Stocks Waver in Narrow Range; EU Woes Linger - CNBC Stocks Waver in Narrow Range; EU Woes Linger - CNBC

Friday, May 25, 2012

Stocks Waver in Narrow Range; EU Woes Linger - CNBC

Stocks Waver in Narrow Range; EU Woes Linger - CNBC

Stocks closed lower in thin trading Friday as investors hesitated to stay long over the three-day Memorial Day holiday weekend amid ongoing worries over the euro zone.

Still, all three major indexes posted their best weekly gains for the month, snapping a three-week losing streak.

The Dow Jones Industrial Average finished lower, led by Boeing [BA  Loading...      ()   ]. The blue-chip index has yet to see a two-day win streak this month.

The S&P 500 and the Nasdaq also finished lower. The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended near 21.

The Dow and Nasdaq are on pace for their worst month since 2010.

Among the key S&P sectors, telecoms edged higher, while materials slipped.

“It’s been a brutal month…and a lot of guys are still hiding today,” said Gordon Charlop, managing director at Rosenblatt Securities. “Everyone’s looking at Europe—the June 17Greek elections—and until we get some clarity there, it’s buyer beware. This chart is looking exactly like last year.” (What Happened to Stocks? Most Unloved in 50 Years)

European shares closed flat, as some traders looked to book profits on the back of a two-day rally with fears over Greece still lurking in the background. The euro briefly dipped below $1.25, nearing a 23-month low.

Adding to jitters, Spain's Bankia asked the state for a bailout of 19 billion euros, more than double what the government had expected earlier this week. Shares of the Spanish bank were halted earlier during European trading. And S&P downgraded the bank to 'double-B-plus' from 'triple-B-minus.' The agency also cut its ratings on another four Spanish banks.

Meanwhile, concerns continued to brew over ongoing flight of capital from European banks.

"We estimate a further 200 billion euros in flight from each of Spain and Italy is quite likely without further policy action," according to a note from Citi. "Economic deterioration, ratings downgrades and especially a Greek exit would almost certainly significantly accelerate the timescale and increase the amounts of these outflows."

In the latest over Facebook's [FB  Loading...      ()   ] IPO debacle, Citigroup [C  Loading...      ()   ] said its Automated Trading Desk saw trading losses of around $20 million, according to sources. Facebook shares have plunged almost 17 percent for the week. (Read More: Still Like Facebook? There’s an ETF for That.)

This comes after Knight Capital Group and Citadel Securities also reported losses earlier this week. UBS, the other large market maker involved in Facebook's IPO, has not disclosed any losses.

Not even a better-than-expected consumer sentiment report could help lift equities. Consumer sentiment climbed in May to its best level since October 2007, with the index hitting 79.3, according to the Thomson Reuters/University of Michigan's final reading.

VeriFone Systems [PAY  Loading...      ()   ] plunged after the electronic payment technology provider handed in a disappointing third-quarter and full-year guidance.

BlackRock's [BLK  Loading...      ()   ]increased its stake in Chesapeake Energy [CHK  Loading...      ()   ] to almost 4 million shares from fewer than 1 million shares, sources told CNBC.

Green Mountain Coffee Roasters [GMCR  Loading...      ()   ] independent director Douglas Daft resigned from the board this week.

U.S. generic drug maker Mylan [MYL  Loading...      ()   ] settled a patent infringement suit with Sunovion Pharmaceuticals, a unit of Dainippon Sumitomo Pharma,related to the Japanese drugmaker's bronchitis medicine Brovana.

U.S. markets will be closed Monday for the Memorial Day holiday.

—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

On Tap Next Week:

MONDAY: Memorial Day—equity, bond markets closed
TUESDAY: S&P Case-Shiller home price index, consumer confidence, Dallas Fed mfg survey
WEDNESDAY: Mortgage apps, pending home sales; Earnings from TiVo
THURSDAY: Challenger job-cut report, ADP employment report, GDP, jobless claims, Fed's Pianalto speaks, corporate profits, Chicago PMI, oil inventories, chain-store sales, Zipcar shareholders mtg; Earnings from Joy Global
FRIDAY: Non-farm payrolls, personal income & outlays, ISM mfg index, construction spending, auto sales, Wal-Mart shareholders mtg

More From

Financial Companies Need A New Model - Yahoo Finance

While the dust is still settling from the bursting of the housing bubble and the resulting credit crunch, it's not hard to make a few general statements about the circumstances that fueled much of the excess. Though the U.S. government has chosen to do little to change how financial companies are structured and managed, this seems like one of the core contributing features of the most recent crisis. It may be time, then, to consider whether the U.S. financial system would benefit from a new model for its financial companies.

SEE: Getting To Know Business Models

Underlying Premises
There were many contributing circumstances to the emergence, growth and collapse of the housing bubble. Like most disasters, the problem wasn't so much a single factor as a combination of multiple reinforcing factors that ultimately led to trouble. That said, the structure of many financial companies appeared to have played a major role.

A large percentage of the major players in the credit system - banks, investment banks and insurance companies - were all structured as public corporations. While this structure theoretically gives every shareholder a voice in how the company is run, in practice it almost never worked that way. Instead, boards of directors and senior managers acted as they saw fit, particularly when it came to the compensation and risk management philosophies of the company.

Across the spectrum of companies, there was widespread excessive risk-taking, with virtually no accountability or personal risk involved. While an individual trader, banker or portfolio manager could be fired for a series of bad trades, and executives could be fired for hiring too many ineffective employees, the shared risk stretched no further than that job. At the same time, managers were rewarding successful employees with huge cash payouts and little apparent concern for the risk they took to produce the results.

When it all fell apart, numerous financial corporations received millions of dollars from the government to stay afloat, but bonuses already paid out were left untouched. Consequently, the system essentially evolved into a "heads, I win; tails, you lose" scenario, where executives had everything to gain by taking on outsized risks (large salaries and cash bonuses) and very little to lose if it all went wrong.

Are There Alternatives?
Financial companies weren't always structured this way. For much of the business history of the U.S., banks were privately owned, investment banks (and merchant banks before them) were structured as partnerships, and many insurance companies were mutual organizations.

While these are all different structures, they share a few common features as they pertain to financial companies. For starters, they tend to attract and retain less capital, so managers tended to focus on a relatively smaller number of businesses where they had real expertise and understanding. Likewise, with capital in short supply (and expensive), managers were much more conservative about how that capital was allocated.

These structures all often gave senior executives huge personal financial stakes in the fate of the enterprise they managed. While not all partnerships were structured in a way that made partners individually financially liable for the company, many were. All in all, then, these structures often meant that managers had a deep personal connection to their businesses; failure of the business was often tantamount to personal financial bankruptcy or at least significant loss of wealth.

SEE: Identifying And Managing Business Risks

Definite Downsides
These are not perfect organizational structures, and certainly do feel out of place in a financial sector that is far larger, more dynamic and more global than ever before.

For starters, a higher cost of capital means that fewer worthwhile projects will be funded or pursued, and this is less efficient for the economy as a whole. After all, there has to be a happy medium somewhere between enterprising businesspersons or young couples being unable to get loans on any reasonable terms and widespread NINJA loans (no income, no job/assets).

These structures are also inherently exclusionary and inefficient. Banks, investment banks and insurance companies are legitimate enterprises that many people want to invest in, and avoiding public shareholding altogether again removes options from the market and reduces investment and capital efficiency. What's more, small, siloed businesses are less efficient and that inefficiency filters through to the economy as more expensive capital and slower-than-necessary growth.

Time for a Hybrid?
Hybrids are still all the rage today in cars, and maybe governments need to consider hybrid models for financial companies. Perhaps it would be possible to structure them as modified limited partnerships where regular investors can participate as shareholders, but managers hold a different sort of stake that entitles them to a different share of profits at the cost of more responsibility and personal liability.

In such a model, then, senior managers would essentially be forced to own this different class of shares as a prerequisite of the position. With more of their own assets on the line, perhaps they would be less eager to pursue risk blindly.

Then again, it may be that such advanced measures are excessive. Perhaps there's a simpler way that fits within the existing structures. What if senior executives were required to hold a certain percentage of their personal financial assets in company shares and could only receive a limited amount of cash compensation in a given year (with the rest in the form of restricted or preferred shares). Such a model would, at a minimum, delay some of the gratification of excessive risk-taking and would enable boards of directors to claw back compensation or otherwise punish those whose decisions ultimately did serious harm to the corporation and its shareholders.

SEE: $1 CEOs And What They Make Now

The Bottom Line
There is no perfect corporate structure, and probably no failsafe method of restraining greed or self-interest. That said, reducing the short-term cash benefits of risky behavior and putting more of a decision-maker's net worth on the line, might serve as a reasonable brake on destructive impulses.

More From Investopedia

World stocks mixed amid bargain-hunting vs caution - Yahoo Finance

BANGKOK (AP) -- Asian stocks eked out gains Thursday as traders hunted for bargains after sharp selling in recent days, but markets in Europe fell amid intensifying fears of a messy exit by Greece from the euro common currency.

Greece called a new round of elections for June 17 after coalition talks to form a government fell apart. The president said depositors were pulling hundreds of millions of euros out of banks, weakening the country's strained financial system.

The developments fueled fears that Greece would exit the euro currency and shake global markets. In elections earlier this month, Greek voters punished parties that supported tough austerity measures needed to secure international bailout money.

But analysts at Credit Agricole CIB in Hong Kong said the scheduling of new Greek elections suggested "a reduction in near-term uncertainties" that could lead to some relief for volatile markets.

Britain's FTSE 100 fell 0.4 percent to 5,380.72 in early trading. Germany's DAX fell 0.2 percent to 6,373.01 and France's CAC-40 lost 0.2 percent to 3,042.45.

U.S. stocks were set for a moderately higher opening, with Dow Jones industrial futures up 0.3 percent at 12,610. S&P 500 futures rose 0.4 percent to 1,327.

In Asia, stock markets enjoyed a slight rebound as investors went bargain-hunting, analysts said.

Japan's Nikkei 225 climbed 0.9 percent to close at 8,876.59 after the country posted better-than-expected growth figures for the first quarter. South Korea's Kospi added 0.3 percent to 1,845.24. Benchmarks in Taiwan, New Zealand and the Philippines also rose.

Australia's S&P/ASX 200 slipped 0.2 percent to 4,157.40, dragged down by financial stocks. Hong Kong's Hang Seng closed 0.3 percent down at 19,200.93.

Mainland Chinese shares bounced back from early losses, buoyed by calls from the country's central bank governor, Zhou Xiaochuan, for market reforms.

The benchmark Shanghai Composite Index rose 1.4 percent to 2,378.89. The Shenzhen Composite Index also gained 1.4 percent to 954.95. Shares in brokerages, financial and trading-related companies led the gains.

Positive news on the U.S. economy on Wednesday underpinned sentiment in Asia. Construction of homes in April rose 2.6 percent from March, and U.S. factory production increased 0.6 percent in April, helped by a gain in auto production.

Some Japanese stocks saw big gains amid news that the country's economy grew at an annualized 4.1 percent for the January-March quarter thanks to a rebound in consumer spending.

Sharp Corp. jumped 5.7 percent and Mazda Motor Corp. added 3.8 percent. Steel company JFE Holdings shot up 5.5 percent.

Benchmark oil for June delivery was up 52 cents to $93.33 per barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract fell by $1.17 to finish at a seven-month low of $92.81 per barrel in New York.

In currencies, the euro fell to $1.2715 from $1.2725 late Wednesday in New York. The dollar rose to 80.35 yen from 80.29 yen.


AP researcher Fu Ting contributed from Shanghai.

Stocks to Watch: Frontline, VeriFone Systems, Talbots - Wall Street Journal

By Corrie Driebusch and Nathalie Tadena

Among the companies with shares expected to actively trade in Friday’s session are Frontline Ltd. (FRO), VeriFone Systems Inc. (PAY) and Talbots Inc. (TLB).

Frontline’sfirst-quarter earnings fell 53% on a double-digit drop in revenue as the company said demand in the tanker market continues to lag supply. But the results topped estimates, and the company, which recently undertook a restructuring effort, said it expects its second-quarter results to be better than the first. Shares were up 8% in premarket trading to $5.38.

VeriFone’s fiscal second-quarter earnings fell 43% as restructuring and acquisition-related costs continued to overshadow stronger revenue and better-than-expected core profit. Shares sank 8% to $41.38 premarket as guidance estimates were mostly below Wall Street expectations.

Talbots said its exclusivity agreement with Sycamore Partners has expired without the companies agreeing to a takeover deal at this time. The struggling women’s apparel retailer and the private equity firm entered the agreement earlier this month after Sycamore Partners made a sweetened offer that valued Talbots at about $215 million. Shares slid 22% to $2 in premarket trading.

Dell Inc. (DELL) is in talks to buy Quest Software Inc. (QSFT), Bloomberg reported, citing people with knowledge of the matter. Bloomberg said Dell is among several companies that made offers for Quest Software after it agreed in March to be bought by private equity and venture capital firm Insight Venture Partners for about $2 billion. Shares of Quest Software jumped 3.5% to $26.05premarket.

SemTech Corp.’s (SMTC) first-quarter earnings slid 90% as expenses and a purchase accounting adjustment related to the chip maker’s acquisition of Gennum Corp. weighed on margins and bottom-line results. But Williams Financial upgraded its stock-investment rating on SemTech to buy from hold saying while the results were below consensus, the quarter was “fairly strong.” Shares rose3.8% to $24.60 premarket.

Delcath Systems Inc. (DCTH) said it plans to sell shares of its common stock and warrants to purchase shares to raise funds to develop and commercialize the specialty pharmaceutical and medical device developer’s products, as well as for working capital. Shares slumped 24% to $1.80 premarket.

New York Mortgage Trust Inc. (NYMT) plans to sell 4 million shares to raise funds to acquire assets, including commercial and residential mortgage backed securities, and for other purposes. Shares fell 5.5% to $6.55 premarket.

Rosetta Genomics Ltd. (ROSG) agreed to sell 570,755 shares to investors at a 29% discount to its Thursday closing price. The molecular diagnostics firm’s shares fell 7% to $15.15 premarket, above the $11.50 offering price.

America’s Car-Mart Inc.’s (CRMT) fiscal fourth-quarter profit jumped 15% as the used-car seller recorded stronger volume and selling prices. Earnings topped analyst expectations.

AOL. Inc. (AOL) urged shareholders to vote for its slate of board nominees, saying activist investor Starboard Value LP’s nominees lack a long-term strategy or relevant industry experience.

Bazaarvoice Inc. (BV) agreed to acquire privately held rival PowerReviews Inc. in a cash and stock deal valued at $151.9 million, including options, that will expand the branding and marketing information company’s client base among small-to-medium sized retailers. The company also reported preliminary fourth-quarter revenue that topped analyst expectations.

Bunge Ltd.’s (BG) board approved a 8% increase in the grain-processing company’s quarterly dividend, the latest in a series of companies to make shareholder-friendly moves.

Exchange operator CME Group Inc. (CME) declared a five-for-one stock split, as the company said it hoped a lower share price would appeal to “a broader, more diverse mix of investor portfolios.”

Delphi Automotive PLC (DLPH) made a binding offer to acquire FCI Group’s motorized vehicles division in a deal valued at EUR765 million, or $972 million, that will strengthen the parts maker’s connector product portfolio. The deal is expected to be accretive to the company’s 2013 earnings.

Dish Network Corp.’s (DISH) standoff with broadcasters over its new ad-skipping technology turned into a legal battle Thursday as the parties filed lawsuits against each other.

Standard & Poor’s Ratings Services upgraded El Paso Pipeline Partners L.P. (EPB) into investment grade territory, citing the company’s growing size and asset diversity.

Mentor Graphics Corp. (MENT) swung to a fiscal first-quarter profit as the chip-design software company saw its margins improve on broadly higher demand.

Rue21 Inc.’s (RUE) fiscal first-quarter earnings rose 21% as the value-oriented teen-apparel retailer continued to record strong sales growth.

Sealed Air Corp. (SEE) appointed Carlisle Cos. (CSL) executive Carol P. Lowe as its new chief financial officer, starting next month.

A U.S. District judge for the Eastern District of Pennsylvania found former USA Technologies Inc. (USAT) director Bradley Tirpak violated a nondisparagement-contractual provision in his attempted proxy battle against the company.

Watson Pharmaceuticals Inc. (WPI) confirmed Thursday it has filed an application with the U.S. Food and Drug Administration to market a generic version of Auxilium Pharmaceuticals Inc.’s (AUXL) Testim 1% gel, a testosterone replacement therapy.

US Stocks Mixed As Spain Weakness Counters Confidence Readings - NASDAQ


NEW YORK -(Dow Jones)- Stocks were mixed ahead of the long weekend, as investors shrugged off better-than-expected consumer confidence readings after reports of regional weakness in Spain.

The Dow Jones Industrial Average fell 6 points, or 0.1%, to 12522.

The Standard & Poor's 500-stock index rose 2 points, or 0.2%, to 1321, and the Nasdaq Composite was mostly flat, falling less than 0.1%, to 2838.

The Spanish region of Catalonia reported early Friday it will need financing help from the central government, which pushed U.S. futures and European stock markets into negative territory before market-open.

"This underscored that the crisis is spreading," said Quincy Krosby, a market strategist with Prudential Financial.

Worries on Europe led investors to discount data that showed consumers are more upbeat than they have been since the most recent U.S. recession. The Reuters/University of Michigan's sentiment index rose to 79.3 at the end of May from 77.8 earlier this month, above the estimates of economists surveyed by Dow Jones.

"It helps that energy prices are going down a little bit, but our biggest concern is with Europe," said Colleen Supran, a principal with wealth-advisory firm Bingham, Osborn and Scarborough.

European markets erased early gains to turn lower as investors expressed caution heading into the weekend, offsetting better-than-expected data out of Germany. The Stoxx Europe 600 was down 0.2%, but had been up as much as 0.8% earlier in the session.

In corporate news, shares of Facebook slipped 3.1% to $32. The stock had gained 6.5% over the last two sessions to close at $33.03 Thursday, but was still 13% below its $38 initial public offering price.

German consumer confidence remained steady in May in the face of all the turmoil about a potential Greek exit from the euro zone.

But adding to investor jitters, shares of Spain's Bankia were suspended for trading ahead of a board meeting to approve a recapitalization plan.

Asian markets were mixed, with China's Shanghai Composite falling 0.7% and Japan's Nikkei Stock Average tacking up 0.2%.

Crude-oil futures ticked up 0.3% to $90.96 a barrel, while gold futures added 0.6% to $1567 an ounce. The U.S. dollar gained ground against the euro, but fell against the yen.

In other corporate news, Verifone Systems slid 12% after the electronic payment company reported fiscal second-quarter results that topped estimates, but provided a third-quarter outlook that was below current earnings and revenue projections.

CME Group rose 2.2% after the exchange operator declared a five-for-one stock split, saying it hopes a lower stock price will appeal to a more diverse mix of investors.

Delcath Systems plunged 35% after the pharmaceutical and medical device company said it plans to launch a public offering of its common stock.

New York Mortgage Trust fell 4.8% after the company said it was selling four million shares of common stock to the public.

    (END) Dow Jones Newswires   05-25-121102ET   Copyright (c) 2012 Dow Jones & Company, Inc. 

US stocks gain on unemployment report - Yahoo Finance

Stocks rose modestly on Wall Street Thursday, breaking a six-day losing streak for the Dow Jones industrial average, after the government said weekly jobless claims edged down.

The lower jobless number suggests that employers may accelerate hiring this month.

In late morning trading, the Dow rose 27 points to 12,862. The Standard & Poor's 500 index gained four points to 1,358. The Dow had been up 96 points earlier.

The tech-heavy Nasdaq composite index fell six points to 2,928. Cisco Systems, one of the 30 stocks in the Dow average, plunged 9 percent after the networking giant warned investors that technology spending appeared to be slowing down and that its revenue would rise much less than analysts had been expecting this quarter. Hardware maker Oracle fell 2 percent.

Before Thursday, the Dow had fallen for six days in a row, its longest losing streak since August. Investors were encouraged by the Labor Department's report that applications for unemployment benefits dropped 1,000 to 367,000 in the week ending May 5. The four-week average, which economists watch more closely, fell 5,250 to 379,000. When that figure remains consistently below 375,000, it suggests that job growth is strong enough to lower the unemployment rate.

The numbers could dispel nascent fears that that strongest yearly start for hiring since the recession ended 2009 was sputtering.

Stocks also benefited from news that Spain would take over Bankia SA, the country's fourth-largest bank, which has high exposure to bad property loans. The government is hoping to convince investors that Spain won't need a bailout.

"Europe's problems are by no means being solved. But the feeling that there is some support there probably helps sentiment a little bit," said Ed Hyland, a global investment specialist with J.P. Morgan Private Bank.

The news helped U.S. financial stocks, which would be vulnerable to an increase in financial stress in Europe. Citigroup rose 1.6 percent and JPMorgan Chase rose 1 percent.

European stocks rose. Spain's IBEXC 35 index jumped 3.1 percent on the Bankia news and a drop in Spain's borrowing costs. Britain's FTSE 100 rose 0.2 percent, Germany's DAX rose 0.6 percent.

Other U.S. stocks on the move included:

— Pfizer rose 1.6 percent after the drugmaker got preliminary approval for an arthritis drug.

— Avon fell 2.1 percent after beauty products maker Coty Inc. raised its offer to buy Avon but also said it will withdraw the latest bid if it doesn't get a response by the close of business Monday.

— Kohl's fell 3 percent after price-cutting led to a 23 percent drop in its first-quarter profit.

Oil prices rose 21 cents to $97.45 per barrel.

Stocks mixed on eurozone uncertainty - Financial Times

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