LinkedIn's stunning debut pushes stocks higher
The Dow gains 45 as LinkedIn shares more than double. Initial jobless claims fall, but a manufacturing report is weaker and home sales sag. Crude oil drops below $99 a barrel. Japan slips into recession.
Updated: 6:50 p.m. ET
Stocks finished higher for the second straight day, reversing a midmorning swoon, on investor hunger for shares of social-networking site LinkedIn (LNKD) and optimism that the jobs market may not be as bad as thought.
LinkedIn shares were priced at $45 in an initial public offering Wednesday night. They opened today at $83 and shot up to as high as $122.70 before dropping back to $109.44 at the close.
That values the company at more than $9 billion. Many market watchers believe the surge in the price was way too much and that social-networking companies are receiving valuations that make no sense.
The LinkedIn news and what appeared to be a successful $10 billion IPO in London of Swiss commodity-trading giant Glencore International seemed to cheer investors.
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The Dow Jones industrials ($INDU) closed up 45 points to 12,605. The Standard & Poor's 500 Index ($INX) was up 3 points to 1,344, and the Nasdaq Composite Index ($COMPX) was up 8 points to 2,823.
The decline in initial jobless claims offset weakness in a closely watched report on manufacturing prospects from the Philadelphia Federal Reserve Bank that was weaker than expected. So was a report on April existing-home sales from the National Association of Realtors. And The Conference Board's April report on leading economic indicators also was weak.
There are few big earnings reports on Friday and no economic reports. But women's apparel maker Gap (GPS) may pressure stocks after the apparel maker missed on earnings estimates and cut its future guidance. Shares fell 15.3% to $19.72 after hours after rising 0.9% to $23.29 in regular trading. Futures trading suggests the open will be lower.
LinkedIn: Biggest Internet IPO since Google
To put the LinkedIn performance in perspective: At 7.84 million shares, LinkedIn's offering was the biggest U.S. Internet IPO since Google (GOOG) went public in August 2004. It shows there is a big group of investors who believe there's money to be made in social networking.
Maybe too big. Google finished only 18% higher on its first day of trading.
Smart Money said LinkedIn may be the most expensive stock in the country. Its current price is some 275 times its earnings over the last four quarters of $15.6 million.
The LinkedIn IPO is being closely watched as a gauge of how IPOs might fare for Facebook, coupon-company Groupon and others.
The IPO also has been controversial, The Wall Street Journal noted, because many in Silicon Valley and on Wall Street say investors are being taken in by a new Internet bubble.
"Eyebrows are raised around this valuation," Macquarie Capital analyst Benjamin Schachter told The New York Times. "People are trying to figure out how do we value the companies that are coming online?"
LinkedIn is one of the best-known sites for career networking and recruitment, along with Monster Worldwide (MWW) and Salesforce.com (CRM), which were up 0.1% to $15.01 and 1.2% to $135.81, respectively.
Commodity prices dip
Commodity prices also were weaker and affected many stocks. Energy shares were lower as crude oil (-CL) in New York settled down $1.66 to $98.44 a barrel. Brent crude was off 96 cents to $111.34 a barrel in London.
As a result, oil drillers and other oil services companies were lower. Schlumberger (SLB) dropped 0.2% to $83.58. Diamond Offshore (DO) fell 1% to $72.06.
Gold (-GC) settled at $1,492.40 an ounce, down $3.40. Silver (-SI) dropped 16.5 cents to settle at $34.932 an ounce. Copper (-HG) was down 5.25 cents to $4.0485 a pound.
Freeport-McMoRan Copper & Gold (FCX) fell 1.3% to $47.97. U.S. Steel (X) was off 0.5% to $45.44.
Interest rates were flat, with the 10-year Treasury yield finishing at 3.171%, unchanged from Wednesday.
|Energy prices -- New York close|
|Thur.||Wed.||Month chg.||YTD chg.|
|Crude oil (-CL)||$98.44||$100.10||-13.60%||7.73%|
|Heating oil (-HO)||$2.8947||$2.9059||-11.63%||13.80%|
|Natural gas (-NG)||$4.0940||$4.1980||-12.86%||-7.06%|
|(per mil. BTU)|
|Unleaded gasoline (-RB)||$2.9260||$4.1980||-15.55%||19.27%|
|(per gallon; AAA)|
Decent news on jobless claims; other reports are weak
The Labor Department said early Thursday that the number of Americans filing for unemployment insurance for the first time dropped 29,000 to 409,000 in the week ended May 14, down from 438,000 in the previous week, according to Briefing.com.
Continuing claims dropped 81,000 to 3.711 million from 3.792 million. The sharper-than-expected drop in claims suggests layoffs might be slowing once again after spiking in recent weeks.
The National Association of Realtors said existing-home sales slid 0.8% to 5.05 million in April from a downward-revised 5.09 million in March. Economists had expected existing-home sales to rise 5.23 million. The sales rate was also down 12.9% from April 2010, when buyers could qualify for a tax credit.
All-cash transactions, mostly investors snapping up foreclosed homes, were 31% in April -- still high, but down from the record 35% in March.
The Philadelphia Federal Reserve Bank said regional manufacturing activity improved slightly in May, but the index fell from its readings in the previous month. The Philadelphia Fed Index dropped sharply to 3.9 from 18.5 in April, its lowest reading since October.
Meanwhile, The Conference Board said the Leading Indicators Index dropped 0.3% in April after rising 0.7% in March.
Japan’s economy shrank at an annual rate of 3.7% in the first quarter, the Japanese government said today, tipping the country into a recession, as the March 11 earthquake and tsunami disrupted production and prompted consumers to cut back on spending.
The drop-off was worse than economists had expected. Among 23 economists surveyed by Bloomberg, the average projection was for a drop of 1.9%.
Economists project that the Japanese economy will shrink again in the current quarter, which ends in June, as production continues to falter and weigh on industrial output and exports.
Meanwhile, 64 Nasdaq-100 ($NDX.X) stocks were higher, led by Chinese stocks Ctrip International (CTRP) and Baidu (BIDU), up 3.5% to $44.82 and3.1% to 135.88, respectively. The index rose 7 points to 2,370.
Thermo Fisher Scientific (TMO) and Tellabs (TLAB) were the S&P 500 leaders, up 4.2% to $65.38 and 3.2% to $4.70, respectively. Thermo Fisher will buy Swedish diagnostics company Phadia for 2.47 billion euros ($3.5 billion) to grow in testing for allergies and autoimmune diseases.
Laggards and leaders
NetEase.com (NTES), up 2% to $46.85. China’s second-biggest online-games operator said first-quarter profit rose 63%, as titles such as “World of Warcraft” helped attract players in the world’s biggest Internet market.
PetSmart (PETM), up 7.6% to $45.71. The pet-store chain said profit in the first quarter was 61 cents a share, exceeding the average analyst estimate of 55 cents.
GameStop (GME), up 2.4% to $27.32. The video-game retailer forecast second-quarter earnings of 23 cents a share at most, trailing the average analyst estimate of 28 cents.
Intel (INTC), down 1.4% to $23.54, the laggard among the 30 Dow stocks. The world’s largest chipmaker, KLA-Tencor (KLAC) and Applied Materials (AMAT) were downgraded by Goldman Sachs Group, which cited increased competition from tablet computers and excess supply. KLA-Tencor dropped 3.8% to $41.21. Applied Materials declined 1.2% to $14.33.
Sears Holdings (SHLD), down 2.6% to $73.86. The department operator lost $170 million, or $1.58 a share, down from a profit of $16 million, or 14 cents a share, a year ago. Sales fell 3.4% to $9.71 billion. Earlier this month, Sears had projected a quarterly loss of $1.35 to $1.81 a share. U.S. same-store sales fell 3.6%, including a 5.2% drop at the Sears chain and a 1.6% decrease at Kmart. Weather was a big problem, CEO Lou D'Ambrosio said. But Sears itself didn't operate very well.
Limited Brands (LTD) down 3.9% to $40.81. The clothing retailer that owns Victoria’s Secret and Bath & Body Works forecast second-quarter earnings of as little as 38 cents a share, falling short of the 43-cent average estimate by analysts.
|Short hits from the markets -- New York close|
|Thur.||Wed.||Month chg.||YTD chg.|
|13-week Treasury bill||0.040%||0.040%||0.00%||-66.67%|
|5-year Treasury note||1.822%||1.842%||-7.75%||-9.62%|
|10-year Treasury note||3.171%||3.171%||-3.79%||-4.05%|
|30-year Treasury bond||4.302%||4.288%||-2.36%||-1.38%|
|U.S. Dollar Index||75.277||75.632||2.97%||-5.06%|
|(in U.S. $)|
|U.S. $ in pounds||£0.616||£0.618||2.90%||-3.81%|
|Euro in dollars||$1.432||$1.426||-3.36%||7.00%|
|(in U.S. $)|
|U.S. $ in euros||€ 0.699||€ 0.702||3.48%||-6.54%|
|U.S. $ in yen||81.699||81.650||0.33%||0.41%|
|U.S. $ in Chinese||6.529||6.502||0.25%||-1.31%|
|(in U.S. $)|
|(in Canadian $)|
|(per troy ounce)|
|(per troy ounce)|
|Crude oil (-CL)||$98.44||$100.10||-13.60%||7.73%|
The drop in continuing claims means those folks have exhausted their 99 weeks and are no longer counted. We are still showing over 400k new claims each month. If you look at the ready willing and able numbers of the working age population right now there are 45% of those unemployed or under employed. Stop and think, if a company like McDonalds post listings for 50,000 openings and you get a million applicants to flip burgers at minimum wage, something is definitely wrong in the job market. This is the lowest rate of able to work employed since 1985.
WalMart, Target and Home Depot are all forcasting lower sales as the consumer tightens its belt and buys just the basics. Right now the average household pays 20% of its income for food and gasoline. Once you factor in house payment or rent, utilities and such there is very little discretionary income left. Its a Catch 22, income levels are down and no one is hiring and the consumer is cutting back because of the drop in income and higher prices. The consumer would spend more if there was more income but small businesses can't create jobs if their is no demand.
LinkedIN cheers investors? I find it perturbing and puzzling that people would buy this stock at a price of 275 times earnings. Does anybody remember the dot com bubble? What happened to good old fashioned reason, logic and common sense?
LinkedIn cheers investors...Goldman Sachs and other dirtbags on wall street must be laughing their butts off. There is a sucker born every minute.
Who cares if you get a job now. Gas prices make it $20 to go anywhere. Food prices make it $20 a day to eat. After rent, insurance, and utilities you would have to make $40K a year just to break even. Only way to survive is with "roommates", like 10 of them, like Mexico. Oh, now I get it. We all have to live like Mexican farm labor to get by because the rich think that's what everyone should be doing for them because that's what they can get cheapest. Thank God for computers, all employers do is ask it how to make the most money and it says F$%#K people. End of story.
"Stocks finished higher for the second straight day, reversing a midmorning swoon, on investor hunger for shares of social-networking site and optimism that the jobs market may not be as bad as thought."
Well, which is it??? A couple of days ago the job market did not meet expectations. Now this.
It's time for regulation of Wall Street, Banks, and the ouster of lobbyist. We had 40 years of prosperity after WW2, when banks WERE regulated.
They also tend to have the most negative attitudes and invest little time at the library or recycling center reading and learning to improve their life.
Sounds like you are describing most of the people here , Popper.
Don't wory though - at 6 pm Saturday May 21, all your problems will go away...or maybe not.
Folks- here's some advise, hang out at your favorite store about that time. Grab all the stuff the Raptured ones leave behind. Grab their car keys too.
swell! -now we can just copy and paste our comments.
Greatest idea ever. When is your IPO? I want in.
Proof that the rich are eating the poor.
Phony equity loans, crash, then swoop in.
Popper -my suggestion was aimed at the folks wo only work 9 days out of 10.
Looks like you are all auto'd up.
I got 4 myself (mine, wive, 2 for the kids) - high miles, though, so i may be looking to find something newer.
Figured we can seize all the stuff left behind at sell it at a police auction. Use it to reitre the national debt. Or maybe those folks can toss down a few gold bricks from the streets in Heaven for us to pay back the Chinese.
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[BRIEFING.COM] The IMF expressed its concerns before the start of today's trading that "excessive risk taking may be building up" with valuations for just about every major asset class looking stretched.
As one can see from the standing of the major indices, that warning went in one of the market's ears and out the other. Actually, we're not even sure it went in one ear. The market started with a bullish bias and has maintained that bias throughout today's session.
The ... More
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