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| Market Summary |
Stocks ended mostly lower on Monday as investors mulled over a number of indicators that pointed to a recession. Uncertainty about the outcome of tomorrow’s presidential election also kept the market lower. The Dow Jones Industrial Average fell 5.18 points to close at 9,319.83. Broader stock indicators ended mixed. The Standard and Poor’s 500 index fell 2.45 points and the Nasdaq added 5.38 points. Major automaker’s disappointing sales kept the Dow jumping from positive to negative. General Motors Corp. (GM: Charts, News, Offers) said its U.S. sales plunged 45 percent in October. Ford Motor Co. (F: Charts, News, Offers) also said that sales in October slipped by 30 percent. Both auto manufacturers cited tight credit markets and a dip in consumer confidence as the reasons behind the drop. Also in focus was a report from the Institute for Supply Management, which showed U.S. manufacturing activity fell to 38.9 in October from 43.5 in September. This was the weakest reading in 26 years. Lending rates continued to improve as banks started seeing the benefits from various stimulus plans. U.S. light crude oil for December delivery fell $3.15 to $64.66 a barrel on the New York Mercantile Exchange. The dollar fell against the euro and gained against the yen.
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| Market News |
Circuit City Stores Inc. (CC: Charts, News, Offers) said Monday it is closing about 20 percent of its U.S. stores -- cutting thousands of jobs -- in an effort to return to profitability as it finds consumers reluctant to spend and its vendors less eager to give it credit. The nation's No. 2 consumer electronics retailer said it will shut 155 of its more than 700 stores and leave at least a dozen markets entirely, including Phoenix and Atlanta, by Dec. 31. It will lay off about 17 percent of its domestic work force, which could affect up to 7,300 people. Circuit City also said it will further cut back on new store openings and plans to work with landlords to renegotiate leases, lower rent or terminate agreements while it deals with tightening credit from its vendors. (Source: Yahoo! Finance) Full Story
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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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PepsiCo (PEP: Charts, News, Offers) is confident about China's long-term prospects despite worries about slowing growth in the country, weak U.S. beverage sales and a stronger dollar. On Monday, the beverage and snack maker announced it will invest $1.0 billion in China over the next four years as part of its ongoing strategy to invest in emerging markets. PepsiCo's shares rose 0.4%, or 21 cents, to $57.22, in afternoon trading. Its shares have tumbled 24.6% since the beginning of the year. PepsiCo Chairman and Chief Executive Officer Indra Nooyi said it's the company's largest investment in China in the nearly 30 years it has been doing business there. "We are enormously confident in the continued prosperity of China," Nooyi said. The news comes on the heels of a disappointing third quarter. On Oct.14, PepsiCo reported its third-quarter profit sank almost 10.0%, missing Wall Street expectations as lower consumer spending, high commodity prices and the global credit crunch cut into its earnings. (See " PepsiCo Falls Flat.") A stronger greenback hurt international sales as well. (Source: Forbes.com) Full Story
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| Market Analysis |
I hear a lot of chatter about the next problem in the financial food chain, as it were. Yet I am much more concerned about jobs and the economy (as well as a future funding crisis I'll explain below) than I am about this phase of the financial crisis. I could be wrong, of course, but I think we're probably in about the eighth inning of the crisis in financials. The government is not going to let any major financial entity (or almost any large entity) go bust at this juncture -- which means no one will lose access to green paper. Thus, while folks are worried about financial institutions, their real concern ought to be the economy. (Source: MSN Money) Full Story
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Last week, Google (GOOG: Charts, News, Offers) settled a controversial copyright case by agreeing to pay tens of millions in licensing fees to authors and publishers, with more to come. At first glance, it looks like this great champion of the free flow of information has caved to copyright interests. But in fact, Google may be better off with a settlement than an outright win. Before the court approves this agreement, then, it must consider the deal's anti-competitive effects. A little history: In 2002, Google launched a project called Book Search. Its ambitious goal was to make every book in the English language text-searchable, just like Google aims to do -- and largely does -- with Web pages. The project held great promise; anyone with an Internet connection could be transformed into an armchair researcher, with the world's library at his or her fingertips. (Source: Washington Post) 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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