Taking Stock of Wall Street 2008-10-22

Bull seems to be retreating in fear as bear firmly monopolizes the Wall Street. The problem for the market is that now it has resumed scrutiny of company fundamentals more carefully instead basing its action on the banking sector news. The fundamentals aren't rosy either. Even when nearly 50% companies attain above the expected earnings and some 20% are in-line with expectations, almost all companies say they are not confident in repeating such results in the immediate future - the next quarter!

GLOBAL PICTURE

Hungary raised its benchmark interest rate to 11.5% to stabilize its currency, the forint. It has already received loan from European Union and may get help from the International Monetary Fund (IMF).

Russia, Iran and Qatar are in an early consultation for a natural gas cartel resembling OPEC for oil. The European Commission warned of counter measures if the trio tried price-fixing.

Bank of Japan is planning to pay interest on reserves maintained by its banking institutions.

China will be infusing $19 bln into the Agricultural Bank of China.

South Korea, which already has a $100 bln bailout plan, is thinking of a fiscal stimulus package for its taxpayers.

Most stock markets worldwide had a bad day today.

US ECONOMIC DATA

The Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending October 17:

The Market Composite Index fell by 16.6%, with the four-week moving average down by 9.2%.

The Refinance Index dropped by 23.5%, with the four-week moving average down by 14.2%

The Purchase Index decreased by 10.9%, with, the four week moving down by 4.9%.

The refinance mortgage activity decreased from 46.4 % to 42.6 %, while adjustable-rate mortgages increased from 2.6% to 2.7%.

30-year fixed-rate mortgages rate fell to 6.28% from 6.47%.

15-year fixed-rate mortgages dropped to 6.05% from 6.17%

EIA Petroleum Reserves Data:

Crude oil inventories were up by 3.18 mln barrels, exceeding the consensus figure of 2.3 mln.

Gasoline inventories rose by 2.71 mln barrels against the forecast figure of 2.1 mln.

Distillate reserves too were up by 2.16 mln barrels, far over the expected rise of 100,000.

Crude oil DOWN by -$5.40 (-7.47%) to $66.92

Gold DOWN by -$32.80 (-4.27%) to $735.20.

CBOE Volatility (VIX) was 69.95,back UP by 16.54 from Friday.

US Dollar Index rallied by 1.8% to 85.5. That is 11.5% up for the year. The main reason for this rise was the warning issued by Bank of England about possible recession in UK and the resulting fall of British pound.

STOCK MARKET INDICES

Dow was DOWN by -514.45 (-5.69%) to 8,519.21

S&P 500 DOWN by -58.27 (-6.10%) to 896.78

Nasdaq DOWN by -80.93 (-4.77%) to 1,615.75

NYSE

Daily Volume: 1.51 bln

A/D Ratio: 509 stocks advanced against 2703 declined

52-week Hi/Lo: 1 stock climbed to new Highs while 441 went down to new Lows

Nasdaq

Daily Volume: 2.58 bln

A/D Ratio: 427 stocks advanced against 2453 declined

52-week Hi/Lo: 2 stocks climbed to new Highs while 312 went down to new Lows

MARKET NEWS

Yahoo (YHOO) is planning to cut 1,500 jobs (10% of its workforce).

EBay's (EBAY) has antagonized its long-term power as it moves to implement an instant payment policy.

Eli Lilly (LLY) seems to be opting for a $1.42 bln settlement with federal prosecutors in its case with federal prosecutors over alleged improper marketing of the psychiatric drug Zyprexa.

Nissan (NSANY) also is going for 780 job cuts globally due to fall in auto sales.

Merck (MRK) will be laying off 7,200 workers by the next three years.

Boeing (BA) is still receiving global orders for aircrafts though production is considerably hampered by strike by its machinists. Another round of talks with the labor unions is scheduled for tomorrow by federal mediators.

M&A NEWS

Samsung gave up its $5.9 bln bid for SanDisk (SNDK)

General Motors (GM) and Chrysler seem to be unsure of their earlier swap talks.

GM is now reportedly looking for an outside investor.

Similarly, Chrysler is heard to be talking to Nissan (NSANY) and Renault. Renault said earlier this week that they are not involved!

COMPANY RESULTS

* Companies that exceeded market's expectations on quarterly earnings:

Northrop Grumman (NOC), McDonald's (MCD), Allegheny Technologies (ATI), General Dynamics (GD), Baker Hughes (BHI),

EMC (EMC), Lam Research (LRCX), F5 Networks (FFIV), Intersil (ISIL), Amgen (AMGN), Seagate Technology (STX),

Cirrus Logic (CRUS), Amazon.com (AMZN), Amerigroup (AGP), Plantronics (PLT), Applera (ABI), Merck (MRK),

Knight Capital Group (NITE), Kinetic Concepts (KCI), Air Products and Chemicals (APD), Kimberly-Clark (KMB), Dover (DOV), ConocoPhillips (COP), Northwest Airlines (NWA), Apple (APPL) McDonald's (MCD), Philip Morris International (PM),

VMWare (VMW), Noble Energy (NE) and WellPoint Health (WLP).

* Companies that matched market expectations:

Wyeth (WYE), Arkansas Best (ABFS), Yahoo (YHOO), Anadigics (ANAD), Chipotle Mexican Grill (CMG) and Robert Half International (RHI).

* Those that missed the forecasts:

Boeing (BA), AT&T (T), Wachovia (WB), Foundation Coal (FCL), Ryder System (R), Coventry Health Care (CVH),

Alliance Data Systems (ADS), Ryland Group (RYL) and Smurfit-Stone Container (SSCC).

ANALYSTS' RATINGS

• Stocks upgraded include:

Boston Scientific Corp (BSX), Broadcom Corp (BRCM), Carter Holdings Inc (CRI), Cascade Financial Corp (CASB), CBRL Group Inc

(CBRL), Cerner Corp (CERN), Genentech Inc (DNA), Hormel Foods Corp (HRL), Lexmark Inc (LXK), Middleburg Financial Corp

(MBRG), Southwest Bancorp Inc (OKSB), Tellabs Inc (TLAB), Torchmark Corp (TMK), Washington Trust Bancorp Inc (WASH) and WesBanco Inc (WSBC).

• Downgraded stocks are:

Ameriprise Financial Inc (AMP), Apple Inc (AAPL), Biogen Idec Inc (BIIB), Computer Task Group Inc (CTGX), Cosan Ltd (CZZ),

Dynavax Technologies Corp (DVAX), Euroseas Ltd (ESEA), GATX Corp (GMT), Lincoln National Corp (LNC), Patriot Coal Corp (PCX),

Precision Castparts Corp (PCP), Scripps Networks Interactive Inc (SNI), Suntech Power Holdings ADR (STP) and Texas Instruments (TXN).

HOW MUCH TRUST BANKS HAVE IN EACH OTHER'S CREDIT WORTHINESS?

Overnight Libor rate fell to 1.12%, the lowest since 2004. It is well below the federal benchmark rate of 1.5%. That means our banks are slowly gaining confidence in making short-term loans to other members of their sector.

POINTERS TO THE FUTURE

• IMF still forecasts recession in Europe, though slightly less than previously feared as bailout plans are in place.
• Hedge funds have lost nearly 8% of their value equal to $88 bln during September.
• Analysts' consensus forecasts for tomorrow's weekly unemployment claims data is higher at 465,000.