A combination yesterday of falling commodity prices and the Federal Reserve holding its nerve helped alleviate the fear of inflation and sent Wall Street soaring, with the Dow Jones Industrial index jumping 330 points, its biggest one-day gain in more than four months. Traders came not to praise commodities but to bury them and, with oil wounded by the dagger of decreasing global demand (crude futures have lost 5 percent in value in the last two days, closing at $119.17 a barrel) and the Fed holding interest rates at 2 percent, the markets dreamed once more of cheaper gas and easing inflation, as the Wall Street Journal reports.
Yet the New York Times sounds a cautionary note, writing: "During this year's financial travails, stock market enthusiasm has several times been ignited only to be dashed by fresh disclosures of problems at banks or renewed signs that the housing market has still not found its bottom." Indeed, the Fed itself seems unsure as to whether the economic glass is half full or empty. "Although downside risks to growth remain, the upside risks to inflation are also of significant concern," it said when explaining the decision to leave rates unchanged. Today's one-two punch announcement of Freddie Mac's quarterly results and the government's weekly energy inventory could test Wall Street's seemingly sunny disposition.
Anglo-Swiss mining giant Xstrata isn't too worried about a blip in the commodities market. This morning it launched a $9.78 billion takeover of the world's third-largest platinum producer, Lonmin. Xstrata has expanded rapidly through a series of global acquisitions and, according to the Financial Times, it "appears to be taking the recent fall in the [Lonmin's] shares—down 26 per cent over the past year—[due to infrastructure problems in South Africa] as a chance to make a move." Lonmin immediately rejected the overture, calling it "opportunistic and entirely unwelcome."
Four years ago, those hulking dinosaurs of the recording and publishing industrial age, Sony and BMG, sought to protect their dwindling businesses in a grand alliance. Yesterday, Sony bought back Bertelsmann AG's half of the Sony BMG Music Entertainment joint venture for $900 million, the Wall Street Journal and FT report. Sony says that having full ownership of its entertainment media business will allow it to bring more value to its PlayStation Network and its 50-50 mobile phone joint venture with Sony Ericsson. But given that Sony BMG's sales today equal what the two companies' music units used to generate separately, this assessment from the WSJ's "Heard on the Street" column seems more succinct: "There is one thing worse than owning a music company in today's brutal market: owning half of one."
Staying with the world of media, News Corporation's full-year earnings ending June 30 rose 58 percent to $5.38 billion. CEO Rupert Murdoch's empire was bolstered by its Italian satellite TV network, its U.S. cable channels (despite launching Fox Business Network) and the 20th Century Fox film studio, writes the Guardian. Even the newspaper and book divisions brought in more money, helped in part by the acquisition of Dow Jones and the success of James Frey's Bright Shiny Morning. Now the bad news: The Fox broadcast network and local affiliates saw operating income drop 28 percent to $279 million due to reduced advertising. And even though the company made good noises about MySpace, the social network's parent unit, Fox Interactive, saw revenues decrease. All of which suggests a testing next few quarters. "As we look ahead, we anticipate an increasingly difficult economic environment," said Murdoch.
Finally, this morning the NYT reports that the "largest hacking and identity theft ring ever exposed"—a multinational organized crime ring spreading from Belarus to Miami—stole more than 41 million credit- and debit-card numbers from retailers like Barnes & Noble and Sports Authority. It also tells us that a Russian cybergang has infected thousands of PCs in corporate and government networks with "programs that steal passwords and other information." Who knew Smersh was getting into e-commerce?