The financial section drags the market further down
May 12, 2008
U.S. stocks had the first weekly drop in a month after AIG's weak quarter revived worries about the credit crisis while surging energy prices elevated fears of inflation. The insurance company shocked investors after posting a wider than expected first quarter loss. AIG reported that it suffered a record first quarter net loss of $7.8 billion, driven by a costly write-off in the market value of assets linked to sub prime mortgages. As a result, shares of AIG dropped almost 9% during Friday’s trading session.
Citigroup (C) also slid down 2% after reporting that it plans to sell off around $400 billion in assets in hopes of becoming more profitable. The bank is trying to rebound from massive losses tied to deterioration in the mortgage and credit markets. Citigroup’s CEO said that he predicts a revenue increase of 9 percent over the next few years, as a result of this asset reduction.
Earlier this week, shares of Yahoo Inc. (YHOO) plunged after Microsoft Corp. (MSFT) withdrew its takeover bid in a dramatic turn after a three month merger battle. Some say, however, that the war is not over, as Microsoft's withdrawal might be a tactical move meant to pressure Yahoo's board.
Sprint Nextel Corp. (S) and Clearwire Corp. (CLWR) revived their partnership to build the fastest wireless Internet network in the U.S., with some assistance from other giants such as Comcast Corp. (CMCSA), Intel Corp. (INTC) and Google Inc. (GOOG). If the strategy succeeds, customers could surf the web on their phones and laptops at speeds comparable to that they get in their homes and businesses today. If no delays are encountered, the network is predicted to be operational around 2010, allowing people to use the network from anywhere in the U.S.
One of the gainers of last week was Circuit City (CC) which said it will allow Blockbuster (BBI) review its books in relations with the video-rental chain's bid to buy the company. After its stock lost almost 85% of its value in the last two years, this event could be a turnaround point. Circuit City also revealed that it received a letter from Blockbuster indicating that the company's largest shareholder, the well known investor Carl Icahn, is prepared to buy Circuit City independently if Blockbuster can not get financing or can not get shareholder approval. Circuit City Stores announced it hired Goldman Sachs to explore strategic alternatives, which may include a sale of the company, but that its board has not determined whether to pursue a particular option.
Finally, oil price continues to break new records, touching the highest price ever of $126.2 before pulling back to $125.8 a barrel. If this increasing trend continues, we should not be surprised to see oil price touching the $200 a barrel as soon as next year, a scenario that could dramatically affect the economy.
Meanwhile the turbulence in Wall Street continues. The combination of trouble in the home mortgage market with fears of recession serves as a fuel to this uncertainty. While recession has not been “officially” declared, one should remember that when declared by the Government it means it has been going on for a while. It is therefore critical for investors to calculate their moves carefully and follow those who have a proven track record. Which brings us to the next chapter.
Yalicoo’s highlights of last week
The last Generous Thursday, the free
daily competition that we grant you every week, was an interesting thriller, as many of you traded extraordinarily well. Eventually, chanon (2.77%) succeeded to place himself in first place, just 0.08% before Fdiaz70 (2.69%) and MarketAce (2.60%). Chanon wisely bet on two energy companies, American Superconductor Corporation (AMSC) and Energy Conversion Devices, Inc. (ENER), which soared immediately after posting their earning reports. As oil prices rise sharply, the alternative energy sector continues to be quite interesting. However, keep in mind that many of these companies could be over-valued, thus it is best to be selective when choosing from these stocks.
There are no surprises in the
Quarterly competition. The quarterly competition scoreboard is exactly the same as it looked last time, with sixpence (16.88%) in the lead, 2 percent before agent (14.06%) and 5 before wOrStCaSe (11.01%). These three traders consistently increase their gap and are running ahead of us all. While the lead of these investors may take some of the excitement involved with attempting to reach first place, it can help the shrewd investor find the better stocks to invest in. Thus, we are still looking for players who can give a fair fight to yalicoo’s well-informed leaders (this is more than a hint for you to join the quarterly competition and show us that you can be the best trader in the pack.
The
monthly competition continues to attract new players; some of whom managed to pass our already well known traders. SC!4, a new trader in our community, is doing well and is currently in the lead. Agent and BanderaS are standing strong in the second and third places. The competition is only in its beginning so many changes are predicted to occur. We will keep on watching and summarizing the highlights of the games again next week.
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