"Technology and Energy sectors made the biggest gains leading the
Nasdaq (up 1.5%) and the S&P (up 1%) Thursday as the May Options
expiration window winds to a close. Oil prices, still the brightest
mark for the Energy sector stayed around $124, although they were
unable to reach new peaks much past $126 a barrel.
It's an Oil price era in Stock and Futures trading right now and the
commodity folks have been rejoicing the last couple of months
virtually non-stop. Concerns over high oil resonate through many
facets of the economy, with the biggest being the story of inflation.
As high oil funnels itself through each and every sectors of the
consumer business the increasing cost of manufacturing, transport and
services will all have to be pushed onto the consumer, thus sparking
increased inflation. Definitely an issue the Fed doesn't want to have
to dive right into after seemingly only months ago steering the US
away from a full blown recession by dramatically cutting Interest
Rates.
In other news, technology related, Carl Icahn (shareholder activist/
corporate wheeler-dealer) took a large stake in Yahoo (YHOO) and is
prepared to enter into a proxy battle with current management. It is
clear, several large shareholders were unhappy with the way the whole
Yahoo-Microsoft (MSFT) situation went that the pressure was applied in
order to unseat the current board at Yahoo, which for one will be more
open to a buyout. The $33/share offer from Microsoft was substantial,
and on the brink of completely overpaying, for the struggling Yahoo
Internet outfit. On the one hand, the Internet is the future and
Internet advertising is leading that future, but on the other, Yahoo
is a struggling horse in the advertising game and can't seem to find
any ways of putting together its huge customer base into meaningful
and exciting new services. Carl Icahn thinks he can help though, and
his track record for displacing management rings throughout Wall
Street (see Motorola (MOT) for an example). Icahn is going to nominate
his board members that will be more open to deal and hopefully get
shareholders a fair price above $30/share. With Yahoo currently
trading under $28 there's a potential there for an easy profitable
trade, if Icahn is able to do as he wants.
Getting Microsoft back to the table will not be easy, as Microsoft's
own shareholders jumped ship sending the stock to drift lower as the
weeks to the potential alliance dragged on and on, so it is clear the
deal isn't the most favourable from within the Software Giant's rank
and file. Microsoft however, is desperate for an Internet presence and
it can't seem to find the functionality and scale of web software and
web services on its own. Windows Live is frankly unheard of in tech
and user circles, Office Live, hasn't made any sort of dent and the
Advertising division is losing money hand over fist as Google (GOOG)
dominants Internet Search. Microsoft's biggest fear in this space has
to be Google Apps (Google's free word processing, spreadsheet and
presentation tools hosted on the web), and as such they have got to
think that Yahoo's Internet service experience and scale will allow
them to have viable online software tools when the game really
changes.
along with Yahoo's profitable advertising initiatives should get Steve
Ballmer talking again, which might at the end of the day reward those
patient Yahoo shareholders."
