On June 10th, Michael Dell, chief executive of Dell Computer, sold 10 million shares in his firm for over $25 (€27.6) each. Just over two weeks ago he bought back 4.3 million at $17.43 each. Since then the share price has risen to $23.
Such corporate insider transactions became common in the wake of the attacks on the World Trade Centre, after securities rules on insider trading were relaxed to stimulate dealing. They show that major shareholders believed their companies had become undervalued as Wall Street took a dive in the tumultuous days after the markets re-opened on September 17th.
This in turn played into a surprisingly bullish recovery in share prices so that, by early this week, the Nasdaq and the S&P had returned to above pre-September 11th levels and the Dow had almost got there.
But for the third straight day yesterday, most stocks lost ground. Several reasons for this were advanced by analysts: consolidation by investors; proliferation of anthrax scares, and uncertainty about the progress of military action in Afghanistan. The day started well with the overnight news that Microsoft, Sun Microsoft Systems and Corning had all reported better-than-forecast quarterly results. However, Microsoft warned that its performance for the fourth quarter would fall below expectations.
Bear Sterns became the latest big name in the US financial services sector to shed employees, as investment business continued to shrivel in the slowing economy. The Wall Street firm plans to cut 800 jobs, including up to 30 in Dublin, and will incur some $57 million in severance charges, according to a regulatory filing by the company. Bear Stearns is reducing its 11,147-strong work force by seven per cent, and top executives have agreed to cut pay by up to 50 per cent.
Merrill Lynch is also preparing for big changes in its operations, which will involve shedding thousands of employees. The giant investment firm reported that third quarter earnings fell 52 per cent to $422 million. Underlining the collapse in brokerage business, investors withdrew a record $32 billion from stock mutual funds in September. The prospect of yet another rate reduction at the next Federal Reserve meeting on November 6th was underlined yesterday by a US Labor Department report that overall prices rose just 0.2 per cent in September.
