Unfazed by Data, Dow Ends Above 8000

Putting the finishing touches on its best four-week win streak since 1933, the Dow climbed above 8000 on Friday as traders weren't spooked by the latest bleak data that showed the U.S. unemployment rate surged in March to 25-year highs.

Today's Markets

The Dow Jones Industrial Average gained 39.51 points, or 0.50%, to 8017.59, the S&P 500 rose 8.12 points, or 0.97%, to 842.50 and the Nasdaq Composite picked up 19.24 points, or 1.20%, to 1621.87. The consumer-friendly FOX 50 added 4.61 points, or 0.73%, to 632.18.

Led by solid gains for financial stocks such as Morgan Stanley (MS) and a Research in Motion (RIMM) inspired tech rally, the markets proved once again to be resilient in the face of the latest dreary economic reports. The end result sent the Dow to its highest closing level since Feb. 9.

In addition to a new report showing the U.S. lost nearly 700,000 jobs in March, the markets withstood data indicating the U.S. service sector contracted further in March. Yet traders cheered the fact that the latest dreary numbers weren't significantly worse than Wall Street was already bracing for.

“It was more of a confirmation of consensus than it was a shot over the bow. And that was what the market wanted," said Peter Kenny, managing director at Knight Capital Group.

Friday's rally underscored how much Wall Street sentiment has improved in recent weeks amid beaten-down stock prices, new government actions and glimmers of hope emerging the housing and manufacturing sectors of the economy.

“It’s pretty shocking. At this point the bulls have control. They are taking any news and spinning it positively,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, N.J. “But I personally think the rally is bumping up against some serious resistance. People have to be careful. They are getting a little too bullish.”

It doesn't get much more bullish than the last four weeks on Wall Street. The Dow has surged more than 21% over that span, its best four-week win streak since soaring 31% in 1933.

“I think the market is really speaking to a degree of confidence in the overall number of projects, initiatives and coordination” taken by the government, said Kenny, citing the government's "five-headed" approach rather than any single program.

More than two-thirds of the Dow's 30 members closed in positive territory on Friday, led by financial giants Bank of America (BAC), Citigroup (C) and JPMorgan Chase (JPM). Drug makers Merck (MRK), Pfizer (PFE) and Johnson & Johnson (JNJ) took tumbles.

Boosted by Research in Motion's better-than-expectedquarterly results and outlook, the Nasdaq Composite rose more than 1%, pushing further into the green for 2009.

Markets Withstand Jobs Report

Faced with plunging profits amid the deepening recession, U.S. employers slashed 663,000 jobs in March, according to a new Labor Department report that nearly matched estimates from economists. The latest carnage on the labor front sent the unemployment rate from 8.1% to 8.5% -- the highest level in 25 years.

While the February unemployment figures were left unchanged -- a positive development for the markets -- the government now says employers slashed 741,000 jobs in January, the biggest drop since 1939. All told, the U.S. has lost 5.1 million jobs since the recession began in December 2007, with most of those job losses occurring in the past several months.

In the commodity markets, oil inched lower, ending 13 cents, or 0.25%, lower at $52.51 per barrel. Gold sank to two-week lows, falling $11.80 per ounce, or 1.3%, to $895.60.

Corporate Movers

Google (GOOG) is in talks to acquire micro-blogging service Twitter, according to TechCrunch. The search giant is reportedly considering paying in cash or stock or a combination of the two. The website also reported that Google and Twitter are in talks about developing a real-time search engine.

Bank of America's (BAC) board of directors signed off on $713 million in dividend payments to the U.S. government under its bailout plan.

Blockbuster (BBI) reached a deal to refinance a $250 million revolving credit facility as part of the retailer’s efforts to restructure its debt load. The move extends the term of the facility to Sept. 2010 and cuts the amount owed from $350 million. Blockbuster’s lenders will also waive any default stemming from a recent going concern notice.

Micron (MU) posted a worse-than-expected adjusted-loss of 82 cents per share as the chip maker’s revenue plunged 27%. Analysts had expected a loss of just 62 cents per share.

Data Dump

The Institute for Supply Management said its non-manufacturing index tumbled to a 40.8 reading in March, down from 41.6 the month before. Economists predicted U.S. service-sector activity would be flat from February. Either way, a sub-50 reading indicates continued contraction.

Global Markets

In Europe, London's FTSE 100 fell 2.31% to 4029.67 while Germany's DAX rose 0.07% to 4384.99 and the Paris' CAC 40 sank 1.11% to 2958.74.

In Asia, Japan's Nikkei 225 gained 0.34% to 8749.84 while Hong Kong's Hang Seng rose 0.16% to 14545.69. China's Shanghai Composite fell by 0.23% to 2419.78.


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Al Lewis: Brother, Can You Spare A House?

Michael Sichenzia spent four years in prison for mortgage frauds he committed in the late 1980s as a home builder in Suffolk County, N.Y.

Today, he's president of Dynamic Consulting Enterprises, a Deerfield Beach, Fla., company that helps troubled homeowners renegotiate loans with banks.

"I get a lot of people who come in here and say, "I don't want to pay what I owe,'" said Sichenzia, 49.
Banks, confronting unprecedented mortgage defaults and foreclosures, are increasingly willing to listen.

Rewarding failure, after all, is what they do -- whether it's for their top executives who've helped destroy the global economy, or just some guy in South Florida who bought way too much condo.

Homeowners living on the edge can call their bank or mortgage-servicing company and beg for mercy. But it helps to miss a couple of payments to really get a financial institution's attention.

"You certainly are going to get more traction... if you are behind in your payments," said Tim Mackey, an attorney who helps people with loan modifications in Arizona.

It typically takes Mackey's firm 50 to 60 hours to get the job done because most loan modification departments are thinly staffed.

Eventually, though, with a lot of persistence, troubled homeowners may get their loan re-amortized at 40 years or their interest rate dropped as low as 4%, significantly reducing their monthly payments.

President Barack Obama's Homeowners Affordability and Stability Plan will help millions more people do this.
I guess sometimes, it pays to not pay the mortgage. And what's in it for responsible homeowners who keep making their payments? Not a lower payment monthly payment. But maybe the slim hope that their property values will stop plunging after their deadbeat neighbors get a loan modification instead of a foreclosure notice.

Even more twisted in the loan modification universe is a polar shift in the economic incentive to cheat on a financial statement.

Not long ago, borrowers would exaggerate their incomes and the value of their assets to get financed. Now, however, they can get a better deal by exaggerating their poverty.

It's kind of like a liar loan in reverse.

"Whenever there's this much money in play, there will be attempts at fraud," said Jame Cofran, who heads the global banking and financial markets group at CGI Group Inc.

Many financial institutions are scantly prepared for the rising tide of loan modification requests. They did a sloppy job of collecting information when they made the loans in the boom, and they may do no better as they modify these loans in the bust.

Some institutions are so difficult to deal with, Sichenzia said he wonders whether they even care. Why deal with troubled borrowers when it's increasingly likely that the federal government will just buy up all the bad loans, anyway?

"It's a poker game, and they're holding," he said. "Why not just wait and dump it all on the government?"

Nevertheless, CGI, an information technology and business process service company, is rolling out systems to help financial institutions deal with the thickening onslaught of loan modification requests.

By electronically verifying income statements, tax returns, credit reports and other data, and organizing it in a computer file, CGI hopes to help banks avoid making loan modifications to people who exaggerate their financial hardships. It may be 2009, but many mortgage makers are still using paper files, leaving plenty of cracks to slip through, Cofran said.

Sichenzia said he will have no part of a loan modification unless it's for a client with a real hardship.

He said his company, with a staff of 25, thoroughly investigates its clients' claims and gets them to sign a notarized affidavit.

"I don't want some bank to come back and say to me, "Hey, you helped this person commit fraud,'" he said.
He's done enough time, already. Besides, there are too many people traipsing through his office who really do need a loan modification. He charges a flat fee of $550 for his service. Sometimes, he works free.

Many of his clients, after all, are elderly or disabled, and were clearly the targets of predatory lending practices. But now they don't have enough income to qualify for a loan modification, Sichenzia said.

"They are going to lose their homes," he said. "I see that every week, here. And it kills me."

--(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. The column is published each Tuesday and Thursday at 9 a.m. ET. He can be reached at 201-938-5266 or by email at al.lewis@dowjones.com or on his blog, tellittoal.com.)


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Week Ahead: Focus Shifts Back to Wall Street

For the first time in weeks, investors’ focus will shift away from Washington and back to Wall Street, where first quarter earnings reports will determine whether the market will continue its upward surge.

Dow Jones Industrial average member Alcoa (AA) kicks off the proceedings on Tuesday.

Analysts earlier this year had predicted a 12% decline in first-quarter profits. But economic conditions have worsened considerably, and that figure has risen to 36% according to Thomson Reuters. Make that 20%, if financial stocks are removed -- cold comfort.

Major retailers are expected to report a small increase in March same-store sales Thursday. Same-store sales likely grew 0.8% overall in March, compared with a decline of 0.7% a year earlier, according to Thomson Reuters.

If Wal-Mart (WMT), the world’s largest retailer, is taken out, same-store sales were expected to fall 3.2% for the month. Department stores are expected to report a staggering 21% drop. Discount stores, which have benefited from the recession, are likely to post a 2.6% increase.

Other companies reporting next week: housewares retailer Bed Bath & Beyond (BBBY), restaurant chain Ruby Tuesday (RT) and fertilizer company Mosaic (MOS) on Tuesday; and liquor company Constellation Brands (STZ) and discount retailer Family Dollar Stores (FDO) on Wednesday. Chevron (CVX), the second-largest U.S. oil company, will provide an interim update Thursday.

The Communications Workers of America board approved a strike by 125,000 workers in five AT&T (T) operations if new contracts are not reached before the current ones expire Saturday night. A major issue is whether workers will bear more of the cost of their health-care benefits.

The Securities and Exchange Commission will take up the issue of short selling Wednesday when the commissioners consider proposals to reinstate the uptick rule. The rule, which the SEC did away with in 2007, prevented traders from doing a short sale unless the price of the stock from the most recent trade was higher than the previous price.

On Monday, the private Conference Board issues its March employment trends index and the Chicago Federal Reserve Bank reports on regional manufacturing activity.

The government will detail February consumer credit Tuesday and February wholesale inventories Wednesday. The Federal Open Market Committee releases the minutes of its last meeting Tuesday.

The U.S. trade balance for February, to be released Thursday, is likely to be little changed from the month before. The deficit has been shrinking since last summer though it contracted sharply in November.

The markets are closed next Friday for the Good Friday holiday.


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Market Winners & Losers: Vornado, Humana

Despite unemployment numbers that have not been seen in more than 25 years, the major indices rallied for a fourth day in a row closing up 0.9% to finish the first week of trading in the second quarter.

Here are Friday’s winners and losers:

Winners:

Kimco Realty Corp. (KIM)

News that it plans to sell upwards of $70 million in common shares was able to outweigh the cuts in production it announced for the coming quarter. It closed at up 25.5% to $9.40, a gain of $1.91.

Principal Financial Group Inc. (PFG)

The insurer gained 19.9% as it looked to be on the receiving end of government cash. It closed at $10.53, up $1.75.

International Game Technology (IGT)

This stock moved up in the mixed sector, gaining 16.4% to end the week. IGT finished the session at $11.66, up $1.64.

Vornado Realty Trust (VNO)

Following sector trends, the REIT continues to rise from yearly lows, closing up 13.2%. It ended the week at $40.66, a gain of $4.75.

Host Hotels & Resorts Inc. (HST)

This is another stock bouncing off its yearly lows to start the second quarter. It gained 13.1% Friday. The REIT closed at $5.01, up 58 cents.

Losers:

Akamai Technologies Inc. (AKAM)

The computer service company dropped 6.9% after an analyst downgrade. It closed the week at $20.06, a loss of $1.49.

Tenet Healthcare Corp. (THC)

Talks with Columbia/HCA Healthcare were stalled, moving the stock toward its yearly lows. THC closed down 6.7% to $1.11, a loss of 8 cents.

Humana Inc. (HUM)

Possible overexposure to Medicare could cause massive problems for the insurer. It dropped sharply from its opening price. HUM last traded down 5.7% to $25.46, a loss of $1.54.

Bristol-Myers Squibb Co. (BMY)

This stock dropped 5.4% as buyout talks for the pharmaceutical company have ceased. BMY closed at $20.17, down $1.16.

Newmont Mining Corp. (NEM)

Reacting to lower commodity prices today, NEM fell 5.1% to end the week. It closed session at $43.89, down $2.35.


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Accounting Rule Makers Soften Mark-to-Market's Bite

Accounting rule makers approved altering controversial mark-to-market accounting guidelines on Thursday to give companies more flexibility when they value assets.

The Financial Accounting Standards Board said it will give companies greater latitude to determine the “fair value” of assets. Mark-to-market had been widely criticized in recent months by the financial-services industry and some market observers who said it contributed to the financial and credit meltdown last fall.

FASB spokesman Neal McGarity maintained that the board had been “responsive” to concerns, and said “our decisions rarely please everyone, but we believe we have helped market participants… with these actions.”

FASB will now let companies use “significant judgment” to value assets when those assets are trading in inactive markets under distressed circumstances.

Also, the standards have been relaxed by which companies have to take impairment charges when they take losses on their investments, particularly in cases where they plan to hold those assets to maturity or where they don’t have to sell them quickly.

Companies will now have to disclose assets valued at fair value quarterly, rather than on the current annual basis.

The changes will take effect for the second quarter of the year, though companies are allowed to adopt them for the first quarter if they have the means to do so. Retroactive changes won’t be allowed.

In the past, MTM meant that companies had to value assets based on the last trading price. In distressed markets, particularly where assets were not trading or there were just a few trades at fire-sale prices, MTM meant that those assets would have to be priced at very low levels.

Companies argued that this wasn’t a good representation of the value, particularly for assets that were being held to maturity. However, supporters of the rules maintained that they were necessary for transparency and accuracy.

FASB had already issued an opinion last fall saying that companies didn’t have to use “fire-sale” prices -- ultra-low prices usually resulting from forces sales -- when valuing assets. Still, critics kept up the pressure, leading to Thursday’s changes.

“I applaud the very important actions taken by FASB today, which has made significant progress toward addressing inaccurate asset valuations in the markets,” House Financial Service Committee Chairman Barney Frank (D-Mass.) said in a statement. “The FASB believes the rule can be applied more fairly and take into account the currently dysfunctional state of some markets. The integrity of the standard-setting process is preserved, while avoiding the pro-cyclical effects of improper valuation practices.”

Still, industry support for the changes was tepid.

“Today’s decision should improve information for investors by providing more accurate estimates of market values,” said Edward Yingling, president and CEO of the American Bankers Association, in a statement. But the ABA opined that FASB “has not done enough to fully repair the accounting rules for securities classified as ‘held to maturity.’”

FASB said it expects to be able to issue the final language of the changes next week.


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U.S. Factory Orders Rebound From January Decline

WASHINGTON--New orders received by U.S. factories rose in February, government data showed on Thursday, breaking a six-month streak of declines and bolstering hopes the economy may be beginning to crawl out of the depths of a recession.

The Commerce Department said factory orders rose 1.8% in February after a revised 3.5% drop in January, initially reported as a 1.9% decline.

Economists polled by Reuters had expected a February increase of 1.5%.

Orders for non-defense capital goods excluding aircraft, seen as a measure of business confidence, jumped 7.1% after a steep 12.3% drop in January.


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Feds Seize Madoff's $9M Mansion to Recoup Funds for Victims

Federal authorities have seized jailed Ponzi scheme mastermind Bernard Madoff's $9 million Florida mansion in an effort to recoup funds for victims of the disgraced financiers gigantic fraud.

Also seized by U.S. Marshals in Florida were an antique yacht and a smaller boat.

All of the property will be auctioned off and the proceeds dispersed among Madoff’s thousands of victims.

A U.S. Marshals spokesman said the 8,753-square-foot, five-bedroom mansion was taken over by the government late Wednesday afternoon, a few hours after marshals seized the boats.

Marshals spent several hours filming and photographing items in the house that might be removed at some point.

The mansion was unoccupied when federal authorities arrived.

Palm Beach County property records show the mansion was purchased in 1994 under Madoff’s wife Ruth’s name for $3.8 million, the Associated Press reported. The 2008 property tax bill was $157,298.

The spokesman said the estate would be monitored and is no longer considered Madoff's property.

Madoff’s attorney Ira Sorkin told reporters he is not taking issue with the seizure of Madoff’s Florida properties.

Madoff, 70, is in jail in New York awaiting sentencing after he pleaded guilty to swindling billions from investors in what could be the biggest scam in Wall Street history. He faces up to 150 years behind bars.

Meanwhile, the U.S. Justice Department has stated its objection to the release of e-mails sent by victims of Madoff to a federal judge who presided over the hearing at which Madoff pleaded guilty.

According to court documents, television networks ABC and NBC are seeking the release of the e-mails, which victims sent to District Judge Denny Chin ahead of the hearing.

Most of the e-mails urge Chin to throw the book at Madoff and to make certain as much of Madoff’s riches as possible are returned to his victims.

All of the e-mails have been released, but many of the names of the victims have been redacted because the writers don’t want their names made public.

The media outlets want the information to be released without the redactions, according to the court papers.


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