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| Weekly Wrap Up |
The week before Halloween, investors must have been feeling fearful, as the markets pulled back for the second week in a row. This week's losses were quite significant, with the Dow Jones losing about 260 points, the NYSE losing over 325, and the Nasdaq losing almost 110. The markets trended down the majority of the week, as investors focused on disappointing economics news, including an unexpected dip in consumer spending and a surprising drop in new home sales. The only positive trading day came on Thursday, as the GDP was reported to have grown 3.5%, and jobless claims did not increase, causing investors to experience temporary hope in the end of the recession. A busy earnings season continued, with a number of surprises. Disappointing profits were seen at Verizon (VZ: Charts, News, Offers), McGraw-Hill (MHP: Charts, News, Offers), United States Steel Corp (X: Charts, News, Offers), AK Steel Holding Corp. (AKS: Charts, News, Offers), Chevron Corp. (CVX: Charts, News, Offers) and Nintendo. Exxon Mobil (XOM: Charts, News, Offers) disappointed as well, reporting unchanging production levels and a 68% drop in earnings per share. Even in this mostly negative week, a few companies did perform better than expected, including Motorola (MOT: Charts, News, Offers), Procter & Gamble (PG: Charts, News, Offers), and Estee Lauder Cos. (EL: Charts, News, Offers). Finally, CIT Group (CIT: Charts, News, Offers) made headlines through the week as initially, the company couldn't agree with investor Carl Icahn, but by the end of the week Icahn was reportedly supporting CIT's restructuring ideas, and it is thought that the company will file for bankruptcy any day now. Crude oil futures fell throughout the week, dropping almost $4 to close at $77.00 a barrel. More Market News
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| Economic News |
US home price gains may not be sustainable-Shiller
The gains in U.S. home prices in recent months may not be sustainable and increases in some areas of the country appear to be in "bubble territory," an economist known for his property market expertise said on Tuesday.
Robert Shiller, an economics professor at Yale University and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, told Reuters Television he does not give quantitative forecasts on where home prices are headed but is concerned about the recent pace of increases. (Source: Reuters) Click here to read the full article
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Jobless claims little changed
The number of Americans filing for initial unemployment insurance were little changed last week, the government said Thursday, with a total figure that missed analysts' expectations.
There were 530,000 initial job claims filed in the week ended Oct. 24, down 1,000 from an unrevised 531,000 the previous week, the Labor Department said in a weekly report.
A consensus estimate of economists surveyed by Briefing.com expected 525,000 new claims.
The 4-week moving average of initial claims was 526,250, down 6,000 from the previous week's revised average of 532,250. (Source: CNN Money) Click here to read the full article
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US consumer spending dips first time in five months
US consumer spending, a critical growth driver, fell for the first time in five months in September, official data showed Friday amid fears the economy may slow just after exiting recession.
Household spending decreased 47.2 billion dollars or 0.5 percent last month, as expected by most economists, following a revised 1.4 percent jump in August, the Commerce Department said. It was the biggest drop since December 2008.
The fall in spending came as Americans' income turned flat in September following a 0.1 percent increase the previous month as the country emerged from nearly two years of recession stemming from a home mortgage crisis. (Source: Google News) Click here to read the full article
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| Business News |
CIT Seen Filing for Bankruptcy in Coming Days
The CIT Group (CIT: Charts, News, Offers) is likely to file for bankruptcy in the coming days, analysts and experts told Reuters.
Separately, the lender said Thursday that it had reached an agreement to reduce the amount of a $3 billion loan from Goldman Sachs (GS: Charts, News, Offers) made last year to about $2.13 billion and got a promise from Goldman not terminate the financing should CIT file for bankruptcy.
In return, CIT will pay Goldman $285 million, a proportional amount of the $1 billion termination fee due to Goldman, and post an additional $250 million in collateral.
CIT, a lender to small- and medium-size businesses, is trying to restructure its debt, and is offering investors two options. One path would be getting its unsecured debt holders - who hold a total of about $30 billion - to voluntarily exchange their bonds for new securities and equity. That path would avoid a bankruptcy filing. (Source: The New York Times) Click here to read the full article
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Ford makes biggest gains in Consumer Reports annual reliability report, Japanese still lead
Consumer Reports has just released results from its annual reliability survey and the findings show that Ford (F: Charts, News, Offers) has made major gains to place itself among or ahead the most reliable Japanese brands. CR reports that 90 percent of Ford, Lincoln and Mercury products scored average or better reliability, and important models like the mid-size Fusion scored above the Honda Accord (HMC: Charts, News, Offers) and Toyota Camry (TM: Charts, News, Offers). Not all was rosy for FoMoCo, however, as all-wheel-drive versions of the Lincoln MKS, MKX and MKZ all scored below average in reliability.
General Motors had 20 of 48 models score average reliability, while Chrysler saw one-third of its models place below average. The Asian brands, meanwhile, are still the standard bearer for reliability. (Source: Autoblog) Click here to read the full article
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U.S. Steel, AK Steel Decline on Results, Forecasts
U.S. Steel Corp. (X: Charts, News, Offers) and AK Steel Holding Corp. (AKS: Charts, News, Offers) fell in New York trading after reporting lower third-quarter results and offering fourth-quarter outlooks that were below analysts’ expectations.
U.S. Steel tumbled $3.17, or 7.8 percent, to $37.41 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest decline since Aug. 17. AK Steel fell $1.61, or 8.6 percent, to $17.18, the most since June 22.
The deepest U.S. recession in seven decades has cut demand for the metal used in construction and manufacturing. U.S. Steel, the largest U.S.-based steelmaker, today posted its third-consecutive quarterly loss and forecast another loss for the current period. AK Steel, the fourth-largest producer, reported third-quarter profit that fell 97 percent and said its average selling price will drop 2 percent in the fourth quarter. (Source: Bloomberg) Click here to read the full article
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Exxon’s Delicate Condition
Exxon Mobil (XOM: Charts, News, Offers) finds itself in ticklish circumstances that go well beyond the issue of the impact that sharply reduced crude prices had on its bottom line.
The oil giant faced a big hangover with a comparison to last year’s third-quarter profit of nearly $15 billion - still a record for any one-quarter profit performance - and it’s a test that it failed when profit declines amounted to more than analysts had been anticipating. Net fell more than two-thirds - steeper than had been expected - to $4.7 billion, and EPS of 98 cents missed targets of $1.03, even though analysts were factoring in the decline in crude prices from the average of $118 a barrel in last year’s third quarter to $68 a barrel in this year’s. As expected, that resulted in a loss for its refining business.
Exxon’s bigger short-coming may be in the stubbornness with which it has clung to its spending program, and the limits that might prevail upon its ability to return money to shareholders. (Source: Barron's) Click here to read the full article
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| Technology Focus |
Why is the Wii wilting?
Nintendo's Wii has been one of the most profitable games consoles ever sold, and after its launch in 2006, Nintendo took months to satisfy pent-up demand. This enabled the company to charge a premium price for its hardware and make large profits while rivals such as Sony (SNE: Charts, News, Offers) and Microsoft (MSFT: Charts, News, Offers) were losing money on every machine they sold.
Traditionally, manufacturers lose money on early sales in order to create a large fanbase. They make it back through sales of high-priced games and, later, on the consoles themselves, thanks to high-volume manufacturing and reducing the cost of the parts.
In the early days, Nintendo gained an extra benefit as the main - almost the only - supplier of Wii games. Third-party software developers such as EA had not expected the machine to be such a success and had not planned many games for it. (Source: guardian.co.uk) Click here to read the full article
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Sprint loses nearly half a billion dollars in third quarter
Subscribers continued to leave Sprint Nextel Corp. (S: Charts, News, Offers) during the third quarter, taking a toll on revenue and yielding a $478 million loss, the wireless carrier said Thursday.
In a release before the market opened on Thursday, Overland Park, Kan.-based Sprint reported a loss for the three months that ended Sept. 30 that amounted to 17 cents a share. It compared with a loss of $326 million, or 11 cents a share, during the same period in 2008. Twenty-one analysts surveyed by Thomson Reuters First Call reported a consensus estimate for a loss of 15 cents a share for the quarter.
Sprint’s net operating revenue for the quarter was $8.04 billion, down 9 percent from $8.82 billion last year. (Source: Bizjournals) Click here to read the full article
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Sony's Outlook Brightens
Sony’s (SNE: Charts, News, Offers) future is looking a bit brighter. The company said today that it now expects an operating loss of $655 million (60 billion yen) rather than $1.2 billion (110 billion yen).
This despite an operating loss of $356 million (32.6 billion yen) in the July-September quarter, from a profit of $120 million (11.05 billion yen) a year ago. Many analysts had expected Sony to post a bigger loss.
Still, Sony has a raft of problems to fix. Its mobile phone joint venture with Sweden’s Ericsson (ERIC: Charts, News, Offers) is struggling in the smartphone market. And while the profitability of its gaming and TV businesses are improving, they are expected to continue losing money for some time. Chairman and CEO Howard Stringer plans to discuss Sony’s latest strategic plans at a press event in November.
Here’s an excerpt of the Q&A part of today’s press conference with Sony’s CFO Nobuyuki Oneda. (Source: Business Week) Click here to read the full article
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| Your Money |
Why we don't hate Wal-Mart anymore
It seems like only days ago that Wal-Mart (WMT: Charts, News, Offers) was the most evil company on the planet.
The list of accusations: It locked workers in stores overnight and ignored overtime rules; it didn't give health-care benefits to a lot of workers; and its execs dreaded union organizers so much they actually shut down a store to avoid letting the labor guys in the front door.
Equality for women employees? Forget about it. That was for East Coast, Hillary-loving wimps, or Wegman's, to worry about. And then there was the part about alleged sweatshops in China. (Sam Walton, back in the day, personally hired toddlers. Right?) And let's not forget the decimation of Main Street, USA.
To be honest, even long-time Wal-Mart (WMT, Fortune 500) admirers had to admit that some of this was true. The company was a bit evil. (Source: CNN Money) Click here to read the full article
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Quiz: Think You Understand Markets? Prove it
Know your stocks from your bonds? Your shorts from your longs? Many investors claim to. Unfortunately, some of those investors don't live up to their expectations. How do you rate? We've selected some questions from the Financial Industry Regulatory Authority's test of investor knowledge. The organization maintains the quiz as part of its mission to promote investor education. See how you do. . . (Source: CNBC) Click here to read the full article
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