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| Market Summary |
Stocks were able to cut some losses on Tuesday, but remained lower as recession fears persisted. The Dow Jones Industrial Average fell 176.58 to close at 8,693.96. Broader stock indicators followed the same path. The Standard & Poor's 500 index declined 20.26 to 898.95 and the Nasdaq composite index fell 35.84 to 1,580.90. Stocks fell into negative territory at the start of the session after reports from a number of companies indicated that the global economic slowdown is hitting different industries. Starbucks (SBUX: Charts, News, Offers) reported weaker earnings and higher revenue that missed estimates. Toll Brothers (TOL: Charts, News, Offers) added fuel to the fire after it reported that fiscal fourth-quarter homebuilding revenue fell sharply from a year ago. Stocks briefly rebounded after the government unveiled its mortgage rescue plan, but fell again during afternoon trading. In addition to the government’s plan, Citigroup (C: Charts, News, Offers) announced a plan to modify $20 billion in mortgages as a method of assisting 500,000 homeowners. Lending rates continued to improve despite falling stocks. The 3-month Libor fell to 2.18% from 2.24%. U.S. light crude oil for December delivery fell $3.08 to settle at a 19-month low of $59.33 a barrel on the New York Mercantile Exchange. The dollar ended mixed versus other major currencies.
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| Market News |
Citigroup (C: Charts, News, Offers) says it will expand its foreclosure prevention efforts and try to keep 130,000 troubled borrowers with $20 billion in mortgages in their homes. The news follows similar initiatives announced earlier this year by IndyMac Bank, which was seized by the Federal Deposit Insurance Corp. last summer, as well as Bank of America (BAC: Charts, News, Offers) and JPMorgan Chase (JPM: Charts, News, Offers) each of which heralded enhanced housing rescue efforts. Banks are undoubtedly feeling pressured to be more aggressive in aiding home owners, given how many billions of taxpayer dollars have poured into the industry to stem the credit crisis. The Citi effort, dubbed the Citi Homeownership Assistance Program, targets 500,000 Citi borrowers. CitiMortgages CEO Sanjiv Das said he expects that more than a quarter of these people, with mortgages worth about $20 billion, will take advantage of the program over the next six months. (Source: CNN Money) Full Story
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The odds of landing a part-time job at department store operator Bealls Outlet Stores Inc. this holiday season are slimmer than getting into Harvard: It's one out of every 45. Don't think the chances are any better at 7-Eleven. One California store received more than 100 applicants in a week and a half for jobs that pay $8.50 per hour -- and the retailer doesn't even usually hire holiday workers. From department stores and convenience chains to call centers, managers who only a year ago had to scramble to fill holiday jobs are seeing a surge in the number of seasoned applicants -- many of them laid off in other sectors and desperate for a way to pay the bills. The flood of jobseekers comes even as the retail industry drastically cuts back on holiday hiring because of the drop-off in consumer spending, and the applicants -- who differ from the usual pool, teens or stay-at-home moms looking for extra spending money -- reflect the nation's fast-deteriorating job market. (Source: MSNBC) Full Story
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Sirius XM Radio Inc. (SIRI: Charts, News, Offers) said its losses totaled $4.88 billion in the third quarter after the satellite-radio provider booked a hefty charge related to a drop in its stock. Sirius XM was created by the combination of satellite-radio companies Sirius and XM in July. It reported results Monday after the closing bell. For the quarter ended Sept. 30, the New York-based company's losses totaled $4.88 billion, or $1.93 per share, compared with losses of $120.1 million, or 8 cents per share, a year earlier. The company's actual results include only two months of operations of XM. They also include a $4.8 billion write-down mostly related to a drop in the company's share price since its merger agreement in February 2007. (Source: Yahoo! Finance) Full Story
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| Market Analysis |
Sir Isaac Newton's third law of motion states that "for every action there is an equal and opposite reaction." The incoming Obama administration should keep this natural law in mind when considering the endless stream of ideas and programs that policymakers, pundits and bureaucrats will be putting in front of it over the next few months. The government has already dipped deep into its toolkit. The Federal Reserve has lent money to investment banks, financed mergers and acquisitions and backstopped the commercial paper market. The Treasury Department seized Fannie Mae (FNM: Charts, News, Offers) and Freddie Mac (FRE: Charts, News, Offers), is guaranteeing money-market funds and then forced private banks to accept the taxpayer as a shareholder via purchases of preferred shares. (Source: Forbes.com) Full Story
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Ludwig Von Mises once wrote that the entrepreneur who fails to use his capital to the "best possible satisfaction of consumers" is "relegated to a place in which his ineptitude no longer hurts people's well-being." The latest losses at General Motors (GM: Charts, News, Offers) reveal yet again that it is the living embodiment of managerial ineptitude, and to insure that it no longer fails its customers while harming the well-being of Americans more broadly, it's essential to let the firm die. Many will of course blanch at the presumed loss of jobs that would result from GM's death, but judging by the high level of unemployment in Michigan, it would be more realistic to say that GM's continued existence under weak management has served as a capital repellant such that capital and jobs will continue to flee the state if GM is saved with the money of others. Worse, business history, from ships to farming to mining, shows that sectors reliant on government help are invariably weakened as opposed to strengthened. (Source: Real Clear Markets) Full Story
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Nothing seems to boost the markets. Trillions of dollars in fiscal and monetary stimulus announcements are now washing over the global economy, with more releases expected soon, but still investor and consumer confidence remain low. We got $580-billion big ones from China over the weekend. Reaction: Dow Jones industrial loses 73 points. Obama elected: Markets plunge. The Obama team promises a "big bang" stimulus push. Zero impact. Could it be that the global economy is now caught in the vicious spiral known these days as an "adverse" or "negative" feedback loop? That's certainly the dominant theory among all the major economic bingo callers around the globe. Could it be, however, that they all have the feedback bass ackwards, looping the loop back from the wrong end of the mechanism? (Source: National Post) Full Story
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