Weekend Edition July 25 2008 at 02:06 PM Edited by Chi-Chu Tschang and Harry Maurer
Top Stories of the Week
Signs of life in the economy
U.S. orders for durable goods unexpectedly rose 0.8% in June, largely thanks to a burst in defense industry bookings, said the Commerce Dept. Durable goods rose just 0.1% in May, and analysts had forecast a drop of 0.5% for last month. Still, durable goods have risen only three times in the past six months.
In another good sign for manufacturing, orders for nondefense capital goods excluding aircraft, a measure of capital spending, jumped in June by 1.4% after slipping 0.1% in May. Compared with a year ago, it's up 3.8%, indicating capital spending hasn't dried up entirely. And finally, sales of new single-family homes fell 0.6% in June, but again, economists had expected even worse.
Source: Wall Street Journal
The Mississippi River reopens after oil spill
Two days after a barge and a tanker collided in the river at New Orleans, causing the barge to leak large amounts of heavy industrial fuel, the Coast Guard re-opened the river to ship traffic at around noon today. Some 200 boats had been stranded.
Source: New York Times
A new chef at Wendy's
J. David Karam, a franchisee and former bidder for Wendy's, will take over as CEO when Nelson Peltz's Triarc completes its takeover of the fast-food chain later this year. That will mean the end of the tenure of Kerii Anderson, who has run Wendy's since late 2006. Karam is president of Cedar Enterprises, which owns and operates 135 Wendy's restaurants.
Source: Reuters
The financials take a beating
U.S. financial stocks suffered their worst one-day fall since 2000 on July 24 after investors renewed their fears over the future of Washington Mutual and weak housing figures. The fall comes after several days of optimism in the markets and was instigated by data showing sharp drops in U.S. home sales and house prices. The news was compounded when research firm Gimme Credit suggested creditors and customers were cutting their exposure to WaMu, which prompted a defiant response from the lender. Investors sought the safety of government debt, pushing yields on two-year Treasury notes down 22 basis points to 2.6%. The S&P 500 fell 2.3% to 1,252.54, its worst one-day slide in a month.
Source: Financial Times
Foreign companies target U.S. assets
American companies are on sale and foreign buyers are circling, taking advantage of a weak U.S. dollar and a depressed stock market to snap up U.S. companies at discounted prices. Deal activity in 2008 has slowed slightly due to the global slowdown in merger-and-acquisition activity, yet foreign acquisitions could still match the record number of deals of 2006.
Source: BusinessWeek
U.S. regional bank posts $1.76 billion loss
Large U.S. regional bank National City posted a $1.76 billion loss on July 24 due to soaring losses on mortgage and real estate construction loans and a writedown for acquisitions. The results included $1.59 billion for loan losses and net charge-offs totaled $740 million. Pretax operating profit rose 19% to $610 million, the bank said.
Source: New York Times
BP's Dudley Flees Russia
The battle surrounding BP's Russian oil joint venture took another turn on July 24 when its beleaguered Chief Executive Officer Robert Dudley left the country citing mounting uncertainties over his visa and 'sustained harassment.' BP said it would launch arbitration proceedings against its Russian partners in TNK-BP to recover 'any and all losses' incurred as a result of a battle for control of the joint venture.
Source: Financial Times
Honda posts strong results, cautions over future growth
Honda reported a surprise 8% increase in quarterly net profit after it raised car prices and cut costs, helping to overcome a stronger yen, crumbling U.S. auto market, and higher commodity prices. Despite the strong performance, Honda -- Japan's second largest automaker and the world's top motorcycle maker -- maintained its forecast for an 18% drop in full-year net profits.
Source: Reuters
Ford hits a tree
The carmaker reported the worst quarter in its history, with a loss of $8.7 billion, as the economic slowdown and American's shift away from large vehicles continue to clobber Detroit. Revenues fell to $38.6 billion from $44.2 billion in the second quarter last year. In an effort to offset news of the thumping loss, Ford offered details of its updated recovery plan. It will add more fuel-efficient cars and crossovers to the North Amercan lineup, including six European small vehicles; convert three of its truck and SUV plants to small-car production; and revamp the Ford, Lincoln, and Mercury lines by the end of 2009. Nevertheless, its shares dropped about 15% in midafternoon trading.
Source: Detroit Free Press
Housing sales fall again
Existing-home sales fell 2.6% in June, to the lowest level in 10 years, says the National Association of Realtors. Resales have tumbled 15.5% in the past year and have sunk 33% from their peak in 2005.
Source: MarketWatch.com
More trouble for UBS
New York State Attorney General Andrew Cuomo sued the beleaguered Swiss bank, claiming it defrauded investors by promoting auction-rate securities as safe havens similar to money-market funds. Cuomo wants UBS to buy back at face value $25 billion in such securities held by its customers in New York and around the country. Massachusetts and Texas have both sued UBS on similar grounds since the market for auction-rate securities cratered in February.
Source: Bloomberg
Fannie-Freddie rescue package reaches Senate
The U.S. Senate will consider housing legislation designed to shore up confidence in Fannie Mae and Freddie Mac and stem record mortgage foreclosures after the House of Representatives approved the bill on July 23. House members voted 272-152 in favor of the measure, which would give U.S. Treasury Secretary Henry Paulson power to inject capital into the mortgages lenders and provides for a federal agency to insure refinanced home loans.
Source: Bloomberg
Yahoo's net profit falls, investors worry
Yahoo's second quarter net profit fell 19%, but the company didn't change its economic outlook despite a weakening U.S. economy and the fallout from Microsoft's failed takeover bid. Now, investors are scouring the company's numbers for evidence that Yahoo's efforts to reinvigorate growth are taking effect and that the firm was justified in repelling Microsoft.
Source: Reuters, BusinessWeek
Abu Dhabi becomes major investor in GE
Mubadala -- Abu Dhabi's state investment vehicle -- said on July 22 that it plans to become one of the 10 biggest institutional investors in General Electric after announcing a series of deals with the U.S. company. That includes an $8 billion joint venture to set up a commercial finance business.
Source: Financial Times
Wachovia's wild ride
The bank's stock plunged, then rose again after the company first reported a bigger-than-expected loss and then said it wouldn't sell new shares. For the second quarter, Wachovia lost $8.86 billion, or $1.27 per share on an adjusted basis, while analysts had forecast a 71 cent-per-share loss. The bank took $6.1 billion in writedowns, pared the dividend, and added $5.6 billion to loan-loss reserves, mostly because of the poor housing market. That sent investors fleeing, but after CEO Robert Steel said the bank would not try to raise money through a share offering, it bounced back and rose more than 19% in midafternoon trading.
Source: MarketWatch.com
Conversation of the Day: The Frozen Economy
Reader Mike Bendzela Writes: "Remember the following as we slouch toward depression: In 1930, the U.S. still had 200 billion barrels of oil under its landscape. Today, that has dwindled to 20 billion."
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