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| Market Summary |
Stocks jumped into positive territory during the last minutes of Tuesday’s session after trading lower a majority of the session. The Dow Jones Industrial Average added 151.17 points to end at 8,424.27. The Nasdaq was initially boosted by encouraging reports from two large technology companies. Hewlett-Packard (HPQ: Charts, News, Offers) said that its fourth-quarter profit would exceed analysts’ expectations despite battling a bad economy. Yahoo! (YHOO: Charts, News, Offers) announced that CEO Jerry Yang would step down from his position. News of Yang’s departure was welcomed by investors who credited him with preventing lucrative deals from Google (GOOG: Charts, News, Offers) and Microsoft (MSFT: Charts, News, Offers). Stocks also briefly jumped after Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke and FDIC Chairman Sheila Bair all said that the bailout package is beginning to work. The news was not enough to keep the market extremely higher and stocks eventually fell closer to the flat line. In other news, a National Association of Home Builders (NAHB) report showed that homeowners’ confidence in the housing market reach a record low in November. U.S. light crude oil for December delivery fell 56 cents to settle at $54.39 a barrel on the New York Mercantile Exchange. Gold fell $9.30 to settle at $732.70 an ounce.
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| Market News |
The Home Depot Inc. (HD: Charts, News, Offers), the nation's largest home improvement chain, said Tuesday that its third-quarter profit sank by nearly a third as shoppers scaled back on everything from custom kitchens to lumber and flooring. The company also forecast a steeper drop in full-year sales due to the still-challenging housing and home improvement markets that are vexing the industry. "You all obviously know that this is a difficult environment," said Chief Executive Frank Blake. "The view we had at the start of the quarter, that we might be nearing the bottom, ... gave way to the financial crisis in September and beyond." But despite the grim environment, the Atlanta-based home improvement chain still managed to top Wall Street's expectations. (Source: Yahoo! Finance) Full Story
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With Jerry Yang stepping down from the top position at Yahoo! (YHOO: Charts, News, Offers), many expect the path is now clear for Microsoft (MSFT: Charts, News, Offers) to swoop back in with a bid to acquire the ailing Internet search giant. Some industry observers argue, however, that Yahoo! can remain a stand-alone business, and even succeed, if it were to stop entertaining thoughts of a buyout and instead come to an agreement with Microsoft on a paid-search deal. Gene Munster, an analyst with Piper Jaffray, said in a research note to clients Tuesday that whomever Yahoo!'s board selects as a replacement for Yang will indicate whether the company has plans of either continuing to compete on its own or looking for a new acquisition or partnership agreement. (Source: TheStreet) Full Story
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Homebuilders' confidence in a near-term housing recovery sank to a new all-time low this month, reflecting growing worries over the U.S. financial crisis, rising unemployment and weakening consumer confidence, an industry trade association said Tuesday. The National Association of Home Builders/Wells Fargo housing market index, started in January 1985, tumbled five points to nine in November. The index stood at 14 in October after slipping three points from September. Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April. "Today's report shows that we are in a crisis situation," NAHB Chairman Sandy Dunn said in a statement. "Tremendous economic uncertainties have driven consumers from the housing market, and it's going to take some major incentives to bring them back." (Source: BusinessWeek) Full Story
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| Featured Article from the InvestorGuide University |
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| Market Analysis |
Last week's economic data shows that "risk aversion hysteria" has had a major impact on economic activity in the United States. The total number of people receiving unemployment benefits (aka continuing claims) increased to almost 3.9 million in late October. As a share of the workforce, continuing claims are now back to the peak hit in the aftermath of the 2001 recession. Meanwhile, retail sales plummeted in October and are down 4.1% versus a year ago, the worst one-year comparison on record. September's international trade data showed a smaller trade deficit, but the underlying figures reported record declines for both imports and exports. (Source: Forbes.com) Full Story
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Treasury Secretary Henry M. Paulson Jr. is up to his ears trying to make the Troubled Asset Relief Program work. That's what he should be doing. He also ought to be pushing a really big economic stimulus plan. Politically, it may be impossible, given a distaste for such a plan in the White House, the brief life left for the Bush administration and the intention on Capitol Hill to have only a short lame-duck session. Paulson should give it a shot anyway. All the actions taken by the Federal Reserve and the investment of $250 billion in banks through the TARP aren't likely to be enough to get the U.S. economy out of the ditch it's in. The economy may be shrinking at a 4 percent annual rate this quarter, according to several forecasters who expect another, smaller decline in the first quarter of next year. The gross domestic production fell at a 0.3 percent rate in the three months ended in September. (Source: Bloomberg) Full Story
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When U.S. stocks plunged last summer, the SEC adopted several measures to constrain short selling, or betting that a stock's price will decline by selling borrowed shares. These included weekly reporting of short positions by large investment managers, requiring short sellers to line up in advance borrowed shares, and temporarily banning all short sales in financial stocks. These measures proved ineffective. Even during the three-week ban starting on Sept. 22, financial stocks fell along with the market, after outperforming the market prior to the ban. Moreover, the liquidity of these financial stocks decreased, and the cost of trading them increased, as bid-ask spreads widened. (Source: Wall Street Journal) Full Story
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