Taking Stock of Wall Street 2008-10-28

It appeared like global festivity on Tuesday that started in the west and traveled with the sun from east to west. All major exchanges in the world took part in the rally. One aspect of today's rally was reminiscent of the good old days: if a stock announced good earnings result, it lifted the whole sector with it!

GLOBAL PICTURE

European market indices had an additional boost from better than expected results from Volkswagen and British Petroleum.

The Australian and New Zealand dollars, two commodity currencies, rose against the U.S. dollar. Recently their central banks were buying own currencies to ease the pressure on a rising US dollar.

French unemployment rose by 41,000 in August, breaking a fifteen-year record. EU is expected to slash benchmark interest rate to 2.75% from the present 3.25%.

South Korea will follow up its interest rate cuts with a stimulus package for its taxpayers.

Japan banned short selling as the Nikkei index shrunk by nearly one-fifth in one week.

US ECONOMIC DATA

The Conference Board's Consumer Confidence Index - took a turn for the worse to a record low of 38, far lower than the consensus figure of 52. It had recorded a comfortable 61.4 in the previous month. The last time it reached this low was forty years ago.

ICSC Weekly Retail Store Sales - showed a moderate increase of0.5%. In the previous week, it had fallen by 1.6%. On an annual basis, sales showed an increase of 1.3%. Almost all that was accounted by daily necessities and not luxury goods.

Redbook National Chain Store Sales - fell 1.1% in the first three weeks of October compared to previous month. On an annual basis, there was a moderate gain of 0.7%.

S&P/Case-Shiller Home Price Index - fell 16.6% in August. In July also it had fallen by 16.3%. 35-40% of the sales were that of foreclosed homes.

Richmond Fed's Regional Manufacturing Index - fell to -26 in October. The previous month's reading was -18. Shortfall was seen mostly in orders, shipments and jobs.

Crude oil DOWN by -$0.49 (-0.76%) to $63.51

Gold DOWN by -$2.40 (-0.32%) to $740.50.

CBOE Volatility (VIX) settled at 66.96,DOWN by -13.10 (-16.36%) from the previous day.

US Dollar Index made a halt in its upward run. It retreated slightlyby-0.23 (-0.27%) to 86.69

STOCK MARKET INDICES

Dow was UP by 889.35 (10.88%) to 9065.12

S&P 500 UP by 940.51 (10.79%) to 940.51

Nasdaq UP by 143.57 (9.53%) to 1,649.47

NYSE

Daily Volume: 1.68 bln

A/D Ratio: 2538 stocks advanced against 684 declined

52-week Hi/Lo: 14 stocks climbed to new Highs while 620 went down to new Lows

Nasdaq

Daily Volume: 2.79 bln

A/D Ratio: 2042 stocks advanced against 896 declined

52-week Hi/Lo: 0 stock climbed to new Highs while 621 went down to new Lows

MARKET NEWS

Boeing (BA) was a leader today in the market. The company reached a four-year labor agreement with its machinist union.

Google (GOOG) settled with publishers and authors with a $125 mln compensation whose books were included in their digitized book collection.

Wal-Mart (WMT) is cutting back expansion plans and 5000 jobs.

Whirlpool (WHR) also is retrenching 5,000 jobs by next year.

Porsche announced it was increasing its stake in Volkswagen.

GE (GE) taps the Fed's new commercial-paper facility, borrowing under $5B.

M&A NEWS

BG Group (BRGYY) is acquiring a 57% ($3 bln) stake in Queensland Gas.

Yahoo (YHOO) is reportedly reconsidering the earlier Microsoft (MSFT) offer. This after their advertizing alliance with Google (GOOG) ran into rough weather from the anti-trust regulators.

Hexion postponed merger with Huntsman (HUN) as bankers backed out of the funding arrangement.

MasterCard (MA) and Visa (V) settled the case with competitor Discover (DFS) with $2.75 bln compensation.

COMPANY RESULTS

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

BP (BP), Whirlpool (WHR), Occidental Petroleum (OXY), U.S. Steel (X), Valero Energy (VLO),

Banco Santander (STD), Schnitzer Steel Industries (SCHN), Convergys (CVG),

Estee Lauder Companies (EL,) EarthLink (ELNK), Bemis (BMS), Royal Caribbean Cruises (RCL), Vishay Intertechnology (VSH),

Under Armour (UA), McGraw-Hill Companies (MHP),

Interpublic Group of Companies (IPG), Amedisys (AMED), Smith International (SII),

Check Point Software Technologies (CHKP),

* Companies that missed the forecasts:

Nomura (NMR), AM Health Management Associates (HMA), Waddell & Reed Financial (WDR), Sepracor (SEPR),

Masco (MAS), Entergy (ETR),Boyd Gaming (BY), USG (USG), Temple-Inland (TIN), Kansas City Southern (KSU), Ashland (ASH)

ANALYSTS' RATINGS

• Following stocks received upgrades:

Biogen Idec Inc (BIIB), Boardwalk Pipeline Partners LP (BWP), British Sky Broadcasting Plc ADR (BSY),

China Telecom ADR (CHA), Corn Products International Inc (CPO), HealthSouth Corp (HLS),

Integra Life Sciences Holdings Corp(IART), L-1 Identity Solutions Inc (ID), Marvel Entertainment Inc (MVL),

PepsiAmericas Inc (PAS), Plum Creek Timber Co Inc (PCL), Pulte Homes Inc (PHM), Ryanair Holdings ADR (RYAAY) and THQ Inc (THQI).

• Downgraded stocks are:

AerCap Holdings NV (AER), AmeriCredit Corp (ACF), CGG Veritas ADR (CGV), Embarq Corp (EQ),

Energy Conversion Devices Inc (ENER), Evergreen Solar Inc (ESLR), FLIR Systems Inc (FLIR), GT Solar International Inc (SOLR), Harmonic Inc (HLIT), ION Geophysical Corp (IO), Lamar Advertising Co (LAMR), National City Corp (NCC), News Corp (NWS), Nighthawk Radiology Holdings Inc (NHWK), Openwave Systems Inc (OPWV),

PC-TEL Inc (PCTI), Ralcorp Holdings Inc (RAH), Ramco-Gershenson Property Trust (RPT),

Rigel Pharmaceuticals Inc (RIGL), Sunpower Corp, (SPWRA), Travelzoo Inc (TZOO) and Viad Corp (VVI).

POINTERS TO THE FUTURE

• The Treasury faces unprecedented financing needs in 2009 to fund a growing deficit and a $700B rescue program,
• It has become fashionable for Wall Street to paint current buyers of homes and securities as "BARGAIN HUNTERS"? But, people can buy only what they can afford. Also, most of the jacked up prices they paid before may have been just speculating premiums the market mavens pocketed from buyers. Now that manipulative profits are not forthcoming, the same customers are called names as if they are doing some forbidden thing. The minions of the financial world should realize that those brave souls are the ones that are holding the fort while everything else is crumbling.
• The world stands to lose nearly $3 tln in this credit crisis. The aftermath: Foreign governments will be circumspect in buying garbage issued by US investment banks and may opt more for government-backed securities.

• Porsche announced it was increasing its stake in Volkswagen. That was in Europe. But, it had its reverberations over the Atlantic. The sudden verbal attack on Citibank by some journalists for not agreeing to merger with Goldman Sachs (in SEPTEMBER! and now October is almost gone!) was reportedly the result of what happened in Europe.

But, how long can journalists do cover-up work for investment bankers?

If the rumors were true - sudden, unexpected 200% increase in Volkswagen share price had Goldman Sachs piling up losses on its SHORT positions on that stock.

It doesn't sound logical that Citibank's refusal to merge was responsible for those losses. How can the administrative decision taken by CEO of one company for the trading losses of a second company? Citibank has the right to refuse any suitors it doesn't like, even if they are in dire straits. They nor the public are responsible if Cit's shar prices went too high for the suitor.

A degree in journalism should not be the license to do cover-up work for investment bankers and misinform the public. Public is not going to force Citi into the hands of its competitors for the simple reason that they are fed up with all bankers, even considering them unpatriotic and even treacherous.

Also, almost all these biggies are NOW owned by US taxpayers. The rules of the game have changed.

All bankers should now realize that they are now subject to the strict surveillance of the Federal Auditors, a rare breed of impartial Americans! Even ethical misdemeanors can prove costly. Not to speak of possible incarceration on financial losses.