Archive for April, 2009

Fannie Mae CEO named Treasury’s bank bailout chief (AP)

Friday, April 17th, 2009 | Finance News

WASHINGTON – The White House turned to an experienced former investment banker Friday to run the federal government's $700 billion bank rescue effort, selecting the head of mortgage giant Fannie Mae as an assistant Treasury secretary.

Herbert Allison Jr., Fannie Mae's president and CEO, will replace Neel Kashkari, a holdover from the Bush administration.

Allison, who must be confirmed by the Senate, would bear the title of assistant Treasury secretary for financial stability and counselor to Treasury Secretary Timothy Geithner.

He would be in charge of the Troubled Asset Relief Program, the fund that has injected billions of dollars into banks in hopes of unclogging credit. He would inherit a program that has been sharply criticized in Congress and which banks have come to view warily because of the restrictions attached to receipt of its funds.

President Barack Obama's administration has been slowly filling Treasury positions, hindered by candidates who have either withdrawn from consideration or been caught up in the vetting process.

Fannie Mae, seized by federal regulators in September, is closely overseen by federal regulators, making the chief executive's job tough to fill in the private sector. The company, therefore, appears likely to turn to an insider as Allison's replacement.

The Wall Street Journal reported on Friday that Fannie Mae was expected to name Michael J. Williams, the company's chief operating officer and a longtime executive as Allison's replacement. Fannie Mae declined to comment.

Allison's selection presents the administration with yet another challenge. If Allison is confirmed, both Fannie Mae and Freddie Mac would be without chief executives. David Moffett, formerly Freddie Mac's CEO, resigned in March.

In Allison, the White House selected a former Merrill Lynch investment banker who became chairman of the retirement fund manager TIAA-CREF. Allison served as finance chief for John McCain's 2000 campaign for the Republican presidential nomination. But politically, Allison has shown himself to be bipartisan in his allegiances, contributing to both Democrats and Republicans, according to Federal Election Commission records.

Since taking over in September at Fannie Mae, where he took no salary, Allison, the son of an FBI agent, developed a reputation for open-mindedness with consumer advocates, even those who have had an a contentious relationship with the giant company.

"Mr. Allison is well-positioned to lead the TARP," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, an industry group. "He has a wealth of experience with buying, selling, protecting, and managing assets to protect the taxpayer investment and strengthen the economy."

Some industry officials said that by pulling Allison away from Fannie Mae, the White House was signaling that TARP would remain a viable component of the government's stabilization efforts for the financial industry, even in the face of hostile lawmakers and wary bankers.

Bert Ely, a banking industry consultant in Alexandria, Va., said Allison has the advantages of being a known quantity to the Obama administration who is "much more of a financial heavyweight" than Kashkari.

Plus, he said, the new job would likely be more of a challenge than running Fannie and Freddie, which have been operating under tight government oversight since last September. "In this new situation, he's going to be much more of a policymaker," Ely said. "I can understand why he would want to take it."

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Associated Press writer Alan Zibel contributed to this report.

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Dow ends best 6 weeks since 1938 on econ hopes (Reuters)

Friday, April 17th, 2009 | Finance News

NEW YORK (Reuters) –
Stocks rose on Friday, with the Dow scoring its biggest six-week gain since July 1938, helped by a reassuring report on the mood of consumers and stabilization in General Electric (GE.N) and Citigroup's (C.N) quarterly results.

The Dow is up 22.7 percent over the past six weeks, making this the largest six-week gain since July 29, 1938.

Friday's close also marked the S&P 500's longest weekly winning streak since 2007.

The Reuters/University of Michigan survey showed that U.S. consumers have more confidence in the economy than they have had since the sudden collapse of Lehman Brothers in September, the latest in a spate of data suggesting the economic slump may be easing.

GE and Citigroup both posted better-than-expected results, lifting the broader market, and bank stocks rallied as investors bet other financial companies could follow up with more news showing the sector is on the mend.

Among banks, shares of Bank of America (BAC.N), due to post quarterly results on Monday, climbed 2.5 percent to $10.60. The KBW Bank index (.BKX) climbed 3.4 percent and has come close to more than doubling since its March lows. GE shares gained almost 1 percent to $12.39.

"The rate of deceleration in the economy is slowing," said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets in Baltimore.

"From a macro standpoint, the reason for a lot of the drive is just that we're continuing to get data points that show things are beginning to operate very well in the credit markets."

The Dow Jones industrial average (.DJI) rose 5.90 points, or 0.07 percent, to 8,131.33. The Standard & Poor's 500 Index (.SPX) climbed 4.30 points, or 0.50 percent, to 869.60. The Nasdaq Composite Index (.IXIC) added 2.63 points, or 0.16 percent, to 1,673.07.

S&P UP 28.5 PERCENT FROM MARCH LOW

The surge capped the S&P 500's longest weekly winning streak since spring 2007 and added to its strong recovery since the stock market's descent to 12-year closing lows early last month.

For the week, the Dow rose 0.6 percent, the S&P 500 advanced 1.5 percent and the Nasdaq gained 1.2 percent.

The benchmark S&P 500 is now up 28.5 percent since the bear market closing low of March 9. Its year-to-date drop has narrowed to about 4 percent.

On Nasdaq, a 1.6 percent gain in the shares of Apple (AAPL.O), the maker of the iPhone and iPod, underpinned the technology sector's advance ahead of Apple's quarterly results next week.

"Apple is probably going to have positive things to say," added Lutz.

Apple's stock closed at $123.42, while Google (GOOG.O) gained 0.9 percent to $392.24, a day after posting a stronger-than-expected quarterly profit.

MCDONALD'S GAINS, BUT CITI FALLS

Also underpinning the market's advance were the gains in the shares of companies seen better able to withstand economic downturns.

Shares of fast-food company McDonald's Corp (MCD.N) rose 2.5 percent to $56.09 after its chief executive told CNBC that he saw "some thawing" in economic conditions. The stock gave the top boost to the Dow.

Deutsche Bank said Procter & Gamble (PG.N), Colgate-Palmolive (CL.N) and Kimberly-Clark Corp (KMB.N) were undervalued at current levels. P&G rose 2.4 percent to $51.66, making it the Dow's second-biggest advancer, while shares of diversified health-care company Johnson & Johnson (JNJ.N)

added 1.6 percent to $53.05.

Profit-taking ahead of the weekend, however, tempered some of the upside, according to traders.

Citigroup reported a smaller-than-expected first-quarter loss, but its shares dropped almost 9 percent to $3.65 as some investors paused following the stock's strong run-up since early last month when the bank said, along with others, it had had a good start to 2009.

Trading was active on the New York Stock Exchange, where about 1.95 billion shares changed hands, above last year's average daily volume of 1.49 billion. On the Nasdaq, about 2.42 billion shares traded, above last year's average daily volume of 2.28 billion.

Advancers outnumbered decliners by a ratio of about 2 to 1 on both the NYSE and Nasdaq.

(Editing by Jan Paschal)

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Mattel posts loss despite boost from Barbie 50th (AP)

Friday, April 17th, 2009 | Finance News

NEW YORK – Mattel surely wishes Barbie could turn 50 every year.

The iconic doll was everywhere during the first three months of the year — from a show at Fashion Week in New York to a flagship store in Shanghai — and the buzz from the anniversary helped Barbie's U.S. sales jump in the first quarter.

It was a bright spot for the company after the worst holiday season in decades, and helped mitigate an overall sales drop of 15 percent for the quarter. Barbie sales had been flagging for years, and the surprise helped send Mattel Inc. shares up 15 percent.

"That's the strongest number they've put up in a long time, at least seven years," said Needham & Co. analyst Sean McGowan. "There was a big anniversary, but even outside of that I think Barbie did well."

The rest of the picture wasn't as rosy for Mattel, the largest U.S. toy maker. Sales fell across most product categories due to the stronger dollar and cautious orders from stores that are still feeling the sting from the holidays.

While not giving specifics about orders for this year's holiday season, Chief Executive Robert A. Eckert said retailers and toy makers across the industry are planning conservatively in terms of sales.

"We would rather chase demand this year if it shows up than get ahead of ourselves and build extra inventory across the supply chain," he said.

Mattel's biggest rival, Hasbro Inc., reports results on Monday. Analysts will also want to hear from them about orders for their most important season.

Retailers have been cutting back on orders to clear inventory after seeing demand from consumers drop sharply last year. Stores had to deeply discount items in order to clear the overstock.

Eckert indicated, however, that the bulk of that problem might be over. Mattel's own inventory fell 9 percent during the quarter.

"As I'm talking to customers, I don't hear people talking about inventory today like they were talking about inventory in January," he said. "My sense is the heavy lifting is probably behind us."

So far this year, Mattel toy sales at retail are up in the low- to mid-single digit percentage range, he added.

Lower-priced toys remain the most popular, Eckert said. A $35 dinosaur called Screature has been selling well while Fisher Price Power Wheels, which retail for several hundred dollars, have been weak.

For the quarter ended March 31 — the least significant season for toy makers — Mattel's loss totaled $51 million, or 14 cents per share. That compares with a loss of $46.6 million, or 13 cents per share, a year ago. Analysts had expected a loss of 13 cents per share.

Revenue fell to $785.6 million, hurt by about 7 percentage points due to the stronger dollar. That missed analyst expectations as well.

Barbie sales rose 18 percent in the U.S. Sales dropped 15 percent internationally but were flat excluding the effect from the stronger dollar.

CFO Kevin Farr said the weak sales had been expected because of the stronger dollar — which is up about 14 percent from a year ago — and because the company had no new product tie-ins to movies.

Eckert said the company is now focusing now on "translating the passion and energy from the 50th (anniversary) celebrations to sustainable worldwide performance for the brand."

Weaker sellers were Polly Pocket toys and products tied to High School Musical, a Disney franchise whose popularity is waning.

The company said it is working on improving its supply chain, cutting the number of items it is developing and reducing capital spending on all but critical projects. Last year it eliminated 1,000 jobs to cut costs.

Shares of Mattel rose $1.98, or 15.2 percent, to close at $15.01 Friday.

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