• Bears take control. Stocks plunged Thursday, with the S&P and Dow falling to levels not seen since 2006. Traders latched on to a bearish outlook from Goldman on its fellow brokerage houses (it sees a $9B Q2 writedown at Citigroup (C)) and GM (GM). Crude's rise of more than $5 to an all-time high of $140.39 increased the tension. Market watchers may derive some small measure of comfort from the day's surprisingly low trading volume. The Dow opens Friday just 120 points from bear market territory - a 20% drop from its highs. The VIX, a measure of volatility, remains 25% shy of its mid-March peak. The gory details: Dow -3.01% to 11,460. S&P -2.9% to 1,284. Nasdaq -3.33% to 2,321.
• Gold, black gold surge ahead. Oil climbed 3.9% to new record highs after OPEC chief Chakib Khelil said he doesn't see $200/barrel oil by year end - just $170, which he blames on speculators and a weak dollar. Libya also threatened to cut back its output. Gold gained 4.18% to $919. Two top Saudi oil officials are polarized as to whether the world indeed faces a major lack in oil supply, or whether the only thing lacking is ingenuity and investment.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
• Opening banks to private-equity. Sources say the Fed is planning moves to make it easier for private-equity firms to take large stakes in ailing banks. A private entity not registered as a bank holding company can own up to 24.9% of a bank, but with 10% ownership it must prove it isn't controlling or influencing the bank's operations. Therein lies the wiggle room. "If we don't facilitate private equity's role in that, that's one less pool of capital to stand between these losses and the taxpayer," Carlyle's Randall Quarles says.
• Bud bucks bid; InBev flexes muscles. Anheuser-Busch (BUD) formally rejected InBev's $65/share $46.4B takeover proposal, calling the offer "financially inadequate." InBev threatened to overthrow A-B's board if the company continues to spurn its offer, but some think it's unlikely to go hostile in a hurry at the risk of alienating "employees, distributors and consumers at a company that is a potent symbol of Americana." Anheuser played up a restructuring effort it calls Blue Seas, but analysts doubted the company could win shareholder support with long-term cost-savings that might take years to realize.
• BofA wields axe on Countrywide. Bank of America (BAC) said it will dismiss 7,500 Countrywide (CFC) employees (2.9% of the workforce) once it completes the buyout, slated for July 1. The all-stock deal, originally worth $4B, now values Countrywide at just $2.8B, but BofA may face up to $10B in losses and writedowns - not to mention Wednesday's trifecta of lawsuits.
• News Corp. looks at Spain, Germany. Sources say News Corp. (NWS) is looking to dealmake in the European pay-TV market, and is studying bidding for Germany's Premiere AG and Spain's Digital+, which together could cost more than $6.3B. Besides increased reach, the deals would also give News Corp. greater leverage in buying satellite space and negotiating with Hollywood studios. Premiere says it is unaware of any News Corp. plans.
• IAC sees $300M writedown for catalog business. IAC/InterActiveCorp (IACI) will take a $300M writedown on the goodwill of its Cornerstone Brands catalog business, due to the "significant deterioration in the macro economic environment for retailers." Cornerstone is part of IAC's retail unit, HSN, which is being spun off later this summer with three other units as CEO Barry Diller moves to slim and refocus the company - whose shares are down 27.3% YTD and 43% over the past 12 months.
• Strategic dealmaking takes over. U.S. merger activity was down 29% in Q2 vs. a year ago, better than the 40% global drop. More interesting, merger activity jumped by 172% vs. Q1. Strategic buyers are stepping in to snap up some of the better deals left untouched by financial buyers, analysts say. Private equity dealmaking fell 85% in the States and 76% elsewhere as tight credit conditions made it all but impossible to secure reasonably-priced funding. Goldman (GS) is the year's top advisory firm, followed by (surprise!) Citigroup (C) - up from #4 a year ago. JPMorgan (JPM) remained at #3. BofA's Stefan Selig notes hostile activity is up sharply, and will continue to dominate.
• Auto stocks crash. Goldman downgraded GM (GM) to Sell, put it on its Americas Sell list, and said it would likely need to raise capital by next year - sending its shares to a 34-year low. Fitch chimed in saying GM and Chrysler may face a cash crunch next year, and that Chrysler's liquidity position could reach "minimal required levels in late 2009." This lead to rumors of Chrysler filing for Chapter 11, which it denied. Moody's and S&P also dropped their outlooks for U.S. carmakers Friday. And auto research firm Edmunds.com dropped its outlook for the sector. All in all a pretty rough day: GM -10.8%. F -3.2%. DAI -3.3%. AXL -14.7%. HMC -4.9%. TM -2.7%. PCAR -6.7%. LEA -16.4%.
• Yahoo moves ahead - alone? Yahoo (YHOO) unveiled its reorganization plan, which president Sue Decker said will speed new-product development by cutting back on red tape. New units include Audience Products, Cloud Computing & Data Infrastructure, and Insights Strategy. The last, tasked with unifying Yahoo's game plan, sounds like it might be a good idea. Meanwhile TechCrunch insists MSFT/YHOO talks continue, and says mass denials on both sides are only meant to repress share prices. It notes Microsoft can buy up to 35% of YHOO without triggering Google's (GOOG) $250M penalty - a stake it could use to control the company, with the cooperation of a few major stakeholders. Carl Icahn disclosed an almost 5% stake in Yahoo, up from a previous 3.7% in May.
• Almost cheap. The NY Fed said JP Morgan's (JPM) Bear Stearns loan was only $28.82B, lower than initially anticipated, after an extensive review of the portfolio.
• The (not so) little caboose that could. Dissident shareholder TCI said that based on preliminary vote tallies, its group secured four of the five seats it was battling for on CSX's (CSX) 12-member board.
• Existing Home Sales for May were up 2% to 4.99M, just ahead of the 4.95M consensus - the year's second highest number, and just 1.4% lower than seven months ago. Bottoming housing prices may set the stage for a modest rebound later this year, some analysts said. Realtors said a full one-third of the 5M annualized home sales are distressed properties, and that strong condo sales artificially inflated the number.
• Final GDP for Q1: +1%, in line with consensus. It was revised up from 0.9%.
• Initial jobless claims for the week came in at 384,000, 9,000 worse than expected. Continuing jobless claims jumped by almost 3% to 3.14M. The four-week initial claims average of 378,250 is the highest since Oct. 2005.
• The Conference Board's Help Wanted index fell one point to 17, down 10 points from a year ago. Help-wanted ads declined in all nine U.S. regions. "There's no sign that improvement is just around the corner," it said.

Earnings: Thursday After Close

• Accenture (ACN): FQ3 EPS of $0.74 beats by $0.05. Q3 Revenue of $6.1B vs. consensus of $5.91B. Raisesfull-year EPS to $2.63-2.65, better than consensus of $2.59.
• Andersons (ANDE): Raised full-year EPS guidance to $4.40-4.80 from $3.65-4.00, vs. consensus of $3.79.
• Christopher & Banks (CBK): FQ1 EPS of $0.32 beats by $0.06. Revenue of $160M vs. consensus of $153M. SSS were flat.
• Finish Line (FINL): FQ1 EPS of $0.02 beats by $0.07. Revenue of $288M vs. consensus of $2814M.
• Intuit (INTU): Sees FQ4 EPS of -$0.09 to -$0.07, short of consensus of $0.05. Sees full-year EPS of $1.57-1.59, short of consensus of $1.63.
• Micron (MU): FQ3 EPS of -$0.30 misses by $0.02. Q3 Revenue of $1.5B in line.
• Palm (PALM): FQ4 EPS of -$0.22 beats by $0.04. Q4 revenue of $296M vs. consensus of $301M.
• Paychex (PAYX): FQ4 EPS of $0.38 in line. Q4 revenue of $519M vs. consensus of $529M.
• Tibco (TIBX): Q2 EPS of $0.07 beats by $0.01. Q2 Revenue of $150M vs. consensus of $148M.

Today's Markets

• Asia markets Friday mirrored Thursday's U.S. drop. Nikkei -2% to 13,544. Hang Seng -1.5% to 22,107. Shanghai -5.29% to 2,748. BSE Sensex -3% to 13,989.
• Europe indexes are largely down in early trading. London +0.09%. Paris -1.2%. Frankfurt -0.92%.
• U.S. futures at 5:00 AM. Dow +0.11%. S&P +0.25%. Nasdaq +0.25%.
• Oil futures hit an overnight high of $141.71, and are up 1.21% to $141.30. Gold is +1.08% to $925.

• What Will Fannie / Freddie Mean for Monday?  »
• Unemployment Rates, Recession Periods and Stock Market Prices  »
• Was August a Tough Month for Dividends?  »
• Regulators Share Blame for the Financial Crisis  »
• Why the Panic over Fannie and Freddie?  »

SA Editor
Eli Hoffmann

• Bio & more articles