Taking Stock of Wall Street 2008-10-15

Another day of bearish fall, in fact the steepest since Black Monday in 1981. All this, despite no less than 10 companies bringing out good earnings reports, yesterday evening and today morning!

Marketmen, in panic, were taking any negative data as another reason to cringe.

But the ridiculous part is that the same data was negative last few month too. They denied the existence of recessive pressures and pushed the market up at the slightest pretext, then.

They ridiculed anybody, even learned economists, who said recession had already started because it didn't suit them.

But the result of such self-denials is that when paranoia sets in, they overreact as chances for ad hoc correction of economic ills have already been wasted.

Even positive fundamentals are cast away on the way side as they run for cover, spreading panic throughout the nation.

In the land of Washington, Lincoln and Freedom, people at the top were expected to be unselfish and non-greedy though ambition and motivation were encouraged. Now since they have proved unworthy of that trust, the government is forced to take active part in business ownership!

No point now, in raising the alarm,"Socialism! Socialism!".

GLOBAL PICTURE

European stock markets dropped by -2% to -3%. Earlier, in Asia it was by around -5%.

Iceland's Central Bank dropped its key interest rate from 15.5% to 12%. It also availed of $545 mln funding from Denmark and Norway.

The Brazilian stock exchange halted trading after its index fell through 10%.

Hong Kong started full guarantee on bank deposits. Earlier they also instituted a liquidity plan for the domestic banking system.

China may find its growth slowing as foreign investors withdraw their investments. Yet it is not expected to be as drastic as the outflow that happened in the case of Russia recently.

Japan's trade deficit touched $2.3 bln in August.

US ECONOMIC DATA

US Bureau of Census Retail Sales data for September - fell by -1.2%, more than the forecast of -0.7%. Compared to last year sales are down 1.0%.

Producer Price Index for September - fell by 0.4%. However, if food and energy prices were excluded, it would have been an increase in PPI by +0.4%, double the expected 0.2% increase!

The Empire State Manufacturing Survey - New York area business conditions index dropped 17 points to -24.6.

The new orders index fell 25 points to -20.5 and the shipments index by 9 points to -8.9.

The inventories index recorded a sharp decline, falling 15 points to -17.1. The average workweek index fell to -9.8.

The Mortgage Bankers Association (MBA) Weekly Mortgage Applications Survey for the week ended October 10 - Mortgage applications rose 5.1% compared to last week but was lower by 17.0% compared to same week of previous year. The four-week moving average went down by 7.9 percent%.

The Refinance Index increased by 12.5%. Purchase Index decreased 0.3%.

The fixed-rate mortgage interests increased:

15-year fixed-rate mortgages increased to 6.17% from 5.71%

30-year fixed-rate mortgage rate increased to 6.47% from 5.99%.

Beige Book, Fed's Report on Economic Activity - Economic activity slowed in September in all the nations twelve regions. Real estate, both residential and commercial, was weakening. Credit availability was tightening. The positive aspect was that inflationary pressures were lessening.

Crude oil dropped by -$1.12 (-1.50%) to $73.42

Gold fell by just -$0.50 (-0.06%) to $839.00

CBOE Volatility again soared through 14.12 points to 69.25.

MARKET INDICES

Dow went DOWN by -733.08 (-7.87%) to 8,577.91

S&P 500 DOWN by -90.17 (-9.03%) to 907.84

Nasdaq DOWN by -150.68 (-8.47%) to 1628.33

NYSE

Daily Volume: 1.63 bln

A/D Ratio: 343 stocks advanced against 2912 declined

52-week Hi/Lo: 2 stocks climbed to new Highs while 201 went down to new Lows

Nasdaq

Daily Volume: 2.55 bln

A/D Ratio: 433 stocks advanced against 2476 declined

52-week Hi/Lo: 5 stocks climbed to new Highs while 217 went down to new Lows

MARKET NEWS

Now that Wall Street's financial worries have been covered, they got something to worry about: economy! As if, it was yesterday night it went red.

And they worried about it in style that the indices fell to the lowest levels in a quarter century.

With crude oil falling to lower seventies, energy sector stocks were the first victims, followed by the commodity-based stocks.

Then that spread over to other eight sectors of the market.

COMPANY NEWS

While car sales everywhere is falling, Ford (F) is positioning in India's small car sector with a $500 mln investment, in time for a revival in 2010.

Samsung intends to sells computers in USA from mid-2009 in a market segment that is already saturated. So let us hope they will offer some price advantages.

Merrill Lynch's (MER) Asian Real Estate Fund investing in Japan, China, South Korea and India, notched up $2.65 bln even when market is in a free fall!

M&A NEWS

GlaxoSmithKline (GSK) is acquiring the Egyptian operations of Bristol Myers Squibb's (BMY).

COMPANY RESULTS

Following companies declared in excess of the analyst's forecasts:

Abbott Labs (ABT), Coca-Cola (KO), Intel (INTC), JPMorgan Chase (JPM), State Street (STT), Wells Fargo (WFC), eBay (EBAY). Crown Holdings (CCK), Polycom (PLCM), Charles Schwab (SCHW), CSX (CSX), Marshall & IIsley (MI) and Xilinx (XLNX).

These companies produced earnings that missed the market's consensus:

Piper Jaffray (PJC), Spansion (SPSN), Kinder Morgan Partners (KMP), WD-40 Company (WDFC), Kinder Morgan Energy Partners (KMP),Delta Airlines (DAL) and Novellus Systems (NVLS).

ANALYSTS RATINGS

The company stocks upgraded include:

Abercrombie & Fitch Co (ANF), Accenture Ltd (ACN), Amcore Financial Inc (AMFI), AutoZone Inc (AZO),

AvalonBay Communities REIT (AVB),bebe stores Inc (BEBE), Callon Petroleum Co (CPE), Centerstate Banks of Florida Inc (CSFL),

Comerica Inc (CMA), Dick's Sporting Goods Inc (DKS), Dollar Tree Inc (DLTR), Equity Residential REIT (EQR), Fifth Third Bancorp (FITB),

First Mercury Financial Corp (FMR), First Security Group Inc (FSGI) First State Bancorp Inc (FSNM), Frontier Financial Corp (FTBK),

Genentech Inc (DNA), Home Depot Inc (HD), La Jolla Pharmaceutical Co (LJPC), Lowe's Companies Inc (LOW), Macatawa Bank Corp (MCBC),

Mid-America Apartment Communities REIT (MAA), Pacific Continental Corp (PCBK), Petsmart Inc (PETM), Salesforce.com Inc (CRM),

Seacoast Banking Corp of Florida (SBCF), SRA International Inc (SRX), SunTrust Banks Inc (STI), Superior Bancorp (SUPR), TJX Companies Inc (TJX),

UDR Inc (UDR), Ultimate Software Group Inc (ULTI), Virgin Mobile USA Inc (VM), Wells Fargo & Co (WFC) and Wyeth (WYE).

Company stocks downgraded are:

Biomarin Pharmaceutical Inc (BMRN), Callaway Golf Co (ELY), Helicos BioSciences Corp (HLCS), Johnson Controls Inc (JCI),

KBW Inc (KBW), Royal Bank of Scotland Group ADR (RBS), Silicon Motion Technology Corp (SIMO), Volterra Semiconductor Corp(VLTR),

W&T Offshore Inc(WTI) and Whitney Holding Corp (WTNY).

FED TALK

Fed Chairman Bernanke addressed the Economic Club of New York. He was confident that the decisive and proactive actions taken by the government will lead to a quicker resolution of the financial crisis. Yet there are no easy quick fixes. It is going to take some time for the results to be felt.

President of St. Louis Regional Fed, Bullard predicted flat or slightly negative GDP for the third quarter, considering the negative September retail sales report.

President of the Boston Regional Fed, Rosengren forecast easing of interbank Libor rates and spreads soon.

POINTERS TO THE FUTURE

- While the interbank credit system is easing, the rise in mortgage rates will be a damper.