Some investors are starting to believe that the worst of the credit crunch is behind us, and European banks including UBS (NYSE: UBS) and Royal Bank of Scotland (NYSE: RBS) are leading a bullish move in the markets.
The dollar stabilized and oil weakened, giving a boost to many blue chip stocks. Home Depot (NYSE: HD) rose nearly 4% in trading on Thursday, and American Express (NYSE: AXP) was up nearly 7%.
Not all news is positive, however. U.S. futures are flat as the markets await the Labor Department's official employment report, due today. According to Bloomberg's calculation, unemployment in the U.S. continues to rise as employers shed more than 75,000 jobs in April. The unemployment rate is now probably at 5.2%, a three-year high. And real unemployment is probably worse that that, since the Labor Department's calculation method, which Bloomberg uses, significantly undercounts unemployment and underemployment.
And the Microsoft-Yahoo! saga continues. The AP reports that Microsoft (NASDAQ: MSFT) may go hostile in its bid to buy Yahoo! (NASDAQ: YHOO) today. Should be entertaining, so say tuned.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
In the battle for "cool history," American Express (NYSE: AXP) wins this one hands down. The company was started in 1850 as an express delivery service. At the time, the U.S. Postal Service was slow and unreliable, and sending anything important or valuable was ill-advised. The American Express Company was known for its "expressmen," who delivered valuable packages all over the country, usually on horseback or with stagecoaches.
After establishing a strong reputation for delivery service, the company later decided to phase out deliveries and move into financial services. They had delivered countless documents for banks, and the money business was appealing. American Express first offered money orders in 1882, followed by travelers cheques in 1891. The travelers cheque business was the main focus of the company for many years.
In 1958, the company gave in to market pressures and issued its first charge card. For almost 30 years, though, the card was not to be used as a "credit" card. All balances were to be paid in full each month. In 1987, that changed as American Express finally issued a card that allowed revolving balances.
After opening trading at $55.00 on March 19, the stock has hit a new high today. V opened this morning at $76.00. So far today the stock has hit a low of $73.91 and a high of $76.08. As of 12:25, V is trading at $74.67, up $2.37 (3.2%). The chart for V looks bullish and steady.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $60 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just two months as long as V is above $60 at June expiration. Visa would have to fall by more than 19% before we would start to lose money. Learn more about this type of trade here.
V hasn't been below $60 since just after its IPO and has shown support around $70 recently. This trade could be risky if the company's earnings (due out on Monday) disappoint, but even if that happens, this position could be protected by the support the stock might find between $60 and $65, where it made intermediate bottoms over the past two months.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in V or AXP.
It seems that despite Apple's crushing earnings and sales estimates Wednesday and Ford swinging to profit this morning, investors are wary of earnings. Stock futures declined early Thursday following Amazon's earnings, Starbucks' profit warnings as well as other companies. In addition, debate over an expected pause in the Federal Reserve recent wave of rate cuts as well as some data seem to leave investors more on a cautious mood this morning.
U.S. stocks ended higher on Wednesday after better-than-forecast results from Boeing (NYSE: BA) helped sentiment on the Street, albeit in a choppy manner. The Dow industrials finished nearly 43 points higher, or 0.34%, the S&P 500 rose almost 4 points, or 0.29%, and the Nasdaq Composite rose 28 points, or 1.29%.
Today, several economic reports are due out. At 8:30 a.m., weekly initial jobless claims will be released, as well as March durable goods orders. At 10:00 a.m., new home sales will come out, where another drop is expected.
Hottest Stocks of 2008 (so far) Some surprising names have performed well this year--and they have room to run. They include Allied Irish Banks, Home Depot, Lowe's, American Express, Time Warner Cable, Vulcan Materials and Verizon. The Hottest Stocks This Year - Morningstar Stock Strategist
Worst Places for Homeowner's Debt It's no secret that homeowners with subprime mortgages have taken a beating. Next up: those who have combined their mortgages with home equity loans, second loans or both. These combinations spell especially bad news for homeowners with the worst city being Sacramento. Other cities with high homeowner debt include San Diego, Washington DC and Colorado Springs. Worst Cities For Homeowner Debt - Forbes.com
Fort Worth-based AMR Corp. (NYSE: AMR), parent of American Airlines, was the first major U.S. airline company to report first-quarter results, and it posted a loss of $1.32 per share. Revenue rose 5% to $5.7 billion. Analysts surveyed by Thomson Financial had expected a loss of $1.34 per share on revenue of $5.73 billion.
Filling seats wasn't American's problem -- average occupancy hit a record 79.1% percent in the quarter. Average fares paid rose 5.1%, as airlines raised ticket prices. But executives said they were concerned about the weakening economy and even more worried about skyrocketing fuel costs. American's fuel spending jumped 45%, offsetting further increases in revenue.
American announced that it will be cutting U.S. capacity by 3.6% this year and selling 90% of its investment arm, American Beacon Advisors. The company also expects to sell or spin off its American Eagle regional airline this year to raise additional cash.
American is also speeding the replacement of its fleet with more fuel-efficient Boeing (NYSE: BA) 737-800s, taking delivery of 30 new planes in 2009 and 2010 instead of the previously planned 23.
AMR shares rose 35 cents, or 4.1%, to $8.92 in trading Wednesday.
5 Foreign Stocks to Love Concerned about your domestic investments in today's troubled economy? Consider these international companies, which can be easily purchased right here in the U.S. They include Finland's Nokia, China's CNOOC, Brazil's Embraer, U.K's InterContinental Hotels Group and Ireland's Allied Irish Banks. 5 foreign stocks we love - How we chose the stocks (1) - CNNMoney.com
Highest Paid CEOs Stocks may have fallen in 2007, but executive pay sure didn't. And if the multi-million dollar paydays for CEOs doesn't raise eyebrows, the 'perks' that go along with the money certainly will. These include corporate jets, special security, private cars with drivers to country club dues and vacations. Among the top paid CEOS including base pay, perks and other compensation are Merrill Lynch's new CEO John Thain, Oracle's Larry Ellison, Goldman Sachs' Lloyd Blankfein and American Express' Kenneth Chenault who each made over $50 million last year. List: Highest Paid CEOs Stocks may fall, but execs' pay doesn't - USATODAY.com CEO perks often include use of company jet, security - USATODAY.com
Retirees Turn to Communes With living costs spiraling upward and empty-nesters feeling a need for a greater sense of community in their lives, some baby boomers are reconsidering the concept of group living. This time around, the idea holds appeal as a cost-efficient, socially engaging way to spend their golden years. Baby boomers go back to the commune -Bankrate
12 Tips for Midnight Tax Filers These tips will help ensure that you get your return into Uncle Sam's hands on time while mailing at the last possible moment. Many happy, but last-minute, returns
MOST NOTEWORTHY: The Brokers and Asset Managers sector, Pacific Sunwear and Metabasis Therapeutics were today's noteworthy upgrades:
Goldman upgraded the Brokers and Asset Management sector to Attractive from Neutral as they believe an inflection point has been reached for stocks with minimal credit exposure, or where exposure is marked to market. Goldman expects the problem to shift to regional banks and specialty finance from brokers. As such, Goldman upgraded American Express (NYSE: AXP), Metlife (NYSE: MET), Bank of New York Mellon (NYSE: BK), Franklin Resources (NYSE: BEN), Janus Capital (NYSE: JNS) and NYSE Euronext (NYSE: NYX) to Buy from Neutral.
Wachovia upgraded Pacific Sunwear (NASDAQ: PSUN) to Outperform from Market Perform based on valuation, merchandising improvements, operating efficiencies, favorable product mix, and reductions in underperforming categories.
Rodman & Renshaw raised Metabasis (NASDAQ: MBRX) to Outperform from Market Perform on valuation given the potential for MB07803.
OTHER UPGRADES:
HSBC raised Novartis (NYSE: NVS) to Neutral from Underweight.
UBS (NYSE: UBS) was upgraded at Morgan Stanley to Equal Weight from Underweight.
Nike (NYSE: NKE) unveiled its Olympics 2008 line Monday, its largest effort for the games ever. Nike actually created products in every sport at the games despite not being an official sponsor of the games like its rival Adidas. As for the U.S. team, it will be attired in Polo Ralph Lauren (NYSE: RL) garb.
If Apple Inc. (NASDAQ: AAPL) was upgraded Monday, today it finds itself on the flip side with a downgrade from Morgan Keegan from Market Perform to Underperform. Ummmm, contrarian is one thing, but I'm not so sure about that one. AAPL shares are down nearly 1.5% in premarket trading.
Meanwhile, according to MarketWatch, Goldman Sachs has upgraded some brokers and asset managers, but is remaining cautious on regional banks, mortgage and specialty finance and REITs. American Express (NYSE: AXP), Metlife (NYSE: MET), Bank of New York Mellon (NYSE: BK), NYSE Euronext (NYSE: NYX) and several others all were upgraded to Buy. Wells Fargo (NYSE: WFC) and several others were cut to neutral.
Morgan Stanley upgraded UBS (NYSE:UBS) from "underweight" to "equal weight" according toBriefing.com. The financial news service also reports that Morgan Keegan downgraded Apple (NASDAQ:AAPL) to "under perform" from "market perform".
Douglas A. McIntyre is an editor at 247wallst.com.
Recently, I've been getting too many emails and comments on my blog asking what I think of the Visa (NYSE: V) IPO. Listen, every single long-term investor should be interested in it. Until today, it's been one of the few remaining marquee companies around unavailable to our stock-obsessed society and aside from litigation risk, the company's got everything going for it.
It's got strong sales and transaction growth and more importantly, like rival MasterCard (NYSE: MA), it's immune to the current credit crunch, passing off cardholder debts to the banks. So, when others are sweating potentially catastrophic events like The Bear Stearns Companies Inc. (NYSE: BSC) and the potential collapse of other brokers like Lehman Brothers Holdings (NYSE: LEH), scaring everyone half to death, these guys are sitting pretty. This is also the main reason why MasterCard's stock has handily outperformed rivals American Express (NYSE: AXP) and Discover Financial Services (NYSE: DFS), two companies -- and stocks -- that are certainly feeling that credit pain.
There'll be plenty of other articles dissecting the company, but I find that in rare situations like these, it's best to think in terms of the general picture. Not because it's the right way to invest, but because it's the way most people do. And those most people are the ones who can really influence the stock price here.
Target (NYSE: TGT) has one of the few lending businesses that is expanding. According toThe Wall Street Journal, "At the end of Target's fiscal fourth quarter, which ended Feb. 2, the company had $8.62 billion of loans outstanding on its Visa cards."
That is a boat-load of money. But Target is not immune to the larger forces in the economy. The Journal quotes William Ryan, consumer-credit analyst at Portales Partners, as saying, "Target appears to have pursued very aggressive credit growth at the wrong time."
The question is why should Target be any different from American Express (NYSE: AXP) or any other credit card company? Economic data show that consumer defaults on home loans, car loans, and credit cards are rising quickly in most segments of the economy and that even well-to-do consumers are having trouble making ends meet.
Target's next earnings report may not look so great. The retailer's stock is up this year, but that can always be fixed.
Douglas A. McIntyre is an editor at 247wallst.com.
According toForbes, Bill Gates of Microsoft (NASDAQ: MSFT) is no longer the richest man in the U.S. The honor now belongs to Warren Buffett, the head of conglomerate Berkshire Hathaway (NYSE: BRK.A). Buffett is worth $62 billion to Gates's $58 billion.
This says more about the shift in the American business landscape than it does about anything else. The Berkshire Hathaway stock is up 30% over the last year, while Microsoft's is flat. Since Berkshire owns an insurance company, it would make sense that the financial crisis would hurt its value, but Buffett has stayed away from the investments that have hurt other companies.
Microsoft may be a safe investment now with its large cash position and steady income from Windows, but it is probably no longer a growth stock. Microsoft software runs on 95% of the world's PCs and many of its servers. That leaves the question of what the company can do to expand rapidly again. The answer may be that it can't.
Buffett's company is in more than a hundred businesses. He can make the argument that diversification is the foundation of a successful corporation. The firm's operations make everything from uniforms for police to concrete block, roofing systems to fabrics. Berkshire also owns large parts of companies from American Express (NYSE: AXP) to Wells Fargo (NYSE: WFC).
The new Forbes ranking shows that a large bucket of good investments trumps owning a piece of one successful company in a market that is no longer growing quickly.
Douglas A. McIntyre is an editor at 247wallst.com.
I estimate that General Electric Company (NYSE: GE)'s GE Money segment is worth between $46 billion and $48.9 billion -- down 10.6% at the high end -- compared to last July's range of $29.6 billion to $54.7 billion.
GE Money provides financial services to consumers and retailers in 50 countries. GE Money offers private-label credit cards; personal loans; bank cards; auto loans and leases; mortgages; corporate travel and purchasing cards; debt consolidation; home equity loans; deposit and other savings products, and credit insurance.
GE Money had a great 2007. Its 2007 revenues and net earnings increased 26% and 31%, respectively, compared with 2006. Revenues in 2007 included $0.4 billion from acquisitions. Revenues in 2007 also increased $4.8 billion as a result of organic revenue growth ($3.5 billion) and the weaker U.S. dollar ($1.4 billion).
This post is part of our 
It seems that despite Apple's crushing earnings and sales estimates Wednesday and Ford swinging to profit this morning, investors are wary of earnings. Stock futures declined early Thursday following Amazon's earnings, Starbucks' profit warnings as well as other companies. In addition, debate over an expected pause in the Federal Reserve recent wave of rate cuts as well as some data seem to leave investors more on a cautious mood this morning.
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