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MarketView
Events defining the day's trading activity on Wall Street
Lauren Rudd
Tuesday, May 11, 2010
Summary
It was another volatile day on Wall Street, albeit
not like we have seen during the past couple of days, but not a cakewalk
either. The Dow Jones industrial average and the S&P 500 indexes both
found themselves in negative territory at the closing bell on Tuesday as
fears that a $1 trillion bailout for Europe is only a band aid and will
not solve the region's deep-seated problems. Furthermore, there is
concern on the Street that those problems will morph into problems for
our economy. As a result it was a trading session that saw little
in the way of real news when compared with recent days, and yet the
session was marked by investors selling stocks in afternoon trading as
concerns over the Greece contagion crept back into the market. Gold hit a new all-time high above $1,230 an ounce as
investors sought the perceived safety of the precious metal, while
falling crude oil prices hit shares of energy companies like Exxon
Mobil. Shares of Walt Disney gained 1.3 percent to end
regular trading at $35.76, ahead of quarterly results. After the closing bell, Disney's stock slid 2.9
percent in extended-hours trading following the release of its quarterly
results, in which Disney's earnings barely exceeded the Street's
forecasts. The company's media network division fell short with
operating income of $1.3 billion, as compared with estimates of $1.43
billion. The reason the Street watches Disney so carefully is
the entertainment and media company's performance is an indication of
the strength of consumer spending, which accounts for about two-thirds
of all domestic economic activity. Domestic sweet crude oil futures ended lower, with
crude for June delivery settling down 43 cents, or 0.56 percent, at
$76.37 per barrel. That hurt energy shares such as Exxon, which fell 0.5
percent $64.46. Helping Nasdaq and the biotech sector, Gilead
Sciences authorized a program, for the second time this year, to
repurchase up to $5 billion in common stock through May 2013. Gilead's
shares rose 2.3 percent to $39.26. Earnings season continued, with Church & Dwight
posting a first-quarter earnings number that beat expectations. However,
the company, whose consumer products include Arm & Hammer baking soda
and Trojan condoms, also gave a weak second-quarter earnings outlook.
Its stock fell 3.4 percent to $67.01. Overseas, Toyota reported fourth-quarter earnings
that comfortably exceeded forecasts. Toyota's ADRs rose 0.9 percent to
$77.46. Federal Reserve Likely To See One-Time Audit
The Senate on Tuesday effectively setback the Federal
Reserve's tradition of secrecy but postponed an overhaul of mortgage
finance giants Fannie Mae and Freddie Mac under a massive reform of
banking regulations. Tuesday's votes on two amendments on the broad
Senate reform bill highlighted the scope of the legislation, as well as
widespread public frustration with the government's unprecedented Wall
Street bailouts. The Senate unanimously voted to expose the details of
the Fed's emergency lending during the crisis, when it pumped hundreds
of billions of dollars into financial markets to stabilize the banking
sector and economies worldwide. The proposal would mark a first in
putting the U.S. central bank under congressional scrutiny, but is a
much softer measure than had first been proposed. The Senate defeated a proposal that would have ended
government control of Fannie Mae and Freddie Mac. The troubled housing
finance giants were seized by the Bush administration at the height of
the crisis in 2008 and put into what was described then as temporary
conservatorship. Fannie and Freddie, which guarantee about half of all
U.S. residential mortgages, have already received a total of about $145
billion in government aid, and the two firms in the last week both said
they need billions more. In a unanimous voice vote, the Senate specified that
money recovered from bailed-out banks should go toward paying down the
ballooning budget deficit, rather than job-creation efforts or other new
spending. A final vote on the financial-regulation bill, with nearly 200
other amendments still vying for attention, looked unlikely until next
week. So far, the Senate has settled on a method to unwind
troubled financial giants and set up wide-ranging consumer protections.
But the chamber still has yet to determine how to ensure that
speculative trading activity does not again put the financial system as
a whole at risk. The Federal Reserve's role in the run-up and the
response to the crisis has come under particular scrutiny, with some
lawmakers accusing the Fed of regulatory lapses and some questioning its
rescue actions. Under a measure approved by a vote of 96 to 0, the
investigative arm of Congress would conduct a one-time audit of the
central bank's emergency lending since December 2007. In addition, the Fed would be required to publicly
disclose by December 1 of this year detailed information about which
financial institutions it assisted with its lending. The Fed had warned
that earlier proposals could compromise its independence and make
monetary policy vulnerable to political meddling. However, at least one Fed policy-maker on Tuesday
said a one-time audit of the Fed's emergency measures would be
acceptable. "I'm comfortable with the modified Sanders
amendment," Jeffrey Lacker, president of the Richmond Federal Reserve
Bank, told reporters. If the Senate bill is approved, it will have to be
merged with the House bill before a package could go to Obama to be
signed into law.
Hiring At 15-Month High Hob hiring hit their highest level in 15 months
during March, while job openings also rose, according to a government
report released on Tuesday that again confirmed that the recovery in the
labor market is gaining traction. New job hires rose to 4.24 million
from 4.01 million in February, the Labor Department said in its monthly
Job Openings and Labor Turnover Survey. March hiring was the highest
since the 4.3 million seen in January 2009, the department said. Job openings increased to 2.69 million in March from
2.65 million the prior month. The survey lags many job market gauges but
can provide insight into labor market dynamics. The hires rate increased to 3.3
percent in March from 3.1 percent in February, the Labor Department said
in Tuesday's report. The job openings rate, a gauge of demand for labor,
was unchanged at 2 percent. Job openings have, however, trended higher
from a 2.3 million low in July 2009.
However, with 15 million people out of work in March, there were 5.6
workers for every job opening, unchanged from February's ratio.
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MarketView for May 11
MarketView for Tuesday, May 11