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| Market Summary |
Stocks advanced on Thursday after the government reported some better-than-expected news. The Dow Jones Industrial Average added 189.73 points to close at 9,180.69. Broader stock indicators also jumped higher. The Standard & Poor’s 500 index added 24 points and the Nasdaq added 41.31 points. Stocks advanced at the start of the session after the Commerce Department said that the nation's economic output was weak, but fell less than expected. Gross Domestic Product fell at an annual rate of 0.3% in the third quarter after growing at a 2.8% rate in the second quarter. Investors were hoping for another rally similar to the one that took place on Tuesday, but conditions remained too volatile to allow this. In corporate news, Avon Products (AVP: Charts, News, Offers) reported weaker-than-expected quarterly profit. American Express (AXP: Charts, News, Offers) said that it will cut 10% of its staff to help save $1.8B next year. Merrill Lynch cut 2009 earnings estimates for a number of companies including Morgan Stanley (MS: Charts, News, Offers) and Goldman Sachs (GS: Charts, News, Offers). U.S. light crude oil for December delivery fell $2.23 to $65.27 a barrel on the New York Mercantile Exchange after rallying the previous session. Gasoline prices continued to fall. According to AAA, prices fell another 4 cents to a national average of $2.547 a gallon. The dollar gained versus other major currencies and gold prices fell $15.50 to $738.50 an ounce.
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| Market News |
Exxon Mobil Corp. (XOM: Charts, News, Offers), the world's largest publicly traded oil company, reported income Thursday that shattered its own record for the biggest profit from operations by a U.S. corporation, earning $14.83 billion in the third quarter. Yet numbers contained within the company's most recent financial report revealed production numbers that continue to sag, and shares slipped 3 percent in midday trading. The Irving, Texas-based company has reported unprecedented back-to-back quarters, the end of the most recent coinciding with a rapid plunge in crude prices. Benchmark oil prices fell another $2.91 to $64.59 Thursday on the New York Mercantile Exchange, about 56 percent off record highs in July. (Source: Yahoo! Finance) Full Story
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Motorola Inc. (MOT: Charts, News, Offers) posted a hefty loss in the third quarter Thursday, citing the continued troubles of its cell phone division. The company will postpone the planned spin-off of the unit, and cut more jobs. The maker of communications gear said it would get rid of 3,000 jobs by April, with about 2,000 of them coming from the cell phone unit. The company last announced 2,600 job cuts in April. Motorola lost $397 million, or 18 cents per share, in the July-September period. It had earned $60 million, or 3 cents per share, in the same period a year ago. Sales fell 15% to $7.48 billion. The loss included 23 cents of charges, mostly for restructuring costs. Without the charges, Motorola would have earned 5 cents a share, reflecting unexpectedly strong results in its non-cell phone operations. (Source: CNN Money) Full Story
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Hartford Financial Services Group (HIG: Charts, News, Offers) shares were losing more than 50% Thursday as the insurer's third-quarter earnings revealed that its variable annuity business has suffered tremendously and further market deterioration, even since the quarter's close, continues to drive concerns about capital adequacy. Hartford's shares were sinking $10.78 Thursday afternoon to trade around $9.08 on fears that the company may need to raise more capital following its mid-October $2.5 billion capital infusion from Allianz (AZ: Charts, News, Offers) further diluting shares. Following Wednesday's market close, Hartford reported a $2.6 billion net loss for the quarter with $834 million attributed to the individual annuity business alone. Variable annuity deposits for the quarter were down to $1.9 billion, compared to $3.3 million in the third quarter of 2007 due to decreased sales. Assets under management decreased to $92 billion, from $123 billion a year ago due to the decline in equity markets. (Source: TheStreet) Full Story
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| Market Analysis |
Back in January, I argued that four major forces would lead to a risk of deflation-- or "stag-deflation," where a recession would be associated with deflationary forces--rather than the inflation that mainstream analysts have worried about. They were: (1) a slack in goods markets, (2) a re-coupling of the rest of the world with the U.S. recession, (3) a slack in labor markets, and (4) a sharp fall in commodity prices following such U.S. and global contraction, which would reduce inflationary forces and lead to deflationary forces in the global economy. How has such argument fared over time? And will the U.S. and global economies soon face sharp deflationary pressures? The answer: Deflation and stag-deflation will, in six months, become the main concern of policy authorities. (Source: Forbes.com) Full Story
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The most basic explanation for why Barack Obama may win next Tuesday is that voters want economic deliverance. The standard fix for this in politics everywhere is to crowbar the old party out and patch in the other one. It is true as well that the historic nature of the nation's first African-American candidacy would play a big role. Push past the historic candidacy, however, and one sees something even larger at stake in this vote. One sees what Joe (The Plumber) Wurzelbacher saw. The real "change" being put to a vote for the American people in 2008 is not simply a break from the economic policies of "the past eight years" but with the American economic philosophy of the past 200 years. This election is about a long-term change in America's idea of itself. I don't agree with the argument that an Obama-Pelosi-Reid government is a one-off, that good old nonideological American pragmatism will temper their ambitions. (Source: Wall Street Journal) Full Story
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Often when people have near-death experiences, they resolve to change their ways. That's not the case with the folks running Wachovia Corp. (WB: Charts, News, Offers), which experienced the financial equivalent. In their starry-eyed world, Wachovia's net assets still were worth $50 billion as of Sept. 30, according to the balance sheet the Charlotte, North Carolina-based bank released last week. Never mind that, on Oct. 2, Wachovia's board approved Wells Fargo & Co.'s offer to buy the company for $14.8 billion in stock, saving it from the clutches of Citigroup Inc. and the undertakers at the Federal Deposit Insurance Corp. Taken literally, the timeline suggests two scenarios. Either Wells Fargo is getting about $35 billion of stuff for free. Or the value of Wachovia's equity plunged $35 billion during the first two days of October. Neither of those happened, of course. (Source: Bloomberg) Full Story
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