Weekend Headlines
- U.S. stocks staged their steepest weekly surge in 34 years after the Federal Reserve's interest- rate cut and signs the credit crisis is ebbing boosted equities trading at the lowest valuations in two decades. ``There's a lot of inexpensive merchandise out there,'' said Warren Koontz, who oversees $2.5 billion as chief investment officer for large, value stocks at Loomis Sayles & Co. in Boston. ``The most I've seen in 25 years.'' Stocks ``overshot to the downside given almost $5 trillion stimulus into the marketplace in terms of liquidity and capitalization done by governments around the world,'' said David Goerz, chief investment officer at Highmark Capital Management in San Francisco, which oversees $20 billion. ``I wouldn't want to be betting against them at this point.''
- Boeing Co.(BA) machinists start returning to work today after accepting a contract with 15 percent raises, ending a strike that idled the planemaker's factories for eight weeks and cut profit by about $10.3 million a day. The four-year contract was approved last night by 74 percent of the voters, the International Association of Machinists and Aerospace Workers said in Seattle, home to Chicago-based Boeing's manufacturing hub. The first workers are scheduled to return late today with the start of the third shift. The 57-day walkout was the third-longest of seven in the union's 73-year history. Workers who averaged $54,000 a year in salary had to get by on union strike pay of $150 a week. ``I think the union's out of touch with reality'' and shouldn't have gone on strike, said Don Icenogle, 45, an inspector at the plane-development center in Seattle who voted ``yes'' both times. ``This isn't that different a contract from the first one, and yet 57 days later it was approved.''
- The cost of protecting investors in Australian corporate bonds against default declined, according to traders of credit-default swaps. The Markit iTraxx Australia index was quoted 5 basis points lower at 265 points as of 9:53 am in Sydney
- The benchmark index for U.S. stock options had the biggest weekly drop in 14 months as bank lending rates retreated following the Federal Reserve's sixth interest- rate cut this year. The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 4.8 percent to 59.89 today, capping a 24 percent decline for the week. ``The market will stay pretty volatile I think even though it looks like we're in a bottoming process'' said Robert Baur, chief economist at Principal Global Investors in Des Moines, Iowa. ``We've got a pretty good recession already baked in.''
- ECB May Follow as Fed, BOJ, India ‘Shocked’ Into Cuts
- Jean-Claude Trichet is extending the European Central Bank's powers just as it gears up for what may be the fastest round of interest-rate cuts in its 10-year history.
- China's manufacturing contracted as the worst financial crisis since the Great Depression eroded export demand. The Purchasing Managers' Index fell to a seasonally adjusted 44.6 last month from 51.2 in September, the China Federation of Logistics and Purchasing said today in an e-mailed statement. That was the lowest since the gauge was launched in July 2005. A reading below 50 reflects a contraction, above 50 an expansion.
- India's central bank unexpectedly cut interest rates for the second time in two weeks and reduced the amount of money lenders must hold in reserve in a bid to protect the economy from the global slowdown. The Reserve Bank of India lowered its repurchase rate to 7.5 percent from 8 percent, reduced the amount of deposits that lenders need to set aside as reserves to 5.5 percent from 6.5 percent, and cut the amount of money lenders are required to keep in government bonds to 24 percent from 25 percent. The steps signal a U-turn from the Reserve Bank's policy stance just a week ago, when Governor Duvvuri Subbarao said a ``heightened vigil'' was needed to fight inflation.
- Steel Authority of India Ltd., the country’s second-biggest steelmaker, and rival Essar Steel Ltd. cut November prices to cope with falling demand. Prices of flat and long products have been cut by as much as $121 a ton, said RK Singhal, a spokesman for Steel Authority. The reductions mean that the price of Steel Authority’s benchmark hot-rolled products will fall by more than 10%, according to Niraj Shah, an analyst at Centrum Broking Pvt.
- Gold, the metal that rallied during every US The number of gold futures held in New York The metal may drop to $600 by year-end for the first time since 2006, said Joel Crane, a Deutsche Bank AG strategist in NY.
- Wall Street's 139-year-old jewel, Goldman Sachs(GS), saved itself by changing into a commercial bank. Now it must compete in a world where its culture, network and trading acumen may not be enough to make it sparkle.
- Panasonic Corp., the world's largest maker of consumer electronics, reached to a preliminary agreement to buy Sanyo Electric Co., the Nikkei newspaper said.
Wall Street Journal:
- McCain’s Honor. A curiosity of this Presidential campaign has been the way former media idolaters of John McCain have suddenly turned on him. They now claim to be horrified by his choice of Sarah Palin, or by his ad hoc economic decision-making, or his TV ads, or something. Whom do they think they've been praising all these years?
- The GOP’s vice-presidential pick says she’d work on energy, government reform and special-needs kids in the White House.
Barron’s:
- Steve Leuthold, who manages $4 billion at Leuthold Weeden Capital Management in Minneapolis , says the US Leuthold has become “a very convinced and optimistic bull” based on a valuation model that is “the most positive we have seen since 1984,” Barron’s said. Biotechnology stocks are attractive because they aren’t tied closely to the economic decline and operate with fewer government regulations. Many are potential acquisition targets, Leuthold said. Technical analysis also indicates that smaller stocks are re-emerging as market leaders, Leuthold said. equity market may hit bottom this month and recommends biotechnology, small-capitalization stocks.
- US stocks will rally until year-end as the US dollar strengthens against the euro, institutional investors told Barron’s in its “Big Money” poll. The DJIA may rally to 10,642 by Dec. 31, money managers who are “bullish”(50%) said, while those who are “bearish”(17%) see the Dow at 9,500. By mid-2009, the bulls anticipate the Dow rising to 11,621, while the bears expect it to decline to 9,379.
NY Times:
- Prostitute-Friendly Ballot Measure Finding Support
San Francisco Chronicle:
- Despite the economic downturn, Salesforce.com(CRM) in San Francisco is one company that's still growing.
Reuters:
- Zhu Min, vice president of Bank of China Ltd., said the global financial crisis will hurt China and the country is only beginning to feel the impact, citing Zhu. China has already seen “a sharp slowdown in industrial profit growth and fiscal income” and the crisis will “precede economic and political turmoil by eight to 12 months,” Zhu said at a conference.
Financial Times:
- Polygon, the Anglo-US hedge fund group which built a name for investor activism at companies such as British Energy, is suspending redemptions in its flagship $4bn Global Opportunities multi-strategy fund while it unwinds the fund and returns money to investors.
TimesOnline:
European hedge fund giant GLG Partners Inc. is sending a letter to investors this weekend saying it will launch a “liquidity review” of its funds to decide the best way to preserve capital. GLG will stop investors from making withdrawals from its Market Neutral fund for six months and will tell investors looking to leave its Emerging Market fund they will not get a full return because some of the funds investments are too illiquid to sell.
- British business leaders are calling for the Bank of England’s monetary policy committee to cut interest rates by as much as 100 basis points this week to prevent a deep recession, citing economists and executives.
Telegraph:
- Are the hedge-funders a spent force? The days of excess are being replaced by an era of relative austerity. Celia Walden on how the masters of the universe are coping.
Estado de Sao Paulo:
- More than half of Brazilian companies plan to curb investments next year as the credit freeze worsens, citing a survey by a national industry group. About 57% of 658 companies in the country’s main industrial state will slow spending in 2009, citing a survey by the Sao Paulo State Federation of Industries. Only 16% will boost budgets, and the rest plan to maintain current levels. Brazilian credit is the scarcest its been in 20 years, citing Paulo Skaf, president of the group known as Fiesp.
China Daily:
The government should find the right balance between curbing inflation and maintaining a stable economic growth, China’s Premier Wen Jiabao said on Saturday. "We must be aware that this year would be the worst in recent times for our economic development," Wen said in an article published in the Qiushi journal. Though maintaining economic growth is important, "we should fully understand the harms (serious) inflation can cause to economic growth, people's livelihood and social stability", Wen wrote.
The Australian:
- News Corporation(NWS/A) chairman Rupert Murdoch has warned that Barack Obama could worsen the world financial crisis if he is elected US president next week and implements protectionist policies. In an interview with The Weekend Australian before delivering the first of six Boyer lectures on ABC radio tomorrow afternoon, Mr Murdoch said the Democrats' policies would result in "a real setback for globalization" if implemented. Mr Murdoch said he did not know whether Senator Obama would implement all of the protectionist measures espoused by the party. "Presidents don't often behave exactly as the campaign might have suggested because they become prisoners of all sort of things - mainly circumstances and events," Mr Murdoch said.
Weekend Recommendations
Barron's:
- Made positive comments on (MI), (TAP), (KEY), (FITB), (ORCL), (CVS), (GENZ) and (MET).
- Made negative comments on (CHD).
Citigroup:
- Reiterated Buy on (PCLN), target $83.
- Added (AOC) and (MMC) to Top Picks Live List and deleted (AIZ) and (ACV).
Night Trading
Asian indices are +1.25% to +5.0% on avg.
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Before the Bell CNBC Video Global Commentary WSJ Intl Markets Performance Commodity Movers Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Daily Stock Events Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/Estimate
- (ASF)/.45
- (SPG)/1.57
- (GT)/.30
- (AMT)/.13
- (VIA/B)/.55
- (N)/-.01
- (PPS)/.43
- (MA)/2.23
- (FST)/1.40
- (ADP)/.50
- (PBI)/.69
- (MHK)/1.11
- (SYY)/.47
- (APC)/1.48
Upcoming Splits
- None of note
Economic Releases
10:00 am EST
- ISM Manufacturing for October is estimated to fall to 41.5 versus 43.5 in September.
- ISM Prices Paid for October is estimated to fall to 48.0 versus 53.5 in September.
- Construction Spending for September is estimated to fall .8% versus a 0.0% gain in August.
Afternoon:
- Total Vehicle Sales for October are estimated to fall to 12.0M versus 12.5M in September.
Other Potential Market Movers
- The Fed’s Lacker speaking, (NITE) analyst meeting and Oppenheimer Healthcare Conference could also impact trading today.
BOTTOM LINE: Asian indices are sharply higher, boosted by technology and financial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 100% net long heading into the week.
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