Taking Stock of Wall Street 2008-09-03

Another regional Fed banker has talked, this time Eric Rosengren from Boston and not so encouragingly because he feels the difficulties facing our economy are stronger than those during the credit crunch of the previous decade. He opposes raising interest rates at this time. In an address to the Chamber of Commerce in Manchester, N.H. he said unemployment can run from the present 2% to a high of 6%.

Is America aware of the fact and bracing itself for a triple unemployment than today? Aren't rosy employment pictures being dished out weekly giving Americans a false sense of financial security and forcing them to spend whatever money they should be saving NOW?

Today saw a flurry of important but confusing economic data:

Fed released the Beige Book which says economic activity is slowing in most of the 12 Federal Reserve districts. Price levels are under pressure from energy, food and other commodities costs. Wages did not contribute much to the pressure this time as the economic downturn made salary increases and even hiring less and less.

Challenger Job-Cut Report says August layoffs fell 14% from the July figures to 88,736, but were 12% higher than in August last year.

Factory Orders rose for the fifth consecutive month. July factory orders rose 1.3% against the June figure revised to 2.1% from 1.7%. The consensus forecast was for a 1% increase.

MBA says weekly mortgage applications jumped 7.5% as 30-year average mortgage rate fell from 6.44% to 6.39%. Refinances increased by 2.1%.

ICSC weekly report on retail chain stores saw sales rising 0.1% from a week ago, and 2.2% from last year.

Market indices sent out mixed signals to day with DOW going up, S&P 500 and Nasdaq sliding down:
Dow UP by 15.96 (0.14%) to 11532.88
S&P 500 DOWN by -2.60 (-0.20%) to 1274.98
Nasdaq DOWN by -15.51 (-0.66%) to 2333.7

Yes, after more than three weeks, volume crossed the billion mark at NYSE:
NYSE: 1.21 bln, Nasdaq: 2.13 bln

But still advancing stocks were almost matched by the decliners:
NYSE: 1614 v. 1491
Nasdaq: 1477 v. 1302

What happened today?

The initial surge happened with the better than expected government data especially on factory orders and retail sales. Then market retreated when auto manufacturers brought out dismal car sales figures.

Ford (F), GM (GM), Nissan (NSANY) and Toyota (TM) came out with their monthly results. Foreign automakers seem to be surviving because of truck sales with car sales sliding. But American car manufacturers can't even claim that.

A late recovery effort by financials did not prove very effective because technology sector was sliding right from the start. It started with Corning's (GLW) warning about an LCD TV supply glut! Related tech stock also fell because less LCD glass demand can also mean less demand for the myriad users of LCD screens! Now the possibilities are endless and market fell on the news.

A customer filed a lawsuit against Apple (AAPL) and AT&T (T) alleging the two colluded to sell more iPhone 3Gs than their network could handle.

Google (GOOG) says Chrome is more an operative system than a browser. But can GOOG achieve all that without compromising Online Safety? Because all online business research has some form of snooping on the consumer's browsing behavior.

Bond insurer Ambac Financial (ABK) received regulatory approval from the State of Wisconsin's regulators to capitalize $850 mln and restart Connie Lee Insurance, for providing insurance guaranty for the municipal bonds.

Investors reaction to Fannie Mae's (FNM) auction of its latest tranche of three and six-month notes was interesting. On hearing that these notes carried more favorable terms, FNM shares fell by 1.5%.

Korean Development Bank's consortium approach to buying stakes in Lehman (LEH) seems to be attracting backers. HSBC (HBC), an undisclosed Chinese bank and South Korea's Military Mutual Aid Association are reportedly interested. It definitely pays to spread risk in a venture like this.

Coca-Cola (KO) seems to have finally woken up from its slumber. They are trying to acquire buy a China Huiyuan Juice Group Ltd in a deal valued at $2.4 bln.

Pfizer (PFE) announced a $725M deal with Medivation (MDVN) to develop and market Alzheimer's drug.

Ospraie Commodity Hedge Fund which is 20% owned by Lehman Bros (LES)is reportedly downing its shutters. Ospraie, once a big player, has suffered losses on its commodity bets going awry in recent months.

Are LBOs coming back? Info provider Informa is finding new suitors for a leveraged buyout - Carlyle, Providence and Blackstone (BX). Financing will be from a banking consortium formed by JP Morgan, Barclays, Royal Bank of Scotland, Bank of America and HSBC.

H&R Block (HRB) is buying its Texas, Oklahoma and Arkansas franchise operator for $278 mln.

Is Morgan Stanley (MS) crazy to start a new real estate fund during a property market downturn? Probably not, because of geographical diversification. The Morgan Stanley Real Estate Fund VII Global is raising $10 bln. Out of that not less than $1.5B will be earmarked for investing in China's high-end residential and commercial properties.

News Corp (NWS) boss Rupert Murdoch made public his dream of owning the New York Times (NYT). But the truth is that American media has been reduced to the third-rate street level by foreign owners. Our remaining media icons also cannot be subverted to the realm of yellow journalism.

COMPANY RESULTS:

Food packers ConAgra and Kraft made cuts to their profit outlooks.

Retailers J.C. Penney (JCP) and Kohl's (KSS), while reporting slide in same-store sales, still beat the consensus forecasts by the experts.

Collective Brands (PSS), Guess (GES) and Joy Global (JOYG) recorded positive earnings exceeding the consensus forecasts.

Casey's General (CASY), SAIC (SAI) and Staples (SPLS) produced earnings that conformed to the forecasts.

H&R Block's (HRB) earnings were disappointing.

CREDIT RATINGS:

Some regional banks had their credit ratings downgraded by Standard & Poor's:

First Horizon (FHN) and National City (NCC).
Zions Bancorp (ZION) and Regions Financial (RF), though not down-rated, had their oulooks stated as negative.

ANALYSTS' RATINGS:

The following companies received analyst upgrades:

ArQule (ARQL), Cabot Corp (CBT), Flowers Foods (FLO), Pharmacyclics (PCYC), United Tech (UTX),Tenet Healthcare (THC), U.S. Steel (X) and VF Corp (VFC).

Today's Downgrades are:
Adolor (ADLR), Allscripts (MDRX), Baytex Energy Trust (BTE), Ceradyne (CRDN), ConAgra (CAG), Kenexa (KNXA), McAfee (MFE), Medicis (MRX), Phillips-Van Heusen (PVH), Sciele Pharma (SCRX), South Fincl Group Inc (TSFG),Time Warner (TWX), Vertex Pharm (VRTX), Vodafone PLC (VOD) and Web.com (WWWW).

Is oil really the reason now for the high gas prices at the bunk? Because oil has gone down from the high of $147+ to around $105. Now they say they can't reduce gas prices due to precautionary cutbacks in production made in the face of hurricanes.

That stock market cannot take advantage of falling oil prices and strengthening dollar shows that there are other weak, inherent fundamentals that underlies market's choppy movements.Information technology, utilities and energy were losing and gaining financials and consumer discretionary sectors could not offset that.

As for the scorecard, the bull and the bear settled for a draw.