Friday’s Market Recap: Blackrock Buys Barclays Global Investors, Airlines Cut Capacity

The markets were down for most of the day, until a late rally sent two of the three major indexes positive, all except the NASDAQ which was down 0.19%.  The Dow Jones and S&P 500 were up 0.32% and 0.14% respectively, closing at 8799.26 and 946.21.  The 10-year saw prices climb once again, as the yield ended at 3.792%.  Oil was down today settling at $72.04, while gold also had an off day settling at $940.70.

Late Thursday night, Blackrock (NYSE:BLK) agreed to buy Barclays Global Investors from Barclays Plc (NYSE:BCS) for 37.8 million shares of common stock and equivalents and $6.6 billion in cash.  The deal was worth a total of $13.5B.  This deal will make Blackrock and BGI the world’s biggest fund manager, managing over $2.7 trillion in assets.  The buzz about a potential buy of BGI by Blackrock started early this week as Blackrock confirmed that it was in talks with Barclays, with Barclays saying that they were also talking to other companies.  In the deal Blackrock also bought iShares, which is a group of mutual funds and ETFs with over $300 billion assets under management.  In April, Barclays had agreed to sell iShares to CVC Capital for $4.4 billion if they could not find a better deal by June 18, which they did with Blackrock.  Unless Barclays receives a counter offer within five business days, Barclays will issue a purchase agreement with Blackrock.  If no counter offers are made the deal is expected to close in the fourth quarter.

In earnings news, National Semiconductor (NYSE:NSM) announced after hours yesterday that it lost $63.7 million, or $0.28 per share with revenue of $281 million, beating analyst estimates of a loss of $0.38 per share with revenue of $273 million.  National Semi attributed a large portion of the loss to restructuring charges of $116 million in pre-tax charges, as the company cut 850 jobs and shut down two factories.  Sales fell 39% the past quarter down from $462 million a year ago as demand for semiconductors has been down as consumer and IT spending has been crippled by the current economic climate.  Positive news for National Semi was that orders for its chips for smart phones were up, and overall bookings were up 30% from the previous quarter.  National Semi believes that they will be able to do well in the future with the company set to do well in a market more energy efficient phones and the increase in smart phone technology.  National Semi is estimating that sales will come in between $285 million and $305 million for the current quarter.

It was reported today that Delta Airlines (NYSE:DAL) and AMR Corp’s (NYSE:AMR) American Airlines will cut capacity more than originally thought.  These major airlines are expected to cut capacity after the summer travel season in an effort to increase fairs to stabilize prices.  The airline industry has been on a roller coaster ride as oil prices have fallen and demand has significantly declined over the past year, with more turbulence ahead as oil prices are currently on the rise.  Delta plans on cutting capacity 10% this year with American cutting capacity by 7.5%.  Air carriers were for the most part unprofitable so far this year, put they are hoping with reduced capacity and possible higher ticket prices they could become profitable.

Disclosure: The fund the author is associated with is long BLK.

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