% in September versus forecasts for a flat reading. PPI rose 1.7% in the previous month. The core PPI, which strips out volatile food and energy prices, fell 0.1% after rising 0.2% in the previous month. Economists thought it would rise 0.1%.
World markets: Global markets were mixed. In Europe, London’s FTSE 100 lost 0.7%, France’s CAC 40 lost 0.5% and Germany’s DAX lost 0.7%. Asian markets ended lower.
Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.34% from 3.38% late Monday. Treasury prices and yields move in opposite directions.
Currency and commodities: The dollar gained versus the euro and the yen, reversing the direction after its recent slide versus a basket of currencies.
U.S. light crude oil for November delivery fell 52 cents to settle at $79.09 a barrel on the New York Mercantile Exchange, after ending the previous session at the highest level in a year.
COMEX gold for December delivery rose 50 cents to settle at $1,058.60 an ounce. Gold has surpassed records repeatedly this month due to the weak dollar and longer-term worries about inflation.
Market breadth was negative. On the New York Stock Exchange, losers topped winners two to one on volume of 1.24 billion shares. On the Nasdaq, decliners topped advancers by over two to one on volume of 2.15 billion shares.
The world’s top cellphone maker Nokia surprised investors by taking a major writedown at its struggling networks unit and revealing a fall in its smartphone sales from the previous quarter.
Nokia, battling aggressively with competitors Apple (APPL) and RIM (RIMM) , said its smartphones market share fell to 35% in July-September from 41% the previous quarter.
"Consumer demand may be showing early signs of improvement but these results show sustained pressure on smartphone margins. Apple’s iPhone is defying gravity in the high tier," said CCS Insight analyst Geoff Blaber.
Nokia booked a $1.35 billion hit from its networks unit, citing challenging market conditions, and dragging the reported group result to a loss per share of 0.15 euros compared with expectations of a 0.09 euros per share profit Nokia’s key handset unit performed slightly better than expected in the July-September quarter as consumer demand for mobile devices started to improve in many markets.
Shares in Nokia (NOK) were down 11% to $14.30 in pre-market trading.
JPMorgan Chase delivered its strongest performance since the financial crisis first took hold two years ago, as the company reported earnings on Wednesday that towered above Wall Street’s expectations.
The bank’s quarterly profits were driven largely by a strong performance in its investment banking division.
And while losses continued to climb in the consumer-related parts of its business, executives at the company suggested that they were starting to see signs of stability.
"I give them a big check mark," said Raymond James analyst Anthony Polini. "Credit quality was in line with expectations and their core [earnings] power remains intact."
JPMorgan Chase, the first in a series of big banks due to report this week, said it it earned $3.6 billion during the third quarter, or 82 cents a share.
That was far better than Wall Street was anticipating. Analysts polled by Thomson Reuters expected the company to report a profit of $2.03 billion for the quarter, or 52 cents a share.
Investors cheered the news, sending JPMorgan Chase (JPM, Fortune 500) stock nearly 4% higher in midday trading Wednesday. Shares across the the banking sector followed, as the S&P Banking Index (BIX) gained more than 2% on the news.
Banking vs. credit
Propping up the company’s latest results was JPMorgan’s investment banking business, which has experienced significant growth over the past year given the disappearance of Lehman Brothers last fall and the weakened state of peers like Citigroup (C, Fortune 500).
Profits in the division more than doubled from a year ago in the latest, climbing to $1.9 billion.
Unlike the previous quarter, when equity underwriting fees lifted the division’s results, fixed income provided a big boost this time given the boom in newly issued corporate and government debt.
That rapid shift in business, however, left many analysts wondering just how sustainable the performance of both JPMorgan’s fixed-income and broader investment banking business could be in future quarters.
"I think the easy money has been made there, no question about it," said Bill Fitzpatrick, an analyst at Optique Capital Management, which owns shares of JPMorgan.
Offsetting those numbers, however, were credit concerns, particularly within its consumer-related divisions such as its credit card business.
"While we are seeing some initial signs of consumer credit stability, we are not yet certain that this trend will continue," JPMorgan Chase CEO Jamie Dimon said in a statement.
During the quarter, the company said it added approximately another $2 billion to its consumer credit reserves, which dragged down results both within its mortgage lending and credit card businesses.
Both divisions reported widening losses compared to the second quarter of 2009.
Mike Cavanagh, JPMorgan Chase’s chief financial officer, tempered that view however, noting that there were some encouraging signs such as stabilization of early-stage delinquencies within its credit card portfolio.
He added that the company could be close to the end of adding to its loan loss reserves if the economy continues to stabilize.
Cavanaugh also delivered some encouraging news for shareholders, noting that a dividend hike was a possibility, provided that the U.S. economy doesn’t endure further weakness from here.
Earlier this year, JPMorgan Chase slashed its annual dividend nearly 87% to 20 cents a share to preserve capital. Cavanaugh suggested it may not be long before the board could raise it to 75 cents or $1 a share.
"If we are lucky that could be some time early next year," he said.
Other top-tier financial firms are slated to report their quarterly results later this week, with Citigroup (C, Fortune 500) slated to report its results Thursday while Bank of America (BAC, Fortune 500) is due up Friday.
What to do with Wall Street’s gluttonous gatekeepers?
By all accounts, the major credit rating agencies — Standard & Poor’s, Moody’s and their smaller rival Fitch — played a significant role in inflating the credit bubble. The firms raked in huge fees by blessing bonds based on mortgages of poor quality. Then Wall Street dumped the highly rated bonds on suckers around the globe.
When homowners couldn’t make their mortgage payments, the bonds turned toxic — touching off a financial sector meltdown that that torched investors everywhere.
Washington has promised reform. But leading plans under discussion would do little to address two longstanding structural problems.
First, the firms earn most of their money taking fees from bond issuers, creating a thorny conflict of interest.
Second, investors and regulators use the ratings for everything from investing decisions to capital requirements — yet the accuracy of the ratings isn’t even officially tracked, much less subject to meaningful scrutiny.
So as regulatory reform season kicks into high gear, there is little sense that serious change is imminent.
"The role of a rating agency is to provide a fair, unbiased assessment of value in order to improve the efficiency of credit markets," Jerome Fons, a former Moody’s managing director, told the National Association of Insurance Commissioners last month.
"But powerful interests prefer inefficient markets so that they can extract returns from the less informed," said Fons, who now runs a risk consulting business. "It takes heroic discipline to stand up to these interests, and in my view, for-profit rating firms are not up to the task."
To be sure, the rating firms stress that they aren’t standing still. S&P notes that it has hired new executives and adopted new rules for rating housing-related securities and preventing conflicts of interest. Moody’s has pointed out its efforts to improve transparency and boost ratings consistency.
Nice ratings, big profits
The rating agencies have performed poorly many times before. Notably, they were just as tardy in flagging the problems at Enron and WorldCom in the downturn at the start of this decade as they were last year at Lehman Brothers and AIG.
Yet despite this uneven track record, the ratings firms’ profits were growing at a rapid clip until the bottom fell out of the housing market.
Moody’s (MCO) saw its profits grow sevenfold between 1997 and 2006, when U.S. house prices topped out. Financial services accounted for three-quarters of profits at S&P parent McGraw-Hill (MHP, Fortune 500) that year.
But the profit gusher at the major firms have eased off in recent years, as the financial markets teetered. And threats stemming from the loose practices of the go-go days are starting to emerge. Take a suit filed in July by Calpers, the giant pension fund.
The firm sued all three big rating agencies, blaming them for $1 billion in losses on debt issued by so-called structured investment vehicles, or SIVs, a favorite tool of Wall Street during the boom. The ratings agencies said the suit lacked merit.
Calpers claimed the rating agencies were negligent in giving high ratings to some bonds that have since gone sour quick pay day loan. The suit also said the firms were "actively involved" in creating these questionable investments, arguing they "would help the arrangers structure their deals so that they could rate them as highly as possible."
The rating firms, without commenting specifically on the Calpers claims, reject the notion that they would ever cross the line into structuring or selling bonds.
"We don’t structure deals — our policy prohibits that," an S&P spokesman said. "We do not structure, design or market securities of any kind," Moody’s said.
Still, some observers contend that the agencies’ actions in structured finance may have compromised a favorite legal defense. The rating agencies say they are merely publishers, and that their ratings are opinions that are shielded by the First Amendment.
But with the lion’s share of revenue coming from the firms whose bonds they rate, "Really they’re more like vanity publishers," said Daniel Alpert, managing director at investment bank Westwood Capital. "There’s no way the First Amendment defense will survive this wave of litigation."
Regulatory underreach?
If the current situation is less than satisfactory, the fixes being pursued on Capitol Hill and at the Securities and Exchange Commission are nothing to write home about either.
The Obama administration this summer called for new rules that would strengthen SEC oversight of the rating agencies and demand that they manage their conflicts of interest better. It also said rules should be rewritten to reduce investors’ and regulators’ reliance on ratings.
But that may be easier said than done. Americans got an inkling of that last fall after AIG faltered and was propped up with taxpayer funds that eventually ran to more than $180 billion.
AIG’s Achilles heel turned out to be the billions of dollars of credit default swaps it wrote to help European banks reduce their capital requirements. In essence, the European banks paid AIG for triple-A ratings that allowed them to lend out spare funds rather than holding them against possible losses.
While the ratings agencies obviously didn’t cause AIG’s implosion, the insurer’s woes show just how integral the big three firms have become to the financial system.
"The system has been set up to rely heavily on ratings," said Matthew Richardson, a finance professor at New York University. "It’s hard to put that genie back in the bottle."
But if Washington hasn’t come up with a workable fix yet, there’s no reason to despair. There are plenty of proposals to change the so-called issuer-pays model and to improve the procedure for approving and overseeing nationally registered rating firms.
It may simply take a while for policymakers to sort through all of them, Richardson adds. After all, massive bank failures and funding crises have up till now taken priority.
"This was part of the crisis, but it wasn’t the heart of the crisis," he said. "It’s going to take some time to get this piece of the puzzle right."
For General Motors, the road out of bankruptcy isn’t proving to be as smooth as its quick trip through it.
In the past week, the company’s plans to sell its Saturn brand to auto retailer Penske Auto Group fell through, forcing GM to start winding down a network of about 350 dealerships.
But that’s not the only post-bankruptcy problem for GM. Its plans to sell Hummer to a Chinese industrial company missed a target date of closing by Sept. 30.
GM is also trying to close a deal to sell two-thirds of GM’s European Opel brand to a joint venture between Canadian auto parts maker Magna International (MGA) and Russian automaker GAZ Group. Despite ongoing losses at Opel, the decision to sell that stake was a difficult one for GM. Many experts are concerned that the Opel sale will weaken GM by limiting its global reach.
"It hurts their global capabilities," said Tom Libby, president of the Society of Automotive Analysts. "They can’t draw on this major source of engineering resources that they’ve used for years. If they had had the money they needed, they wouldn’t have done it."
Libby said it’s not surprising that the Saturn deal fell through, that Hummer is behind scheduled, or that the Opel deal has raised questions. But he said these are all signs that turning around GM for the long run will be a significant challenge.
"They made assumptions during the bankruptcy process and that’s why the process was so quick," he said, referring to the company’s six-week trip in and out of bankruptcy court. "But it was always going to be difficult to meet those expectations."
Saturn closure comes with costs
The Saturn deal with Penske (PAG, Fortune 500) was never going to raise a large amount of money for GM. But it would have allowed GM to supply a Penske-run Saturn with vehicles for two years while it found a new contract supplier. That plan would have helped GM keep factories running more efficiently.
In addition, GM will now have to pay Saturn dealers between $100,000 and $1 million each to wind down, which will cost the company more than $100 million. Libby said those payments, while modest in comparison to the company’s ongoing losses, still will hurt GM.
"They have no excess funds. It’s going to affect something in the organization significantly," he said.
GM spokesman John McDonald said that the company never counted on avoiding payments to dealers through a Saturn sale. So the collapse of the Saturn deal is not a setback, he said.
McDonald added that the company hopes to produce the same number of vehicles for its other brands that it would have if it was still making Saturns no fax pay day loans. GM has Chevrolet and Buick offerings that are similar to most Saturn models.
Saturn’s industrywide market share has fallen to a record low of less than 1% this year as buyers avoided the endangered brand and GM cut back on marketing efforts. But Saturn still accounted for about 4% of GM’s total sales in 2009. So any slip in sales could hurt GM at a time when it is struggling to end a period of market share declines in the U.S.
Opel deal critical. Hummer? Not so much.
The Opel deal could affect GM’s competitiveness not just in Europe but in North America as well. Some of GM’s most critically acclaimed vehicles in recent years, including the Chevrolet Malibu and the Buick Lacrosse, are built on an Opel platform.
The Opel sale was temporarily put on hold by GM’s new board as it studied whether it was the best move for the company following bankruptcy. But the need for short-term cash and political pressure from the German government, which had loaned the company money to keep Opel afloat, left GM little choice than to proceed with the sale.
"It wasn’t negotiating from a position of power," said Subroto Banerjee, a partner with business consultant Frost & Sullivan. "In a time of being forced to sell something, you’re in deep trouble. You’re going to give up more than they’d like."
Still, the Opel deal could benefit GM even though some worry about the impact it will have on sales. The keys to whether the deal will be good or bad for GM depends on how much access GM will have to Opel’s engineering resources going forward and the limits on Opel’s new owners being able to compete against GM in markets outside of Europe.
"From GM’s position, those two things are critical," said David Cole, chairman of the Center for Automotive Research, a Michigan think tank.
Then there’s Hummer. The decision to get rid of Hummer, while arguably attracting the most attention because a Chinese company wants to buy the brand, will likely have the least impact on GM. Hummer is small even in comparison to Saturn and it has a much smaller dealer network.
GM’s McDonald insists that missing the target date to close the deal is not necessarily a sign that there are problems. "Especially when dealing with an international buyer, missing a deadline is not uncommon," he said.
Nonetheless, Hummer has been another drain on GM’s limited resources, and experts say they need to resolve the future of the brand sooner rather than later. Libby said that keeping Hummer is not an option for GM.
Stocks meandered Friday, at the end of a second straight week of losses, as investors worried that a worse-than-expected jobs report was further evidence that the rally has gotten ahead of the recovery.
The Dow Jones industrial average (INDU), the S&P 500 (SPX) index and the Nasdaq composite (COMP) all lost a few points.
"The [jobs] report was a disappointment, but a recovery is not going to go in a straight line," said John Wilson, chief technical strategist at Morgan Keegan.
Since the rally highs were hit last week, stocks have lost about 5%. Wilson said stocks may need to ease another 5% lower over the next few weeks, but that a 10% pullback would be sufficient to bring buyers back in to push the market higher.
Stocks got hammered Thursday after weaker-than-expected readings on manufacturing and jobless claims sparked worries about the pace of the economic recovery. The Dow closed down 204 points.
Stocks are also vulnerable to a bit of selling after a strong July through September period in which the Dow and S&P 500 both jumped 15%, their biggest quarterly gains in more than a decade. The Nasdaq gained 15.7%, its best quarterly performance since 2003.
The advance was part of a bigger run up that has propelled the leading indexes for roughly 7 months straight. The advance has been driven by slowly improving economic news and tremendous amounts of fiscal and monetary stimulus.
But lately, a number of the reports have been missing expectations, including readings on jobs, manufacturing and consumer confidence earlier this week.
Since bottoming at a 12-year low March 9, the S&P 500 has gained 51.2%, and the Dow has gained 45% as of Friday’s close. After hitting a six-year low, the Nasdaq has gained nearly 61%.
Economy: Employers cut 263,000 jobs from their payrolls in September after cutting a revised 201,000 in August, the Labor Department reported Friday morning. Economists were expecting 175,000 jobs cuts, on average, according to Briefing.com.
The unemployment rate, generated by a separate survey, rose to 9.8%, a 26-year high. That was in line with economists’ forecasts and up from the 9.7% rate in August. Most economists expect the national unemployment rate to hit 10% by year end, although in a number of states it is much higher.
A separate government report showed that factory orders plunged in August versus forecasts for a rise. The Commerce Department said factory orders fell 0.8% versus forecasts for a flat reading. Factory orders rose 1.4% in the previous month.
Company news: Troubled lender CIT (CIT, Fortune 500) launched a debt-exchange plan as part of its efforts to restructure and avoid bankruptcy. But the company said if the plan is not successful, it will likely file for Chapter 11 protection.
Apple (AAPL, Fortune 500) shares gained after both Morgan Stanley and UBS issued bullish notes on the company’s forecast.
Market breadth was positive. On the New York Stock Exchange, losers beat winners two to one on volume of 1.4 billion shares. On the Nasdaq, decliners topped advancers two to one on volume of 2.47 million shares.
World markets: Global markets tumbled. In Europe, London’s FTSE 100 lost 1.2%, France’s CAC 40 lost 1.9% and Germany’s DAX lost 1.5%. Asian markets declined as well, with the Japanese Nikkei losing 2.5%.
Currency and commodities: The dollar tumbled versus the euro and the yen, resuming its recent plunge against a basket of currencies.
U.S. light crude oil for October delivery fell 87 cents to settle at $69.95 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery rose $3.60 to settle at $1,004.30 an ounce. Gold closed at a record high of $1,020.20 two weeks ago.
Bonds: Treasury prices tiptoed higher, lowering the yield on the benchmark 10-year note to 3.21% from 3.18% late Thursday. Treasury prices and yields move in opposite directions.
Nintendo said it is cutting the price of its popular Wii video-game console by $50 to $199.99.
The 20% price drop on the Wii, which features a motion-sensor remote, will take effect Sunday, according to a Nintendo statement released early Thursday.
The new price is the first reduction since the console launched in November 2006.
The interactive Wii immediately proved wildly popular across demographics — including rehabilitation centers, to aid patients’ recovery — and demand for the console outstripped supply more than a year after its initial release in November 2006.
Earlier this year, Nintendo Chief Executive Satoru Iwata said the company had sold 50 million Wii units.
The company said in a statement Thursday that it hoped the new price would attract consumers who were on the cusp of becoming gamers. According to its own research, Nintendo said there are about 50 million Americans who fall into that category.
Nintendo’s price cut mirrors recent moves by two rivals. In August, Microsoft (MSFT, Fortune 500) slashed the price of its high-end Xbox 360 "Elite" model by $100 — just days after Sony (SNE) cut its console PlayStation 3 by the same amount.
‘It’s-a me, Mario’
In its statement, Nintendo also confirmed the release date of "the first truly multiplayer" game in its ever-popular "Mario Brothers" series no fax cash advances.
The "New Super Mario Bros." for Wii will hit stores Nov. 15. It’s the first title in the classic series that allows four users to play the game at the same time.
Customers can try this and other games at a "sampling tour" coming to three cities in October.
"Differentiating between thousands of [game] alternatives is nearly impossible," said Nintendo in a statement, adding that the ideal solution is allowing consumers to test drive the games before they plunk down cash for a game or system.
Users will be able to try out one of several Wii games, including "Sports Resort" and "Wii Fit Plus," as well as DS titles like "The Legend of Zelda: Spirit Tracks."
The tour will come to Long Beach, Calif., Oct. 2-4; to Philadelphia Oct. 9-11; and end in New York City Oct. 16-18.
G20 finance leaders pledged on Saturday to keep economic life-support packages in place until a recovery is firmly secured, but reached no deal on putting limits on bankers’ pay.
Finance ministers and central bankers meeting in London agreed fiscal and monetary policy would stay “expansionary” until recovery from the worst financial crisis since World War II was certain, a draft of their joint statement seen by Reuters showed.
The global economic outlook is certainly a lot better since leaders last meeting on the economic crisis in April, but policymakers are worried about derailing that recovery by pulling the plug too soon.
“We will continue to implement decisively our necessary financial support measures and expansionary monetary and fiscal policies consistent with price stability and long-term fiscal sustainability until a recovery is firmly secured,” the draft said.
With politicians looking for someone to blame for the recession, the rhetoric leading up to the meeting had been directed firmly at bankers and their lavish multi-million dollar bonuses.
But the ministers could not agree on putting an actual cap on bonuses as had been advocated by some countries and leading charities.
Instead, they agreed to create a global structure for imposing tighter controls on pay at financial institutions to discourage bankers from making the kind of risky bets that started the crisis back in August 2007.
These included deferring bonus payments over time and subjecting them to “clawback” in case things went sour. The compromise was that the Financial Stability Board, a global regulatory council headed by Bank of Italy chief Mario Draghi, would study caps and the whole issue of pay further auto loan rates.
“Pay and bonuses cannot reward failure or encourage risk taking.” British Prime Minister Gordon Brown told the start of the meeting. “It is offensive to the public whose taxpayers’ money in different ways has helped many banks from collapsing and is now underpinning their recovery.”
CHANGING WORLD ORDER
The draft statement showed agreement that emerging nations like India and China should have a greater say in the running of the International Monetary Fund and World Bank but did not offer up any formula of how this should be achieved.
It said only that their voice in global economic policymaking would grow “significantly” and that it expected “substantial progress” to be made on the issue at a summit of world leaders in Pittsburgh later this month.
The BRIC group of leading emerging powers — India, China, Russia and Brazil — had laid out on Friday concrete targets for how much movement they wanted in IMF and World Bank quotas.
Nor was there much clarity yet on a U.S. proposal for increasing the capital that banks hold in order to prevent a rerun of the crisis that led to the collapse of some of the world’s biggest banks.
While G20 countries agree that banks need more money set aside in reserves to cushion against losses, how much is needed and how that is calculated appears to be in dispute.
Cash for Clunkers is just about at the end of the road.
The government-funded rebate program, popular with consumers, comes to its official completion on Monday.
Dealers still have only until 8 p.m. Monday ET to write deals deals under the program.
The government has extended the deadline for filing Clulnker voucher claims to noon Tuesday following technical problems with the Web site dealers use to submit claims, the Department of Transportation announced Tuesday afternoon.
The U.S. Department of Transportation had received 625,000 applications from dealers for Cash for Clunkers vouchers totaling $2.58 billion as of Monday morning, the DOT said.
In a statement released late Friday, the National Automobile Dealers Association called on the government to accept dealer rebate requests until Aug. 31. The group cited computer slowdowns that could result from "overwhelming demand" on Monday.
Some dealers said they were participating in the Clunker program right up to the end. Others said they had stopped because they didn’t want to risk giving a $4,500 discount on a car and not be reimbursed by the government.
AutoNation (AN, Fortune 500), the country’s largest dealership chain, stopped doing Cash for Clunker transactions after Friday. AutoNation had completed over 12,000 deals, according to spokesman Mark Cannon.
"It’s been a great run," Cannon said.
Under Clunkers, which launched July 27, vehicles purchased after July 1 are eligible for refund vouchers worth $3,500 to $4,500 on traded-in cars with a fuel economy rating of 18 miles per gallon or less.
Car buyers trading in a vehicle must prove that the vehicle has been titled to them for at least a year and, in most states, that the car has been insured for a year. Dealers have to provide copies of that paperwork, among other things, to the National Highway Traffic Safety Administration in order to get their rebates.
The Virginia Automobile Dealers Association reported late last week that about 25% of its member dealerships had already dropped out of the program because of uncertainty over getting paid for their deals.
The Virginia auto dealers’ group reports that dealers have been reimbursed for only about 3% of all the deals that have been done in that state. Hall described the submission process as challenging, with frequent problems and rejections.
"It’s been ugly, ugly," Hall said.
The principal trade group for dealers made a last-minute push to extend the deadline for dealers to submit paperwork.
Did buy a new car under the Cash for Clunkers program? Please share the details. What did you buy? What did you trade in? How much did you pay? We want to find out if people have gotten deals out of this program or not. E-mail your story to realstories@cnnmoney.com or send in an iReport and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.
Powered by WordPress -- XHTML 1.0