Market Winners & Losers: Dynegy, AIG

The markets ended the week on a down note on Friday, with the major indices landing solidly in the red.

Here are the day’s winners and losers:

Winners

Dynegy Inc. (DYN)
The utilities provider continued to inch away from its yearly lows, gaining 14.5% on Friday. The stock ended the week at $1.74 a share, a gain of 22 cents on the day.

American Capital Ltd. (ACAS)
American Capital bucked the sector trend, gaining 13.9%, or 14 cents, on Friday to close at $1.15.

General Motors Corp. (GM)
GM fought off some unkind words from UBS to end the week on a high note. Shares gained 10.8%, or 31 cents, to close at $3.18.

Ford Motor Co. (F)
Shares moved up 9.6% on Friday as UBS encouraged investors to stray from GM and buy Ford. The stock closed at $2.75, a gain of 24 cents on the day.

ConAgra Foods Inc. (CAG)
Shares of ConAgra moved up 3.4% on Friday ahead of the company’s earnings release next week. The stock ended the week at $15.07, a gain of 49 cents on the day.

Losers

American International Group Inc. (AIG)
The joyride has finally come to an end for AIG, which saw its stock drop 22.2% on Friday after a string of positive days. Shares finished Friday at $1.26, a loss of 36 cents on the day.

Xerox Corp. (XRX)
A dismal earnings report and outlook cuts by two ratings agencies led the stock 18.7% lower on Friday. Shares closed at $4.34, a loss of $1.00 on the day.

ProLogis (PLD)
PLD followed sector trends as the stock closed down 16.3% to end the week. ProLogis last traded at $5.39, a loss of $1.05 on the day.

XL Capital Ltd. (XL)
Analysts had hyped the stock early in the week, but the wind beneath XL’s wings could not last until Friday. Shares closed at $4.24, a loss of 73 cents, or 14.7%.

Host Hotels & Resorts Inc (HST)
The stock started out the week in the positive, but ended in negative territory on Friday. Shares closed down 13.5% at $3.78, a loss of 59 cents on the day.


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Mass Layoffs Stack Up as Employers Respond to Downturn

The Labor Department reported a rise in mass-layoff activity in February as employers struggle to cope with the nation’s worst recession since the Great Depression.

The number of mass layoffs – or layoffs of 50 people or more by a single employer – rose by 542 to a seasonally adjusted 2,769 last month. As a result, 295,477 workers lost their jobs, according to the government report.

Mass layoff activity, on an industry basis, surged to all-time highs across the board. Job cuts in the manufacturing sector accounted for 42% of all mass-layoff events and 47% of initial claims filed for the month. In February 2008, the manufacturing sector accounted for only 28% of events and 36% of initial claims, the department said.

California weighed in with the highest number of initial claims for the month, with 45,557. Illinois, Pennsylvania, and Wisconsin followed behind, according to the data.

For the first two months of 2009, 48 states and the District of Columbia reported year-over-year increases in average weekly initial claims tied to mass layoffs. The only two states to see year-over-year decreases were Louisiana and Mississippi, the report said.

Mass layoff events have totaled 28,481 since the official start of the recession in December 2007, the department said.


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How Not to Use the Tax Code

Suppose employees in an industry benefiting from federal tax subsidies received regular extra payments amounting to a significant share of their annual income. Would you want to tax them, perhaps requiring them to pay as much as 90% of those extra payments in taxes?

If the answer is “yes,” tell that to your waiter next time you eat at a restaurant.

Food is one of the most heavily federally subsidized commodities, with the Department of Agriculture spending about $55 billion for various food programs including food stamps and aid to farmers.

Tips -- whether a standard 15% to 18% of a restaurant check or more -- are a major source of income for waiters and waitresses. We would not think of taxing those tips at a higher rate than ordinary salaries. To do so, would be an abuse, perhaps misuse, of the nation’s tax code.

Yet, we think nothing of applying the higher tax to the bonuses paid to American International Group (AIG) executives because they are in an industry, indeed a specific company, receiving government assistance.

The effort to apply a special tax on the AIG bonuses is one of two attempts this week to target the tax system for a narrow purpose. Even as Congress was considering the special AIG tax (adopted by the House of Representative Thursday), the Internal Revenue Service announced special rules to apply to victims of admitted schemer Bernard Madoff and other Ponzi investors.

IRS Commissioner Douglas Shulman told Congress Tuesday the guidelines would apply to all such victims and allow them to recover taxes paid on “fictitious income.” Investors -- in fact, all taxpayers -- already have recourse on their tax returns through the ability to deduct theft losses. Those losses though are subject to a cap. Under the plan announced by the IRS, Madoff investors will be able to claim a theft loss equal to 95% of their investment less any withdrawals or re-invested gains.

Current IRS regulations allow tax filers to claim losses going back three years and forward 20 years. The new IRS regulations will allow Madoff investors to go back five years and claim the loss as having occurred in 2008.

Typically too, filers claiming losses are not allowed to include taxes they paid on what turned out to be phony income. Under the new plan, they will be.

And, not all scammed investors are being treated equally. In a briefing on the plan, an IRS official would not say whether victims of an alleged scam involving the Stanford Financial Group would be able to claim the same losses, explaining “to have a theft loss, there needs to be some evidence of criminal theft.” Stanford Financial, for example, has been accused by the Securities and Exchange Commission of engineering an $8 billion fraud.

The fuzziness of the IRS treatment of Madoff and Stanford victims -- as well as the hurried tax penalty to be assessed on AIG bonus recipients, is of concern because of the precedent it sets -- and we don’t know where it might lead.

To be sure, the tax system -- as all government spending programs -- is highly political, taking money from one segment of the population and re-allocating it. Yet, targeting specific groups -- for higher payments or special tax breaks -- appears to violate any semblance of fairness in the tax system, or efforts to provide incentives for specific behavior.

For example, we encourage homeownership by providing special tax deductions for mortgages and, until 1986 tax changes, had provided an incentive for purchasing a car by allowing a deduction for interest paid on auto loans. When the auto-loan interest deduction disappeared, savvy homeowner car buyers began to use home-equity loans to finance car purchases, putting their homes at risk to buy a car, a consequence not considered when the tax change was enacted. That they were violating a fundamental finance principle, financing a relatively short-term asset with a long-term loan, was a topic left for almost esoteric economic discussion.

It brings to mind another attempt to use the tax code to address a narrow tax loophole. In the Tax Reform Act of 1969, Congress tried to limit the use of tax benefits by high income households who, because of their ability to use the tax code, owed little or no taxes income tax.

Congress was able to identify 155 tax filers and wrote a complex provision to ensure they paid taxes. The households affected by the law now number in the tens of millions -- all subject to the Alternative Minimum Tax.

Mark Lieberman is the senior economist for the Fox Business Network. Prior to joining FOX, he served as first vice president and manager of economic analysis and research at Washington Mutual in New York. Before that, he served as senior vice president at Dime Savings Bank of New York (which was later acquired by Washington Mutual), where he specialized in credit and risk management. He is a member of the Executive Committee of the New York Association for Business Economics. He has a degree in Economics from the Wharton School of the University of Pennsylvania.


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Post-Fed Blues: Banks Lead Selloff

Dragged down by a bad day for the tumultuous financial sector, stocks took a dive on Thursday, ending Wall Street's recent hot streak and wiping out all of Fed Day's gains.

Today's Markets

The Dow Jones Industrial Average lost 85.78 points, or 1.15%, to 7400.80, the S&P 500 fell 10.31 points, or 1.30%, to 784.04 and the Nasdaq Composite Index tumbled 7.74 points, or 0.52%, to 1483.48. The consumer-friendly FOX 50 sank 8.46 points, or 1.42%, to 585.68.

Aside from sinking shares of banks like Citigroup (C) and Goldman Sachs (GS), the markets were also under pressure from a flurry of bleak economic reports, a $70 spike in gold prices, three-month highs for oil and disappointing results from bellwether FedEx (FDX).

Few were surprised to see the markets suffer a pullback as the Dow had rallied in six of its last seven days, adding 1,000 points since hitting 12-year lows. Thursday's losses, which were Wall Street's worst since March 5, came after the Dow jumped almost 100 points on Wednesday after the Federal Reserve unveiled plans to pump another $1 trillion into the shrinking economy.

“We’ve had five or six really good days. It’s okay to give a little back,” NYSE trader Ted Weisberg told FOX Business. “Nothing fundamentally has changed. We know the rally is technical.”

More than half of the Dow's 30 components ended in the red, led by Bank of America (BAC),JPMorgan Chase (JPM) and Citigroup (C). On the other hand, Alcoa (AA)rebounded from its two-day plunge and General Motors (GM) rose sharply on news of a bailout for the auto-parts suppliers.

Even with Thursday's losses, the Dow is still on track for its first back-to-back weekly gains since May 2008.

The Nasdaq Composite fared better than the broader market, thanks in part to business software giant Oracle (ORCL), which late Wednesday reported better-than-expected quarterly results and surprised Wall Street by announcing plans to pay a dividend.

Wall Street is clearly still digesting the Fed's newly-announced plans to buy up to $300 billion in long-term U.S. Treasurys and another $750 billion of mortgage-backed securities. The moves, aimed at making credit more accessible and ending the 14-month recession, had an immediate impact as the 10-year Treasury note on Wednesday took its largest one-day drop since the aftermath of the 1987 stock market crash.

While the equity markets initially cheered the unprecedented action, some are concerned about the threat of strong or hyperinflation, underscored by huge gains in the commodity markets Thursday.

Banks Reverse Course

Financial stocks like Morgan Stanley (MS) ended deeply in the red, giving up earlier gains despite General Electric (GE) saying Thursday it expects its troubled GECapital unit to be profitable in the first quarter and 2009.

Also, shares of Citigroup (C) initially surged but then plunged after the bailed-out bank said it will ask for permission to perform a reverse stock split, a move that will boost the company's stock price but increase the number of shares outstanding.

Gold, Oil Soar on Dollar's Plunge, Fed

Commodities surged on Thursday in response to the sharply weaker dollar, which continued its selloff on fears the Fed's latest moves will result in a jump in inflation.

Just a day after the energy market was rattled by a bearish inventory report, the price of a barrel of crude soared $3.47 to $51.61, its highest price since Nov. 28.

Building on a late-day move from Wednesday, gold, which is seen as an inflation hedge, settled at $958.30 per ounce after surging $69.50, its strongest rally since Sept. 17.

Data Dump

The Labor Department said initial jobless claims declined by a better-than-expected 12,000 to 646,000 last week. On the other hand, the government said claims filed by people out of work for more than a week soared by 185,000 to 5.47 million.

The Philadelphia Fed said its manufacturing index improved to -35 in March, topping estimates but showing continued contraction. Separately, the Conference Board said its leading economic indicators index declined 0.4% last month, beating expectations.

Corporate Movers

American Axle (AXL), Lear (LEA) and auto-parts suppliers surged after the Treasury Department promised the industry $5 billion in aid to prevent a collapse that could threaten Chrysler, Ford (F) and General Motors (GM).

FedEx (FDX) saw its shares jump even after the bellwether missed expectations with a 75% plunge in profit. FedEx said sales slumped 14% and announced plans to cut costs by another $1 billion. However, the shipping giant said it is gaining market share despite the recession.

Cisco (CSCO) unveiled plans to buy privately held digital camcorder-maker Pure Digital Technologies for $590 million in stock.

Microsoft (MSFT) CEOSteve Ballmer said he is "sure" the software giant will restart talks with Yahoo!(YHOO) about doing a search deal, according to Reuters.

Discover Financial (DFS)suffered a 50% drop in earnings from continuing operations in the latest quarter. The fourth-largest U.S. credit card network also said it will slash its dividend by 67%.

Barnes& Noble (BKS) posted a 30% drop in fourth-quarter net income as same-store sales slumped 7.3%. The largest U.S. book retailer sees a first-quarter loss.

Corning (GLW) said it expects to post an adjusted-profit in the first quarter and sees price declines moderating in the second quarter.

Global Markets

European markets jumped for the second-straight session. Germany's DAX rose 1.18% to 4043.46 and London's FTSE 100 gained 0.31% to 3816.93.

Asian markets ended narrowly mixed overnight as Japan's Nikkei 225 tumbled 0.33% to 7945.96 and Hong Kong's Hang Seng rose 0.1% to 13130.92.


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An Economic Silver Lining -- in the Auto Industry

There are many silver linings to be found in this economic crisis cloud and here I bring you one of them involving -- really, I swear -- someone in the auto industry.

Howard Sackaroff started a new job in December and he loves it. After 30 successful years working at auto dealerships, the writing was on the wall in October: the dealership he was working for in Danbury, Conn., was being sold and there was a mutual parting imminent in a less-than-desirable economic climate.

Undaunted by those circumstances or the fact that he is in his mid-50s, Sackaroff prepped his resume -- which included positions over the years as auto mechanic, service manager, sales manager, fleet manager, general sales manager and general manager, and his penchant for taking over troubled dealerships and righting their course -- and posted it on some automotive job Web sites. That’s when a company called Ride Away came persistently knocking, looking for a new general manager.

“I kept making assumptions it was a tiny little company,” Sackaroff said. “But I was home doing nothing, so I agreed to the interview at a Norwalk, Conn., industrial park. I walked in kind of jaded. I had been pushing metal and plastic for 30 years and fixing dealerships, but I figured there’s got to be more to life than that.”

After the first interview, Sackaroff did some research on Ride Away and what he found “completely floored” him: 11 locations, a solid business plan, a mix of government and private funding, and they were philanthropic.

“I was ready for a change,” Sackaroff said. “I said to myself, what’s the worst that can happen? If I hate it, I can go back to the auto business.”

As it turned out, he doesn’t hate it. According to its Web site, Ride Away is America's “largest provider of accessible vehicles and vehicle modifications including hand controls, wheelchair and scooter lifts, ramps, raised doors, lowered floors and specialized gas, brake and steering controls.” In other words, it holds the key to an independent life for the disabled. Hence, its company slogan -- We Deliver Freedom.

The customers "get so excited,” Sackaroff said. “Life is easier for them. A person who’s confined to a wheelchair can become completely mobile. They’re not stuck in their houses anymore. And for the spouse who was loading them into a regular car, folding up the wheelchair and putting it in the trunk, imagine what these vehicles do.

“Our job is to ask, ‘What do these people need to buy?’ It’s not always what they think they need. This is not a five-minute process. It’s very intricate. It gets you close to them. It’s always an hour and a half conversation. A lot of them are angry. They feel life has been unfair. In other moments they accept it. They like to talk and I like to listen.”

That is one of the biggest challenges of the job. The listening. Sackaroff diplomatically asks about their prognosis and then bases his recommendation on that. For example, he needs to ascertain if they have a disease that's degenerative.

“If the doctor says the person is probably going to be stable for the next two years, what they need will be different from someone who is getting worse by the month,” Sackaroff said. “Then I have to ask, ‘Why do you want to spend money on this if you can’t drive it in four months?’”

It’s kind of an ironic twist for Sackaroff, whose family pressured him into applying to medical school as a young man. He did and was accepted, but opted instead to get a job as an auto mechanic at a car dealership.

“From when I was a little kid, I loved cars,” he said. “I was taking engines apart at an early age.”

That first job led him to 10 years in service and 20 years in management, so he got to know every facet of the business and even bought and sold dealerships a few times. He worked at Chevrolet through 1991 and then Honda, Dodge and Hyundai right up to last year.

“Those years were financially satisfying, but by no stretch was it emotionally satisfying,” Sackaroff said. “I was trapped in the kind of income and lifestyle I wanted. I didn’t hate it but it became repetitive.”

And so now he is happily sharing his gifts at Ride Away. He took a small cut in salary, but negotiated for a “bigger piece of the pie” and he is maintaining the suburban lifestyle he was living. In all, Sackaroff was job-free for less than a month, but his advice to those who have been laid off is valuable nonetheless.

“I went out of my comfort circle,” he said. “I was willing to do something different with the intention of some kind of emotional reward.”

When asked if this job is a culmination of everything he’s done, he didn’t hesitate with his answer: “Yes.”

Silver, silver everywhere.

Nancy Colasurdo is a practicing life coach and freelance writer. Her Web site is www.nancola.com. Please direct all questions/comments to FOXGamePlan@gmail.com.


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Cavuto: Go Ahead, Hate AIG

Be mad at AIG (AIG).

Be madder still at what Congress is considering under the guise of punishing AIG....ideas the president is certainly open to, according to his press secretary.

Here's the deal:

Go ahead, hate AIG.

Hate the rescue.

Hate the snakes there trying to profit from the rescue.

Hate their bonuses.

Hate their greed.

Hate all that.

But hate what I’m about to tell you more than any of that.

A lot more.

Hate it more than any greed AIG executives are showing.

Because it doesn't hold a candle to the gall some in Congress are showing.

Senator Chris Dodd wants to take that bonus money and tax it at 98%.

That'll show 'em.

Maybe so, Senator.

But what exactly will it show?

That you didn't catch these guys before, when that massage weekend might have been a tip-off?

Or you just want to stick it to anyone with money now to claim the rich are the rip-off?

Frankly, I suspect it's both.

And frankly, I’m worried. Very worried.

Here's why:

This AIG thing is an excuse.

A golden opportunity to go for the gold.

To stick it to the rich.

To vilify folks whose greed you should have seen coming and use it as a Trojan horse to make a larger case against capitalism i know is coming.

But this isn't a Trojan horse.

This is a Trojan horse's ass.

And, my friends, what makes you think it stops at sticking it to today's villains de jour?

Or today's company execs' on the taxpayer dole?

What makes you think it stops with AIG?

Or with pay packages in general at Citigroup (C)?

What makes you think a clever Congressman intent on soaking the rich can start, first by soaking the bad rich.

Before extending that soaking to the kind-of-bad rich?

Then maybe the not bad at all rich?

Where does one draw the line in a fit of rage when no one's watching?

Until they wake up the next morning and discover everyone -- and I mean, everyone -- is paying


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Shell Under Investigation in U.S. Bribery Probe

Royal Dutch Shell has announced it is under investigation by the Securities and Exchange Commission for possible violations of bribery rules governing overseas territories.

In the company’s 2008 annual report, it stated, “Shell is currently under investigation by the United States Securities and Exchange Commission and the United States Department of Justice for violations of the US Foreign Corrupt Practices Act.”

Just last year, Shell announced that one of its U.S. subsidiaries had been contacted by the Department of Justice regarding possible violations of the Foreign Corrupt Practices Act.

Also in Shell’s 2008 annual report, Chief Executive Jeroen van der Veer stated plans to step down in mid-2009, handing over his title to Peter Voser, current Chief Financial Officer of Shell. It was not clear exactly when van der Veer plans to step down.

Shell could not immediately be reached for comment.

A copy of the report is available on the company's Web site.

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