With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.
Countrywide's Mozilo Charged with Fraud; Mortgage Rates Hit 6-Month High; Intel Gets Foothold in Wireless; UAL Looking to Jettison 747; Rio May Sell $15 Billion in Stock After Chincalco Deal Fails; Oil Prices Jump 5%; Allison: Banks Need $100 Billion Cushion; Retail Sales Plunge
The Securities and Exchange Commission yesterday (Thursday) filed fraud charges against former Countrywide Chief Executive Officer Angelo Mozilo. The charges may involve Mozilo's sale of shares of giant mortgage lender Countrywide, which last year was sold to Bank of America Corp. (NYSE: BAC) CNNMoney reported. "We do not believe there is any fair basis for allegations to be made against Mr. Mozilo," attorney David Siegel told CNN. "All of Mr. Mozilo's stock sales were made in compliance with properly prepared and approved trading plans and reflected recommendations by his financial advisor over a long period of time."
U.S. mortgage rates soared to their highest levels in almost six months this week, threatening the overall recovery of the U.S. economy. Interest rates on U.S. 30-year fixed-rate mortgages increased to 5.29%, up from 4.91% in the week ended June 4, according to a survey released yesterday (Thursday) by home funding company Freddie Mac (NYSE: FRE). The higher rates reflect an increase in yields on U.S. Treasury bonds, despite government efforts to keep rates at low levels to lift the hard-hit housing sector. "Any additional rate increases will significantly hurt the home purchase and refinance markets, which will really hurt the economic recovery," Alan Rosenbaum, president of Guardhill Financial, a New York City-based mortgage banker and brokerage company told Reuters.
Intel Corp. (Nasdaq: INTC), is buying software company Wind River Systems Inc. (Nasdaq: WIND) for about $11.50 a share in cash or $884 million, a 44% premium over Wind River's Wednesday closing price. The purchase will help the world's largest maker of semiconductors get its chips into more consumer electronics and wireless devices. Wind River makes operating systems for a wide range of wireless devices including cars and mobile phones, serving customers such as Sony Corp. (NYSE ADR: SNE). "If you have a chip you want to put in a lot of things other than a PC, you need code," Dallas-based analyst Cody Acree told Bloomberg. "Wind River brings that, and it brings customers."
Boeing Co. (NYSE: BA) and European consortium Airbus S.A.S. have been asked by UAL Corp. (NYSE: UAL) to submit bids to replace its wide-body fleet, including its aging 747 jumbo jet, according to a letter made public by Reutersyesterday (Thursday). Boeing's order could amount to as many as 150 planes, a move experts say could jumpstart demand for new planes from embattled U.S. carriers as they struggle through the recession. The U.S. airline industry's fleet of jets is older than its foreign rivals despite widespread concerns that older planes use far more fuel than modern aircraft.
Rio TintoPLC (NYSE ADR: RTP) may sell as much $15 billion in stock to replenish its coffers and pay down debt after a $19.5 billion investment from Aluminum Corp of China Ltd. (ADR NYSE: ACH) fell through, Bloomberg reported, citing anonymous sources. Rio may also sell interests in some of its Australian iron ore mines to BHP Billiton Ltd. (NYSE ADR: BHP), said the people, who declined to be identified because Rio's board hasn't approved the deal. Rio is trying to sell assets to repay $10 billion of debt this year. Its total debt of $38.9 billion was incurred mainly through the 2007 purchase of Alcan Inc.
Oil prices rose more than 5% after Goldman Sachs Group Inc. (NYSE: GS)saidprices might hit $85 a barrel by the end of the year due to higher demand and lower supplies, Bloomberg reports. Goldman rescinded its forecast that said prices would briefly fall before a rally. "There seems to be a growing realization that oil will end the year in the $80 area, and this is spurring some buying," said John Kilduff, senior vice president of energy at MF Global Ltd. (NYSE: MF).
U.S. retailers posted disappointing sales in May as unemployment surged and consumers cut spending, according to a Thompson/Reuters poll. Sales were weaker than expected at 63% of the 30 retailers tracked by Thomson Reuters. May same-store sales fell 4.8% compared with May 2008.