Stocks End Flat Following Fed Comments

Stocks finished flat Thursday after the Federal Reserve said the economy appeared to be growing at a "moderate" pace but offered a cautious reading on inflation.

The Dow Jones industrial average, which at one point had been up 70 points after the Fed decision, ended down 5.45, or 0.04 percent, at 13,422.28.

Broader stock indicators finished mixed. The Standard & Poor's 500 index slipped 0.63, or 0.04 percent, to 1,505.71, and the Nasdaq composite index rose 3.02, or 0.12 percent, to 2,608.37.

The central bank, which stood pat on short-term interest rates as had been widely expected, offered investors a relatively unchanged assessment of the economy, saying its primary concern remains the risk that inflation will fail to moderate.

Stocks bounced around as investors tried to interpret the Fed's comment that recent readings on inflation excluding energy and food prices showed some improvement but no pronounced signals of easing.

"They took a middle-of-the-road approach. The Fed said some encouraging things about the future growth rate of the economy," said John Miller, head of fund management for Nuveen Asset Management. "They could have been more negative or more concerned about the meltdown in subprime markets or the potential for housing weakness to spread into consumer spending. The changes in the statement didn't indicate any concerns about those recent events."

He contends, however, that the Fed, which left rates unchanged at 5.25 percent as it has for the past year, was careful to remain guarded about inflation.

"It's a little bit of a hawkish message because they're saying they're not really convinced inflation is decreasing in any meaningful way," he said.

Bonds fell after the Fed comments, with the yield on the benchmark 10-year Treasury note rising to 5.11 percent from 5.08 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

The modest moves in stocks Thursday follow a rally by all three major indexes in the previous session. Stocks have been turbulent during the past few weeks because of soaring bond yields and concern about the broader effect of faltering subprime loans.

The Fed's comments on so-called core inflation, which excludes often volatile food and energy prices, came as some investors had expected the bank would switch its focus to overall inflation, said Marc Pado, U.S. market strategist at Cantor Fitzgerald. Some inflation readings have been rising because of spikes in energy and food costs. While the Fed often focuses on the core level, Pado noted the overall inflation figure affects the economy because rising prices for gas and food can cut into consumer spending.

Wall Street's focus on the Fed's comments left little room for attention elsewhere; investors appeared unfazed as oil prices spiked above $70 per barrel on the New York Mercantile Exchange for the first time since August, then fell back.

Oil prices began moving up Wednesday after a government report showed an unexpected drop in gasoline inventories. Light, sweet crude rose 60 cents to close at $69.57 on Thursday.

In corporate news, shares of General Motors Corp. (GM), one of the 30 stocks that make up the Dow industrials, rose to a two-year high after agreeing to sell its Allison Transmission commercial and military business to an investment conglomerate and a private equity firm. The stock was the best performer in the Dow, rising 74 cents, or 2 percent, to $38.15.

Dillard's Inc. (DDS) rose $2.76, or 8.1 percent, to $36.69 after an investment group representing minority shareholders said it plans to press the department store chain to boost profits.

Digital River fell $5.67, or 11.2 percent, to $45 after the e-commerce outsourcing company cut its second-quarter and full-year forecasts.

Bed Bath & Beyond Inc. (BBBY) fell $1.47, or 3.9 percent, to $36.09 after the home goods chain lowered its full-year profit target, citing uncertain economic trends.

Novellus Systems Inc. (NVLS), a semiconductor equipment maker, fell $1.01, or 3.4 percent, to $28.89 after warning its second-quarter results would come in at the low end of its forecast amid weakness in the chip market.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.49 billion shares compared with 1.76 billion traded Wednesday.

The Russell 2000 index of smaller companies rose 0.57, or 0.07 percent, to 839.03.

Overseas, Japan's Nikkei stock average rose 0.46 percent. Britain's FTSE 100 rose closed up 0.67 percent, Germany's DAX index rose 1.54 percent, and France's CAC-40 rose 1.09 percent. [via]

Vodafone tipped for iPhone deal in Europe

Vodafone recovered from early weakness to close higher Monday amid talk that it could land an exclusive deal to sell Apple’s iPhone in Europe.

Shares in the mobile phone operator opened lower as traders digested a Financial Times interview with Denny Strigl, chief operating officer of Verizon Communications.

Mr Strigl refused to say whether Verizon Wireless, the US mobile phone company in which Vodafone has a 45 per cent stake, would resume dividend payments in two years.

However, Vodafone bounced back to finish 1 per cent higher at 157.6p after Credit Suisse issued a “trading buy” recommendation and said the company was the frontrunner to land the European iPhone contract.

In the US, AT&T won an exclusive five-year deal for the iPhone, which goes on sale this week.

Credit Suisse said a similar deal in Europe would provide a fillip to the Vodafone share price.

“The winner could sell more than 6m such devices over the next 3 years. Assuming half these were new customers, this could add 8p to our valuation if Vodafone were to win,” it said. After the market closed, a block of 200m Vodafone shares were traded at 157.6p. Traders reckoned it might have been an activist investor buying stock.

In the wider market, leading shares closed higher for the first time in six trading sessions.

Lifted by a strong opening on Wall Street, the FTSE 100 rose 21 points, or 0.3 per cent, to 6,588.4. The FTSE 250 fell 11.7 points, or 0.1 per cent, to 11,577.4.

However, trading volumes were thin and traders said the mood would remain jittery until the US interest rate decision on Thursday.

J Sainsbury provided the session’s speculative feature, rising 1.8 per cent to 582½p on talk that several members of the Sainsbury family had been approached to see if they would be prepared to sell their holdings at 610p a share.

On a more fundamental tack, Enterprise Inns recovered some of Friday’s losses, rising 1.9 per cent to 686½p on the back of a Citigroup upgrade to “buy”. Setting a 859p target price, the broker said if Enterprise were able to convert into a Real Estate Investment Trust, its shares would be worth 60 per cent more than the present level.

Should Enterprise fail, Citi said the downside would be limited by a £1bn share buy-back programme, which it expects to kick in over the next 18 months.

Elsewhere, drinks group Diageo improved 0.9 per cent to £10.61 after Credit Suisse said it expected a positive trading statement next week.

“We believe the growth has continued apace in the US and international divisions and that European revenues have seen a recovery from a weak first-half,” the broker said.

Anglo American, down 1.4 per cent at £29.95, and Antofagasta, off 1.6 per cent at 608½p, were among the biggest fallers in the FTSE 100 after both mining companies were downgraded by Cazenove.

The broker said it had decided to cut Anglo to “in-line” because it was trading at a 25 per cent premium to rivals Rio Tinto, up 0.1 per cent to £37.90, and BHP Billiton, 1.1 per cent better at £13.90.

As for Antofagasta, Cazenove said the downgrade to “underperform” was based on the fact that the copper miner looked expensive against its peer group.

Forth Ports was among the best performers in the FTSE 250, climbing 4.8 per cent to £18.46.

Shares in the property and ports group, which has been touted as a takeover target for several years, fell 8.1 per cent last week on fears that one of its biggest shareholders was looking to sell because of ethical considerations. Forth is studying proposals to carry out ship-to-ship oil transfers in the Firth of Forth.

HMV Group rallied 3.4 per cent to 123¼p as nervous traders continued to buy back short positions before Thursday’s annual results.

There has been speculation in the past week that HMV, one of the most shorted stocks in London, would announce the sale of its Japanese business alongside the figures. However, speculation late Monday was that HMV had approached Virgin Megastore with a merger proposal. [via]

Cross-sell offers don’t make consumers cross, survey suggests

Call centers can help companies reach out to customers as well as answering their questions, suggests a new survey. 84% of consumers participating in the survey said they would like to receive proactive communication from their suppliers, and 76% said they would like to hear about other products and services a company offers.

While only 21% said they would like to hear about cross-sell offers when speaking with a company representative on the phone, 82% said they would like to get such offers via e-mail.

The results come from a fall 2006 online survey of 500 consumers age 18 and over who had dealt with a contact center in the previous 12 months. The survey was conducted by Lightspeed Research on behalf of Genesys Telecommunications Laboratories Inc., a provider of software for managing customer service interactions.

The survey suggested that customer service is important in building loyalty. 48% of those surveyed said customer service has the biggest impact on their loyalty to a company, while 37% cited product quality, 13% price and 2% brand name and reputation. 63% said the last time they stopped doing business with a company was at least in part a result of poor customer service.

The survey found consumers are willing to communicate by other means besides telephone. Asked which methods they like to use for communicating with a company, 82% cited phone, 78% e-mail, 28% live chat, and 2% text message.

The survey also showed that consumers expect companies to respond quickly to e-mail inquiries. 20% said they expect a response to their e-mail within one hour, up from 6% when the same question was asked in 2003. 15% expect a response within four hours and 51% within 24 hours. [via]

Yahoo promotes David Karnstedt to head new search and display ad teams

Yahoo Inc. has combined its sales operations for Internet search and display advertising under a unit called North American Sales. The company has promoted David Karnstedt from senior vice president of search sales to head of the new sales organization.

Wenda Millard, Yahoo’s chief sales officer in the U.S., has left the company as part of the reorganization of the sales organization, Yahoo says. "While Wenda was a big contributor to our success in the past, the industry has shifted and requires a different set of skills to take the business forward,” says Gregory Coleman, executive vice president of global sales.

"The future of advertising isn`t about choosing between search and display, but about leveraging the breadth of advertising products to more effectively reach your customers with the right message, in the right context, at the right time, and on the right platform," Coleman adds.

Karnstedt joined Yahoo Search Marketing (formerly Overture) in 2001 and went on to build and manage the company’s North American sales force for search advertising. Earlier in his career, Karnstedt served on the management teams of several Internet companies including search providers Wired Digital Lycos and Alta Vista. Over the years he has helped to develop marketing and branding strategies related to Internet search advertising.

"Integrating our world-class search and display sales teams under David`s leadership will allow us to better serve all of our advertisers` marketing objectives ranging from brand awareness to direct response," says Yahoo president Sue Decker. "This is one of many important steps we`re taking to re-invigorate our display business, further build on our industry-leading position in advertising, and drive thought-leadership in the online advertising marketplace."

Karnstedt’s promotion follows the appointments last week (With a new/old CEO at the helm, Yahoo sets a course for…where?) of Yahoo co-founder Jerry Yang as chairman and CEO and Decker as president. Yang succeeded Terry Semel, who remains as non-executive chairman and advisor to senior management. Decker, formerly executive vice president and head of Yahoo’s Advertiser and Publisher Group, continues to head that group as well as Yahoo! Network, Connected Life and Yahoo’s International operations. [via]

Oil, Gas Futures Rise Supply Concerns

Oil and gas futures rose Monday as reports of new refinery outages countered news that Nigerian labor unions ended a strike over the weekend.

Analysts said traders started buying after hearing of problems at two refineries over the weekend, which revived concerns about domestic gasoline supplies. Oil had started the day dropping more than $1 a barrel and pulling other energy futures lower in response to the strike's end.

Light, sweet crude for August delivery rose 4 cents to settle at $69.18 a barrel on the New York Mercantile Exchange, while gasoline for July added 1.59 cents to settle at $2.3025 a gallon. August Brent crude rose 18 cents to settle at $71.36 a barrel on the ICE Futures exchange in London.

In other Nymex trading, heating oil futures for July rose 0.44 cent to settle at $2.0424 a gallon while July natural gas prices fell 19 cents to $6.94 per 1,000 cubic feet.

At the pump, gas prices extended their decline. The average national price of a gallon of gas dipped 0.3 cent overnight to $2.978 a gallon, down from the late May record of $3.227, according to AAA and the Oil Price Information Service.

Futures traders began the day selling on news that Nigerian labor unions called off a strike aimed at overturning a government fuel price hike, ending a four-day work stoppage. The unions accepted a government proposal to raise gas prices by 4 cents a liter - half of what the government wanted - in exchange for a government promise to hold prices steady for a year.

Energy futures prices rose sharply last week on worries the unions would follow through on their threat to shut Nigeria's oil industry down, although in the end, oil supplies were not affected. Nigeria is Africa's biggest oil producer and one of the top overseas suppliers to the United States.

Later in the day, investors switched their focus to reports that Exxon Mobil Corp. (XOM) and Lyondell Chemical Co. (LYO) were forced to shut down some gasoline making equipment at refineries in Texas over the weekend, said Andrew Lebow, senior vice president at Man Financial Inc.

"The market reassesses and starts worrying about these refinery problems," Lebow said.

Neither shutdown was major or expected to last long. But in a tight market, any little bit of lost refinery capacity can send prices higher, analyst said.

Last week's inventory report from the Energy Department's Energy Information Administration showed unexpected jumps in oil and gasoline inventories, but a surprising decline in refinery utilization rates. Traders were blindsided by the 6.9 million barrel build in crude stocks, and sent oil prices down by nearly $1 Wednesday. But the respite was short-lived, as worries about the Nigerian strike and Iranian nuclear enrichment pushed oil up on Thursday and Friday.

The record gasoline prices of recent months were the result of an unusual number of domestic refinery outages this spring. Analysts and traders have long been concerned that the refining industry won't be able to produce enough gasoline to meet U.S. summer driving demand, which peaks between the July 4 and Labor Day holidays. Those fears have been fed by EIA reports that show refinery utilization rates in the 87 percent range, well below the 94 percent to 95 percent range analysts prefer.

Oil prices, which trade in sympathy with gasoline futures, are likely to continue trading in the high $60 range, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service.

"It's hard to find something that you're going to grab onto and say, well, this is going to drive prices higher or this is going to drive prices lower," Kloza said.

Although retail gas prices continue to fall, their pace of decline has slowed, Kloza said. Gas prices aren't likely to continue falling, and could even rise again if the supply picture doesn't improve, analysts said.

"The overall battle goes on - supplies are so much lower than normal," Flynn said. [via]

GLG Sells Itself in Reverse Takeover

GLG Partners LP, one of Europe's largest hedge funds, said Monday it is selling itself in a $3.4 billion reverse takeover that will give it access to the U.S. stock market.

Under the terms of the deal with Freedom Acquisition Holdings Inc. (FRH) (FRH), the combined company will be named GLG Partners Inc. and will trade on the New York Stock Exchange. GLG, which is not currently traded, may also seek a listing in Europe.

"This strategic transaction is an important step in building GLG's global business, affording us the opportunity to increase brand awareness and expand in major targeted markets," said Noam Gottesman, co-chief executive of GLG.

New York-based Freedom Acquisition is a "blank check" company, an investment vehicle that allows the parent company to raise money for acquisitions by listing on the stock exchange. Such companies reveal acquisitions after putting shares on the market.

Shares of Freedom Acquisition rose 73 cents, or 7 percent, to $11.18 Monday.

GLG, with $20 billion (14.9 billion euros) under management, will receive $1 billion (742.7 billion euros) in cash and 230 million shares of Freedom common stock, the company said in a statement. Freedom's shareholders will own approximately 28 percent and current GLG equity holders will own about 72 percent of the combined company's shares.

"I think its another example of securitizing the business in the same way that private equity has been buying up" businesses, said Richard Hunter, a broker at Hargreaves Lansdown in London. Management is "looking to crystalize the value of their business."

Freedom was founded last year by Nicolas Berggruen and Martin E. Franklin, chief executive of a consumer products conglomerate, Jarden. They will both join GLG's board of directors.

Berggruen's company is an investment vehicle for his family's money, whose assets in 2004 exceeded $1 billion. His grandfather, Heinz Berggruen, was a friend of Pablo Picasso and operated the family's art gallery in Berlin until his death earlier this year. Nicolas Berggruen's father, John, also operates a family gallery located in San Francisco.

High-risk and largely unregulated, hedge funds have traditionally been the investment domain of the wealthy. But the funds and private equity firms have become more popular investments because of their potential returns.

Shares of private equity group Blackstone Group shares rose 13 percent in their stock market debut Friday, as investors scrambled for a piece of the sixth-richest initial public offering in U.S. history. The company is worth about $38 billion. Blackstone shares fell $2.62, or 7.5 percent, to $32.44 Monday.

Around 9,400 hedge funds operated worldwide at the end of 2006, controlling assets of some $1.4 trillion (1.04 euros trillion). That's more than twice as many hedge funds as operated five years ago, while funds under management have nearly tripled during the same period, according to Chicago-based Hedge Fund Research Inc.

The 2.5 billion euro GLG transaction is subject to Freedom shareholder and regulatory approval. GLG expects to complete the deal early in the fourth quarter. [via]

Consumers spend same time online as TV, but TV ad spending’s higher

Advertisers spent four times as much on television advertising last year as they did on all online advertising combined: display, search and classifieds, according to a new report from JupiterReseach. Marketers spent $68.3 billion on TV ads last year versus some $16.5 billion in online advertising.

Neither better targeting opportunities online nor the greater availability of branding-friendly rich media ad inventory online has led to any significant online cannibalization of TV ad spending, according to Jupiter’s report, “Media consumption patterns: Online vies with TV as primary medium.”

But that spending disparity doesn’t reflect the fact that online consumers now spend approximately equal amounts of time in online activities as they do in watching television, according to the report. Jupiter`s study found that both TV viewing and online use are up over the past five years, with the median time spent on each activity by online consumers now about 14 hours per week.

The research firm’s report does note that the “highly desirable” 18- to 24-year-old audience spends about twice as much time online, at a median 14 hours per week, as they spend watching TV, at a median seven hours per week. But the Internet is not the most effective way for reaching all young audiences. In contrast to young adults, teens, at a median 10 hours per week, spend more time watching TV than they spend online, at a median eight hours per week, Jupiter’s report found.

While brand marketers should use online vehicles to reach the young adult audience, “The Internet is no panacea for communicating with youth. Rather, multimedia campaigns are necessary,” according to the report. [via]