Market briefing --- Mike (medium)
Marsh & Mclennan --- Su (fast)
NYSE --- Julie (slow)
welcome to “world financial report.” i’m michael mckee. for the latest on the change in leadership and business practices at marsh & mclennan, the insurance broker accused of taking kickbacks and rigging bids, the rebound in the stock led an industrywide rally as marsh’s new chief executive created a compliance unit to oversee its business. su keenan has more on the changes which come less than two weeks after new york attorney general eliot spitzer sued the company. su?
>> mike, with these latest moves, replacing the c.e.o., establishing a compliance unit and banning 52 fee―fees that suggest a conflict of interest, marsh & mclennan is avoiding criminal indictment by eliot spitzer. new chief executive, michael cherkasky, says he’s committed to a quick settlement of the investigation and spoke with spitzer today. cherkasky said bid rig suggest limited in his review so far and that a narrow client group was hurt by the practice. he says the company will negotiate restitution. he says the move to ban commissions could cut profit by more than a quarter next year, but expects to remain competitive as rivals do the same. as part of the civil suit, new york attorney general eliot% -spitzer refused to negotiate with former c.e.o. jeff greenberg. greenberg stepped down yesterday after running the world’s largest insurance brokerage for five years. cherkasky replaces him as a relatively new insider. he was the former head of kroll, the security firm marsh bought in july. cherkasky has a prior working relationship with spitzer, serving as his boss when both were manhattan prosecutors over a decade ago. now that glenberg is out, spitzer says marsh can move forward towards resolution of the lawsuit and he will not pursue criminal charges against the company itself help john bogle predicts major changes ahead for insurance brokers.
>> someone doing a lot more business with you, you can treat them better than someone else. i see nothing particularly the matter with that. when you get into bid-rigging and companies asked to deliberately put in high bids to make the low bidder look like the low bidder and have the low bidder subsidizing that bid, that’s not good, that’s not traditional. i think we’ve run over the bounds of ethical behavior here. >> bogle says it has taken the mutual fund industry a year to recover what he calls from the cloud of spitzer’s investigation into improper trading in the mutual fund industry. back to you.
>> su keenan. we’ll hear from michael cherkasky about his plans for moving the company forward later on in the program. it wasn’t just marsh. insurance companies across the board led stocks higher today. the dow jones industrials finishing up almost 139 points, the biggest gain for the dow in four months, since june 7. the s&p 500 up by 16 points and the nasdaq rising by 15. looking at volume on the new york stock exchange -- for more on today’s trading action, here’s a report from julie hyman at the big board.
>> the dow jones industrials had their biggest gain today since june 7, recuperating―more than recuperating, losses from the prior two sessions. the dow broke through intraday lows on both friday and on monday so folks telling me today it was coming back from oversold levels. the s&p 500 also coming back in the session though not as much as the dow, up 1.5%, only the biggest gain this month thus far. insurers accounting for much of the gain today. marsh & mclennan rebounding after it replaced its c.e.o., jeffrey greenberg, with michael cherkasky and said it was creating a new compliance unit. the s&p 500 insurance index, the biggest gainer within the s&p 500. some of the biggest gainers within that index included a.i.g., o’on and ace and hartford financial. health insurers doing well today not just because of the rebounds generally in the group but also because of wellpoint health which released third-quarter profit beating analysts’ estimates and raising their full-year profit forecast. looking at utility stocks, the s&p 500 utilities index closing at its highest since may of 2002 and many components of the index reaching record highs in today’s session. this is the only group, by the way, that has risen five straight sessions. many of the other s&p 500 groups had been mixed. these, again, stocks, touched all-time highs today although as you can see, t.x.u. did not close at that level. i’m julie hyman, bloomberg news, at the new york stock exchange.
>> two major insurance companies are reporting higher earnings for the september quarter. they released results after the close of regular trading. chubb had third-quarter earnings rising 40%, coming in at $1.88 a share. chubb saw an increase in premiums and investment income. excluding gains and losses, chubb earned $1.72 a share, 11 cents more than the average analysts’ estimates. chubb’s the nation’s second largest insurer of corporate executives and directors. at aflac, third-quarter earnings rose 27 percent. sales in the u.s. and japan missed targets, forcing the company to lower its forecast. chief executive daniel amos says he’s “disappointed.” japan is aflac’s biggest market . the company earned 58 cents a share in the third quarter. crude oil futures rose on speculation u.s. inventories of heating oil, diesel and gasoline will continue to fall as demand exceeds refinery output. supplies of distillate fuels likely fell a million barrels last week according to the median estimate of analysts polled by bloomberg news. checking oil prices, oil finishing up on the day, $55.17, tying the record set last friday for the all-time high, that is december crude futures there. morgan stanley’s chief global economist, stephen roach, who has seen the possibility of resegfor some time, continues to say high energy costs are dangerous for the economy.
>> in my view, if we spend three months where the oil price averages $50 a barrel or higher, that will qualify as a full-blown oil shock and for an unbalanced, vulnerable global economy, that’s a lethal combination and could bring recession next year.
>> reacting to the move up in crude, gasoline, heating oil and natural gas all higher on the day. consumer confidence, though, lower. falling in october for the third straight month, suggesting growing voter discontent with the economy a week before the presidential election. the conference board’s index dropped to 92.8, the lowest since march. the main reason, concern over jobs and income.
>> business conditions were down and people were a little discouraged about their incomes. but they would see increases. so it was across the board but always the key is that employment picture. people are nervous about that employment situation.
>> higher energy prices are also weighing on consumers, according to smith. the gain of optimism about the next six months plunged to 92 from 97.7 in september. since the survey began in 1967, no president but ronald reagan has won re-election with the confidence index below 100 as voters go to the polls. three incumbents have lost when readings were below 90. when president bush took office, the index was almost 116. treasuries largely brushed off the confident report, moving a bit in reaction to stocks and the government auction of inflation protected securities. the 10-year note on the day was down a quarter, yield up two basis points, almost three, to 4%. at&t will pay $100 million to settle a lawsuit by shareholders. the class-action suit is seeking $2.4 billion in damages, accusing at&t of lying about its finances. shares rose on the day 20 cents. at&t wireless wireless, meanwhile, is no more. and cingular wireless is now the nation’s largest mobile phone company. we’ll speak with the chief operating officer, rafael de la vega, next.
