(Headlines - scroll down for full stories)
1. Slow Market Start — Is a Bad Year Looming?
2. Real Estate Developer Teetering on Bankruptcy
3. US Airways Ups the Ante for Delta
4. Trade Deficit Narrows as Crude Prices Fall
1. Slow Market Start — Is a Bad Year Looming?
According to the Stock Trader's Almanac, the first five trading days of the year
can be an early warning signal for investors.
That Almanac says that if stocks are net positive for the first five days of the
year, 86 percent of the time the stock market is generally positive for the rest
of the year. But if stocks are net negative for the first five days of the year,
such as this year, there is a 48 percent chance that stocks will end the year in
the red.
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This year, the S&P 500 closed down 0.4 percent at the end of the first five
trading days.
Clearly, this early warning signal is much more reliable in positive years, and
less so in negative years. However, if investors wait until the end of the
month, they'll be more likely to predict the stock market's direction for the
year.
According to the Almanac's January Barometer, "as the S&P 500 goes in January,
so goes the market." By waiting to see if stocks are positive or negative at the
end of the month, the accuracy rate of the indicator registers 91.1 percent. In
other words, the indicator has been wrong just five times since 1950.
"January is important because it gives you some general sense of investors'
appetite for stocks," Jason Trennert, founder and chief investment strategist of
Strategas Research Partners, tells USA Today. "If you start off weak, people are
probably less inclined to put money to work in stocks."
If stocks end the year below 1,418.30 on Jan. 31, make sure you at least hedge
your bets on the stock market. We find a great tool for that is a LEAPS put
option on the either the Dow or the S&P 500. Good luck!
Editor's Note:
2. Real Estate Developer Teetering on Bankruptcy
Mills Corp. may be forced to seek bankruptcy protection if it is not able to
repay a $1.1 billion loan due at the end of March.
The shopping mall owner and developer made the announcement on Tuesday, sending
its shares down more than 17 percent.
The company, whose creditors last month agreed to extend a loan maturity date to
March 31, said in a regulatory filing the loan agreement requires Mills to sell
significant assets to pay off the loan, and if Mills is not successful it could
be forced to seek bankruptcy protection.
Mills also said it would restate some results due to accounting errors, reducing
shareholders' equity by up to $352 million, with the bulk coming from items
related to cost capitalization. Mills said it has completed an internal review
and found discrepancies in its accounting practices.
The company said it has identified material weaknesses in internal controls over
financial reporting and will restate its financial statements for 2001 through
2004 and for the first three quarters of 2005.
The Chevy Chase, Md.-based real estate investment trust ( REIT ) had previously
reported shareholders' equity of $1.33 billion. Mills , which owns 38 retail
malls in the United States, has said it is pursuing options, including a sale of
all or part of the company.
Mills' accounting problems led to firings, layoffs, top management resignations
and a probe by U.S. securities regulators.
Mills' shares were down $3.36, or 17.7 percent, at $15.58 on the New York Stock
Exchange in early afternoon trading, reaching their lowest level since October.
The stock has lost more half its value over the past 52 weeks.
© 2007 Reuters.
Editor's Note:
3. US Airways Ups the Ante for Delta
US Airways sweetened the pot on its rocky proposed merger offer with Delta Air
Lines. USAir is offering almost 20 percent more than its original offer, a $10.4
billion package, which is designed to get Delta's creditors to push for an
agreement.
Delta's management has been against the merger from the start, wishing to remain
a standalone entity. But focusing on Delta's creditors shows a shrewd move on
USAir's part. "Right now, we feel very good about our chances of getting this
done," US Airways CEO Doug Parker told analysts on a conference call.
Delta's creditors committee reportedly did not ask USAir to raise its offer, but
indicated that it couldn't reach a decision on the original one. The new bid
offers Delta's creditors $5 billion in cash and 89.5 million US Airways shares.
The original offer was for $4 billion cash and 78.5 million US Airways shares.
The nine-member committee includes Boeing Co., Coca-Cola Co., the Air Line
Pilots Association, and the Pension Benefit Guaranty Corp.
"They were struggling with a decision and the analysis of our proposal versus
that of Delta's standalone proposal," Parker said. "We just wanted to make it a
much, much easier analysis for them, and today we've done that."
Delta management still seems opposed to the merger. In a statement, the company
said, "On its face, the revised proposal does not address significant concerns
that have been raised about the initial US Airways proposal and, in fact, would
increase the debt burden of the combined company by yet another $1 billion."
However, USAir's Parker says Delta doesn't have to be onboard for the proposal
to come to fruition. "We would very much like to see Delta management begin to
work with us and support this transaction, but that's not what this proposal is
about," Parker said.
It's about getting Delta's creditors to accept the offer. Stay tuned.
Editor's Note:
4. Trade Deficit Narrows as Crude Prices Fall
The U.S. trade deficit unexpectedly fell for a third straight month in November
as exports of commercial airplanes and other products hit an all-time high and
the bill for foreign oil declined to the lowest level in 16 months.
The Commerce Department reported Wednesday that the deficit fell by 1 percent to
$58.2 billion in November, the lowest monthly total since July 2005. The deficit
hasn't declined for three consecutive months since early 2003.
The November improvement came as a surprise. Analysts had forecast a slight
increase from October's deficit of $58.8 billion.
The politically sensitive deficit with China declined in November after setting
records for three straight months. Shipments of cell phones and clothing eased
following a huge surge in previous months as retailers had stocked their shelves
for holiday shoppers.
Even with the improvement, the imbalance with China for 2006 climbed to an
all-time high of $213.5 billion, surpassing the 2005 12-month total of $202
billion, which had been the previous record deficit for a single country.
The overall deficit for 2006 is running at an annual rate of $765.4 billion,
putting the country on track to see a record imbalance for the fifth consecutive
year. The deficit for all of 2005 was $716.7 billion.
While American consumers benefit from cheaper goods imported from abroad,
critics contend that the deficit represents the loss of manufacturing jobs to
foreign nations that compete unfairly against American workers. Since President
Bush took office in 2001, the country has lost nearly 3 million manufacturing
jobs.
Democrats used the soaring trade deficits, especially in hard-hit manufacturing
regions, in their campaigns last fall to win back control of Congress and they
are now expected to step up pressure on the administration to do more to lower
the trade deficit.
For November, U.S. exports of goods and services rose 0.9 percent to a record
high of $124.8 billion, reflecting a big jump in sales of commercial aircraft
and aircraft parts.
Imports were also up, rising by 0.3 percent to $183 billion. This increase came
even though America's bill for foreign oil fell to $21.5 billion, an improvement
of $86 million from the October level and far below the all-time high of $29.3
billion set in August when global oil prices were surging.
Analysts believe oil imports will continue to moderate with oil now trading
around $55 per barrel, compared to the all-time high above $78 per barrel set
last summer.
After China, the United States ran its second largest deficit in November with
Japan, an imbalance of $7.9 billion, down 4.2 percent from October.
The deficit with Canada, America's biggest trading partner, slipped to $5.4
billion in November, down 0.8 percent from October, while the imbalance with the
European Union edged up 0.5 percent to $9.5 billion.
© 2007 Associated Press.
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