Wall Street reacts to Fed: The Dow skyrocketed more than 300 points on news of the Fed's decision to lower the discount rate it charges banks. But after 90 minutes of trading, two-thirds of that gain has been erased. Perhaps it's because investors wanted the Fed to go all the way by cutting the federal funds rate, which has held steady at 5.25 percent for more than a year. Of course, there are those who believe that the central bank should not have acted at all – that the financial world should be able to handle it own problems without expecting to be bailed out, even if it hurts. (Bloomberg) Here's the text of the Fed announcement.
Scared depositors: It's not quite a bank run, but lots of worried Countrywide Bank customers want out. Apparently, there were so many people who came into Countrywide branches to withdraw money on Thursday that in some cases bank workers had to take names. The company tried to assure depositors that their money is safe and federal regulators weren't alarmed by the volume of withdrawals. In a statement, the bank said: "It is very important to remember that Countrywide Bank is well capitalized, with FDIC-insured deposits, and is one of the largest banks in the United States, with assets over $107 billion." (LAT)
Countrywide connection: A turning point in the market's nose-dive this week came when Merrill Lynch analyst Kenneth Bruce put a surprise "sell" rating on Countrywide Financial and then raised scenarios in which the nation's largest lender might even face bankruptcy. One analyst responsible for such a reaction? Well in this case yes because Bruce used to work at Countrywide (his boss was David Sambol, who is now the firm's president). From the WSJ:
Given his history with Countrywide, some market watchers have wondered if Mr. Bruce had an inside track on its draw-down announcement. But people close to Mr. Bruce say his change of heart came after signals of turmoil in the commercial-paper market popped up on Monday, when the Canadian paper issuer Coventree Inc. revealed plans to seek backup funding after failing to sell new notes. That news, plus the continued weakening of the mortgage market, prompted the analyst to issue his Wednesday report, these people say. In fact, they add, he hadn't spoken to officials at the Calabasas, Calif., lender since the prior Friday.
Wall Street backs off movies: Well, you knew this was bound to happen. The credit squeeze is quickly cooling the enthusiasm for slate-financing deals, in which syndicates of Wall Street types provide financing for movie studios. They had been plowing billions of dollars into Hollywood, but few are doing especially well because the studios only included their riskiest movies. You mean Hollywood was taking advantage of outside investors? We're shocked! (WSJ)
Tom Cruise sneaks in: Just as Goldman Sachs backed away from a $1 billion funding commitment for MGM, United Artists closed its $500 million deal with Merrill Lynch. Lucky for Paula Wagner and Tom Cruise, who became co-owners of UA last November, that their deal to raise money was pretty much completed before all the recent market hub-bub. Meanwhile, MGM CEO Harry Sloan said Goldman Sachs' move would not impact the movies it has in the works. That’s a relief. (Variety)
Beware of the 105: Columbia Pictures expects to close the Century Freeway's eastbound lanes for much of this weekend and next to shoot a police chase sequence for the Will Smith action film "John Hancock." Expect lots of explosions, gunshots and helicopter flyovers. The eastbound 105 was closed on two weekends to shoot "Live Free or Die Hard." (Daily Breeze)
Another drop in gas prices: The average price of self-serve regular gasoline in the Los Angeles-Long Beach area is $2.864, which is 8.1 cents cheaper than last week, 26 cents below last month, and 37 cents under last year. (Auto Club)
Petit Wal-Marts?: Forget about supercenters - the retail giant's latest idea calls for convenience stores that are stocked with groceries and cater to more affluent tastes. Sound familiar? That's what the British grocery chain Tesco is planning for Socal this fall. The new Wal-Mart outlets are being readied for introduction early next year. From the WSJ:
The company may have waited too long to develop successors to its big-box U.S. stores. Analysts now chopping their profit estimates for this and next year say Wal-Mart has seemed tone-deaf to consumer trends. Failed pushes in women's fashions and home decor continue to sap profits, and high gasoline prices are eating into supercenter visits. Recently, Wal-Mart has tried running ads promoting its low prices as worth the extra travel. Nonetheless, the smaller stores could help Wal-Mart do more than fend off Tesco. The retailer has been largely shut out from upper-income and urban markets, including those in California and New York. High land costs and local opposition have limited the discounter to just 28 supercenters in California, a tenth of the number in Texas. Smaller stores are less likely to stir up opponents than the hulking 200,000-square-foot big-box stores.
Home for sale: That's kind of an understatement. It's a brand new 30,000-square-foot Tuscan-style mansion in Beverly Park, home of Sumner Redstone, Eddie Murphy, Barry Bonds, et al. The property includes a sand volleyball court (yeah!), an herb and vegetable garden, a pool, wine cellar and two master suites. Asking price: $50 million. That's a little chancy for a spec property, but developers believe that the high end of the market remains strong. (WSJ)