Taking Stock of Wall Street 2008-09-09

If market goes down and oil goes up, market blames oil.

If market goes down and oil goes down, market blames the oil sector.

When market goes up, the credit usually goes to financials and techies!

And today, market was like the drunk guy who dreamed about winning the jackpot and woke up only to realize he didn't.

Treasury's bailing out of Fannie and Freddie was celebrated with such euphoria yesterday. Today morning, market woke up to see the usual adverse economic conditions greeting it at the open.

When media says Fed is worried about global economic worries, one doesn't know whether to laugh or cry. Because, it is this obsession with foreign economies while fully ignoring Americans at home that is exactly at the root of the very same global problems.

Our government should realize that only by making Americans rich, USA can enrich rest of the world too. Spending money abroad without first spending on Americans is like putting money into a bottomless hole.

These last few days proved that beyond doubt. We saw almost all foreign stock exchanges and some foreign central banks reacting negatively to what happened here in USA.

Again, another set of data made it difficult for the market:

National Association of Realtors reported its index of pending home sales fell -3.2% in July exceeding the expected decrease of -1.5%. Pending sales fell in the West and Northeast while it was flat in the South. In contrast, Midwest showed a small increase. June pending home sales were revised higher to a 5.8% increase from the earlier figure of 5.3%.

Wholesale inventories report showed a rise of 1.4% in July, exceeding the expected increase of 0.7%. June wholesale inventories were revised lower to a 0.9% gain from the earlier reported 1.1% gain.

According to U.S. wholesale sales report, the wholesale sales decreased by 0.3% in July. In June it had showed a 3% rise.

Redbook reported that National chain store sales fell 0.8% in the first week of September vs. the previous month. It gained 1.8% vs. a year ago.

The Congressional Budget Office said the federal budget outlook has deteriorated due to a weakening economy and rising war spending. The U.S. deficit this year is likely to be double that in 2007.

Crude oil prices fell a steep 4.2% to $101.87 per barrel, the lowest level since April. It then recovered to 103.26.
Gold lost by -$10.50 to $792.00.

Now to actual market performance:

Dow fell by 280.01 (-2.43%) to 11,230.73
Nasdaq fell by 59.95 (-2.64%) to 2,209.81
S&P 500 fell by 43.28 (-3.41%) to 1,224.51

Out of 3280 stocks traded at the NYSE, only 404 advanced against 2817 declined. The volume was 1.67 bln. While 41 stocks rose above their 52-week Highs, 304 stocks fell below their 52-week Lows.

At the NASDAQ, out of 2986 stocks only 578 advanced against 2311 declined. The volume was 2.59 bln. While 41 stocks rose above their 52-week Highs, 200 stocks fell below their 52-week Lows.

Market was falling right from the open. When a company is in dire straits not only news but rumors abound. First
Standard & Poor's put Lehman (LEH) on its credit watch list casting doubt's on LEH's ability to raise additional capital.

Then came the news that Korean Development Bank is no longer interested in investing in LEH. LEH plummeted by -40%.

Later rumors about denial of any such knowledge by KDB or a possible bid by Goldman Sachs did not make any ripples.

Financials suffered in the process. In the lead were American International Group (AIG), Washington Mutual (MM) and American Express (AXP).

The first victim of Treasury's bailout of Freddie Mac and FannieMae has spoken:
Wells Fargo (WFC) will take a non-cash charge of $480 mln related to preferred securities of Fannie and Freddie.

But Fannie is back in business with a proposed sale of its first post-takeover tranche of benchmark notes. Leading names like Barclays (BCS), Citigroup (C) and JPMorgan (JPM) will be the managing the show.

The question is whether it will have to make concessions to the bidders as happened with Freddie's last auction.

US Bancorp (USB) declared that its non-performing assets and charge-offs are increasing quarter to quarter.

Homebuilders fell after pending home sales came out, including Hovnanian Enterprises (HOV), DR Horton (DHI), KB Home (KBH), Pulte Homes (PHM),Toll Brothers (TOL) and Lennar Corp (LEN).

Insider buying by Michael Dell of another $100 mln of his own company's stock boosted DELL.

Strange how investors are more worried about Steve Jobs getting leaner than about his thinner wares. Apple (AAPL) unveiled the thinnest nano yet with more memory, 120 Gigabytes. Jobs blames rumors of his deteriorating health on short-seller hedge funds.

McDonald's (MCD) reported 8.5% rise in global same-store sales.

Hewlett-Packard (HPQ) is bring out its 24-hour notebook battery for XP soon.

Considering BHP Billington's (BHP) interest in Rio Tinto (RTP), it will be interesting news that Norway sold its £500 mln stake in RTP. They object to grossly unethical conduct in one of RTP's mines.

CIT Group (CIT) canceled its plans to sell its $4.5 bln rail franchise as financial situation has brightened up.

GOOGLE brings in good news and bad news:

The Justice Department has hired its former antitrust litigator Sanford Litvack to investigate the Google (GOOG) and Yahoo (YHOO) search alliance.

But GOOG seems to be unperturbed and busy:

-brokering TV ads on cable networks owned by GE's NBC, gaining a foothold in the TV-ad market.

-halving the retention of users' personal data to nine months

-receiving double the present price forecast from analysts with its recent deals.

Texas Instruments (TXN) fell in the morning due to analyst downgrades, only to snap back up in the after-hours trading.

Tobacco manufacturer Reynolds American (RAI) is laying off up to 10% of its workforce and will be focusing more on its successful brands.

Analysts' Ratings:

The following stocks were upgraded:
Century Casinos (CNTY), Credit Suisse (CS),Hewlett-Packard (HPQ), Kimberly-Clark Corp (KMB), MasterCard (MA) and Prana Biotechnology Ltd (PRAN).

Downgrades included:
Authentec Inc (AUTH), BB&T Corp (BBT), Cathay Bancorp (CATY), The Colonial BancGroup (CNB), DR Horton (DHI) Gartner Group Cl A (IT), Potlatch Corp (PCH), Goodyear Tire (GT), KB Home (KBH), Massey Energy (MEE), Novartis (NVS), PPD Inc. (PPDI), Procter & Gamble (PG),Pulte Homes (PHM), SanDisk (SNDK) TCF Financial Corp (TCB), Toll Brothers (TOL), Texas Instruments (TXN), Tw Telecom (TWTC), Webster Financial Corp (WBS) and Wet Seal Inc (WTSLA).

Yes, the bull had to make a hasty retreat under the hostile circumstances created by falling energy stocks and worries of a global economic slowdown. Not to speak of fears about a tottering financial sector.

According to earlier statements by Ali al-Naimi, the Saudi Petroleum Minister, the market was fairly well-balanced and didn't need any adjustments.

But, now reports from Vienna says OPEC will roll back daily output to 28.8 mln barrels, down from the previous levels of 29.67 mln barrels a day, determined in July.

OPEC President Chakib Khelil said the new quotas would cut output by 520,000 barrels a day. OPEC's review found that earlier measures have ensured adequate supply in the market and that world inventories have risen to comfortable levels.

Oil prices, which had reached a five-month low recently, is already firming up in the global markets tonight after OPEC's decision.

Recent hikes in prices has kindled public awareness in USA in conserving energy.

EIA's projections released today expects the total U.S. petroleum consumption to decline by 610,000 barrels per day in 2008 and, considering the poor state of economy, the trend is to continue into 2009.

With OPEC slashing production, attention now reverts to Washington.

Tomorrow is Wednesday and EIA will report its weekly data on petroleum inventories in the morning. And natural-gas supplies data comes out on Thursday morning.