Market briefing --- Bob (fast)
Fannie Mae --- Peter (slow)
NYSE --- Julie (slow)
Crude futures --- Su (fast)
welcome to “world financial report.” i’m bob bowden. in his first public response to allegations of accounting irregularities, fannie mae’s top executive disputes the allegations and defends the company a actions. franklin raines comments came at a hearing held by the house financial services committee on capital markets and peter cook joins me live from the hill with the latest. peter?
>> bob, it’s been a sometimes% heated exchange between fannie% mae c.e.o. franklin raines and
>> the hearing started with ofao’s director testifying, saying fannie mae has engaged in a prolonged and concerted effort to mismanage earnings.
>> the stakes are too high to just forgive past sins. if any company, especially a government sponsored enterprise, is allowed to get away with this type of accounting misconduct, then no regulator can do its job and no investor is safe.
>> the allegation that the company’s books may have been manipulated in a way to boost executive compensation has drawn attention from members of the subcommittee throughout the course of the day. some members have seized on that allegation as evidence of the need for congress to pass legislation increasing oversight of the government sponsored enterprises like fannie mae and also freddie mac. other subcommittee members have risen to the defense of fannie mae, saying this a rush to judgment on the part of ofao and saying all the facts need to be considered before action is taken by congress or regulators in the case. that is something that franklin raines has maintained throughout the course of his testimony. in the end, he says the s.e.c. will decide whether or not fannie mae’s accounting in question was correct. certainly not the final chapter in this story.
>> thank you. fannie mae shares up 2.2% today, their fourth consecutive rally session. moving on, the world’s second largest biotech drugmaker, genentech, out with earnings for the third quarter and boosting its full-year forecast. shares in the extended hours trading, pulling up that graphic, genentech up 2.8% in after hours at $51.68. higher sales of avastin boosted profit 52% last quarter. net income climbed to almost $239 million from $152 million a year before. excluding items, genentech earned 24 cents a share, exceeding analysts’ estimates. revenue increased 47% to $1.2 billion, matching estimates. ahead of the report, shares of genentech fell 88 cents to $50 .25 and have gained 7% this year. stocks rose on the day as optimism about third-quarter earnings overshadowed record oil prices. alcoa led gains and earnings ruts are doe out tomorrow. it was the third rally session out of the last four and green arrows for the dow, s&p and nasdaq. the nasdaq, the winner, up .8% -- stocks led higher by oil company today. many of those stocks hit record highs. for more on today’s trading action, here’s a report from julie hyman at the big board.
>> the dow and s&p both ending the session at the highs of the day and actually a―speaking of highs, we had a lot of record highs in energy stocks today. that was the group that outpaced the move we saw in the overall market as we saw the price of oil climbing above $50 a barrel. the energy index, the best performer within the s&p 500. exxon-mobil hitting an intraday high in the session. a number of others, as well, conocophillips and chevrontexaco among them. we saw the oil and gas drillers, in particular, performing well today. some of the best performers within that group including transocean, rowan, nabors and noble. material stocks doing quite well today, in contrast to yesterday when we saw oil rising and materials taking a hit. that group, the second best performer within the s&p 500, the materials index. a lot of the metals stocks performing well today and hitting record highs, including phelps dodge, alcoa rising today ahead of earnings tomorrow. dow transports once again hitting a five-year high in today’s session. they’ve done that over the past few sessions. a lot of folks talking about the correspondence or lack thereof between the rise of oil and the rise in transport stocks. we talked to lawrence pretour -- cretoura at cloveer capital about the phenomenon and he said the volumes are symbolic of a good sign as transport companies pass on higher energy costs to clients and he sees it as positive at this stage in the economy and the stock market . i’m julie hyman, bloomberg news at the new york stock exchange.
>> more on crude oil prices setting new highs. today, the u.s. energy department said initial supplies rose less than expected and stockpiles of heating oil plunged. the report pushed crude futures above $52 in new york trading, setting a record close for a second day. su keenan has more on the rally and joins me on set.
>> and the rally also included home heating oil futures up 75% from a year ago. the department of energy predicts the average user in the northeast part of the united states will pay 38% more than last winter and that’s in the case of a normal winter. today’s inventory report showed supplies of heating oil and diesel supplies plunged last week and while the government report shows crude oil supplies grew more than a million barrels, that’s about half what analysts surveyed by bloomberg expected. goldman’s analyst believes a cold winter will push prices higher.
>> if you had a cold winter, we would expect to see prices higher than this. you probably have a one in four shot of seeing $60.
>> he says supply concerns, especially after the last hurricane, have sent crude futures up 70% this year. burnham securities mordecai abeer says it’s impossible to put a ceiling on the price of oil.
>> a good one to ask because nobody would give you a correct answer on that. your guess is as good as anybody to go to $60 to $80 a barrel to take the worst-case scenario. if there is revolution in saudi arabia.
>> and it is the bear’s view that globally, there is no shortage of supply and prices should come down to $40 a barrel. oppenheimer’s fadel gheit.
>> in a bull market in oil prices, that is supported more by speculation than by fundamentals and a correction is overdue, it doesn’t mean it will happen tomorrow or next week but eventually it will happen and it will be steep.
>> fadel gheit is a bear. friedman billing ramsey’s rasheed is not, raising his estimate for oil to $39 a barrel, and the trend higher is sustainable.
>> thank you. when we return, one lawyer says in terms of big cases, they don’t come bigger than this. the u.s. is squaring off against the european union over subsidies for boeing versus airbus. we’ll hear from ralph crosby, chief executive of the parent company of airbus.
