Colombia's paramilitaries

Free trade in thugs

Getting tougher with right-wing warlords

Relocating his business to the United States?

IN A surprise move on May 13th, President Álvaro Uribe announced the extradition to the United States of 14 of Colombia's most notorious paramilitary warlords on drug-trafficking charges. As well as sending a warning to other right-wing paramilitaries, the aim is to show Democrats in Washington that Mr Uribe means what he says about breaking with paramilitary groups who continue to murder trade unionists and other left-wingers.

Democratic congressional leaders and their trade-union allies have cited those murders as a reason for their refusal to approve a free-trade agreement with Colombia. Mr Uribe may also be hoping to boost his already soaring approval ratings to strengthen his hand in an eventual bid for an unprecedented third term as president. More than two terms in a row are currently banned by the constitution, so this would require approval by Congress.

Mr Uribe's move could backfire. Human-rights groups fear that it will rob the victims of the compensation that they are entitled to from their tormentors, and could also remove the evidence needed for a successful investigation into why Colombia's paramilitaries and their political accomplices have hitherto enjoyed impunity. More than 60 congressmen, most allies of Mr Uribe, are either already in prison or under investigation in Colombia for alleged links to paramilitaries. Last month, Mario Uribe, the president's cousin and close political ally, was arrested.

“The good news is that these paramilitary bosses could now face serious jail time,” said José Miguel Vivanco, Americas director of Human Rights Watch, a lobbying group. (In the United States, cocaine dealers can get 30 years or more.) “The bad news is they may no longer have any reason to collaborate with Colombian prosecutors investigating their atrocities...Just as local prosecutors were beginning to unravel the web of paramilitary ties to prominent politicians, the government has shipped the men with the most information out of the country,” he lamented.

In fact, the United States has agreed to allow Colombian prosecutors continued access to the extradited men. They have also apparently agreed to transfer to Colombia any seized assets or fines imposed on the warlords to compensate more than 100,000 victims who have come forward. Created in the 1980s by wealthy ranchers to protect themselves from attacks by the left-wing FARC guerrillas, the paramilitaries developed into armed gangs, accused of many thousands of killings as well as drug-trafficking and money-laundering.

Explaining his decision in a televised address on May 13th, Mr Uribe said the extradited men had violated the conditions of a 2003 pact with the government under which they agreed to surrender to the authorities in exchange for relatively light prison sentences—a maximum of eight years—and protection against extradition. In return, they had promised to confess to their crimes, cease all illegal activities and use their drug money to compensate the victims of their appalling crimes. But the 14 warlords had continued to run their criminal networks from prison and had failed to pay reparations, Mr Uribe said.

If the move was made with one eye on Washington, its timing appears to have been determined by a legal wrangle. Groups representing victims have been fighting to halt the extraditions. This appears to have prompted Mr Uribe's decision to send the paramilitaries to the United States. Colombia's Supreme Court had recently supported these groups, ruling that extraditions of paramilitary bosses should be carried out only after they had confessed to their crimes and paid reparations. But this was overturned by a judicial council last week. Within hours, the first paramilitary leader to be extradited, Carlos Mario Jiménez, alias “Macaco”, was on a plane bound for the United States, a journey made a week later by his 14 colleagues. More may follow.

South African riots

Nowhere left to go

Xenophobic violence rocks South Africa’s biggest city

SITTING beside a road in Alexandra—an overcrowded Johannesburg township on the edge of the city’s main business district—a 21-year-old Zimbabwean migrant, Talent Dube, is at a loss for words. Two years ago she fled hunger and unemployment in next-door Zimbabwe. Last week an armed mob chased her and two relatives from the small shack they shared in Alexandra. The attackers took everything: phones, television, clothes and their single mattress. She is now camping, along with 1,000 or so Zimbabweans, Mozambican and Malawaians, in the safety of the Alexandra police station. Many of the displaced have been in South Africa for years, but angry residents—themselves suffering pervasive unemployment, poverty and now rocketing food and fuel prices—accuse them of stealing jobs and houses, and of being criminals.

This round of horrific anti-foreigner violence started in Alexandra on May 11th. It has now spread to other townships around Johannesburg and into the city itself. Some 20,000 people have been displaced. In the worst incidents, east of the city, some victims were burnt alive, as locals watched and laughed. At least 22 people have been killed, and scores wounded or raped. Foreign-owned shacks and shops have been looted. Now violence is spreading as South Africans from smaller ethnic groups, such as Vendas and Shangaans, are attacked. Terrified victims are turning police stations into refugee camps. In an effort to contain the violence the police have fired rubber bullets at mobs waving machetes, guns and iron bars. Dozens have been arrested.

A string of leaders from the ruling African National Congress (ANC) waltzed through Alexandra last week; Thabo Mbeki, the president of the country, has condemned the violence. An official panel will look into what sparked the latest problems—conspiracy theories abound—and what to do about them. Xenophobic incidents are hardly new; but the scale of the anti-foreigner violence is unprecedented, and it is compounded by criminals after loot.

Broader questions need asking about South Africa's handling of immigration. The country’s mines and farms have long employed workers from Lesotho, Malawi and Zimbabwe; wars in the region long sent refugees across the border. But the end of apartheid saw a rapid increase in flows from poorer neighbours. The collapse of Zimbabwe has forced many, perhaps 2m or more, to flee south. As most migrants are illegal, numbers are hard to come by. But the South African Institute of Race Relations reckons that there could be as many as 5m foreigners in the country illegally. Many work on the fringes of the economy; some do commit crimes. South Africa benefits too, as many who are skilled and educated flock in. Many foreign teachers and doctors take lower-skilled jobs as gardeners or waiters. Others have started informal businesses. Their relative success has fuelled their neighbours’ ire.

The government’s approach was long to turn a blind eye to mass illegal migration, while a tiny minority of migrants are deported by police. At times the police are heavy-handed or corrupt. Reports of harassment and bribe-taking are common. None of this is eased by the fact that applying for legal migration is almost impossible. Despite a chronic shortage of local skilled workers, and thus a desperate need for foreign professionals, it is extremely hard for outsiders to find legal employment. The ministry of education decided last year to hire foreign teachers to plug in shortages of qualified teachers crippling public schools; but those already in the country struggle to navigate the red tape. South Africa can no longer afford to ignore the fact that, as in many other countries, foreigners will keep on coming.

Obama Aims for `Significant' Delegate Mark in Oregon, Kentucky

May 20 (Bloomberg) -- Democrat Barack Obama is poised to hit a new milestone on his path to the presidential nomination in today's Oregon and Kentucky primaries by securing a majority of all the pledged delegates to the party's convention.

While Obama claims the achievement as ``a pretty significant mark'' in the campaign, rival Hillary Clinton vows that ``this is nowhere near over.''

Both campaigns say they expect a split decision from today's round of voting. Clinton leads polls in Kentucky, which has 51 pledged delegates at stake, while Obama is ahead in Oregon, with 52 delegates apportioned based on the vote.

The way the delegates are awarded will give Obama more than the 15 he needs to surpass 50 percent of all the 3,646 pledged delegates awarded in Democratic primaries and caucuses beginning Jan. 3 in Iowa and ending June 3 in Montana and South Dakota.

Still, the Illinois senator will be short of the 2,026 delegates needed for the nomination, leaving him and Clinton to tussle for the support of about 200 Democratic officials and officeholders known as superdelegates who have yet to declare their support.

The results of today's primaries will help ``make an argument to any superdelegates remaining that we should be the nominee,'' Obama, 46, said while campaigning May 18 in Oregon.

Obama has the momentum in the race for delegates, both pledged and unpledged. He is 112 delegates away from winning the nomination, according to his campaign's calculations, while Clinton, a New York senator, is about 300 delegates away.

Endorsements

Since the beginning of May, Obama has collected more than 50 superdelegate endorsements, about four times as many as Clinton. He gained the backing yesterday of Senator Robert Byrd of West Virginia, a state where Clinton won a 41-point victory in a primary last week. Byrd was one of four superdelegates to declare their support for Obama yesterday.

Clinton remains undeterred.

``There is no way this is going to end any time soon, so we are going to keep fighting for the nomination,'' Clinton, 60, said yesterday in Prestonsburg, Kentucky.

At another stop she argued that she has won more votes in the nominating contests than Obama.

Her calculation includes the results of Michigan and Florida, the two states that were stripped of their delegates and the results not counted by the national party organization because they held early primaries.

The party's rules committee is scheduled to meet May 31 to determine whether to seat delegates from those states, and how to apportion them.

Next Primaries

Clinton says she will continue campaigning to try to win in Puerto Rico June 1 and South Dakota and Montana on June 3, the last presidential primaries. Any victories she scores in the remaining primaries aren't likely to knock Obama off course for the nomination.

On the campaign trail, Obama continued to spar with the presumptive Republican nominee, Arizona Senator John McCain. He barely mentioned Clinton today except to praise her for running ``a magnificent race'' and to insist that Democrats will be united once the primaries end in two weeks.

Obama and McCain traded barbs over Middle East policy and how to prevent Iran from obtaining nuclear weapons.

In a speech in Chicago, McCain, 71, said Obama's stated willingness to engage in direct diplomacy with Iran ``betrays the depth'' of his ``inexperience and reckless judgment.''

`Threat of Iran'

``I understand the threat of Iran,'' Obama said in a response in Billings, Montana. ``Thanks to George Bush's policies, Iran is now the greatest threat to the United States and Israel.'' He said McCain ``wants to double down on that failed policy.''

Polls show Clinton to be the clear favorite to win Kentucky, a coal-mining state that borders West Virginia, where the New York senator captured 67 percent of the Democratic vote on May 14. She leads Obama 54 percent to 26 percent when polls of Kentucky voters are averaged, according to Pollster.com.

Polls show Obama is ahead in Oregon, where voters must mail their ballots or hand-deliver them by 8 p.m. local time. Pollster.com's trend analysis shows Obama leading with 54 percent to Clinton's 42 percent.

As of May 15, 29 percent of the state's 2 million registered voters had returned ballots for either the Democratic or Republican primary, according to the Oregon secretary of state's Web site.

Brazil Buys More PCs Than TVs, Bolstering Hewlett-Packard, Dell

May 20 (Bloomberg) -- When Catarina Delboni traded in her generic computer for a new system from Hewlett-Packard Co., she joined the ranks of Brazilian consumers taking advantage of lower prices and payment plans to buy from the top U.S. brands.

Her old machine was a lumbering Frankenstein pieced together with parts from different companies, said Delboni, a 22-year-old engineering student in Sao Bernardo do Campo. The new one, bought in March for 1,800 reais ($1,084) with her father's credit card, is faster. Spreading the cost over 10 payments ``definitely made my life easier,'' she said.

Brazil ranked as the fifth-largest PC market last year as bank credit offers, installment plans and growing prosperity fueled purchases, especially among low-income consumers. The shift is a boon to Hewlett-Packard and Dell Inc., the world's top PC makers. A tax break for PC makers has allowed them to cut prices and compete with unregulated sellers whose so-called gray- market machines dominated the market.

``You have a consumer market that's exploding as people have more access to credit,'' said Mario Anseloni, managing director of Hewlett-Packard's Brazil division. ``That's transforming the whole economy.''

Demand in Brazil is helping PC makers expand revenue as U.S. spending slows. Hewlett-Packard, which generates two-thirds of its sales outside the U.S., may disclose fresh evidence of the trend today when it reports second-quarter results. Sales grew 11 percent to $28.3 billion in the period, according to a preliminary report last week.

Overtaking TVs

Total Brazilian PC shipments rose 38 percent to 10.7 million units last year, according to research firm IDC in Framingham, Massachusetts. That marked the first time that shoppers bought more PCs than television sets in the country. Brazil's PC market, which ranked seventh in 2006, is poised to take third place by 2010, behind the U.S. and China. Japan and the U.K. are now third and fourth, IDC said.

Palo Alto, California-based Hewlett-Packard fell 58 cents to $46.71 yesterday in New York Stock Exchange trading. The shares have declined 7.5 percent this year, dragged down last week by concern that its $13.2 billion acquisition of Electronic Data Systems Corp. is too costly. Round Rock, Texas-based Dell, down 14 percent this year, declined 11 cents to $21.20.

Brazil's economy last year grew at the fastest pace since 2004 and should be able to maintain annual growth of as much as 4.5 percent, Standard & Poor's said in April after raising the country's debt rating to investment grade for the first time. The upgrade will spur foreign investment, furthering economic growth.

Low-Income Buyers

Low-income families, eager for Internet access, are buying PCs at a faster pace than any other group, according to the Brazilian Internet Steering Committee. Spending by Brazilian businesses on software, services and computers rose 12 percent to $20.7 billion last year, IDC said. The country accounted for almost half of technology purchases in Latin America. Outlays may rise another 12 percent this year to $23.3 billion, IDC said, compared with 4 percent in the U.S.

The opportunity to win consumers and business customers is prompting Hewlett-Packard, Dell and International Business Machines Corp., based in Armonk, New York, to expand operations in the country.

Hewlett-Packard, which entered Brazil in 1967, has 8,000 employees in sales, research, services and manufacturing at four factories there.

Retail Help

Working with 3,000 retailers and 25,000 partners, Hewlett- Packard leads the Brazilian market in sales to consumers and small businesses and ranks behind IBM in corporate sales, according to Anseloni.

``Brazil is the most competitive market in Latin America,'' Anseloni said. ``The challenge is not to win, but to win and make money.''

Hewlett-Packard doesn't release sales figures for the country, saying only that orders in Brazil, Russia, India and China account for 9 percent of total revenue and that sales in Brazil have doubled in the past three years. Revenue in the four countries jumped 35 percent in the three months ended in January, compared with an 8 percent gain for the total Americas region.

Dell established operations in Brazil nine years ago as part of its move into Latin America, said Raymundo Peixoto, head of Dell Brazil. The tax breaks help the company compete with gray- market computers, machines from manufacturers that don't pay taxes or distribute computers through approved channels. Such systems had been selling for as much as 40 percent less than Dell's PCs, Peixoto said.

Gray-market PCs now represent less than half of Brazilian shipments, down from more than 70 percent in 2004, IDC said.

Like Hewlett-Packard, Dell relies on partners such as Wal- Mart Stores Inc. to reach consumers, who represent the biggest growth opportunity, Peixoto said.

``If you look forward, the next billion people connected to the Internet will come from emerging markets,'' he said.

Oil Rises to a Record After Pickens Says Prices May Reach $150

May 20 (Bloomberg) -- Crude oil rose above $129 a barrel in New York for the first time after billionaire hedge-fund manager Boone Pickens said that oil will reach $150 a barrel this year.

Supplies aren't keeping up with demand, Pickens said, echoing comments last week from Goldman Sachs Group Inc. A strengthening of the euro against the dollar added to the gains.

``There is so much momentum in the market that it doesn't take much for prices to reach new records,'' said Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``We rose today after Boone Pickens basically parroted the Goldman line on prices.''

Crude oil for June delivery rose $1.77, or 1.4 percent, to $128.82 a barrel at 9:59 a.m. on the New York Mercantile Exchange. Futures reached $129.46, the highest since trading began in 1983. Prices are 98 percent higher than a year ago.

The June contract expires today. The more-active July futures contract rose $1.88, or 1.5 percent, to $128.60 a barrel. Contracts for delivery in December 2010 and 2011 are up more than 3 percent, a signal that inventors don't expect prices to drop.

The dollar weakened against the euro, prompting investors to buy commodities as a hedge against the currency's decline. The European Central Bank may keep rates at a six-year high to cut German inflation.

German consumer prices rose 2.6 percent in April from a year earlier after jumping 3.3 percent the previous month, the most in 12 years. The ECB aims to keep inflation in the euro region below 2 percent.

The dollar has fallen 11 percent since Sept. 18, when the Federal Reserve began cutting rates to ease financial-market strains and stave off a recession. The U.S. central bank cut rates seven times while the ECB left rates unchanged. The dollar fell 0.9 percent to $1.5647 per euro at 9:49 a.m. in New York.

`Pounded' Dollar

``Oil is up because the dollar is being pounded on the bigger-than-expected increase in German inflation,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``The likelihood that the ECB will cut rates to be more in line with those in the U.S. is reduced by the German inflation numbers.''

Pickens, the founder and chairman of Dallas-based BP Capital LLC, made his price forecast on CNBC today. Pickens's BP Capital Energy Equity Fund fell 14 percent in the first two months of the year amid soaring prices for natural gas and crude oil. He told CNBC on Feb. 21 that he was short on both crude oil and natural gas. A short is a bet that prices will fall.

`Well Respected'

``Pickens is well respected in the industry, even though he made the mistake of shorting oil in February,'' Samples said.

Oil advanced on May 16 when Goldman Sachs boosted its estimate for the second-half of the year to $141 a barrel, from $107, citing supply constraints. Credit Suisse Group AG and Societe Generale SA raised their oil prices forecasts for 2008 and 2009 today, citing investor flows and limited supply.

Brent crude oil for July settlement rose $1.83, or 1.5 percent, to $126.89 a barrel on London's ICE Futures Europe exchange. The contract touched a record $127.49 today.

U.S. Producer Prices, Minus Food, Energy, Rise 0.4% (Update3)

May 20 (Bloomberg) -- Prices paid to U.S. producers, excluding food and fuel, rose more than forecast in April, reflecting increases in automobile and furniture costs.

The 0.4 percent gain in so-called core prices was twice as big as anticipated and followed a 0.2 percent increase in March, the Labor Department said today in Washington. A drop in energy costs and unchanged food expenses held the total price measure to a 0.2 percent gain.

Soaring raw-material costs are likely to hurt profits as a slowing economy prevents companies from raising prices enough to cover expenses. A report last week showed prices paid by consumers rose less than forecast in April.

Businesses ``have considerable pipeline cost pressures,'' said Aaron Smith, a senior economist at Moody's Economy.com in West Chester, Pennsylvania. While companies may find it tough to pass the costs on to consumers given the economic slowdown, today's figures are ``a reminder that inflation pressures reside even as we have slower growth,'' he said.

Treasury securities rallied, with benchmark 10-year notes yielding 3.80 percent at 9:39 a.m. in New York, down from 3.83 percent late yesterday.

Economists' Forecasts

Economists forecast producer prices would rise 0.4 percent, according to the median of 70 projections in a Bloomberg News survey. Estimates ranged from no change to a 1 percent gain. Excluding food and energy costs, producer prices were expected to rise 0.2 percent, according to the Bloomberg survey.

Factories, farmers and other producers were paid 6.5 percent more in April than a year earlier. That compares with a 6.9 percent gain for the 12 months ended in March.

The core index was up 3 percent in April from a year earlier, the biggest gain since December 1991.

Rising costs for metals, chemicals and fuel propelled the increases in raw materials, the report showed. The price of steel-mill products jumped 5.5 percent in April and agricultural chemicals surged 5.6 percent. Further down the pipeline, prices for scrap steel and iron soared 32 percent, the most since July 2004, and scrap copper costs jumped 5.3 percent.

So far this year, wholesale costs are up 8.5 percent at an annual pace compared with 8.4 percent for the same time last year. The core rate has increased at a 5.2 percent annual pace, compared with 2.1 percent in the first four months of 2007.

Food, Fuel

Food prices were unchanged and fuel costs dropped 0.2 percent, the first decline this year.

The increases in fuel costs last month were less than the gains recorded for April of prior years and may have lead to the government reporting that energy costs were lower on a seasonally adjusted basis.

Crude oil and other energy products prices have continued to rise this month and may elevate inflation figures in coming months. The price of a barrel of crude on the New York Mercantile Exchange closed at a record $127.05 a barrel yesterday.

The cost of passenger cars climbed 0.4 percent, light trucks were up 1.3 percent and commercial furniture jumped 1.8 percent, the most since February 1981.

Costs of intermediate goods, those used in earlier stages of production, increased 0.9 percent, after a 2.3 percent gain the prior month. They rose 11 percent from a year ago.

Excluding food and energy, intermediate prices increased 1.2 percent. Prices for raw materials, or so-called crude goods, increased 3.2 percent.

Impact on Deere

Deere & Co., the world's largest maker of tractors and combines, is among companies being constrained by rising costs. The Moline, Illinois-based company said last week that profit this quarter will fall short of analysts' estimates as U.S. construction slows and material prices jump.

Materials, which represent as much as 20 percent of Deere's costs, and freight expenses will rise as much as $500 million this year, twice as much as the company's earlier forecast. It spent $60 million more than in the year-earlier quarter.

Producer prices are one of three monthly inflation gauges reported by the Labor Department. The government said last week that prices of imported goods jumped 1.8 percent in April, pushed up by higher energy and metals costs.

The consumer price index, the government's broadest measure of inflation, increased a less-than-forecast 0.2 percent last month, as cheaper costs for cars and hotel rooms offset the biggest jump in food in 18 years.

Rate Expectations

Concern over inflation has led investors to project Fed policy makers will keep the benchmark interest rate unchanged at 2 percent at least through September. It would be the first pause since the central bank started cutting rates in September.

While uncertainty is ``high,'' inflation is likely to moderate as the economic slowdown continues, policy makers said last month in announcing a reduction in the benchmark rate. Even so, some officials are expressing greater concern.

Other companies have said they are likely to pass on price increases to customers. Dr. Pepper Snapple Group Inc., a beverage maker, may raise prices this year to counter higher transportation and ingredient costs, Chief Executive Officer Larry Young said May 7.

``We took pricing last year, we'll be looking at probably taking some pricing again this year,'' Young said in a Bloomberg television interview. The company is working on 23 cost-cutting projects, he said.

-- With reporting from Rhonda Schaffler and Monica Bertran in New York. Editors: Carlos Torres, Chris Anstey

U.S. Stocks Drop on Credit Concern, Producer Prices; Banks Fall

May 20 (Bloomberg) -- U.S. stocks fell, dragging down the Standard & Poor's 500 Index from a four-month high, as analysts forecast more credit losses and faster inflation threatened to keep the Federal Reserve from stimulating the economy.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. led financial shares to a third straight decline as Oppenheimer & Co. said banks may write off more than $170 billion of additional reserves by the end of 2009. American International Group Inc., the world's largest insurer, slid to the lowest level since 1998 on plans to raise more capital. Home Depot Inc. tumbled after the largest home-improvement retailer said profit slumped 66 percent.

The S&P 500 lost 9.48 points, or 0.7 percent, 1,417.15 at 10:16 a.m. in New York. The Dow Jones Industrial Average slid 145.99, or 1.1 percent, to 12,882.99. The Nasdaq Composite Index dropped 20.96, or 0.8 percent, to 2,495.13. Almost three stocks retreated for each that rose on the New York Stock Exchange.

``There are still some serious credit issues that need to be worked through in a weakening economy driven by a weaker consumer,'' Leo Grohowski, who helps oversee $162 billion as chief investment officer at Bank of New York Mellon Wealth Management, said in an interview on Bloomberg Television. ``Some of the liquidity fears that were really driving the market down have been minimized, but we are in the midst of a credit crunch.''

Inflation Concern

Seven of 10 industries in the S&P 500 dropped after the Labor Department reported a 0.4 percent gain in producer prices excluding food and fuel in April, twice as big as economists had forecast. The benchmark for U.S. equities is still 11 percent higher than its 19-month low reached March 10 after the Federal Reserve helped bail out U.S. banks and earnings at two-thirds of the companies in the index beat analysts' estimates.

Stocks fell in Europe and Asia as record oil weighed on the outlook for earnings.

JPMorgan lost $1, or 2.2 percent, to $44.99. Oppenheimer, which has a ``perform'' rating on JPMorgan, said it lowered earnings estimates for the U.S. banking sector ``significantly.''

``The real harrowing days of the credit crisis are still in front of us and will prove more widespread in effect than anything yet seen,'' analysts including Meredith Whitney wrote in a research note.

The analysts cut their estimates for 2008 earnings for Bank of America, Citigroup, JPMorgan, Wachovia Corp. and Wells Fargo & Co. by an average of 17 percent, and reduced their 2009 estimates by 20 percent. In all, the banks earnings will be 72 percent lower than the Thomson First Call consensus forecast, Oppenheimer estimates.

Citigroup lost 41 cents to $22.58. Bank of America retreated 49 cents to $35.61. The S&P 500 Financials Index tumbled 1.3 percent as 87 of its 92 companies fell.

AIG's Capital

AIG retreated 92 cents, or 2.4 percent, to $38.03. The insurer will raise a total of $20 billion, 60 percent more than it originally said it needed to protect against further writedowns, Chief Executive Officer Martin Sullivan said.

Goldman Sachs Group Inc. slipped 67 cents to $183.72 and Morgan Stanley lost $1.05 to $45.15. Losses from hedging may weigh on Goldman and Morgan Stanley, according to analysts at smaller rival Lehman Brothers Holdings Inc., who cut their second-quarter earnings estimates for the two biggest U.S. securities firms. Goldman will probably earn about $3.18 a share in the period, down from an earlier estimate of $3.75, Lehman said in a report. Morgan Stanley's per-share estimate was reduced to 87 cents from $1.31.

`Serious Risk'

Global financial-market turmoil stemming from the U.S. subprime mortgage crisis may have yet to run its course, the International Monetary Fund's deputy chief said in Tokyo today.

``We still see serious risks to global financial stability,'' Deputy Managing Director John Lipsky said in a speech that was delivered by Daniel Citrin, the IMF's deputy director for Asia Pacific.

Still, lending confidence at banks rose to the highest level in more than nine months, according to a key market indicator. The so-called TED spread, which measures the difference between what the U.S. government and banks pay to borrow in dollars for three months, dropped below 78 basis points for the first time since August. The cost of borrowing dollars overnight dropped to the lowest since December 2004, the British Bankers' Association said.

Nucor Corp. lost $2.74, or 3.4 percent, to $78.58 after the largest U.S. steelmaker by market value said it will raise about $3 billion from share sales and loans to fund expansions and acquisitions. The company said it plans to sell 25 million shares to investors in a public offering and will borrow as much as $1 billion in ``the near term.'' The money may also be used to repay existing loans.

Retail Slump

Home Depot lost 99 cents to $27.88. Net income declined 66 percent as consumers grappling with the deepest U.S. housing slump in more than 25 years cut back on remodeling projects.

First-quarter earnings at retailers in the S&P 500 have slumped 19 percent on average as record crude prices and slumping home values reduce spending on non-essential items. Wal-Mart Stores Inc., the world's largest retailer, said May 13 its earnings may trail analysts' estimates.

Energy Rally

Crude today rose above $129 a barrel for the first time after billionaire hedge-fund manager Boone Pickens said that oil will reach $150 this year. Prices will climb because supply isn't keeping up with demand, Pickens, the founder and chairman of Dallas-based BP Capital LLC, told CNBC.

Exxon Mobil Corp., Chevron Corp. and ConocoPhillips, the largest U.S. energy companies, also gained after Credit Suisse Group AG and Societe Generale SA raised their oil prices forecasts for 2008 and 2009, citing supply limitations. Societe Generale boosted its 2008 outlook for New York crude 14 percent to $115 a barrel, and 2009 by 10 percent to $110. Credit Suisse increased its estimate for this year to $120, and next year to $110.

An index of energy companies in the S&P 500 climbed to a record.

Staples Inc. gained 33 cents to $23.90. The world's largest office-supplies retailer said first-quarter profit rose 1.5 percent and revenue exceeded some analysts' estimates as it sold more pens and paper to companies.

Medtronic Inc. rose the most in the S&P 500, adding 2.2 percent to $48.93. The world's biggest maker of heart rhythm devices said fiscal fourth-quarter profit was unchanged, beating analysts' estimates on sales from the new Endeavor heart stent.