Market briefing---Matt (slow)
Investigation---Su (fast)
NYSE---Deb (fast)
Nasdaq---Bob (fast)
Currency
Interview: IDEAGlobal--- Callow, Sean--- Currency Strategist
welcome to “world financial report.” I'm Matt. the ouster today of two executives at alliance capital management, the nation’s biggest publicly traded money manager, is new evidence that the probe is hitting the $7 trillion industry at the highest levels. su keenan has the latest on the investigation and why an industry settlement seems unlikely.
>> let’s get to alliance. alliance capital management is holding two top executives responsible for the inproper fund trading that regulators have put under the spotlight. the nation’s biggest publicly-traded mutual fund ousted its president and chief operating officer, 58-year-old john carifa. also asked to resign, the chairman of mutual fund distribution, michael laughlin. reaction in the industry which last week saw putnam investments remove its long-time c.e.o. was swift.
>> it shows you how high up this goes. these are senior people asked to leave the firms. so it’s way past the point where the fund industry can abbott like this is something on the fringe. these are central people violating the investors’ trust.
>> the alliance executive ouster is the latest fallout as new york attorney general eliot spitzer’s proib o probe of the $7 trillion industry has focused on trading privileges given to some customers, mainly hedge funds, by mutual fund companies. the securities and exchange commission extended spitzer’s probe focusing on whether fund managers channelled sought-after shares of initial pulic offerings to hedge funds rather than to other funds. on the issue of settlement, executives and lawyers say it’s unlikely there will be an industry-wide agreement due to the different circumstances. according to one source, eliot spitzer plans, instead, to negotiate separately with fund companies. regulators want to change business practices and get restitution for investors.
>> it’s not the funds themselves that would make restitution payments, but rather their advisers, the fund management companies. and we’re going to ensure that the shareholders here don’t bear the brunt of any relief imposed.
>> meanwhile, the biggest fedration of labor unions in the u.s., the afl-cio, is considering taking legal action against the funds named in the probe.
>> what we’ve heard in the last couple of weeks as a result of eliot spitzer’s investigations, that there has been systemic conduct by employees of mutual fund complexes that have nickeled and dimed the millions of mutual fund participants out of nonof money that should have been theirs.
>> the afl-cio has roughly $1 trillion invested in the mutual fund industry by their members. >> the mutual fund stocks are also affected and deborah kostroun has been tracking the bigger picture there at the nyse.
>> if you look at the investment managers index, this is a weighted index reflecting the performance of 19 publicly-traded investment management companies. look at what it’s doing over the last couple of weeks. down in today’s session, as well. over the past week, lobbing off about 1.5%. if you look at the companies and how they’re performing, alliance capital once again lower today. they have been down quite a bit over the past week along with a.x.a. and also janus and putnam, owned by marsh & mclennan. that stock is actually a little bit higher in today’s session. intin addition, if you look at 3m, news after the close of trading -- 3m closed at a record last thursday and higher today more they are buying back as much as 1.5 billion of outstanding shares, equalling 2.4% of the company’s outstanding shares. so 3m coming out lower in today’s session, but in the after-hours, higher with the news of the stock buyback. in today’s session, one of the things we did see, some of the stocks that were the worst performers, really have been some of the best performers since the low on march 11. looking at small caps, we’ve been talking about small caps since the low on march 11. they are some of the worst performers. year to date, they have been performing well, but some of the biggest losers today, along with technology shares.
>> thanks, deb. the nasdaq was the worst performing index of the three benchmarks today. chip stocks were a big drag on the market. bob bowden has the details from the nasdaq marketsite in times square.
>> lots of chip stocks moving lower today. the s.o.x., philadelphia semiconductor index, at a 52-week high yesterday and turned around today. 18, all 18 of the 18 stocks in the philadelphia semiconductor index were down today, altera down 5%. amkor, intersil, micro championship, all down today -- micrmicro chip. adobe shares down 3.6%. the maker of photoshop and acrobat software. a “barron’s” article said investors were concerned about the number of stock options available to employees of adobe. adobe issued options on more than 20% of its shares compared to most large companies where the average is 2%. amazon shares down 4.3% on monday after founder and c.e.o. jeff bezos sold 400,000 shares of his own holdings. it was a small percentage, less than .5% of his holdings as he has 105.6 million shares. nextel suffered today. the wireless company down because its competitor―it has another competitor in the walkie-talkie cell phone market. cingular wireless says, based on comments from its c.e.o., that in the first half of next year it will be in the walkie-talkie cell phone business joining verizon as a competitor to what has been nextel’s bread and butter market, the walkie-talkie functionality. overall, a week day at the nasdaq.
>> the yen rose against the dollar and euro in new york trading today. japan’s currency rose after prime minister junichiro koizumi won re-election pledging to maintain policies that have attracted international investment to japan. the yen has gained 14% against the dollar since koizumi was elected, first elected in april 2001. joining us to talk about the yen’s rise is senior currency strategist atideloble―ide ideaglobal.
>> it’s probably only a minor positive and we already have good news factored in because foreign investors have been buying japanese equities every week since april so there is good news priced in but the re-election of koizumi was a relief to the market and also the yen accelerated a little bit, particularly when a couple of other independents and also the new conservative party, small but essentially threw their lot in with the l.d.p. and meanwhile the democratic party of japan, the opposition, has been pressing koizumi to get along with reform. so overall, it is positive. but i wouldn’t say euphoric. essentially you have the yen positive for a number of reasons and whether koizumi has necessarily been a huge factor is debateable.
>> what’s the likelihood the yen strength. continue?
>> i think we are in for further yen appreciation. we have it tagged at 105 for the year end. it could get there sooner except that the ministry of finance is very concerned that the yen could rise too fast and choke off the japanese recovery by hitting exports and making deflation a bigger problem than it already is so there may well be further intervention for the bank of japan to slow the rise if not reverse it.
>> we’ll have to leave it there, running very tight on time. sean callow, senior currency strategist at ideaglobal. more to come here as we take a closer look at the markets as stocks finished lower today. we’ll speak with one chief market strategist expecting a change.
