Today was a very good day for the markets considering the bad news from AIG. We opened this morning lower thanks to weakness in the European and Asian markets and news that AIG’s auditor found accounting errors that may have underestimated losses. Here is the Bloomberg.com link describing the situation. There was also news that Fitch Ratings (one of those rating agencies) might lower AIG’s AA credit rating. Because of all this news AIG’s stock was down 12% and all other financials were also down.
On average, the major indexes finished the day up about 0.5%, and if it wasn’t for the bad news from AIG, we would have seen at least a 2% rally.
Dow Jones announced they will be removing Altria and Honeywell from the Dow Jones Industrial Average, and Bank of America and Chevron will replace them. Here’s the link to the article. Dow Jones explained that Altria is now too small and too focused of a company after their recent split and Honeywell is too levered to the industrial sector which is less important in today’s economy. Because of the rising important of the financial and energy sectors in today’s economy, Bank of America was added because it is the country’s biggest bank by deposits and Chevron is a major integrated company.
Energy stocks were up big again today (thanks to another rally in crude oil – up to $93.67) due to extreme cold weather in many parts of the country.
Back to the Yahoo! – Microsoft battle. There were rumors that Microsoft might up its bid for Yahoo! and this prompted RBC Capital Markets to downgrade Microsoft’s stock. MSFT traded below $28 today. Yahoo! released a statement today saying that the bid “is not in the best interests of Yahoo! and their stockholders and that it substantially undervalues Yahoo!.”
Just recently, Microsoft announced they will take their bid directly to the Yahoo! shareholders instead of letting the Yahoo! board of directors decide. Here is the Bloomberg.com article describing the situation.
In earnings new, Darden Restaurants (Red Lobster, Olive Garden, and LongHorn Steakhouse) offered guidance that surpassed analysts’ estimates. Hasbro, the toymaker, also posted results that beat estimates. This was great news for many restaurants and retailers and it gives us insight as to how the consumer might be spending its money in these uncertain times.
Also, struggling Motorola was in talks with Nortel Networks regarding a possible joint venture in order to combine their wireless departments. Motorola has been struggling recently as Nokia has stolen market share. This joint venture could also result in the expansion of WiMax, which is a large-scale wireless network that has proven itself yet.
Upcoming economic reports to watch:
1) Results from today’s Term Auction Facility by the Fed
2) Tues - February National Association of Home Builders housing index
3) Wed - January CPI and January housing starts
4) Thurs - January leading indicators, February Phily Fed survey
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