Wall Street, Still a Little Wobbly, Steadies Itself on Home Services

Dec

Wall Street, Still a Little Wobbly, Steadies Itself

posted by admin in Home Depot

THE stock market steadied this week after more than a month of volatility, partly in reaction to the Federal Reserves decision on Aug. 17 to encourage banks to borrow directly from the Fed at a lower rate and help ease the credit squeeze that has been rattling the financial system.

But while stocks in general stopped their fall and even posted some gains for the week, the woes from the collapse of the subprime mortgage market continued to claim more victims among lenders. And it was far from clear whether Home Depot would be able to save the sale of its wholesale unit to a consortium of private equity firms.

MORTGAGE WOES Countrywide Home Loans, the nations largest home mortgage company, received a big lift on Wednesday, when Bank of America agreed to invest $2 billion. Countrywide had been struggling in recent weeks to raise the money it needed to continue offering mortgages, stirring concerns among investors who, in turn, punished its stock. The move was widely seen as an attempt to put Countrywide on firmer footing and restore confidence in its stock.

But the number of casualties among subprime lenders continued to rise, led by Lehman Brothers announcement on Wednesday that it was shutting one of its home lending units and laying off 1,200 employees. In recent weeks, several mortgage companies that specialized in risky home loans have stopped making loans, shut down or encountered other distress.

While markets were calmer this week, it remains unclear whether the worst has passed for mortgage lenders. The Fed is watching for clues on whether the housing market and consumer spending are weakening before deciding whether to cut its benchmark interest rate.

SLOWER GROWTH SEEN The nonpartisan Congressional Budget Office issued a relatively optimistic forecast for economic growth on Thursday, predicting that the turmoil in the stock market would not stop the overall economy from growing. But the office did lower its previous forecast for growth this year to 2.1 percent from 2.3 percent. Other economists also scaled back their expectations.

Even as they were trimming their forecasts, many economists warned that their predictions might still be too optimistic.

DELTAS NEW CHIEF Delta Air Lines passed over two top company executives and named the former head of Northwest Airlines as its chief executive on Tuesday. Richard H. Anderson, who spent 14 years at Northwest before leaving in 2004 to become an executive vice president at the UnitedHealth Group, succeeds Gerald A. Grinstein, who announced in April that he would retire.

Both Delta and Northwest filed for bankruptcy protection in September 2005 and emerged this spring. Analysts have speculated whether the two airlines would eventually merge because their route systems are complementary. With Mr. Andersons appointment, could closer ties be next?

ONE STEP CLOSER Tribune Company shareholders voted overwhelmingly on Tuesday to approve an $8.2 billion buyout led by Samuel Zell, the billionaire real estate developer. But the transaction has several hurdles before the deal is done.

The first, and perhaps biggest, is that since the deal was struck at $34 a share, the companys stock has fallen significantly and the credit markets have been contracting, raising questions about whether Mr. Zell will be able to go ahead with his plan to turn Tribune from a public company into one owned by employees. The deal also needs the approval of the Federal Communications Commission.

Analysts still expect the deal to go through, but probably with some changes to assuage investors and bankers concerns.

BIG BILLS Talk about a hefty bill. For the last few weeks, some iPhone users have been getting bills from AT%26T that are the size of small novels. The reason for the outsize bills is that AT%26T itemizes not just every phone call but every detail about every text message and Internet data transfer. Unless it was told otherwise, AT%26T was sending out the detailed bills.

After hearing from scores of angry customers, AT%26T said that as of Sept. 28 all new wireless customers along with any customers making a change to an existing account, like adding a new line would be sent shorter bills summarizing their iPhone use.

Anyone who still wants to be reminded of each and every call and message will be charged $1.99 a month to have the detailed bills mailed.