The markets closed at mixed positions today as the DJIA and S&P 500 ended down 0.09% to 8,497.18 and 0.14% to 910.71 respectively, while the NASDAQ  was up 0.66% to 1,808.06.  Commodities traded up as Gold inched up $3.80 to $936.00 on news of a financial overhaul.  Crude Oil bounced up to $71.03 and Natural Gas increased around 2.5% to $4.42/mmbtu.  Investors drove prices up and yields down on the 10-Year as yields decreased to 3.65%.

This afternoon, Obama released big news of a reconstruction of the financial regulatory system as the government plans to shift power and responsibility onto the Fed, hoping to stabilize the economy.  The Fed’s new power will allow a greater regulation in areas unseen before, such as hedge funds and credit default swaps.  The financial markets retracted today on news of this plan due to the massive uncertainty it brings to the table.

The Obama Administration also aims to create a new consumer protection agency to prevent abuses to mortgage and credit markets in the future, hoping to curb the chances of a deep recession due to financial instability again.  Roughly everything in the financial markets is impacted by this plan.  Banks and companies deemed too big to fail will now be at the mercy of the Federal Reserve.

FedEx [FDX: 50.70, -0.72 (-1.40%)] released earnings this morning at FQ4 EPS of $0.64 which beat analyst expectations by $0.13.  However, revenues were down from $8.32B to $7.85B over the same quarter last year.  Earnings are down 56% over last year, and management continued to slash FQ1 guidance from $0.68 to $0.30-$0.45.  Management cited the decrease in revenue and guidance is due to lower volumes at FedEx Express and FedEx Freight.  FedEx Express revenues were down 25% from $6.4 billion to $4.8 billion over the same quarter last year.  There was also a $260 million dollar operating loss due to aircraft related charges.  This weighed down the stock 1.49% today, bringing shares down to $50.70

To further increase consolidation in the generic pharmaceutical industry, Watson Pharmaceuticals [WPI: 30.27, +1.43 (+4.96%)] announced a plan to purchase Arrow Group for $1.75 billion.  This will give Watson a promising new drug pipeline with an increased foreign exposure.  Watson primarily operates in the U.S., the Arrow acquisition will give them a greater exposure to Canada, France, Germany, U.K., and Scandinavia.  Watson expects this deal to go through by the end of the year, pending review by regulators.

Prices increased in May at the lower end of expectations, pushing the consumer price index up 0.1% on a month to month basis.  This is a pretty tame number when considering energy costs increased significantly over the past few weeks.  This report was good news for the Fed and bond markets, possibly indicating a longer wait for a raise in interest rates.

Be sure to read tomorrow’s Market Recap for a greater understanding of the financial markets

- Brendan Stevens

Disclosure: None.

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