News at a Glance
Square One: Stocks finish Friday barely changed.
Another Gas Record: One gallon of gasoline now costs $3.787.
Sentiment Falls: Consumer index hits its lowest point since 1980.
Recovery Predicted: Treas. Secretary Paulson looks to Q3, Q4.
The Lowdown
A late rally left the major indexes fairly flat Friday.
Stocks ended mixed after bullish comments from Treasury Secretary Henry Paulson helped offset pessimism over record oil and gas prices and weak data about the consumer. After being down as many as 99 points, the Dow Jones Industrial Average finished just 6 points lower at 12987. The Nasdaq slipped 5 to 2529, and the S&P 500 gained 2 at 1425.
Stocks were in a deep hole for most of the day, but Paulson's comments helped bring them back to the line. He predicted improved conditions during the second half of the year. "We are closer to the end of the market turmoil than the beginning," Paulson said in prepared remarks.
Paulson added that the administration's tax rebates would help drive economic activity. "The fiscal stimulus will provide support to the economy as we weather the housing correction, capital markets turmoil and higher energy and food prices," he said. The economic stimulus package has been the subject of criticism by economists and pundits who have called it too modest and accused it of failing to weight the distribution of funds to those who needed them most.
On the New York Mercantile Exchange, crude oil futures surged, crossing the $127 mark before easing. By 4:14 p.m., crude traded up $2.91 on the day at $126.70 a barrel.
Meanwhile, gas prices struck a new record for the ninth straight day. The national average cost of a gallon of gasoline is now $3.787, according to the latest data published by AAA.
Energy inflation has left the consumer measureably upset. The Reuters/University of Michigan Index of Consumer Sentiment fell below May estimates to its lowest point since June 1980.
The global economy got a weak prognosis from the United Nations. World economic growth will slide to 1.8% in 2008, down from 3.7% in 2007, according to a new report released by the UN's Department of Social and Economic Affairs. The report cites the decline of the dollar, record energy prices and the collapse of the U.S. housing market as factors putting global growth at risk.
The annual rates of housing starts and building permits each rose in April, surprising economists who had predicted more declines. Prior to the report, the rate of permits had declined in each of the last four months.
Corporate News
General Motors (GM) and Chrysler agreed to new labor deals with the Canadian Auto Workers union. The workers had five more months on their contracts, but CAW officials wanted to hammer out a deal quickly in the interest of reassuring workers during the economic slowdown, Reuters reported. Each deal freezes wages for three years but allows for annual cost-of-living increases. The deal also eliminates a week a vacation in exchange for one-time payments of $3,485 and improved drug benefits, The Wall Street Journal reported.
Macy's (M) has entered into an exclusive agreement with FAO Schwartz that will allow the toy retailer to set up stores in 685 Macy's department stores over the next two years, the firms said. As many as 275 department stores will host FAO Schwartz stores by the fall. FAO toys will also be sold on the Macy's web site.
Abercrombie & Fitch (ANF) posted a 3% increase in first-quarter net income on the strength of its flagship brand and a jump in direct-to-consumer sales. Abercrombie earned $62.1 million, or 69 cents a share, up from $60.1 million, or 65 cents a share, the firm said in a statement that bears little resemblance to its catalogs. Analysts had been looking for earnings of 66 cents a share.
Apple (AAPL) signed a deal with the French wireless firm Orange that will bring the iPhone to customers in Africa, the Middle East and parts of Europe. "Orange today announced a new agreement with Apple to bring the iPhone to Orange customers in Austria, Belgium, the Dominican Republic, Egypt, Jordan, Poland, Portugal, Romania, Slovakia, Switzerland and Orange's African markets later this year," the French firm said. Apple had previously signed deals with AT&T (T) in the U.S., Rogers Communications (RCI) in Canada, Telecom Italia (TI.A) in Italy and Vodafone (VOD) in Australia and India.
The Economy
Housing starts rose to an annual rate of 1,032,000 units in April, rebounding from a revised rate of 954,000 in March, the Commerce Department said. Building permits, a leading indicator for the housing market, climbed to annual rate of 978,000 last month, up from a revised annual rate of 932,000 in March. Economists had expected housing starts to come in at an annual rate of 940,000 for April and building permits to come in at an annual rate of 912,000. REPORT
The Index of Consumer Sentiment fell to a preliminary May reading of 59.5, down from an April reading of 62.6, Reuters and the University of Michigan said. The reading represents the lowest point for the index since June 1980. Economists had expected a slight dip this month to 62.0. STORY
ReadMe
Time on the economy and the executive branch: The next president could be in a position to make sweeping economic reforms. Here is how they might get underway. STORY
Bloomberg on investing: A new survey shows nearly half of affluent investors are bullish on Asia and the energy sector. STORY
Newsweek on summer travel: Record gas prices are threatening the American vacation (a statement more effective when read aloud in Colbert-like outrage and preceded by the word, "Nation."). Here are a few tips for getting away on a budget. STORY
WatchMe
Modern Marvels: The episode reviews the history of metal, including a recap of the Bronze Age and a look at the science of new alloys. HIST, 7 p.m.
Survival Guide: BoomerAngst: The special explores the problems and fears Baby Boomers must confront as they approach retirement. CNBC, 9 p.m.
Major League Baseball: Mets at Yankees: Who will Wall Street root for? (Hint: The Yankees) ESPN, Sun., 8 p.m.
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