| Market Summary |
Stocks ended mostly lower on Wednesday despite briefly rallying after the Federal Reserve announced interest rate cuts. All three major gauges fluctuated throughout the session as investors awaited the decision. As expected, policymakers agreed to cut key interest rates by half a percentage point to 1%. The rate cuts reassured investors that the Federal Reserve will do what is necessary to help stabilize the slowing economy, but was not enough to keep stocks in positive territory. Credit markets continued to improve. The Libor, which is the overnight bank-to-bank lending rate, fell to 1.14% from 1.24%. The 3-month Libor fell to 3.42% from 3.47%. In corporate news, Procter & Gamble (PG: Charts, News, Offers) reported quarterly sales and earnings in its fiscal first quarter that topped estimates. Kraft (KFT: Charts, News, Offers) announced that profits more than doubled in the third-quarter due to the sale of its Post cereal division. U.S. light crude oil for December delivery rose $4.77 to $67.50 a barrel on the New York Mercantile Exchange. The yield on the 3-month Treasury bill fell to 0.57% from 0.75% as investors hesitated putting money back into the stock market. The dollar retreated against the euro and the yen.
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| Market News |
General Motors Corp. (GM: Charts, News, Offers) said Wednesday that reduced demand in the U.S. and Western Europe helped push the company's third-quarter worldwide sales down 11 percent, as GM fell further behind Toyota Motor Corp. for this year's No. 1 global sales spot. GM sold 2.11 million vehicles in the third quarter, while Toyota's sales for the period fell 4 percent to 2.24 million. The results bring GM's total sales for January-September to 6.66 million vehicles compared with Toyota's 7.05 million. GM said sales declines in the United States and Western Europe offset strong demand from emerging markets. Sales outside of the U.S. grew by 164,000 vehicles in the first nine months of the year. Mike DiGiovanni, GM's executive director of global market and industry analysis, said the same economic woes that have resulted in steep drops in U.S. sales this year spread to western Europe during the recent quarter. (Source: Yahoo! Finance) Full Story
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Garmin (GRMN: Charts, News, Offers) shares traded higher Wednesday after exceeding third-quarter estimates, although the company warned that full-year profit will come up short of forecasts. The Cayman Islands-based digital navigation device maker cut its forecast for a full-year profit to $3.51 a share from $3.86 a share, both of which exclude a 27-cent-a-share gain related to the tender of Tele Atlas shares. The company's revenue target was reduced to $3.6 billion, from the previous forecast of $3.9 billion. Wall Street currently expects Garmin to post a full-year profit of $3.89 a share, excluding items, on revenue of $3.8 billion, according to a poll of analysts by Thomson Reuters. During the company's conference call, Garmin executives said they have seen a slowdown in October, which prompted the change to guidance. Garmin said it appears the retail channel wants to limit their own risk in carrying inventory. (Source: TheStreet) Full Story
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Casino operator MGM Mirage (MGM: Charts, News, Offers) said Wednesday that its third-quarter profit tumbled 67 percent in part because of a write-down, compared with a year-ago period when the company benefited from an insurance payout related to Hurricane Katrina. MGM Mirage also said it has postponed further development of its MGM Grand Atlantic City project, and of a joint venture on the Las Vegas Strip with Bahamas developer Kerzner International and Istithmar World Capital, a firm in Dubai. "We intend to resume development (in Atlantic City) at such time as economic conditions and capital markets are sufficiently improved to enable us to go forward on a reasonable basis," Chairman and Chief Executive Terry Lanni said in a statement. (Source: Forbes.com) Full Story
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| Market Analysis |
A lot has been said about the causes of the drastic drops -- and extreme volatility -- in stock prices and the impending recession. Blame has been heaped on low interest rates and dubious mortgage practices, and on the subsequent collapse of real-estate prices and the freeze in financial markets. But one other major factor has largely escaped attention. To state the obvious: The valuation of an individual stock reflects the collective expectation of investors about a company's future profits, dividends and appreciation, and the same is true of the market as a whole. These profits, in turn, are greatly influenced by government policy on taxes, spending, subsidies, environmental and other regulations, labor laws, and the corporate legal climate. Investors have heard enough from both candidates in the last month or two to conclude that prospects for a flourishing, competitive, growing and reasonably free economy in a McCain administration are bad, and in an Obama administration far worse. (In fact, the market's bearish behavior over the last couple of months pretty closely tracks Barack Obama's gains.) (Source: Wall Street Journal) Full Story
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The U.S. consumer is in a foul mood, and the effects on investors and the economy are likely to be harsh. The Conference Board said on Oct. 28 that its consumer confidence index has dropped to an all-time low, from 61.4 in September to 38 in October. Americans were partly reacting to what they saw on the news in the past month: A plunge in the stock market, the dysfunctional credit markets, the failure of major financial firms, passage of a $700-billion bailout package in Washington, and a Presidential campaign focused on the economic crisis. But consumers' fears aren't entirely a media creation (BusinessWeek.com, 10/28/08), economists say. Consumers are starting to feel the economic squeeze where they live. (Source: BusinessWeek) Full Story
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From Wall Street to Main Street, from the City to the Bourse, investors are panicked. This crisis of confidence has claimed victims that one year ago would have seemed laughable. Bear Stearns, Lehman, Merrill Lynch, Fortis, Bradford & Bingley, AIG, Wachovia, Fannie Mae, Freddie Mac, just to name a few. Unfortunately, we have been caught with some of these positions in our portfolios as we sought to exploit the fears, rather than hide from them. Our approach of exposing the portfolio to the cheapest stocks has often protected our investors from the downside risks to the market, although that has not been the case for much of this cycle. Nevertheless, some interesting changes to market leadership are afoot. The value/momentum cycle appears to have begun to turn. While the current volatile market has been driven by emotion, the turn may actually be justified by the fundamentals for the two sectors at the heart of the cycle - commodities and financials. Historically, these turns come before the data is completely clear or consistent. But once the data is available to the market, the investment opportunity will have passed. (Source: Pzena Investment Management) Full Story
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| On This Date |
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October 29, 1929: Black Tuesday. One of the worst days in stock market history, the herald of the Great Depression. The Dow Jones Industrial Average drops 12% and investors drop 12 stories. In less than a month from mid October to mid November, $30 billi
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| Notable Quotable |
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Investors in the corporate bond market do not enjoy the same access to information as a car buyer or, dare I say, a fruit buyer. - SEC Chairman Arthur Levitt
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| October 28, 2008 |
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