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US markets set for fifth week of losses, Telsa, Fiat, Ford and Mazda in focus

Published: 20:19 03 Jun 2011 BST

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Continued weak economic data is pushing stocks toward five straight weeks of losses. A surprising increase in unemployment sent stocks tumbling in early trading, though they have recovered some. The Dow is off 65.39 to 12,183, Nasdaq is down 25.61 to 2,748, and the S&P 500 dropped 7.99 to 1,305. Still, markets are up for the year so far.

Former U.S. Senator and Presidential candidate John Edwards has been indicted with felony charges by a federal grand jury for violating campaign finance laws by accepting more than $900,000 from donors. The charges stem from Edwards attempt to cover up his affair with mistress, Rielle Hunter and former aide, Andrew Young, with whom he fathered a child. Prosecutors allege Edwards conspired to direct money to the women to maintain his image as a family man, the centerpiece of his campaign. Conviction may result in up to five years in prison and hundreds of dollars in fines. Edwards is expected to plead not guilty on all charges. 

Ford Motor Co. (NYSE:F) and Mazda Motor Co. (OTC:MZDAY) are in discussions to break up their 50-50 joint venture in the U.S. The venture, called AutoAlliance International, operates a plant in Flat Rock, Michigan that builds the Mazda 6 and Ford Mustang, though the plant operates only at half capacity. Dissolving the alliance will likely require Ford to produce a second vehicle at the plant to maintain current capacity while Mazda will need to seek a new North American plant for auto productions. Ford and Mazda may have already begun parting ways some time ago, with Ford reducing its stake in the smaller company from 11% to 3.5% last year.

Fiat SpA (OTC:FIATY) has set an agreement with the U.S. Treasury to buy its remaining 6% stake in Chysler Group LLC. Fiat will pay $500 million for the Treasury’s 98,461 shares, giving it a 52% majority in Chrysler and ending the U.S. government’s involvement in the auto company. The deal will close in 30 to 60 days. The deal will help expedite Fiat’s plans to eventually combine with Chrysler, forming a single global automaker.

President Obama touted the recovery of America’s Big Three automakers at a Chrysler plant in Toledo today, saying it would not have happened without his bailout plan. His $80 billion bailout of General Motors (NYSE:GM) and Chrysler helped save jobs and aided in the broader economic recovery, says the White House. Indeed, The Big Three have regained significant market share, GM and Ford are once again profitable. Of the $80 billion in aid, about half has been repaid.

Electronic Arts Inc (NASDAQ:ERTS) is starting an online service called Origin to sell more of its software online rather strictly through retail stores. The service will include an application allowing users to purchase, download, and track games for PCs, opening with more than 150 titles. EA will attempt to spur sales with social networking features allowing gamers to communicate with friends online. Other companies including game maker Valve Corp and videogame store chain GameStop already offer downloading services for PCs.

Groupon’s IPO is expected to be a gauge of continued investor appetite for technology offerings. In just two and a half years, the company has grown revenues to $644.7 million in the first quarter of 2011 alone. Yet its growth has been fueled by enormous spending, with losses of $413.4 million in 2010 and another $113.9 million in Q1 2011. Some have been concerned about its most recent round of fund-raisings, in which a combined $1.08 billion was raised only to see $930 million of that go to pay early investors. The high spending is reminiscent of Amazon’s (NASDAQ:AMZN) early days, only competition is now much more intense. 

Stocks on the Move

DryShips Inc (NASDAQ:DRYS) rose 8.6% on an upgrade from neutral to buy from Goldman Sachs

Forest Laboratories Inc (NYSE:FRX) increased 3.1% on the announcement of a $500 million accelerated stock buyback program 

Monster Worldwide Inc (NYSE:MWW) dropped 4.8% as U.S. payrolls grew less than expected and unemployment rose to 9.1%

Orexigen (NASDAQ:OREX) fell 33% when the company decided to quit development of its obesity pill due to FDA requests for a new heart study before approval

Tesla Motors Inc (NASDAQ:TSLA) rose 6.7% with the announcement that it had priced a secondary offering of 5.3 million shares at $28.76 per share 

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