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Markets: Still Jittery


The big, bad market crash may have to wait. As of press time it seemed that the Feb. 27 global stock sell-off, which started with Chinese bourses tanking and culminated in a 416-point decline in the Dow, had not stopped buyers. They came back with a vengeance on Mar. 6, bidding up America's major indexes to their biggest rally of the year. Developed and emerging-market benchmarks sprang back even more. As for the instigator, China: Even after Feb. 27's one-day 9% rout, mainland shares are still up 9% in 2007.

Still, the S&P 500 remains down 2% this year, Japan has slipped 3%, and Russia and India have each dipped in excess of 8%. Wall Street bears can point to heightened volatility and growing anxiety over subprime mortgage rot. Meanwhile, bulls shout that the market remains fairly valued, earnings are still growing—and the Federal Reserve can always open the liquidity spigot if and when the economy starts to look parched.

See "A Brief Respite, Then More Pain for Stocks"

Tales of insider trading are once again shaking Wall Street. On Mar. 1 federal prosecutors and regulators announced the filing of criminal and civil fraud charges in one of the largest insider trading cases in two decades. The authorities busted 13 people including a UBS (UBS) executive director and a former Morgan Stanley (MS) compliance officer in a series of schemes that allegedly netted at least $15 million in illicit profits. The next day, the SEC charged unknown people with scoring at least $5.4 million by trading in advance of the $45 billion offer for utility giant TXU (TXU).

See "The Century's Big Insider-Trading Bust"

Research In Motion (RIMM), seller of the boffo BlackBerry wireless device, is making every effort to look like it's doing the right thing. The company, one of more than 140 facing scrutiny over options grants, said on Mar. 5 that it would take a $250 million noncash charge to account properly for grants made between 2002 and 2006. rim also said that while no one did anything wrong, it was shaking up management. Co-CEO Jim Balsillie relinquished his seat as chairman, and the board was reshuffled. In other handheld news, The Wall Street Journal reported on Mar. 5 that Palm (PALM) is working with Morgan Stanley to study options, including a sale of the company.

Will private equity grab the driver's seat at Chrysler Group? Cerberus Capital Management and Blackstone Group have joined General Motors (GM) on the short list of serious bidders for the DaimlerChrysler (DCX) unit. Both firms met with the company the week of Mar. 5. Blackstone has experience in the auto industry as majority owner of parts maker TRW Automotive (TRW) and formerly as an investor in American Axle & Manufacturing (AXL). Cerberus acquired 51% of GM's GMAC finance arm last year.

Speeding the downward spiral in the subprime mortgage market, New Century Financial (NEW) on Mar. 2 said it was under investigation for questionable stock sales and accounting errors. By Mar. 7 its stock had sunk 65%.

The Bentonville (Ark.) behemoth said on Mar. 5 that a computer technician over several months intercepted messages and taped phone calls between employees and a reporter for The New York Times. The company fired two snoopers and disciplined a manager. Federal gumshoes are on the trail.

How's this for a comeback? In the fall of 2004, Japan's financial regulator told Citigroup (C) to shutter its private bank for allegedly misleading clients about investments and making loans that were used to manipulate stocks. Rehabilitated, Citi emerged as a white knight with a $10.8 billion bid on Mar. 6 for Nikko Cordial, Japan's third-largest broker. The deal would be the biggest foreign acquisition in Japanese history.

See "Tokyo Comeback: Citi Buys Nikko"

Cell-phone maker Motorola (MOT) tried to hang up on Carl Icahn on Mar. 2, filing a proxy with the SEC urging shareholders not to vote with the billionaire activist, who owns at least 1.4% of the company and has said he wants a seat on the board. Icahn, meanwhile, escalated by filing documents saying he intends to buy more than 4.4% of the company. Judging from Icahn's history, he may settle for Motorola's using some of its $11.2 billion cash hoard for a stock buyback. Sources say talks are already taking place.

Spurring fears of unrest that could zap production, thousands of French workers struck Airbus on Mar. 6 to protest plans to eliminate 10,000 jobs in four countries. Meanwhile, French pols called for a strong state role in the planemaker's parent, EADS—a rebuke to managers who say Airbus is already hamstrung by political interference. Airbus also had to ground a planned cargo version of the A380 megajet after its last remaining customer, UPS (UPS), canceled an order for 10 freighters on Mar. 2.

Waxworks and theme parks aren't for kids only. Just ask private equity giant Blackstone Group, whose Merlin Entertainments spent just under $2 billion on Mar. 5 for Tussauds Group, owner of the London Eye ferris wheel and the Madame Tussauds wax museum franchise. The deal makes Merlin, which bought Denmark-based theme park chain Legoland in 2005, the world's No. 2 attractions operator after Walt Disney (DIS).

See "No Mystery in Blackstone's Wax Museum"

The folks at Alltel (AT) know there's little future for a sleepy regional phone company, so they're dialing for a suitor. Sources confirmed on Mar. 6 that Alltel has talked with the likes of Verizon (VZ), Sprint (S), and AT&T (T). Alltel declined comment. Analyst reports say Alltel could fetch $25 billion to $30 billion. That stiff price makes it unlikely a deal will get done soon.

They're everywhere: ads from Gap (GPS), Apple (AAPL), and others flogging merchandise benefiting the charity Global Fund to Fight AIDS, Tuberculosis & Malaria. So just how much has this high-profile (Product) RED campaign, fronted by singer Bono and running for about a year, raised? Some $18 million, reported Advertising Age on Mar. 5. Doesn't seem like much, right? Julie Cordua, marketing chief for red, says it's actually $25 million, since some participating companies haven't yet closed their 2006 books. She adds that the $6 billion Global Fund over the previous four years had collected only $5 million from private sources, a fraction of what red has raised. "We think it's great," she says. But the amount is way less than what the half-dozen companies, which donate a portion of profits from selling red items, spent to market those goods. Some estimates put that number at $100 million. Cordua says the actual figure is "far less" and would have been spent as part of the companies' regular ad budgets. As for red's target in 2007, Cordua says, "we haven't set a goal."


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