Taking Stock of Wall Street 2008-08-29

Yesterday, we talked about the doubtful longevity of government-sponsored white washing and re-painting of economy. Also, about market men trying to paint Wall Street red by just magnifying GDP headlines without delving deep into the adverse statements hidden in the reports.

Now-a-days the tactics seems to be to engage in rabble-rousing to tempt the small investor based on some, if not any, data, trick him into buying at the highs of the day and then leave him in the lurch holding losses as the next day starts lower down.

But, investor confidence is too low that volumes are becoming less. So the number of people hurt in this one-day wonder shows may be comparatively less. Remember the average daily volume for NYSE is 1.5 billion, a figure not touched in the last two weeks.

What was the important government data released today? Personal spending was up 0.2% in line with the projections.

This should have pushed up the market today as the spent money actually went to the businesses. It didn't. Because,
personal income decreased 0.7% during July against 0.2% forecast.

When the personal incomes decreased, any additional spending should only have come from the government's stimulus checks.

That means, with jobs losses continuing despite government's job data to the contrary, increased spending can only come from further monthly checks from the government!

So, which is better - issuing more and higher stimulus checks every month to the citizenry or creating more jobs for them which at least puts in some income tax into the government coffers? After all, no stimulus check can equal wages and perks.

No wonder, the Chicago Purchasing Manager Index for August (57.9) and the University of Michigan consumer confidence survey for August (63.0) exceeded expectations.

Oil prices rose up by 2.7% during the session, but then fell back in the afternoon almost unchanged at $115.65 per barrel. Still the stocks couldn't take advantage of oil's retreat.

As for the hurricanes, Gustav is gathering momentum as it approaches the Gulf of Mexico and Hanna may join the fray, if Gustav fails to move away.

The market indices went down:

Dow down by -171.22 (-1.48%) to 11543.96
Nasdaq down by -44.12 (-1.86%) to 2367.52
S&P 500 down by -17.85 (-1.39%) to 1282.83

Again advance-to-decline ratios for stocks reversed to the bearish mode:
NYSE: 1140 v. 1932
Nasdaq: 1034 v. 1789

Volume is still less than even 1 bln at the NYSE:

NYSE: 959 mln
Nasdaq:1.58 bln

Stocks started lower today morning and couldn't recover much after that till close.

Technical stocks led the fall as computer maker Dell (DELL) missed forecast earnings and then went on to warn about less IT spending. Even stalwart Microsoft was pulled down after that.

Nasdaq and S&P suffered most both being weighted down by technological stocks.

Losses broadened to include all major sectors with only the telecommunication sector showing some semblance of resistance, especially by AT&T.

Even Marvell Technology (MRVL) finished lower despite stellar earnings and solid revenues.

The following companies were upgraded:

Chartered Semi (CHRT), DXP Enterprises (DXPE), Eagle Materials (EXP), Netezza (NZ) and Royal Bank of Canada (RY) .

Downgraded companies include:

BlackRock Kelso (BKCC), Constellation Energy (CEG), Domtar (UFS), Energy Conversion (ENER), H&E Equipment Srvs (HEES), International Paper (IP), Kayne Anderson Energy (KED), Newstar Financial (NEWS), Novo-Nordisk A/S (NVO), SY BANCORP (SYBT) and Wimm-Bill-Dann Foods (WBD).

Fortune Brands (FO) announced early termination of distribution arrangements with Pernod Ricard, receiving $230 million compensation.
They also acquired the latter's Cruzan Rum brand for $100 million.

Microsoft (MSFT) is acquiring Greenfield Online (SRVY) including ciao.com, the German price comparison and shopping site for $486 million, adding to its advertising revenues.

Yesterday's darlings, Freddie Mac (FRE) and Fannie Mae (FNM) appeared to be losing favor. Freddie intends to auction bills of 3- and 6-month maturities each worth $1 billion.

Now, we hear that the Bank of China has been cutting its holdings of FNM and FRE securities by 25% since June. That explains the sudden reversals. That we enriched the Chinese by sacrificing our jobs and factories doesn't mean that they impoverish themselves by holding our worthless securities!

International Rectifier (IRF) rejected Vishay's (VSH) offer of $21.22 per share.

Novartis (NVS) stopped further development of antibiotic Aurograb after the failure of its Phase II trial.

Lukoil (LUKOY.PK), Marvell Technology (MRVL), Nintendo (NTDOY.PK) and Sims (SMS) brought out better than expected results.

Dell (DELL) disappointed with less than expected returns.

Today's relentless thrashing of the bulls by the bears seems to be the backlash of yesterday's post-GDP pumping. Investors' disillusionment was evident the way even companies that brought out good tidings like Microsoft and Marvell were beaten up. Government's stimulus check-driven spending data and late show-off attempt by telecom and financials were ignored.