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| Weekly Wrap Up |
After coming off its worst month in 21 years, the Dow Jones Industrial Average ended the week down close to 400 points. Monday was a relatively quiet day and Tuesday's markets were boosted by encouraging earnings reports. In the two days following the historic presidential election, investors were jittery about the economy and the direction it will take under Barack Obama and the Dow Jones Industrial Average sank over 900 points. Thursday's announcement that European and British banks cut key interest rates did little to boost US markets. Friday saw a brief recovery but markets ended the week in the red. A Labor Department report was released on Friday showing that employers cut 240,000 jobs in October. Lending rates continued to improve as banks started seeing the benefits from various stimulus plans. The 3-month Libor fell to 2.51% from 2.71% on Tuesday. A report from the Institute for Supply Management showed U.S. manufacturing activity fell to 38.9 in October from 43.5 in September. This was the weakest reading in 26 years. Automakers reported dismal numbers on Monday with General Motors Corp. (GM: Charts, News, Offers) sales plunging 45% in October. Ford Motor Co. (F: Charts, News, Offers) also said that sales in October slipped by 30%. Both auto manufacturers cited tight credit markets and a dip in consumer confidence as the reasons behind the drop. Cisco (CSCO: Charts, News, Offers) said that it saw a dive in orders in October and will stop hiring. AT&T (T: Charts, News, Offers) announced that it will buy Wayport, Inc. for $275 million. GMAC Financial Services said its third-quarter loss widened to $2.52 billion. After jumping to $70.53 a barrel on Tuesday, U.S. light crude oil for December delivery ended the week at $61.19 a barrel. Both Treasury prices and the dollar ended the week lower. More Market News
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| Economic News |
Business at America's manufacturers from plastic companies to lumberyards plummeted to the lowest level in 26 years in October, in what many economists called a sure sign of recession. The Institute for Supply Management said Monday its manufacturing index fell to 38.9, the lowest reading since September 1982 when the U.S. was in a deep recession. Any reading below 50 signals contraction. "It's a report that confirms everything we learned in the last couple months — the economy is falling deeper into recession," said Stuart G. Hoffman, senior vice president and economist for The PNC Financial Services Group. The index had been hovering near what economists call "the boom-bust" line for most of the year until its sharp fall in September brought it to the lowest level since the aftermath of the Sept. 11 attacks. (Source: MSNBC) Full Story
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It is an open question whether the history books will call this "the Panic of 2008.'' A panic occurs when terror replaces thinking and reason, as happened in mythology when Pan frightened the Titans in their epic battle with the gods. This stampede to the exits certainly looks like a panic. Markets are pricing in catastrophes beyond modern experience. Corporate bonds, for example, are trading at levels consistent with default rates of about 50 percent. If half of U.S. firms default on their debt, we might need to find a word that is worse than "depression''. But the view that these prices have been driven by a panic is really quite hopeful. It suggests the truth can't possibly be so bad, that sooner or later markets will wake up and recover. Such hope may be misplaced. We should all pray that we are living through a panic. It is far scarier if markets aren't panicked, but rather are functioning well and properly discounting the probability that the economy will be horrific. (Source: Bloomberg) Full Story
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The nation's retailers saw their sales plummet last month to the weakest October level since at least 1969, as the financial crisis and mounting layoffs left shoppers too scared to shop. The stunning drop-off from an already weak September performance is further darkening the outlook for the holiday season and dimming hopes for any industry recovery until at least the second half of next year. As merchants reported their dismal sales figures Thursday, Wal-Mart Stores Inc., the world's largest retailer, proved to be among the few bright spots as it benefits from shoppers focusing on buying basics at discounters. Most other stores, from luxury merchants to teen retailers, suffered steep sales declines as consumers were spooked by shrinking retirement funds and volatile markets. The number of people continuing to receive jobless benefits reached its highest level in more than 25 years, according to government figures released Thursday. (Source: Forbes.com) Full Story
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| Business News |
Toyota (TM: Charts, News, Offers)expects its earnings for this fiscal year will be less than a third of last year's profit and its lowest annual total in eight years. The forecast shows it is feeling the effects of a contraction in the vital U.S auto market as well as the credit crunch that has led to big losses at its American rivals. Toyota Motor Corp., which had been riding high on the success of its Prius hybrid and Camry sedan, also blamed a surging yen on Thursday as it slashed its profit forecast for the year ending March 2009. The stronger yen erodes Toyota's overseas income. Japan's biggest automaker reported that its profit plunged 69 percent to 139.8 billion yen ($1.4 billion) in the July-September quarter. Quarterly sales dropped 8 percent to 5.98 trillion yen ($60 billion). (Source: Yahoo! Finance) Full Story
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Dean Foods Co (DF: Charts, News, Offers), the largest U.S. dairy company, posted a third-quarter profit that missed Wall Street forecasts due to increased costs and marketing for its Horizon Organic dairy business. Dean also forecast full-year earnings below analysts' estimates and issued a 2009 outlook that could trail expectations, sending its shares down 21 percent and erasing gains made in the last week. The organic dairy business was hit by rising costs for organic milk as well as spending on marketing to stave off competition. Dean's price increases on Horizon Organic milk are double the increases seen from private-label rivals, pushing its price gap to the upper limit of what it sees as an acceptable range. The higher the price gap, the more likely it is that consumers will trade down to private-label products in a tough economy. The company also expects organic milk supply to decline significantly over the next six months, which would further increase prices. (Source: Forbes.com) Full Story
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Time Warner Inc. (TWX: Charts, News, Offers) reported third-quarter profit Wednesday that beat Wall Street expectations, even as its AOL online unit continued to weigh down the company with a 6% decline in advertising revenue. The media conglomerate saw growth in its cable-access and cable-network businesses. But its Time Inc. magazine unit showed weakness. Revenue fell 17% in the AOL unit. And revenue fell 9% at the Warner Bros. movie division compared with a strong 2007 period led by a "Harry Potter" sequel - despite the high-profile theatrical release of the Batman sequel "The Dark Knight," which has grossed more than $527 million so far this year. Overall, Time Warner reported net income of $1.07 billion, or 30 cents a share, roughly in line with the $1.09 billion, or 29 cents per share, it earned in the year-ago period. Time Warner is the parent company of CNNMoney.com. (Source: CNN Money) Full Story
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| Technology Focus |
Google's (GOOG: Charts, News, Offers)decision to quit an online search ad deal with Yahoo (YHOO: Charts, News, Offers) could open up another takeover attempt by Microsoft (MSFT: Charts, News, Offers). Google said Wednesday that after four months of review by the Department of Justice -- and despite revisions to the deal's terms -- "it's clear that government regulators and some advertisers continue to have concerns about the agreement." "Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners," wrote Google's legal officer David Drummond on the company's blog. "That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement." The Justice Department acknowledged that it had planned to challenge the deal on antitrust grounds, claiming that under the arrangement, both Google and Yahoo! Would account for 90% of the search advertising market. (Source: TheStreet) Full Story
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Panasonic and smaller Japanese rival Sanyo said Friday they are starting talks on a buyout deal that would create one of the world's largest electronics companies as soon as year-end. Panasonic President Fumio Ohtsubo and Sanyo President Seiichiro Sano shook hands at a news conference in Osaka, monitored by satellite TV in Tokyo, underlining their willingness for Panasonic's acquisition of Sanyo. The companies have much to gain by combining their technologies and production expertise to boost global competitiveness, they said, appearing together before a traditional Japanese folding golden screen. Speculation has been rife cash-rich Panasonic Corp. is interested in buying Sanyo Electric Co., which has been struggling to turn itself around. But more time is likely needed for a deal with Sanyo's biggest stakeholders, Goldman Sachs Group Inc. of the U.S. and Japanese banks Sumitomo Mitsui Banking Corp. and Daiwa Securities SMBC. Those companies invested $3 billion in Sanyo in 2006, and hold about a combined 70% stake in Sanyo. (Source: CNN Money) Full Story
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Sprint Nextel (S: Charts, News, Offers) notched a big win Tuesday night when the U.S. Federal Communications Commission approved its plan to join its WiMax holdings with those of Clearwire. In anticipation of the decision--which helps clear the way for Sprint to build a nationwide network using the high-speed wireless broadband technology--shares of Sprint rose 49 cents, or 14%, to $4 Monday. But the company's third-quarter results on Friday are expected to be much less celebratory due to the continued strength of Sprint's major rivals, AT&T (T: Charts, News, Offers)and Verizon Wireless (VZ: Charts, News, Offers). Both telcos added 2 million new wireless subscribers to their rosters in the third quarter. Analysts say many of the defectors likely came from Sprint. (Source: Forbes.com) Full Story
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| Your Money |
Why is it that when the stock market was hitting new highs just about every day, Washington rang with proposals to put Social Security money into the stock market? And now with stocks in the tank, why has the idea vanished off the radar screen? If the idea is to buy low and sell high, why isn't now, in the middle of a bear market, an even better idea? Reader Steve Foltz brought this up in an e-mail to Jubak's Journal a little more than a week ago. His specific question was a good one: Why isn't anyone talking about putting Social Security money into stocks now that they're down 40% from their October 2007 highs? Thinking about that specific question, though, raised an even larger issue: If we're in the midst of the greatest financial crisis since the Depression, why aren't we doing more outside-the-box thinking about how to resolve the crisis? (Source: MSN Money) Full Story
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