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US STOCKS-Oil's fall, techs' gain drive stocks higher

Reuters: [2008-05-15 23:48:00]

(Updates close with Intel gains, oil shares' rise and CBS deal)

*Oil pullback eases inflation worries

*Microsoft shares jump as Icahn seeks Yahoo control

*Intel gains after price target increase

By Caroline Valetkevitch

NEW YORK, May 15 (Reuters) - U.S. stocks rose in light trading on Thursday, pushing the S&P 500 to its highest close since January, as a pullback in oil prices eased concerns about inflation and a battle to control Yahoo Inc <YHOO.O> helped the tech sector.

The Nasdaq also had its best close since Jan. 3. Shares of chip maker Intel Corp <INTC.O> jumped 4.7 percent after Lehman Brothers raised its price target on the stock, citing strength in notebooks and servers.

Crude oil futures fell to below $122 a barrel during the session, but shares of energy companies gained as investment bank UBS sharply raised its projection for oil prices. Shares of Exxon Mobil Corp <XOM.N> advanced 1.6 percent to $91.30.

News late in the session that key members of the U.S. Senate reached a deal on a housing rescue plan raised hopes for the beleaguered home market.

Financier Carl Icahn started a proxy battle to get control of Yahoo and force it to strike a deal with Microsoft Corp <MSFT.O>. Other deal news included CBS Corp's <CBS.N> plan to buy CNET Networks <CNET.O>.

"Tech is doing great ... That's very encouraging and the Nasdaq chart is the strongest one out there right now," said Joe Saluzzi, co-manager of trading at Themis Trading, in Chatham, New Jersey.

The Dow Jones industrial average <.DJI> shot up 94.28 points, or 0.73 percent, to end at 12,992.66. The Standard & Poor's 500 Index <.SPX> rose 14.91 points, or 1.06 percent, to 1,423.57. The Nasdaq Composite Index <.IXIC> climbed 37.03 points, or 1.48 percent, to close at 2,533.73.

Trading volume continued to be very light on the New York Stock Exchange, with about 1.20 billion shares changing hands, well below last year's estimated daily average of roughly 1.90 billion. On Monday, NYSE volume hit its low for the year at 1.05 billion.

SOXX UP, CNET SOARS

Intel was up $1.13 at $24.97, while the Philadelphia Stock Exchange index of semiconductors <.SOXX> rose 2.1 percent.

June crude <CLM8> dipped 10 cents to settle at $124.12. Traders said a surprisingly large increase in U.S. natural gas inventories contributed to crude's fall. Earlier this week, U.S. crude hit an intraday record at $126.98 a barrel.

"Oil sold off, which was nice, even though it's still very high. That's part of what happened," said Todd Leone. head of listed trading at Cowen & Co. in New York.

In the sweeping housing rescue plan, the two largest U.S. housing finance companies, Fannie Mae <FNM.N> and Freddie Mac <FRE.N>, would backstop a government mortgage insurance fund, two industry sources told Reuters. Shares of home builders surged after the news. An index of home builders <.DJUSHB> rose 3.7 percent.

On the Nasdaq, Yahoo shares gained 2.3 percent to $27.75, while Microsoft rose 1.7 percent to $30.45.

When talks between Microsoft and Yahoo ended earlier this month, the software company was offering $33 a share for Yahoo, but the Internet company was holding out for $37.

Shares of CBS slid 2.4 percent to $24.23 on the NYSE, while shares of CNET surged 43.5 percent to $11.41. CNET was the Nasdaq's second-biggest percentage gainer.

JC PENNEY SHINES

Retailers benefitted after JC Penney Co Inc <JCP.N> said its earnings in the current quarter could top analysts' forecasts. The outlook drove JC Penney's battered stock up 4.7 percent to $46.32 even though it posted a 50 percent profit drop in the first quarter. For details, see [ID:nN15204424]

Data painted a mostly weak picture of the U.S. economy. A report showed softer-than-expected U.S. industrial output for April and a manufacturing report from the New York Federal Reserve Bank was also weak. Meanwhile, initial jobless claims rose slightly more than expected in the latest week.

Volume on Nasdaq was stronger than on the NYSE. About 2.22 billion shares traded, above last year's daily average of 2.17 billion.

Advancing stocks outnumbered declining ones by a ratio of about 7 to 3 on the NYSE and by 8 to 5 on Nasdaq. (Additional reporting by Jennifer Coogan, editing by Jan Paschal) ((caroline.valetkevitch@thomsonreuters.com; +1 646 223 6393; Reuters Messaging:caroline.valetkevitch.reuters.com@reuters.net))

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UPDATE 5-Senators reach accord on US housing rescue-sources

Reuters: [2008-05-15 23:26:00]

(Recasts with sources on deal, Dodd comments, background)

By Patrick Rucker and Kevin Drawbaugh

WASHINGTON, May 15 (Reuters) - Leaders of the U.S. Senate Banking Committee have reached a deal on a broad housing rescue plan in which Fannie Mae <FNM.N> and Freddie Mac <FRE.N> would provide funds to support a federal mortgage insurance fund, two industry sources said on Thursday.

Committee Chairman Christopher Dodd, a Connecticut Democrat, said an accord had not yet been finalized, but he told reporters after a meeting of the panel, "We're getting pretty close to it ... We're down to a few issues."

Funding for the $300-billion mortgage insurance fund, to be run by the Federal Housing Administration (FHA), proved to be one of the biggest stumbling blocks during talks all week between Dodd and Sen. Richard Shelby, the committee's top Republican.

Developing a mechanism to fund the program was seen as key to getting the rescue plan out of the banking committee and to the Senate floor for final approval, although that could still be a distant prospect. Aides said Senate leaders are not yet engaged in the housing package debate.

Dodd and Shelby have also agreed on language to create a new regulator for Fannie Mae and Freddie Mac, the lobbyists said.

The Dodd-Shelby pact on financing the FHA mortgage insurance fund would see Fannie Mae and Freddie Mac direct money from a new affordable housing fund to the government's largest homebuyer aid program.

The GSEs would send 100 percent of their contributions to backstop the insurance program in its first year, 75 percent in the second year and 50 percent in the third, the sources said.

The formula was crafted by Sen. Jack Reed, Democrat from Rhode Island, to satisfy Shelby, who objected to any taxpayer subsidy for the rescue plan, lobbyists said.

After temporarily adjourning a late afternoon banking committee meeting on the legislation and pledging to reconvene later in the evening, Dodd said, "We're in pretty good shape. Let's see what happens over the next few hours."

The White House has threatened to veto a similar rescue package passed last week by the House of Representatives. But the Bush administration has left open the door to discussions.

White House spokesman Scott Stanzel on Thursday said, "We're not commenting on any discussions we may or may not be having. If a bill comes to the president's desk it should meet the principles he has outlined."

Administration officials have said President George W. Bush's priorities are to retool the FHA with a system that sees riskier borrowers pay a higher mortgage insurance premium and reforming Fannie Mae and Freddie Mac oversight.

Both the Senate and House packages contain approaches to meeting those White House's goals. But both packages also propose setting up the FHA mortgage insurance fund, an idea that the administration dislikes.

The Congressional Budget Office has said that the FHA mortgage insurance plan would cost up to $2.7 billion. That would pay for expanding the FHA so it can help arrange lower-cost refinancing for as many as 500,000 homeowners whose homes have lost value since they took out their mortgages.

Shelby, of Alabama, has insisted that taxpayer money not be used to finance the FHA insurance program. He was not present at the Thursday afternoon committee meeting.

"We believe that we have an agreement in concept," said Shelby spokesman, Jonathan Graffeo. "We are now in the process of seeing whether that concept can be translated into legislative language that we can agree on."

Since last spring, the nation's mortgage market has been shaken by sinking home values that have erased billions of dollars of investor wealth. An estimated two million foreclosures are forecast for this year.

In March, the Federal Reserve put billions of dollars on the line to facilitate the takeover of Wall Street investment firm Bear Stearns Cos Inc <BSC.N>, which was near collapse.

Democrats have criticized policy-makers for being too eager to bail out investors, yet reluctant to aid struggling homeowners.

Last week, the House approved its own version of legislation to set up the $300 billion fund, adding billions more in homeowner aid to stabilize the market.

House Financial Services Committee Chairman Barney Frank, who sponsored the House bill, said on Thursday he saw some chance a deal could be reached.

"I wouldn't say I was optimistic, but I think it has a reasonable chance," the Massachusetts Democrat said. (Reporting by Patrick Rucker and Kevin Drawbaugh) ((patrick.rucker@thomsonreuters.com; +1-202-310-5474; Reuters Messaging: patrick.rucker.reuters.com@reuters.net)) Keywords: USA HOUSING/CONGRESS

. Keywords: USA HOUSING/CONGRESS

Mexico bonds gain as price worries ebb; stocks up

Reuters: [2008-05-15 23:21:00]

(Recasts, adds details and closing prices)

* Bond prices gain as inflation fears recede

* Tortilla price hike may be tamer than feared

MEXICO CITY, May 15 (Reuters) - Mexican bond prices rose on Thursday, mostly recovering from recent losses as investors worried less about the impact on inflation from a forecast that corn tortilla prices would rise, while stocks rose.

The government's benchmark 10-year peso bond <MX10YT=RR> rose 0.395 of a point in price to bid 98.058, pushing its yield down 6 basis points to 8.04 percent.

The benchmark IPC stock index <.MXX> gained 0.66 percent to 31,542.97 points, while the peso <MXN=> <MEX01> firmed 0.11 percent at the official central bank close to 10.476 per dollar.

Bond investors fear accelerating inflation could push the central bank to raise interest rates this year.

Worries were further stoked after producers of corn flour tortillas on Wednesday said they will soon raise prices for the Mexican staple.

Some media reports said tortilla prices, eaten for almost every Mexican meal, could rise by as much as 40 percent citing a small tortilla-maker group.

The news spooked bond investors, who dumped long-term bonds on Wednesday, pushing the yield on the 10-year bond up 7 basis points. But yields edged down on Thursday as investors questioned how big the increase could be and when it could hit.

"There has been a knee-jerk reaction to these tortilla prices," said Siobhan Morden a local market strategist at ABN AMRO in New York.

Morden added that it seemed likely that the government would be able to structure a new pact with producers to keep tortilla prices down, as it did in early 2007 and renewed several times in the last year.

But many investors were remaining cautious ahead of the central bank's monthly policy review, set for Friday at 9 a.m. (1400 GMT).

While analysts unanimously ruled out any change on Friday in the bank's overnight rate from levels of 7.50 percent, according to a Reuters poll, many are expecting the bank to introduce a tightening bias in tomorrow's statement.

In currency trading, traders said investors were exercising caution ahead of the central bank's monthly review on Friday. IXE brokerage said in a note that the peso could strengthen to around 10.43 per dollar, should the central bank introduce a more hawkish tone to its statement.

In stock trading, shares of miner Grupo Mexico <GMEXICOB.MX>, one of the world's largest copper producers, gained 3.13 percent to 79.20 pesos as copper prices rose nearly 2 percent in New York.

Shares of Cemex <CMXCPO.MX>, the top supplier of cement in the United States, gained 1.64 percent to 30.96 pesos. Its New York traded shares added 2.32 percent to $29.57.

Among losing stocks, America Movil <AMXL.MX>, Latin America's biggest cell phone operator, shed 1.14 percent to 30.41 pesos while its New York traded shares lost 0.43 percent to $58.25. (Reporting by Michael O'Boyle) ((michael.oboyle@reuters.com; +5255-5282-7160; Reuters Messaging: jason.lange.reuters.com@reuters.net)) Keywords: MARKETS MEXICO/

Average primary bank borrowing from Fed hit record

Reuters: [2008-05-15 22:59:00]

NEW YORK, May 15 (Reuters) - Average daily borrowing by high-quality U.S. banks from the Federal Reserve rose to a record this week, surpassing the average borrowing in the week of the Sept. 11 attacks, the Fed said on Thursday.

Commercial banks' primary credit borrowings were an average $14.42 billion per day in the week ended May 14, higher than the daily rate of $11.72 billion in the Sept. 11, 2001 week, it said. (Reporting by Richard Leong) ((richard.leong@thomsonreuters.com ; +1 646 223 6313; Reuters Messaging: richard.leong.reuters.com@reuters.net )) Keywords: USA FED/DISCOUNT RECORD

US CORP BONDS-Market stronger, new debt sales continue

Reuters: [2008-05-15 22:57:00]

    NEW YORK, May 15 (Reuters) - The U.S. corporate credit 
markets rallied on Thursday, while companies including HBOS Plc 
<HBOS.L> and NiSource Finance Corp tapped the new issue 
market. 
    The benchmark investment grade credit derivative index 
tightened around 5.5 basis points to 90 basis points, its 
tightest level in more than a week. 
    The rally was in line with a higher stock market, which was 
buoyed by a pullback in crude oil. Healthy demand for new bond 
issues also supported the market. 
    "There are a lot of new deals out there," said Mirko 
Mikelic, senior portfolio manager at Fifth Third Asset 
Management in Grand Rapids, Michigan. 
    New debt sales have been pricing more favorably than in 
previous months, indicating better demand for new debt, he 
said. "A lot of people are putting cash to work, the cash 
market has moderately improved," 
    HBOS, Britain's biggest mortgage lender, on Thursday sold 
$2.0 billion in debt in the 144a private placement market, said 
market sources. 
    NiSource Finance, a unit of electric utility NiSource Inc 
<NI.N>, also sold $700 million in debt. 
    In the high yield market, Oklahoma City-based oil and 
natural gas company SandRidge Energy Inc <SD.N> sold $750 
million of 10-year senior notes in the 144a private placement 
market. The size of the deal was increased from the originally 
planned $500 million. 
    Financials dominated secondary trading with JPMorgan Chase 
& Co's <JPM.N> 7.9 percent bond due 2018 the most actively 
traded, according to MarketAxess. 
    Residential Capital's 8.375 percent bond due 2010 slipped 
in jumpy trade. ResCap is offering to exchange the debt for new 
bonds with a later maturity. The deadline for the offer will 
expire on Friday. 
    The bond fell to 49 cents on the dollar, from 49.5 cents at 
Wednesday's close, according to MarketAxess. 
 (Reporting by Karen Brettell and Anastasija Johnson; Editing 
by Leslie Adler) 
 ((karen.brettell@thomsonreuters.com; +1 646 223 6274; Reuters 
Messaging: karen.brettell.reuters.com@reuters.net )) 
    For other related fixed-income quotations, stories and 
guides to Reuters pages, please double click on the symbol: 
    U.S. CORPORATE BOND PRICE QUOTATIONS...<NASDBONDS> 
    U.S. CREDIT DEFAULT SWAP COLUMN........[CDV/] 
    U.S. CREDIT DEFAULT SWAP NEWS..........[CDV]    
    EUROPEAN CORPORATE BOND MARKET REPORT..[EUB/] 
    EUROPEAN CORPORATE BOND MARKET REPORT..[EUB/] 
    CREDIT DEFAULT SWAP GUIDE..............<CDSINDEX> 
    FIXED INCOME GUIDE.....................<BONDS> 
    U.S. SWAP SPREADS REPORT...............[SWP/] 
    U.S. TREASURY MARKET REPORT............[US/] 
    U.S. TREASURY OUTLOOK..................[US/0] 
    U.S. MUNICIPAL BOND MARKET REPORT......[MUNI/]           
Keywords: MARKETS USCORPBONDS 
    

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