Stocks were mixed Monday morning as investors returned for the final few trading days of 2008.
The Dow Jones industrial average (INDU) and the broader Standard & Poor’s 500 (SPX) index were both up a few points shortly after the opening bell. The Nasdaq composite (COMP) was down a few points.
Stocks drifted higher Friday in a thinly traded session, but all three major indexes are down sharply for the year.
The Dow is down nearly 36% versus last year. The S&P 500 has tumbled 40.5% and the Nasdaq is off 42% year to date.
Monday’s session was expected to be quiet, with many market participants on the sidelines celebrating the year-end holidays. The markets will be closed Thursday for New Year’s Day.
In Europe, markets reopened after an extended Christmas break, with London up more than 2%, Frankfurt up nearly 2%, and Paris up nearly 1% in morning trading. Asian markets ended mostly higher, with Tokyo’s Nikkei index up 0.1%.
Oil rose amid concerns about the Middle East following Israel’s military action against Hamas in the Gaza Strip. Crude futures rose $1.31 to $39.02 a barrel.
The financial sector was in focus early Monday amid reports that a consortium of private equity and hedge fund firms is close to a deal to buy the assets of failed mortgage lender IndyMac payday cash advances. The company’s bank unit was seized by the government in July in one of the largest bank failures in U.S. history.
In corporate news, two of the nation’s top automakers, General Motors (GM, Fortune 500) and Chrysler, will take possession of the first part of the $13.4 billion in emergency loans from the government.
Kuwait decided Sunday to scrap a deal to form a $17.4 billion petrochemical joint venture with Dow Chemical (DOW, Fortune 500). The decision is a big blow to Dow, which had hoped to use some of the proceeds to repay some of the $13 billion in debt it’s assuming in the acquisition of Rohm & Haas, due to be completed in 2009.
Other markets: The dollar fell versus the euro and the yen.
COMEX gold for February delivery was up $5.4 to $876.60 an ounce.
Gasoline prices fell 0.8 cent to a national average of $1.619 a gallon, according to a survey of credit-card swipes released Monday by motorist group AAA.
All news is bad news in real estate right now. Have you recently bought a house anyway? Send your story and photos to realstories@cnnmoney.com and you could be featured in an upcoming article.
In a scathing report released Tuesday, congressional investigators outlined a pattern of mismanagement, dysfunction and abuse of power at the Federal Communications Commission under the agency’s Republican chairman, Kevin Martin.
The report - the result of a nearly yearlong, bipartisan investigation by the House Energy and Commerce Committee - accuses Martin of manipulating data and suppressing information to influence telecommunications policy debates at the agency and on Capitol Hill.
The report also charges that the commission has become politicized, failed to carry out some important responsibilities under Martin’s leadership, and blames him for undermining an open and transparent regulatory process.
Martin also is accused of micromanaging commission affairs, demoting agency staffers who did not agree with him and withholding information from his fellow commissioners.
"Chairman Martin’s heavy-handed, opaque, and non-collegial management style has created distrust, suspicion and turmoil among the five current commissioners," the report says.
Martin’s legacy at the FCC will be "a blueprint of what not to do," said Bart Stupak, D-Mich., who chairs the House Commerce Committee’s Subcommittee on Oversight and Investigations.
"The findings suggest that, in recent years, the FCC has operated in a dysfunctional manner and commission business has suffered as a result," said Commerce Committee Chairman John Dingell, D-Mich., who will be relinquishing the reins of the panel to California Democrat Henry Waxman next year.
Robert Kenny, a spokesman for Martin, said the committee "did not find or conclude that there were any violations of rules, laws or procedures affordable car insurance." Martin is widely expected to leave the commission after the White House changes hands.
Among the findings of the 110-page report:
- Martin manipulated the findings of an FCC inquiry into the potential consumer benefits of requiring cable companies to sell channels on an individual - or "a la carte" - basis. The House investigation concludes that Martin undermined the integrity of the FCC staff and may have improperly influenced the Congressional debate on the matter by ordering agency employees to rewrite a report concluding that a la carte mandates would not benefit consumers.
- Martin tried to manipulate the findings of an annual FCC report on the state of competition in the market for cable and other video services to show that the industry had a big enough market share to permit additional government regulation. When the full commission voted to reject that conclusion, Martin suppressed the report by withholding its release.
- Under Martin’s leadership, the FCC’s oversight of the Telecommunications Relay Service Fund, which pays for special telecommunications services for people with hearing or speech disabilities, was overly lax. This resulted in overcompensation of the companies that provide these services by as much as $100 million a year - costs that were ultimately passed along to phone company customers.
Kenny said Martin makes no apologies for his "commitment to serving deaf and disabled Americans and for fighting to lower exorbitantly high cable rates that consumers are forced to pay."
Stocks tumbled Thursday as a rash of job cuts at major companies added to jitters ahead of the November jobs report.
The Dow Jones industrial average (INDU) ended down 215 points, recovering from a decline of as much as 332 points earlier in the afternoon. The Standard & Poor’s 500 (SPX) index fell 2.9% and the Nasdaq composite (COMP) retreated 3.1%.
Stocks seesawed through the morning, but turned lower in the last hour of the session. Wall Street has been reversing direction fairly regularly in the last hour of trading each day.
"It’s the 3 o’clock shuffle," said Joseph Saluzzi, co-head of equity trading at Themis Trading.
He said that with the uncertainty about the automakers and the worry about the November jobs report due Friday, investors would rather back out of stocks.
Executives from GM, Ford Motor and Chrysler testified before a Senate panel in an effort to get a $34 billion aid package from Congress. They speak before a House panel Friday.
Oil prices at an almost 4-year low and a selloff in gold and other metals kept the global recession in focus and added to the stock selling, Saluzzi said.
While the recession hasn’t seen its turning point yet, the stock market is trying to bottom, said Will Hepburn, president and chief investment officer at Hepburn Capital Management
"The government has put a lot of money to work, and at some point that money will come back into the economy and stock market," Hepburn said.
The problem in the short term, he said, is that between hedge fund redemptions and tax-loss selling, investors are going to want to sell into rallies through year-end.
"These are bear market spikes and they’re painful for people because they fizzle out quickly," Saluzzi said.
Research firm TrimTabs estimates that hedge fund redemptions between September and year-end will likely reach $250 billion.
Jobs: On Friday, the government is expected to report that employers cut 325,000 non-farm jobs from their payrolls in November after cutting 240,000 in the previous month.
The unemployment rate, generated by a separate survey, is expected to have risen to 6.8% from 6.5% in the previous month.
Ahead of that report, a slew of major companies announced more than 20,000 job cuts Thursday.
Among the standouts: AT&T (T, Fortune 500) said it would cut 12,000 jobs, or 4% of its workforce, while DuPont (DD, Fortune 500) said it was cutting 2,500 jobs. Both companies are Dow components. Also, Swiss bank Credit Suisse (CS) said it was cutting 5,300 jobs, or about 11% of its workforce, in the U.S. and globally.
A trio of financial services firms announced 3,000 job cuts Wednesday.
Also on Wednesday, payroll-processing firm ADP said 250,000 private sector jobs were cut.
In other employment news, the number of Americans filing new claims for unemployment benefits last week dipped to 509,000 from a revised 530,000 the previous week. Economists surveyed by Briefing.com expected jobless claims of 540,000.
Automakers: The Big Three automakers began two days of testimony on Capitol Hill, pleading for a bailout after being rebuffed last month.
On Tuesday, GM (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler each submitted their turnaround plans to Congress. The automakers are looking to receive a combined $34 billion in aid versus the initially requested $25 billion online payday loan. Early reports say Congress is unlikely to grant their requests.
The Senate Banking Committee held its hearing Thursday, while the House Financial Services Committee will hold its hearing Friday. (Full story)
Retailers: Wal-Mart Stores (WMT, Fortune 500) continued to outperform the overall retail sector as consumers sought bargains amid the economic crisis. Wal-Mart reported a 3.4% rise in November same-store sales, or sales at stores open a year or more. That was above the company’s growth forecast of 1% to 3%.
But other chains had a rougher period. Sales at Wal-Mart rival Target (TGT, Fortune 500) fell 10.4%, department store chain Nordstrom (JWN, Fortune 500)’s sales fell 15.9% and teen clothing chain Abercrombie & Fitch (ANF)’s sales fell 28%. (Full story)
Oil and metal stocks slipped with the raw commodities. Dow stocks Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500) and Alcoa (AA, Fortune 500) all declined.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by nearly three to one on volume of 1.47 billion shares. On the Nasdaq, losers topped winners by five to two on volume of 2.10 billion shares.
Other economic news: A report showed that October factory orders fell 5.1% after declining a revised 2.5% in September. Economists thought orders would fall 4.5%.
Federal Reserve Chairman Ben Bernanke said Thursday that the housing market is the key to the economic recovery and that the government has to do more to deal with foreclosures.
Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.56% from 2.66% late Wednesday. The 10-year yield dipped below 3% last week for the first time since the note was first issued in 1962. Treasury prices and yields move in opposite directions.
The yield on the 3-month Treasury bill inched up to 0.02% from 0.01% Wednesday, but still near the 68-year low of zero hit last month. The 3-month is seen as the safest place to put money in the short term. A low yield means wary investors would rather preserve cash despite earning little or no interest on it than risk the stock market.
Lending rates eased. The 3-month Libor rate slipped to 2.19% from 2.20% Wednesday, while overnight Libor fell to 0.52% from 0.88% Wednesday, according to Bloomberg. Libor is a key bank lending rate.
Other markets: In global trading, Asian markets ended lower. European markets ended lower, erasing earlier gains after the European Central Bank, the Bank of England and Sweden’s Riksbank all lowered rates. (Full story)
The dollar gained versus the euro and fell against the yen.
U.S. light crude oil for January delivery fell $3.12 to settle at $43.67 a barrel on the New York Mercantile Exchange, ending at a nearly 4-year low.
COMEX gold for February delivery lost $5 to settle at $765.50 an ounce.
Gasoline continued its fall to nearly four-year lows, with prices down 1.4 cents to a national average of $1.789 a gallon, according to a survey of credit-card swipes released Thursday by motorist group AAA. Prices have been sliding for 2-1/2 months and have dropped more than $2 a gallon, or 53%.
President-elect Barack Obama selected New Mexico Gov. Bill Richardson for the position of secretary of Commerce in a news conference Wednesday morning.
"With his breadth and depth of experience in public life, Gov. Richardson is uniquely suited for this role as a leading economic diplomat for America," Obama said.
Richardson, one of the best-known Hispanics in the Democratic Party, also served as energy secretary during the Clinton administration, as well as ambassador to the United Nations.
Referencing the country’s deteriorating economic situation, Obama said that it is "time to not just address our immediate economic threats, but to start laying the groundwork for long-term economic prosperity cash advance loans."
"As governor of New Mexico, Bill showed how government can act as a partner to support our businesses, helping create 80,000 new jobs," Obama noted. "And under his leadership, New Mexico saw the lowest unemployment rate in decades.
Richardson, 61, is the third former presidential rival to join Obama’s team. Vice President-elect Joe Biden and Sen. Hillary Clinton, Obama’s pick for secretary of state, also competed for the Democratic presidential nomination.
Local United Auto Workers leaders from across the country will hold an emergency meeting in Detroit on Wednesday to discuss concessions the union could make to help auto companies get government loans.
UAW leaders called the meeting Monday night in an e-mail, obtained by The Associated Press, to local union presidents and bargaining chairmen.
Among the subjects to be discussed at the meeting will be the possibility of restructuring the union-administered health care fund so that the automakers can delay payments to the multibillion-dollar fund, according to a person familiar with the matter.
The union leaders will also discuss potentially eliminating the jobs bank, in which laid-off workers keep receiving most of their pay. The person spoke on condition of anonymity because the details of the talks haven’t been finalized.
Presidents from union locals for General Motors Corp., (GM, Fortune 500) Ford Motor Co. (F, Fortune 500) and Chrysler LLC will attend the meeting, according to the e-mail. A separate meeting for GM union officials will follow.
Members of the committee that negotiated contracts last year with GM, Chrysler and Ford also will attend.
Chief executives from all three companies and UAW President Ron Gettelfinger are traveling to Washington this week to present business plans to Congress as they seek to get $25 billion in federal loans to help them survive.
The CEOs will go before Congress on Tuesday, the same day major automakers are scheduled to report November U Free Credit Report and Score.S. sales. Analysts are expecting yet another month of dismal volumes due to the economic recession and the credit crisis.
GM, Ford and Chrysler would refinance their companies’ debt, cut executive pay, seek concessions from workers and find other ways of reviving their staggering companies.
Gettelfinger said Tuesday the plans the automakers are submitting to Congress don’t yet include union-approved cutbacks, but he said "we recognize that there may be additional sacrifices required."
"We have ongoing discussions with the companies about different issues. We’re working all the time to help save the companies money," he said on WJR-AM’s "Paul W. Smith Show" in Detroit.
U.S. automakers are struggling to stay afloat heading into next year under the weight of an economic meltdown, the worst auto sales in decades and a tight credit market. GM, Ford and Chrysler went through nearly $18 billion in cash reserves during the last quarter, and GM and Chrysler have said they could collapse in weeks.
Last month, chief executives from the Detroit Three failed to convince Congress they were worthy of the $25 billion in loans. House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., ordered them to outline major changes, including the elimination of lavish executive pay packages and assurances that taxpayers would be reimbursed for the loans.
A Democratic official says President-elect Barack Obama will name New Mexico Gov. Bill Richardson as commerce secretary.
The official says Obama plans to announce Richardson’s selection after Thanksgiving. The official spoke on condition of anonymity because the official was not authorized to speak publicly about the negotiations.
Richardson was energy secretary and U business card.N. ambassador under President Bill Clinton. Richardson would be the most visible Hispanic named to Obama’s Cabinet.
Richardson dropped out of the Democratic presidential contest in January and endorsed Obama.
Massachusetts is the state best positioned for growth when the current economic turmoil recedes, according to the 2008 State New Economy Index released Tuesday.
Washington, Maryland, Delaware, New Jersey, Connecticut, Virginia, California, New York and Colorado rounded out the top ten.
The study, issued by the nonpartisan think tank Information Technology & Innovation Foundation (ITIF),measures how effectively states operate in order to compete nationally and globally. It notes that states should be focused on whether their economies are well positioned for robust growth in the next decade, pointing out that innovation is central to state economic success.
"We had to go back a full year to get data, but I do think these results will, to some extent, be able to predict how each state will do in the current economic turmoil," said Dr. Rob Atkinson, president of the foundation.
"In recessions, there are higher levels of entrepreneurship because people who are laid off will use that opportunity to start a business," he said. "We won’t be in this predicament forever. States that foster risk-taking and treat this time as an opportunity will be in a better position when they emerge - they’ll be growing, instead of replacing the investments they slashed."
Funded by entrepreneurship boosters the Ewing Marion Kauffman Foundation, ITIF considers 29 factors in determining which states are the most - and least - "New Economy." These indicators included, among other things, start-up activity, education, venture capital investment, IPOs, patents and alternative-energy cash loan in one hour.
Those data points were then grouped into five meta categories that the ITIF says embodies the New Economy: knowledge jobs, globalization, transformation into a digital economy, technological innovation capacity and economic dynamism.
"The index is a composite of variables," said Atkinson. "But economic dynamism, which measures factors such as the number of fast-growing gazelle companies and value of IPOs, is more important than, say, globalization or a digital economy at influencing the new economy leadership."
Based on past observation, states that foster startups, particularly fast-track tech ventures, are also those that adapt best in economic downturns and emerge from them with higher standards of living, according to the the survey, which was also released in 1999, 2002 and 2007.
Utah, Massachusetts, Colorado, Georgia and New York placed at the top of the ITIF’s list in the economic dynamism category, while Alabama, West Virginia, Hawaii, South Carolina and Kentucky ranked lowest.
Mississippi, West Virginia, Arkansas, Alabama, Wyoming, Kentucky, South Dakota, Oklahoma, Iowa and Louisiana were seen by the foundation as the least prepared to rejuvinate themselves.
Three big city mayors asked the federal government Friday to use a portion of the $700 billion financial bailout to assist struggling cities.
They sought help with the pension costs, infrastructure investment and cash-flow problems stemming from the global financial crisis.
The mayors - Michael Nutter of Philadelphia, Shirley Franklin of Atlanta and Phil Gordon of Phoenix - made their request in a letter to Treasury Secretary Henry Paulson.
Nutter said cities are facing an economic crisis not seen since the Depression and need help just like financial institutions.
"I want to make sure that cities and metro areas are at the table, that their voices are being heard, that our challenges and problems are well understood, so that we can get relief," Nutter said.
President-elect Barack Obama has also called for some sort of aid to state and local governments so they don’t have to raise taxes or lay off workers while the federal government is trying to revive the economy, but he hasn’t proposed or endorsed a specific aid plan.
On Thursday, groups representing the nation’s mayors and governors asked Congress to jump-start the economy by increasing food stamp payments, extending unemployment insurance and boosting funding for Medicaid.
Chris Hoene, director of policy and research at the National League of Cities, said Friday that revenue is down 4.3% from last year in American cities. He said cities are in what looks like the first wave of a three- to four-year financial decline. He said revenue from property, income and sales taxes are all down at the same time for the first time in a survey taken since 1985, and widespread cuts in services are likely.
"What we’re seeing happening right now in the economy is going to be playing itself out for the next several years," Hoene said.
The three mayors proposed providing loans to help cities pay pension costs creditscores. They also want $50 billion in loans for investment in infrastructure, and additional one-year loans to cities unable to borrow cash because of the tight credit markets.
Nutter said he met with Phillip Swagel, Treasury’s assistant secretary for economic policy. He said Swagel "completely understood that we have major problems, in big and small and medium-size cities all across America and they want to be helpful. It’s just a matter of figuring out what’s the best way to do it and what works best."
Asked about the request, a Treasury spokeswoman referred to Paulson’s statement Wednesday that assistance to local and state governments wasn’t the purpose of the bailout funding.
"The focus … is to stabilize financial institutions and strengthen the financial system, promote lending and so on," Paulson said then.
The Philadelphia pension system lost more than $650 million in the first nine months of the year. Last week, Nutter announced Philadelphia would be laying off city employees, cutting salaries, closing most of its swimming pools and shutting nearly a dozen library branches to cope with a $108 million shortfall this year caused by lower business and real estate tax revenue. The deficit could grow to a total of $1 billion over five years.
Phoenix’s budget deficit is at least $200 million and could reach $250 million by June if tax revenues keep sliding. The figure represents up to 22% of the city’s $1.2 billion general fund, which pays for most city services.
Franklin said this week that city employees in Atlanta will have their hours and pay cut by 10% each week. The cuts are being made to help the city weather an expected budget shortfall of $50 million to $60 million.
Diversified manufacturer Tyco International Ltd. said Tuesday that per-share profit for fiscal 2009 will fall short of Wall Street estimates.
In releasing its fiscal fourth-quarter earnings,Tyco (TYC) said it expects earnings per share for the new year to be $2.20 to $2.50.
Analysts surveyed by Thomson Reuters expect per-share earnings for 2009 to be $3.01.
Shares tumbled $3.36, or 13%, to $21.98 in early afternoon trading.
Edward D. Breen, chairman and chief executive officer, told analysts in a conference call that currency translation could cut per-share earnings about 38 cents and that per-share earnings at the electrical and metal products business could drop by 35 cents.
"While this estimate may be too harsh, we think it’s prudent to be conservative in this environment," he said.
Tyco said its electrical and metal products business that manufactures steel tubes and pipes, electrical conduit, armored wire and cable, metal framing systems and building components, will feel an impact from declining steel prices short term cash loans.
More than 50% of Tyco’s revenue is generated outside the United States, the company said. At current exchange rates, Tyco said it has seen about a 20% devaluation in non-US currencies, which it said will cut revenue by about 10 percentage points in 2009.
However, Tyco said it will benefit next year from improved operating performance, additional restructuring and a lower tax rate, Breen said.
Tyco said per-share earnings in 2008 were $3.06, above the $2.99 expected by analysts, according to Thomson Reuters.
The dollar fell against the euro Friday after a dismal unemployment report increased the likelihood that the Federal Reserve would cut its key interest rate to 0.5% in order to bolster the economy.
Employers cut 240,000 jobs in October, according to the Labor Department, and the unemployment rate rose to 6.5%. The report sparked concern that the U.S. central bank may have to extend its efforts to keep the economy afloat.
"Everyone is just looking forward to a larger rate cut by the Federal Reserve," said Kathy Lien, director of currency research with Global Forex Trading in New York.
The Fed’s next meeting on interest rates is scheduled for Dec. 16.
The dollar fell against the 15-nation euro, which rose 0.47 cents to $1.2763 from $1.2715 late Thursday. The dollar also lost ground against the British pound, which rose 0.49 cents to $1.5673 from $1.5626, but gained against the Japanese yen, rising ¥0.64 to ¥98.39.
Economy still sour: The jobless report was the latest in a long line of poor economic signals this week.
On Thursday, a Thomson Reuters monthly report on retail sales showed another huge decline in October, marking yet another sign that Americans are putting off non-essential purchases.
Another report earlier this week showed the nation’s services sector contracted in October to its lowest level in at least 10 months.
However, even as currency investors anticipate another Fed rate cut, the dollar, which is often purchased by investors as a hedge against economic risk, will probably continue to gain strength as the global economy slows, according to Lien Faxless pay advances.
"In no way do I think the dollar rally is over," she said. "Everyone knows the global economy is headed for a recession, and that tougher timer are ahead."
Europe rate cuts: As the global economy slows, central banks of Europe will be able to cut interest rates much deeper than the Federal Reserve, meaning greater weakness is possible for the euro and pound.
The Fed’s key interest rate is currently at 1%, and another deep cut could take it down to 0.5%, but the rates of the European Central Bank and the Bank of England are much higher.
On Thursday, the ECB cut its rate by a half-percentage point to 3.25%, while the BoE slashed its rate by 1.5 percentage points to 3%.
"They can keep cutting their rates just a little bit longer," said Nick Bennenbroek, chief currency strategist at Wells Fargo in New York.
Rate cuts by the ECB and BoE weakened the euro and pound against the dollar on Thursday. By late Thursday, the pound had lost 1.3% against the dollar, while the euro was down 2%.
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