Googling a Comeback

The roller coaster that is the U.S. markets corkscrewed its way through another wild trading day on Thursday—the Dow plunged 415 points early on, only to end 401 points higher in a last-hour surge. The Wall Street Journal and New York Times had difficulty explaining the 800-plus-point swing. The WSJ says perhaps it was the suddenly brightening inflation picture (and, the hopes of another interest rate cut) that triggered the late rally, which, it admits, doesn't quite add up when you consider "the overall picture that emerged was one of a reeling economy that may take considerable time to right itself."

The NYT, too, had trouble pinning down an explanation, saying there were a series of economics reports that seemed to nullify any real good news for investors. The inflation report was doused by poor manufacturing numbers, welcoming yield gaps on Treasury bonds were canceled out by further signs the commercial-paper market is still in a deep freeze and the now-vanishing fear of stagflation is being replaced by plain old recession worries. “The realization is dawning on people that we are heading into a recession, and it may not be the short and shallow recession that we had hoped for,” Brian Gendreau, an investment strategist at ING Investment Management, told the NYT. “The focus has shifted from the financial crisis to the real economy, but the news is not good there either.”

And what about the overseas markets on Friday? According to BBC, Asia had a mixed trading day, though the Nikkei was up strongly following the Dow rally. And the Big 3 European bourses—in London, Frankfurt, and Paris—were all trading higher.

The early buzz on European trading floors Friday was over Google. Its better-than-expected 26 percent surge in profits reported Thursday, for a moment at least, were enough to stifle global recession fears. "Google's figures were really good and this is helping sentiment not just in the technology sector. Everyone is breathing a sigh of relief after a tricky week," a London trader told Bloomberg on Friday. Shares in Google jumped 10 percent in after-hours trading following its sterling earnings call, the NYT writes. Google's secret? The search-ads business is proving to be recession-proof (for now), and the company slowed its break-neck expansion pace, hiring just 519 people last quarter, as opposed to 2,130 a year ago, BusinessWeek reports. Still, the company said tough times lie ahead. "The economic situation today is globally worse than what people were predicting just a month ago," CEO Eric Schmidt was quoted by BusinessWeek as saying. "But we're optimistic about Google's future."

Elsewhere in the tech sector, it was truly a mixed day. Yahoo shares jumped 12 percent on comments from evidently a still-jilted Steve Ballmer, who declared publicly Thursday the failed tie-up between Microsoft and Yahoo would "make sense economically." Too bad the rest of Microsoft doesn't feel that way, AFP reports. Moving to Europe, the world's largest mobile-handset maker, Nokia, reported a 30 percent drop in profits on declining sales Thursday, the Guardian reports. Still, Nokia's weak numbers were better than expected, enough to trigger a relief rally, according to BusinessWeek. For gadget heads, it wasn't so rosy. Nokia's "iPhone killer"—the Nokia 5800 "Comes with Music," as it's called—won't be available in the United States until sometime next year, Fortune writes.

Things are so bad for the airline industry right now that even Southwest posted a quarterly loss; before yesterday it hadn't missed a profitable quarter for more than 17 years. The Dallas-based carrier incurred a loss of $120 million in the third quarter due to "an accounting charge to write down the declining value of a fuel-hedging program," writes the Los Angeles Times. Southwest has long hedged against fuel-price fluctuations by locking in prices months ahead of time. That worked well while the price of oil was soaring, but the 40 percent collapse since June hit Southwest hard. Still, with oil now below $70 a barrel (and OPEC scrambling to call an emergency meeting to stop the rot), the outlook for all the airlines looks slightly better (notwithstanding the recession). Shares in Southwest jumped 8 percent yesterday.

Cheaper oil also means Americans will take to the road again—just one motivation for GM and Chrysler to shore up their crumbling empires by merging. The WSJ reports that "major banks that have long lent to both companies, such as J.P. Morgan Chase & Co., are ... keen to do a deal to help reduce exposure to the auto industry." GM is about to report "dismal" third-quarter earnings and is "scrambling to find new sources of funding." A merged Detroit giant might make sense to the auto industry for another reason, writes the Detroit News. "A fattened GM in the United States arguably could become "too big to fail," it writes, and demand a government bailout.

Finally, while the rest of Wall Street is struggling, one "fund" is thriving: a select fantasy football league where the total purse is $1 million, reports the WSJ. All the winnings are donated to charity at the end of the season, say the participants, who include legendary hedge-fund trader Paul Tudor Jones and Raj Rajaratnam, the Sri Lankan native who founded Galleon Group. "It's just boys being boys," one member of the league said. That's Wall Street for you.