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| InvestorGuide Daily Editor's Note:
Marketplace Senior Editor Paddy Hirsch explains how banks have gotten frozen in their tracks, awaiting a rescue. Click Here to view the video. |
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| Market Summary |
Stocks continued to look for direction on Monday after a volatile session sent stocks jumping from positive to negative throughout the session. The Dow Jones Industrial Average lost 203.18 points and ended at 8,175.77. Broader stock indicators posted moderate declines. The Standard & Poor's 500 index fell 27.85 points to 848.92 and the Nasdaq composite index fell 46.13 points to 1,505.90. Investors remained hesitant to push the market higher ahead of numerous economic reports due this week. Stocks advanced earlier in the session as an unexpected increase in new home sales boosted the market. The Commerce Department reported that sales of new single-family homes rose by 2.7 percent in September. Global recession jitters continued to weigh on the market after European and Asian markets declined. The Treasury Department announced that they signed agreements to buy stock in nine big banks. The Fed’s are hoping that this will help loosen credit markets. In corporate news, Loews Corp. (L: Charts, News, Offers) said it will buy $1.25 billion of preferred stock in insurer CNA Financial (CNA: Charts, News, Offers). CenturyTel Inc. (CTL: Charts, News, Offers) said it will acquire Embarq Corp. (EQ: Charts, News, Offers) in a $11.6 billion deal. U.S. light crude oil for December delivery fell 93 cents to settle at $63.22 a barrel. Prices have slid $84.05 since July on bets that global demand is slowing. The dollar ended mixed versus other major currencies.
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| Market News |
Coal-producing Arch Coal Inc. (ACI: Charts, News, Offers) said Monday its third-quarter earnings more than tripled, beating Wall Street's expectations. But the miner lowered its earnings outlook for the year, citing near-term softening of coal demand. Yet even with the weakening global economic backdrop, Arch's chairman and chief executive told analysts the St. Louis-based company remained on pace for its best financial showing ever. "Despite the significant decline in coal equity value since July, underlying coal supply-demand fundamentals remain positive and suggest to us the correction has been overdone," Steven Leer said. "Coal has been the fastest-growing primary energy source in the world over the last five years, and this trend is not likely to fundamentally reverse course, even with a weakening global economy," Leer said. (Source: Yahoo! Finance) Full Story
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Sales of newly constructed homes rose in September, according to the monthly report from the U.S. Census Bureau, inching up 2.7% from August to an annualized rate of 464,000. The reading was above the consensus forecast of 450,000, according to economists surveyed by Briefing.com, and up slightly from the 17-year low in August, which saw 452,000 new home sales. But the reading was still the worst September for new home sales since 1981. Sales are down 33.1% from September of 2007, and far below the pace of the boom years. In 2005, for example, 1.3 million new homes were sold. In response to slower sales, home builders have been reducing their production. As a result inventory has fallen, but there were still about 394,000 new single family residences on the market at the end of September. At the current pace of sales, that would take 10.4 months to sell through. (Source: CNN Money) Full Story
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Verizon (VZ: Charts, News, Offers) matched Wall Street's estimates with its third-quarter profit Monday, as gains in its wireless segment offset weakness in its wireline business. The New York phone giant recorded net income of $1.67 billion, or 59 cents a share, compared with net income of $1.27 billion, or 44 cents a share, in the year-ago quarter. Adjusted for one-time items, Verizon said it had a profit of 66 cents a share, which matches the average estimate of analysts polled by Thomson Reuters. Sales rose 4.1% from a year ago to $24.8 billion; that figure exceeded Wall Street's expectations. Analysts had been looking for a $24.5 billion top line. Verizon Wireless -- jointly owned by Verizon and Vodafone (VOD: Charts, News, Offers) -- continued to show strength, adding 2.1 million net subscribers in the second quarter. The monthly customer defection rate remained at an industry low 1.33%, with post-paid churn slightly above 1%. (Source: TheStreet) Full Story
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| Market Analysis |
AFTER YEARS of decline, U.S. auto companies face the double whammy of a credit crisis and a recession. Car and truck sales fell 26.6 percent in September, the first month since 1993 in which fewer than 1 million vehicles moved off the lots. General Motors (GM: Charts, News, Offers), threatened with bankruptcy and burning through $1 billion in cash reserves per month, is groping for a merger with Chrysler. Ford's (F: Charts, News, Offers) stock is down more than 70 percent in the past year, and investor Kirk Kerkorian is dumping his shares. The $25 billion federal loan approved by Congress on Sept. 25 may not reach Detroit for six to 18 months because of red tape. So Detroit's allies are pushing for waivers of the usual rules and, perhaps, another $25 billion before the end of the year. And why not? Everyone else seems to be getting a bailout these days. Hundreds of thousands of people depend on Detroit for their jobs, directly or indirectly. Well, we can think of several objections. First, there is the question of whether the U.S. government should be picking winners and losers in a business such as this. (Source: Washington Post) Full Story
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About a year ago Stephen Moore, Peter Tanous and I set about writing a book about our vision for the future entitled "The End of Prosperity." Little did we know then how appropriate its release would be earlier this month. Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness." When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses. (Source: Wall Street Journal) Full Story
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Are Americans really preparing to vote on "trickle-up'' economics? This novel theory suggests that if government provided the lion's share of tax benefits to low- and middle-income Americans and small businesses, they would create more revenue, jobs and financial flexibility. The U.S. presidential candidate who gets economic incentives right for small businesses is on to something powerful. For anyone earning less than $250,000, it could be the difference between falling further behind and future financial security. I have recently seen three neighbors shutter local businesses and have wondered how federal economic policies might have helped them stay afloat and maintain their payrolls. There's something to be said for giving breaks to shop owners, contractors and small manufacturers. Trickle-up policies provide more viable incentives than its obverse: supply-side economics. (Source: Bloomberg) Full Story
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