Investment News Briefs: AIG Shares Surge; Mortgage Delinquencies Break Another Record

Cash for Clunkers Out of Gas; AIG Shares Surge; Leading Indicators Point to Recovery; Mortgage Delinquencies Break Another Record; Sears Reports Surprise Loss; Gap Profit Dips Slightly

• The government’s popular Car Allowance Rebate System (CARS), popularly known as “Cash for Clunkers,” will end Monday at 8:00pm the Washington Post reported. It’s been a thrill to be part of the best economic news story in America,” LaHood said in a statement Thursday. “Now we are working toward an orderly wind down of this very popular program.” Officials initially thought money for the program would last at least through Labor Day, but the vast majority of the $3 billion allotted by Washington has been spoken for.

• Shares of American International Group Inc. (AIG) yesterday (Thursday) shot up $5.56 a share, or 21.25%, to close at $32.30 after newly appointed CEO Robert Benmosche said he was confident he could return the company to profitability. Analysts say that the surge was greatly exacerbated by stock short sellers buying back shares to cover their positions. “When a share price displays such optimism just a day ahead of expiration, implied volatility is bound to go through the roof,” Andrew Wilkinson, the senior market analyst at Interactive Brokers, told Bloomberg. “Any level-headed market maker would raise the volatility reading because the uncertainty surrounding where the

• The Conference Board Leading Economic Index rose in 0.6% in July, following an upwardly revised increase of 0.8% in June, which could mean the recession is bottoming out and a recovery may begin soon. Overall, six of the 10 indicators were positive contributors, three were negative, and one was neutral.

• The number of homeowners who were behind on their mortgage or already in the process of foreclosure climbed to a record high in the second quarter, according to the Mortgage Bankers Association. About 13.16% of mortgage loans were delinquent or in the process of foreclosure during the quarter. That’s the highest level ever recorded by the survey, which has been conducted since 1972, and breaks a record set last quarter.

• Weak sales of clothing and home appliances along with one-time costs contributed to a surprise loss for Sears Holdings Corp. (SHLD). The retailer reported a net loss of $94 million, or 79 cents a share for the quarter ended August 1. That compares to a profit of $65 million, or 60 cents a share in the same quarter a year ago. Revenue was down to $10.55 billion from $11.76 billion a year ago. Analysts polled by Thomson Reuters expected Sears to earn 35 cents a share. Investors reacted as expected on such negative news, dumping Sears’ stock to make it close at $65, down $8.76 or 11.88%.

• Gap Inc. (GPS), which owns the Old Navy and Banana Republic chains, saw its second quarter profit shrink slightly as consumers cut spending on clothes. Gap reported a net income of $228 million, or 33 cents a share for the quarter ended August 1, compared to a profit of $229 million, or 32 cents a share in the same quarter last year.

Subscribe by RSS Subscribe by Email