Taking Stock of Wall Street 2008-08-20

As we thought yesterday, Hewlett Packard (HPQ) with its stellar 3rd quarter performance announcement yesterday lifted today's market from the ruts. Bull looking for any straw to hold onto finally found one in HPQ.

Only one problem though. 41% of HPQ's profits came from Europe. Many EU countries are facing the threat of recession. So, while we can give the benefit of doubt to HPQ for the coming 4th quarter, HPQ's projections for the next fiscal year's first quarter much depends on what happens to the European economy in six months' time.

But unlike the small investor, market makers on the floor live one day at a time and make hay while sun shines. And market freshened up for one day.

Morning heard an important announcement from the online auctioneer eBay (EBAY) that they want to focus more on fixed-price sales than auctions. Taking a cue from Amazon (AMZN), probably. Anyway non-paying buyers and cheating sellers, your joyrides will soon be over!

Now to major indices:

Dow fought back by 68.88 (.6%) to 11417.43
Nasdaq by 4.72 (0.2%) to 2389.08
S&P 500 by 7.85 (0.6%) to 1274.54

Bullish stocks matched the bears, unlike the last two days

NYSE 1654 v. 1448 Nasdaq 1379 v. 1414
Volumes were 1.07 bln and Vol 1.77 bln respectively, not significantly higher from yesterday.

US government released its weekly energy report. Crude oil stocks increased by 9.3 million barrel. It was the largest weekly addition since the year 2001. So oil couldn't make much headway today: $114.98.

Wednesday saw the singular spectacle of a regional Federal Bank president, Jeffrey Lacker of Richmond, publicly blasting the Bush administration's intervention in FannieMae (FNM) and FreddieMac (FRE) and wants the two cash-strapped institution privatized.

But, are privatized institutions any better? They too need to be hoisted up from the hole with tax-payers money. A double whammy for the tax-payer: loses the invested money first, the tax he paid next.

Yet, FannieMae and FreddieMac seemed to be in an inexorable slide with losing one-fifth of their value from yesterday.

Lacker also hates the idea of another monetary stimulus before the markets are stabilized.This statement has an element of truth in it. Without some firmness in the market, stimulus goes down the drain as far businesses are concerned. For the tax-payer that may reduce his indebtedness. But then who created the tax-payer's debt and for whom? The answer comes a full circle right to the doorsteps of the businesses.

Todaywe had confirmation of inflation from another regional Federal Bank president, Stern of Minneapolis, who said it is higher than he would like it.

SEC finally scrambles up to restrict naked short-selling that has already made pinksheets a refuge of thieves. What about the thousand of US citizens who lost their money all these years to manipulators hiding in Canada and Europe?

Analyst upgraded the following companies:

Goldcorp (GG), Hutchison Telcom (HTX), ITT Educational (ESI), KLA-Tencor (KLAC), O'Reilly Auto (ORLY), Tessera Tech (TSRA), Unibanco (UBB), Universal Technical Institute (UTI) and Yamana Gold (AUY)

Downgraded companies include:

Advance Auto (AAP), Comverge (COMV), DISH Network (DISH), Dr Pepper Snapple (DPS), Jack Henry (JKHY), National Instruments (NATI),Novatel Wireless (NVTL),PNM Resources (PNM) and Stellent (STEL).

Luckily, the news that Lehman Brothers failed to secure capital from South Korean funds did not create any havoc to the financials. LEH need the funds badly to cover losses associated with bad loans and assets. Let us hope it wouldn't deteriorate to another Bear Sterns.

Wachovia Bank got rid of some of their troubled loans selling to LandCap Partners for $40 million. At least that much obligations could be moved out of the way avoiding write downs.

Eli Lilly added Dairy Cow and Posilac brands to its portfolio by paying $300 million.

Ross Stores returned a 14% rise in revenues and earnings soaring by 46%.

Wholesale club BJ returned better results that of the nearest rival Costco.

ADI was another company that could show positive results though it couldn't beat the market's expectations.

Today can be considered a draw between the bull and the bear. Market somehow managed to recoup the ground lost on Monday and Tuesday, on the oxygen supplied by just one company, Hewlett-Packard (HPQ). Had oil advanced further, the floor would definitely have given way.

The world heard today happy tidings from two rice-eaters of the world:

Japan is instituting a point system favoring citizen buying local produce thus discouraging imports.

India announced that her farmers planted record crops and that helped push up her grain reserves from the recent lows.

Now, if we get similar news from China too food worries should subside for the medium term.

May be rice bags will soon be available at their previous prices in our groceries. Let us wait fot the flyers.

After-hours happenings:

May be my hopes about the rice bags are premature. Today evening USDA says I will have to pay 5-6% more, a record high for the last three decades.

Semtech, Limited Brands, Phillips-Van Heusen,Gymboree, Longs Drug Stores, Hot Topic and Bally Technologies beat earning expectations.

JDS Uniphase returned lower earnings than expected. Salesforce.com matched it.

Today can be considered a draw between the bull and the bear. Market somehow managed to recoup the ground lost on Monday and Tuesday, on the oxygen supplied by just one company, Hewlett-Packard (HPQ). Had oil advanced further, the floor would have definitely given way.

Again I took a beating just now: oil soared past $115 and firming up there. Bull, take care.