U.S. technology stocks rose on Monday
for the third straight session, while blue-chip stocks declined
slightly, as rising corn prices hurt beverage makers' shares
and broker downgrades of leading telephone companies spurred
some selling in that sector.
BlackBerry maker Research in Motion rose more than 6
percent after investors said that Nokia's new phone models
would not pose a threat to RIM's dominance of the business
market. It was among the Nasdaq's top-weighted gainers.
Weighing on blue chips were downgrades of Dow components
Verizon Communications, which fell 2.8 percent to $36.26, and
AT&T, which fell 1.5 percent to $36.14. UBS cut its ratings on
the stocks to "neutral" from "buy," citing pressure from mobile
competitors and the weak economy.
Fears that floods in the Midwest would drive up prices of
soda ingredient corn syrup hit Pepsico Inc, which fell 2.4
percent to $65.93, and Coca-Cola, which fell 2 percent to
Corn prices have risen for eight straight days as floods
cut back anticipated corn harvests in the Midwest. U.S. corn
futures for July 2009 delivery rose above $8 a bushel for
the first time.
Nasdaq's gains were supported by the perception that big
technology companies that cater to corporate customers have
less exposure to the swings in consumer spending, said Mike
McCarty, options strategist at Meridian Equity Partners, in New
The Dow Jones industrial average was down 16.37 points, or
0.13 percent, at 12,290.98. The Standard & Poor's 500 Index was
up 2.05 points, or 0.13 percent, at 1,361.74. The Nasdaq
Composite Index was up 19.75 points, or 0.80 percent, at
Further supporting technology shares were perceptions that
"they were beaten up ... so there is a little bottom fishing,"
said Todd Leone, head of listed trading at Cowen & Co. in New
The semiconductor index, up 1.7 percent, was attracting
particular interest since it was approaching its 200-moving day
high, Leone added. Shares of Research in Motion gained 6.1
percent to $141.11 on the Nasdaq.
Declines in the broad market were offset by a rebound of 6
percent in the shares of investment bank Lehman Brothers
Holdings Inc after its CEO Richard Fuld took responsibility for
the company's first-ever quarterly loss, which reassured
investors about the bank's stability. The quarterly loss of
$2.8 billion matched Lehman's forecast.
Lehman shares rose 5.6 percent to $27.23.
Lehman's jump helped U.S. bank stocks, with the KBW bank
index up 2 percent. Earlier in the day, Lehman's stock climbed
as high as $28.21, a gain of 9.3 percent from its close on
Friday on the New York Stock Exchange.
Another positive factor was the slight decline in U.S. oil
futures prices after they hit a record high near $140 a barrel
earlier in the day. On the New York Mercantile Exchange, U.S.
crude oil for July delivery settled at $134.61 a barrel, down
(Editing by Jan Paschal)
The sickly U.S. factory sector
produced more bad news on Monday, with a gauge of manufacturing
in New York state contracting in June for the fourth time in
Confidence in the housing sector, the origin of the current
economic downturn, also weakened this month. Home builder
sentiment matched the lowest level on record set in December,
an industry group said.
The reports highlight the dilemma for the Federal Reserve,
which has tried to boost the economy with interest rate cuts,
even though this risks fueling inflation. Price growth is
already elevated due to high oil and commodity prices.
The New York Fed's "Empire State" report on factories
showed inflation pressures remained high in June. At the same
time, it highlighted the weak state of the state's factory
sector, boding ill for other regional reports to follow.
"The theme that came of this report is softer demand and
elevated costs," said Jonathan Basile, economist at Credit
Suisse in New York.
The Empire State general business conditions index fell to
minus 8.68 from minus 3.23 in May.
The report reflects a national factory sector that had
already contracted in May for the fourth consecutive month
while inflation pressures surged to their highest in four
years, as reported earlier this month by the Institute for
The factory sector has been hit by the wider U.S. economic
slowdown, led by the bursting of the housing bubble last year.
Economists polled by Reuters had expected a reading of
minus 2.00 in the Empire State report.
In a separate report, the Treasury Department said foreign
appetite for U.S. securities recovered in April after suffering
during the worst of the credit crisis.
On Wall Street, blue chip stocks were flat in early
afternoon trade, while the Nasdaq gained. The dollar slid
against the euro and government bonds, which benefit from weak
economic conditions and poor stock market performance, rose
Bonds received a boost from a Washington Post column by
Robert Novak that raised doubts over whether the Fed would
raise interest rates to fight inflation.
Novak wrote that Federal Reserve Chairman Ben Bernanke does
not intend to raise interest rates because he is more worried
that soaring oil prices will slow global growth rather than
Novak's column, citing unnamed "sources close to him," said
Bernanke "has no plans for a raise."
The Empire State survey is one of the earliest monthly
guideposts to U.S. factory conditions. It will be followed on
Thursday by the Philadelphia Federal Reserve Bank's report on
factory activity in the U.S. Mid-Atlantic region.
The New York Fed's prices paid measure of June inflation
eased to 66.28 -- its first drop since December -- from 69.57
in May. The May prices paid reading was the highest since the
start of the data series in July 2001.
However, the gauge of prices received jumped to 26.74 --
the highest since January 2006 -- from 15.22 in May.
The rise in prices received could be worrying for inflation
vigilantes since it suggests manufacturers are having success
in passing their higher costs down the chain of buyers.
The National Association of Home Builders said its
preliminary NAHB/Wells Fargo Housing Market Index fell to 18
from 19, the same level reached in December and the lowest
since the index began in January 1985. Readings below 50
indicate more builders view market conditions as poor than
"None of it is encouraging," David Seiders, NAHB chief
economist, said on a conference call.
(Reporting by Burton Frierson; Editing by Tom Hals)
Sirius Satellite Radio Inc's
(SIRI.O) planned acquisition of rival XM Satellite Radio
Holdings Inc (XMSR.O) on Monday moved closer to consummation
after a key U.S. regulator expressed support for the
16-month-old deal, driving up both companies' shares.
Federal Communications Commission Chairman Kevin Martin
confirmed published reports that he would support the
transaction, with the companies agreeing to a series of
Those conditions include a pledge to make 24 radio channels
available for noncommercial and minority programming, according
to FCC sources. In addition, the companies would agree to cap
prices, provide interoperable radios and offer programming on
an "a la carte" basis.
"I am recommending that with the voluntary commitments
they've offered, on balance, this transaction would be in the
public interest," Martin said in a statement.
Martin's proposal to approve the deal could be circulated
among the other commissioners as soon as this week, the FCC
Martin's decision could remove the last regulatory hurdle
in a lengthy and heavily criticized move to combine the
companies. Antitrust authorities at the U.S. Department of
Justice approved the merger in March after concluding it would
not harm consumers.
The Justice Department said satellite radio companies faced
stiff competition from traditional and high-definition radio,
iPods and MP3 players, and audio on mobile phones.
Shares of Sirius, the satellite radio home of shock jock
Howard Stern and the National Football League, climbed 11
cents, or 4.3 percent, to $2.65 in afternoon Nasdaq trading.
The stock closed at $3.69 on February 16, 2007, the last
trading day before the deal was announced.
XM shares rose 49 cents, or 4.5 percent, to $11.36, down
from $13.98 just before the announcement of the merger
agreement. The company's programming features talk show host
Oprah Winfrey and Major League Baseball.
'SIGH OF RELIEF'
Stanford Group analyst Frederick Moran said the companies'
share prices had faltered in recent weeks as investors grew
concerned about the protracted FCC review.
"Today you are seeing a sigh of relief that the FCC
approval still does look like it will happen, albeit a bit
later than we all expected," Moran said.
The deal, which calls for the exchange of 4.6 Sirius shares
for each XM share held, was originally valued at about $4.6
Under U.S. law, the FCC must determine whether a
communications merger is in the overall public interest. In the
case of the XM-Sirius deal, the agency also has to decide
whether to waive a rule that has barred the two satellite radio
companies from combining.
Stifel Nicolaus analyst Blair Levin said Martin would
probably be able to get the deal approved with support of the
two other Republican FCC commissioners, Robert McDowell and
Deborah Taylor Tate.
The concessions by XM and Sirius may not be enough to win
over the two Democratic commissioners, Michael Copps and
Jonathan Adelstein, Levin said.
However, he said the concessions could help muffle the
fallout from Democrats on Capitol Hill, many of whom have been
critical of the deal.
Interest in pay-radio has cooled in the 16 months since
their deal was announced, as both XM and Sirius have muted
their marketing push while lobbying regulators to approve the
But as the number of cars with built-in satellite radio has
increased, both services are still adding subscribers, who pay
about $13 a month for more than 100 channels of music, news and
XM ended the first quarter with about 9.3 million
subscribers, vs. 8.6 million for Sirius.
(Reporting by Franklin Paul in New York and Peter Kaplan in
Washington; Editing by Gerald E. McCormick and Lisa Von Ahn)