Market briefing---Bob (medium)
Citigroup & Bank of America---Su (fast)
NYSE---Deb (fast)
>> welcome to “world financial report”. i’m bob bowden. after the bell, developments in a pair of legal cases involving the altria group, parent of cigarette maker philip morris. an appeals court in illinois has told a trial judge in that state to reconsider the size of a bond the cigarette maker would need to post in order to appeal a recent ruling. the original bond was set at 12 million and then reduced to 6.8 billion. philip morris said the 12 billion bond could bankrupt the company. in another case a federal judge in nevada has denied class certification by five cases filed by smokers in that state. the news could have a significant impact on similar cases pending in nevada and elsewhere. altria shares rose in thes tended hours trading, as you see up, 8/10 of a percent since the 4:00 p.m. eastern time close. other news after the bell, rambus says fiscal second quarter net income fell 23% as litigation costs surged. the designer of high speed memory chips reported earnings declined 4.5 million or four cents a share, meeting wall street expectations. revenue increased to $29.2 million. in the regular session we saw shares of rambus up 1.9% on the day or 35 cents. however, in the extended hours we see the other direction. rambus shares moving down 2.5%, down 47 cents to $128.43. rambus shares have almost trippedled this year as the company seeks to resolve litigation related to intellectual properties. >> bank stocks rallied today as citigroup and bank of america said mortgage refinancing and consumer loans helped boost second quarter earnings. bank of america’s net income rose 23% from a year earlier to a record $2.7 billion. revenue also came in stronger than analysts’ expected, climbing 12%. that’s more than double the consensus forecast. citigroup, the world’s biggest financial company said net income rose 5% to 4.3 billion, or 83 cents a share. that beat the 80 cent forecast of analysts surveyed by thompson financial. bloomberg’s su keenan has more details on the banking group.
>> analysts and investors see the latest news from citigroup and bank of america as a strong sign of recovery for the banking sector and the driver behind today’s rally in financial stocks . the philadelphia key bank index which tracks the stock performance of the 24 largest banks in the u.s. is at its highest level in two years, up 23% year to date. now, news of citigroup’s 5% increase in second quarter earnings helped push shares to their highest level in a year and a half. as you can see, up 2% on the day p but the stock is up 47% from its march 11 low. the bank raised its dividend to 35 a share from 20 cents. the c.e.o. told investors on the conference call “we think the outlook for the second part of the year and going forward is also beginning to strengthen.” he went on to say investment bank rers seeing increases in the backlog and expected deals and acquisitions. he says that’s a sign that people are beginning to think about getting back to business. citigroup shares make up 4.5%. derek rollingson helps manage $1 billion in assets and says the rally in bank stocks is just beginning.
>> we are extremely confident the worst is over. we have valuations on the sector in general of about 28% undervalued, we have 20% news before we even have fair value based on our methodology. given that coupled with the recent news releases of the earnings today, you know, it just increases our confidence you can see substantial run in these stocks .
>> he said turning to bank of america, shares hit their highest level in five years today. they are up 24% since the march 11th low. the company said revenue grew faster than in any four since the bank was formed in 1998, due to record business in its mortgage division. richard bove, managing director at harper and arnet says this latest quarter will be the last quarter industry record $29 billion in earnings.
>> i think investment banking business has clearly turned around dramatically. that’s helping companies like both citigroup and bank of america. trading activity has been extraordinarily strong in the industry. i’m sure that’s part of the numbers.
>> now, most of the country’s major banks report earnings this week. j.p. morgan reports on wednesday. its shares rose more than 4%. it hit a new high for the year as well. bob, back to you.
>> thank you, su. much a buyout in the internet industry, yahoo is buying rival overture services for $1.63 billion in stock and cash. yahoo will pay nearly 2/3 of one yahoo share and $4.7 for each overture share. the price is 13% more than overture’s closing price on friday. the chief financial officer says the deal will let the company provide a full spectrum of advertising services.
>> one of the major attractions to us of putting these two companiesing the was that we really offer the most diverse and integrated set of solutions for advertisers, whether from the self-service platform and sponsored search to contechtual based marketing and contechtually based content, all the way to text graphics, banners, a lot of the new digitizeation we’ve been doing as well. so we really offer any and all solutions.
>> looking at yahoo shares on the day they finished up one cent, $32.20. overture services up 2.54 to $24.05 p boise cascade is buying office max for over a billion dollars. the biggest maker of lumber and paper says it will consider further cutting back its dependence on manufacturing. office max shareholders will get $9 a share in cash and stock . that’s a 25% increase over friday’s trading price. the purchase will more than double shares at boise’s office products distribution unit to over $8 billion and give it 1,000 retail stores in the u.s. boise is reorienting its business emphasizing sales and services rather than wood and paper. peoplesoft won an approval from the justice department to buy business software rival j.d. edwards. even so, oracle says it will still go forward with its takeover bid for peoplesoft. the purchase price for j.d. edwards is $1.75 billion and is expected to be completed on july 17th. both shares ended the day higher as you can see. oracle says it’s extending its $19.50 per share offer until august 15th, with or without j.d. edwards. oracle shares fell more than 1.5% in the session today. our deborah kostroun is at the big board, and she begins with investor comments on the second quarter earnings season that were just really getting under way now.
>> that’s right, bob. in fact, this week 132 companies in the s&p 500 will be reporting their earnings, and gordon fowler, chief investment officer at glenmede trust company says one of the things with this earning season, this reporting season, we are transitioning from cost cutting led growth to now see sales led growth in earnings. he helps manage about $13 billion in philadelphia. he says four quarters ago we had 44% of companies showing year-over-year sales growth. last quarter you had 70% of companies showing year-over-year sales growth. he says the recovery definitely different at this time. we’re being led by debt sales growth. that’s something we heard from banking stocks today. tomorrow we have more earnings, many from the financial area. that helped power the markets in today’s session. many of those earnings that we are getting tomorrow, actually many of those stocks seeing some 52-week highs in today’s session fleetboston, state street. just a couple of the companies hitting 52-week highs. fannie mae, in fact, they just―we just reported a few moments ago that they boost today company’s quarterly dividend to 45 cents from 39 cents. other stocks , it’s the financials doing quite well on the heels of that bank of america and citigroup earnings. many of the broker dealers also performing quite well and also seeing some new highs that we saw in today’s session. also merrill lynch. they report their earnings tomorrow, in tomorrow’s session. semiconductors, another area of strength in the market, this after intel, they will be reporting their earnings tomorrow. but also an analyst at merrill lynch recommended buying the stock . he said the lower cost production is hching intel’s profit. so we’ll get more insight into intel. in fact, that stock hit its best level in over a year. johnson & johnson, that was the biggest gainer in heart stent makers in the dow jones industrial average. we saw guidant performing quite well. that got an upgrade after hitting of 52-week, an upgrade from j.p. morgan. johnson & johnson will report their earnings. one of the things they’ve been so focused on since april, they got u.s. approval for their cipher stent. they still have that market pretty much sewn up. boston scientific likely to be a threat down the road. back to you in the studio.
>> deborah kostroun from the new york stock exchange. when we come back the next guest invests in convertible skurts, a bond that gives investors the opportunity to convert into common stock .
