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April 8, 2008 – 5:58 am | by BizIntel
It’s no secret that international growth (especially in markets such as China and India) has been driving global energy demand. Per the Economist, worldwide energy consumption will grow about 3.5% by the end of 2008, and oil prices are expected to remain relatively high.
However, emerging markets such as Brazil are also playing a pivotal role on the supply side as well. With the recent discovery of the Tupi and Jupiter fields off the coast of Rio de Janeiro, Brazil could find itself among some of the largest holders of oil reserves in the world. The location of these reserves (deep water) is beneficial for leading oil services companies such as Noble Corp. (NYSE: NE).
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Tags: Stock Picks
April 4, 2008 – 6:59 am | by BizIntel
The Bureau of Labor Statistics announced unemployment jumped to 5.1% in March this morning, confirming investor fears that the US is in the throes of a recession. Per the data, non-farm payrolls fell by 80,000 in March, led by further declines in manufacturing, construction, and employment services.
Bad News Gets Worse
Of particular note is a decline of 35,000 jobs in professional and business services. This is unsettling for Wall Street, as these jobs had remained resistant to the declining job market until now.
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April 3, 2008 – 6:49 am | by BizIntel
Jobless claims announced this morning grew to 407,000 (week-end 3/29) vs. the consensus estimate of 365,000 and prior period claims of 366,000. The markets already show signs of weakness on the heels of the news, as investors typically put significant weight on employment data when evaluating the health of the economy.
Tags: The Stock Market
March 19, 2008 – 6:47 am | by BizIntel
The stock markets look ready to open down this morning after Wall Street digests yesterday’s key events. The Federal Reserve once again lowered the Fed Funds rate about 3/4 of a percentage point to 2.25%, disappointing investors who were looking for a full point rate cut. According to The Wall Street Journal, the move was a sign that the Fed is looking to rely on other options besides interest rates to stimulate the market (in order to keep inflation in check).
The Stock Market & Bank Stocks Rise
Also making headlines were better than expected earnings at major banks such as Morgan Stanley (NYSE: MS), Lehman Brothers (NYSE: LEH) and Goldman Sachs (NYSE: GS). All three stocks had suffered over the past year from uncertainty surrounding the subprime lending fiasco. The market reacted positively to both major news items, as the Dow closed up about 3.5%.
March 17, 2008 – 6:21 am | by BizIntel
There’s nothing quite like a fire sale in the stock market - except, of course, when even the buyer (who just swapped a dime for a dollar) feels ill at ease with the transaction. Unfortunately, that seems to be the case now, as JP Morgan Chase (NYSE: JPM) announced yesterday that it was purchasing ailing giant Bear Stearns (NYSE: BSC) for the rock bottom price of 2 bucks a share.
Why So Cheap?
Bear Stearns is a product of the mortgage backed security implosion that has unfolded over the past year. The amount of mortgage securities it holds (which are essentially worthless) is in the billions - making bankruptcy certain in the absence of a buyout or government intervention.
The Fed, fearing a domino effect on Wall Street if the firm were to fold quickly, has been working hard to secure JP Morgan Chase as a buyer. They have even gone as far as putting up an unprecedented $30 billion in capital to finance Bear’s illiquid assets (i.e., mortgage backed securities). However, despite the Fed’s backing, management at JP Morgan is still sweating all of the uncertainty behind the deal. This was the key driver behind the firm’s per share offer price of $2.
Shareholder Mutiny Brewing
According to an article in The Wall Street Journal, Bear stockholders are extremely displeased with the buyout price. They argue that filing for bankruptcy is a much better option, as book value of the firm is believed to be far greater than $2 per share. Still, management position is that stockholders will agree to the deal (which is expected to close in June).
The Stock Market Reaction
All of this uncertainty and panic will send the major stock market indices lower. Even with an additional move by the Fed to lower the discount rate (which was also announced yesterday), the economy and the US dollar are in trouble. So, buckle up - I think we are in for a rough ride.
Tags: bear stearns