Market Outlook for 15th Oct 2009

 

INTRADAY calls for 15th Oct 2009
+ve Sector & Scripts : SUGAR, METAL, JPAssociates, CAIRN, Bajaj Hind,
Neyveli
BUY TATAPOWER-1343 for 1375-1383+ with sl 1325
BUY SAIL-179 for 183-188+ with sl 176

BUY ADSL-494 for 521-533+ with sl 485
BUY IVRCL-411 for 448+ with sl 405

Breakout
BUY Hindalco-135 for 149-151+ with sl 132
BUY DishTV-47 for 60-64+ with sl 43

Expected Breakout
BUY IDFC-155 above 157 for 163-65+ with sl 154

Positional
BUY HindoilExpl-360 for 426-433+ with sl 343
BUY Punjlloyd-295 for 326-333+ with sl 283
BUY Rajesexp-78 for 96+ with sl 72
BUY RENUKA-206 for 226-246+ with sl 200 

 

Strong & Weak  futures

This is list of 10 strong futures:

DCHL, Sesa Goa, PTC, Nagarjuna Const, Dena Bank, HCC, Indian Bank, LITL, IOB & Canara Bank.

And this is list of 10 Weak futures:

RCom, Idea, Bharti Airtel, MTNL, Grasim, Suzlon, TTML, Ambuja Cement, India Cement & Lupin.

Nifty is in Up trend

 

NIFTY FUTURES (F & O): 
Rally may continue up to 5129 level for time being.

Support at 5098 & 5105 levels. Below these levels, expect profit booking up to 5080-5082 zone and thereafter slide may continue up to 5064-5066 zone by non-stop.

Buy if touches 5027-5029 zone. Stop Loss at 5011-5013 zone.

On Positive Side, cross above 5145-5147 zone can take it up to 5161-5163 zone by non-stop. If crosses & sustains this zone then uptrend may continue.
 
Short-Term Investors: 
Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop.
3 closes above 5155.00 level, it can zoom up to 5520.00 level by non-stop.
 
BSE SENSEX:
 Higher opening expected. Uptrend may continue. 
Short-Term Investors:
 
Short-Term trend is Bullish and target at around 17671.82 level on upper side.
Maintain a Stop Loss at 16613.22 level for your long positions too.

SL Triggered.

POSITIONAL BUY:
Buy GUJ TERC LABORAT (BSE Cash) 
Bulls may hold on gains today.
 

1 Week: Bullish, as per current indications.

1 Month: Bullish, as per current indications.

3 Months: Surprisingly going up, opposite to bearishness.

1 Year: Surprisingly going up, opposite to bearishness.
 
Buy MODIPON (BSE Cash) 
Bulls may hold on gains today.
 

1 Week: Bullish, as per current indications.

1 Month: Surprisingly going down, opposite to bullishness.

3 Months: Bearish, as per current indications.

1 Year: Bullish, as per current indications.
 
 
Global Cues & Rupee
The Dow Jones Industrial Average closed at 10,015.90. Up by 144.80 points.
The Broader S&P 500 closed at 1,092.02. Up by 18.83 points.

The Nasdaq Composite Index closed at 2,172.23. Up by 32.34 points.

The partially convertible rupee INR=IN ended at 46.13/14 per dollar on yesterday, stronger than Monday's close of 46.48/49.
 
Interesting findings on web:
The Dow Jones Industrial Average has topped the 10,000 mark for the first time in a year.

World markets were boosted by the news that US bank JP Morgan Chase reported a better-than-expected profit in the July-to-September quarter.

A robust start to earnings season helped U.S. stocks climb sharply Wednesday, with the Dow rising above 10,000 for the first time in a year. Minutes from the Federal Reserve's latest meeting did little to shake investor views on the pace of economic recovery, but strong retail sales helped bolster optimism that consumer spending would join the rebound in corporate investment.

The Dow closed up 144.8 at 10,015.86, its highest since October 2008.

The Nasdaq also rose 32 points to 2,172.23, while the Standard & Poor's 500 climbed 18.83 points to 1,092.02.

RUSSELL623.9412.24+2%

TRAN4045.06152.64+3.92%

UTIL377.80.94+0.25%

S&P 100504.888.45+1.7%

S&P 400712.5812.73+1.82%

NYSE7182.38150.51+2.14%

NAS 1001754.2623.99+1.39%

Cheers erupted on the floor of the New York Stock Exchange as the Dow crossed 10,000 around midday. As quickly as it crossed the 10,000 mark, it retreated — as if just stepping a pinky toe across the line. Another attempt in the final hour of trading helped push the Dow above 10,000 — and keep it there through the close.

Some market pros said the Dow's break above that level today will likely trigger a wave of sell orders but other said it could be full steam ahead.

"Dow 10,000 may be largely psychological, but with tremendous levels of cash on the sidelines this may still be a call to action for investors," Lawrence Glazer, managing partner at Mayflower Advisors, told Reuters.

More importantly, traders said — hedge your bets.

Blue-chip index at best leve in a year after Intel, JPMorgan beat estimates. Better retail sales may signal consumer rebound.

But correspondents say the Dow is still far off its all time highs and the US economy has a long way to go before there is real recovery.

Analysts said the latest rise in the Dow could encourage more investors into the market.

"Dow 10,000 may be largely psychological, but with tremendous levels of cash on the sidelines this may still be a call to action for investors," said Lawrence Glazer from Mayflower Advisors in Boston.

JP Morgan Chase is the first big US bank to report third quarter results.

The second-biggest US bank made a net income of $3.6bn (£2.5bn), compared with $527m in the same period of 2008.

Strong performance in its investment banking division cancelled out losses on credit cards and consumer loans.

On Thursday, Goldman Sachs is expected to announce hefty profits, but Citigroup is likely to post a loss.

Bank of America is also expected to have made a loss when it announces its third quarter results on Friday.

Earnings of financial companies are in the spotlight as investors wait to see if banks' bad loans are slowing so they can repair their tattered balance sheets and increase lending. The optimistic view was bolstered before the start of trading when JPMorgan reported results. The bank said it made a profit of 82 cents a share, way over the Wall Street consensus and several times its profit last year. Shares were up 3.3% for the day.

More troubled firms may also be making progress toward mending their finances. Business lender CIT Group ( CIT - news - people ), which has faced the possibility of bankruptcy if it cannot restructure its outstanding debt, reportedly moved closer to winning a loan of several billion dollars on Wednesday. Bank of America ( BAC - news - people ) was said to be arranging the rescue, which would allow CIT to pay down existing debt and continue to lend to many small and mid-size U.S. businesses. The news sent shares of CIT up 15.2% in regular trading.

Retail sales figures for September showed a smaller drop than economists were expecting, contributing to the broad-based rally. Sales were off 1.5% last month compared to an estimated decline of 2.1%. Much of that was due to falling auto sales thanks to the absence of Cash For Clunkers. Stripping autos out, sales grew 0.5%, the second straight month of gains. Consumer spending is a large component of economic gorwth, but has lagged other economic indicators in rebounding from the financial crisis and the recession. The new figures helped retail shares to solid gains with the SPDR S&P Retail ETF ( XRT - news - people ) up 2.4% on Wednesday.

Retail sales fell 1.5 percent in September, the Commerce Department reported, but beat economists' expectations of a 2.1-percent drop. Auto sales trailed off a bit, now that the Clunkers program is over. Excluding the volatile auto component, sales rose for a second straight month.

This government report came after big chain stores last week beat September sales forecasts, helped by a helped by a late Labor Day and delayed back-to-school shopping. Plus, a cool September helped several retailers that are more impacted by weather.

Meanwhile, import prices rose 0.1 percent in Septemer as the price of imported petroleum fell. Economists had expected a 0.2-percent increase. And business inventories shrunk by 1.5 percent in August, the 13th consecutive monthly decline—and largest since last December.

Federal Reserve officials were apparently conflicted about whether to expand or cut back a program aimed at driving down mortgage rates during their meeting last month. Minutes of the meeting, released today, showed some members thought an increase in the program was necessary, while at least one thought signs of a recovery warranted a reduction.

Minutes of last month's Federal Reserve policy meeting out Wednesday afternoon showed the U.S. central bankers discussed their options for buying mortgage-backed securities if the economy does not rebound from the recession quickly. Stock markets reacted little to the news but the dialogue showed that the Fed remains concerned about the pace of recovery and members had differing opinions over whether to spread the remaining purchases over a longer period or increase the size of the program.

Yet this has been more of a traders' rally than an investors' rally, meaning that many average investors remain on the sidelines, preferring instead to put their money into safer bonds and money-market funds.

The stock market comeback that began March 9 has been led by big banks, which have been propped up by billions of dollars in taxpayer bailouts. Economists and traders worry that long-term gains cannot be sustained unless the government help is withdrawn. 

"My biggest concern is much more akin to taking the IV tube out of the patient," said Art Hogan, chief market strategist at Jefferies & Co. "We have to move from an economy that is stimulated by the government to an economy that's self-sustaining. That needs to be orchestrated extremely carefully."

For most Americans, a real recovery comes down to one issue: jobs. With the U.S. unemployment rate at 9.8 percent and expected to crest above 10 percent, 15 million jobless Americans may find little to cheer about in Dow 10,000. High unemployment will cool the sizzling stocks.

"If you don't get a sustained recovery, the market's overvalued," said Steven Ricchiuto, chief economist at Mizuho Securities USA. "I believe it's not going to be sustained. The payroll numbers are telling you that. When you look at the tax collections the government is getting, that's lower. People are not getting hired."

Even the most optimistic bulls do not predict another 50 percent surge over the next half-year. More likely, analysts say, is a "sideways churning," as the economy wrestles to bring down unemployment and companies try to generate profit through new revenue, not just cost-cutting. Bearish economists predict a "double-dip" recession that would see stocks take another dive as unemployment continues to rise.

Wednesday's surge was met by cheers on the floor of the New York Stock Exchange, where traders donned ball caps printed with "Dow 10,000 2.0," a reference to the last time the Dow pushed upward through 10,000 -- more than 10 years ago, in spring 1999.

The gap describes something of a lost decade for the U.S. economy.

As measured by gross domestic product, the economy is about 40 percent larger than it was in spring 1999. This makes the value of Dow 10,000 lower today than 10 years ago.

What's more, in 1999, the total domestic debt -- owed by governments, businesses and individuals -- was $24.6 trillion. Today, it stands at $50.8 trillion and rising, thanks in part to expanded deficit spending under President Bush and new spending programs, such as the $787 billion stimulus, under President Obama.

At the same time, the dollar is near a 14-month low against major foreign currencies, sending gold to historic highs of more than $1,060 per ounce as domestic investors and foreign governments hoard the precious metal, fearful of the ongoing depreciation of the dollar.

Stock prices, as valued by their price-to-earnings ratios, are at about the same level as during the 1990s stock market run-up, Ricchiuto said. However, if investors who own stock in their retirement plans kept their money in those accounts since March, when prices were low, they were able to increase their holdings cheaply.

Now, with the Dow at 10,000, when will investors see it regain its historic high of 2007? Years? "Yes," Ricchiuto said. "Years."

For many financial planners, the Dow hitting 10,000 Wednesday for the first time since last October is more white noise rather than a game-changing moment in managing long-term investments. But in the decade since the Dow Jones industrial average first surpassed that psychological marker, some planners say significant changes in the investment landscape have broadened their options and shifted once-popular strategies.

In general, the process is the same, the planners say. They determine their clients' financial goals, time before retirement and amount of risk they are willing to bear, and then they create a diverse portfolio. But in 1999 the prevailing sentiment was that the markets were only going up, that technology stocks were the hottest vehicles for growth and that the dollar would hold its own against the euro. And the "buy and hold" strategy still seemed to make sense.

It was easier to buy and hold knowing the market was going up and not worry about the nitty-gritty, said Michael Kresh, a certified financial planner in Islandia. "But today we know there are large sections of the economy that get into trouble after they reach their peak. . . . We can't think of buying and holding anymore. You have to start saying, well, forget about today, what's going to be good five years from now?"

Jack Chite, a Sayville certified financial planner, agreed the buy and hold tactic doesn't work in such a rapidly changing environment. "The old buy and hold strategy is less popular today than it was then," he said. "Let's say we want to make a 12 percent return. Once we make that 12 percent, we might sell out and reallocate to something else. Back in 1999, we would have just let it ride."

While financial planners still say diversification is a must to diminish risk - as is looking for quality investments - changes such as globalization and inflation worries have affected where clients put their money.

In 1999, money market accounts paid as much as 5 percent and the dollar was relatively strong, Kresh said. Persuading people to buy international assets was difficult. And commodities were largely ignored, he said.

Today, he said, people planning for retirement have to take into account the dollar's position against other currencies.

"We have learned that inflation has to come back because we are putting too much money into the economy. We learned that tons of money are going to be spent on infrastructure and . . . we learned that the dollar is not the strongest currency anymore and that if we ignore it, we ignore it at our peril," Kresh said.

"That doesn't mean six months from now things won't change."

The steady increase in the stock market over the last year — with Silicon Valley tech stocks outperforming the market as a whole — is buoying hopes that a recovery is far enough along for consumers to begin spending again, just in time for the holidays, and that banks will start lending again. It's also good news for people who have seen their retirement nest eggs shrivel.

"A lot of people want to pooh-pooh it as just a meaningless number," said Erik Davidson of Wells Fargo's Private Bank, "but for the average investor it is somewhat confidence-inspiring. It is another brick in the wall, more of the feeling that things are coming back again."

Companies are less reliant on stock performance than cash flow for operations, Intel's spokesman Chuck Mulloy noted, though the market moves are good news for investors. "From a day-to-day point of view we don't run this company based on the performance of the stock," Mulloy said.

Though party hats were donned on Wall Street, analysts noted that the Dow hurtled through the 10,000 mark several times in the past decade, only to lose ground again as bubbles popped and recessions struck.

Vanguard Investment Strategy Group warned that the markets "have come a long way in a hurry" and said it's a good time to make sure portfolios are balanced to weather "the uncertainties and volatility that accompany investing in the stock and bond markets."

"People shouldn't become more optimistic or pessimistic based on a market index alone," Donald G. Bennyhoff, senior investment analyst with Vanguard, said.

Experts said several things were at work in the market rebound, which has so far recovered about half of its losses since reaching a high of 14,164 two years ago on Oct. 9, 2007. Key factors in the rebound:

— Stocks probably overshot the economy on the way down in anticipation of a much worse recession than has actually occurred. At the March low point, many companies were arguably undervalued.

— Businesses quickly laid off work forces and maintained or improved their productivity, resulting in improved profits even in the midst of a severe recession.

— The market is a leading indicator of economic recovery, just as unemployment is a lagging indicator.

"The stock market is way ahead of the underlying economy, without question," David Shulman of the UCLA Anderson Forecast said. "But that's the way it usually is. The question is whether or not we'll have an economic follow-through to justify stock prices or not."

The market's climb is clearly confirmation that the economy is beginning to improve, economists said, but millions of people still are jobless, many businesses are still starved for credit, and there are growing concerns over defaults on commercial real estate.

"Things are not that good" in terms of the overall economy, Brookings Institution economist Barry Bosworth said. "So the surge in the stock market in the last few months gives a false air of optimism."

But the market is correctly responding to positive corporate profit reports, Bosworth said. "Profits are doing better than the overall economy, and the stock market is essentially a measure of profits," he said.

Robert E. Scott of the Economic Policy Institute in Washington D.C. said the numbers illustrate for him "the disconnect between Wall Street and Main Street. The numbers about the real economy are very bleak."

The rally was also propelled by a strong profit report from JP Morgan, spurring hopes that the banking sector is recovering enough to begin lending again.

"Perhaps this will lead banks to start lending again, which is an absolute necessity for the economy to turn around," Samuel F. Lek of Lek Securities in New York said. "But as we stand right now, we have not seen any aggressive stance by banks to lend. It's not as bad as it was, but it's also not good."

While the Dow's passing of the 10,000 mark was greeted with relief, analysts cautioned the economy remains fragile. Light volume also signalled that conviction was weak, which makes it easier to push stocks up.

Scott Marcouiller, a senior equity market strategist at Wells Fargo Advisors in St Louis, said "it means we've come a long ways in a hurry".

"It is a psychological positive, but it's also a logical spot now for us to take a pause."

The stock market's bullishness contrasted with some dire warnings from senior bank regulators, however, who said on Wednesday that lingering weakness among banks and in the broader economy were still a worry.

John Dugan, the US comptroller of the currency, said credit quality continues to deteriorate across almost all classes of banking assets, in nearly all sizes of banks.

He said national banks will need to set aside more capital and reserves to absorb these potential losses, which could cause more small institutions to fail.

Sheila Bair, the chairman of the Federal Deposit Insurance Corp, said the number of so-called "problem banks" and bank failures would remain high for the next several quarters, and the economic recovery may not be as robust as in past cycles.

The 10,000 milestone shows how far the market has come since a year ago when investors fled collapsing financial markets.

Bonuses back

A year after US taxpayers committed hundreds of billions of dollars to bailing out financial firms, executives are once again set to rake in massive bonuses as big banks return to spectacular profits.

The Wall Street Journal said big banks and securities firms were on track to shell out $140bn in total pay and benefits to employees this year.

That would be about 20 per cent more than last year for employees at 23 top US investment banks, hedge funds, asset managers, and stock and commodities exchanges, it said.

John Terrett, Al Jazeera's correspondent in Washington DC, explained that the average worker on Wall Street is going to be paid $143,400 a year, $2,000 better off than last year.

"There is a real 'oh my gosh' factor, because many Americans have had their pay cut, their hours slashed, their bonuses and benefits slashed, or have just been sacked," he said.

Reports of a return to soaring bonuses drew a warning from the White House, with spokesman Robert Gibbs saying on Wednesday that "pay on Wall Street can't return to the speculative era that we saw last, specifically right before the economic collapse".

"Pay has to be based on a reasonable assumption of risk, not speculation," he added.

More than a year after the worst financial crisis in decades, the US government is still struggling to push through reforms to tighten bank and market oversight and many are worried that the momentum for tighter regulations may have already dissipated as the economy and markets recover.

The US congress is to probe executive compensation at companies such as American International Group and Bank of America which have received significant taxpayer funds, the chairman of the House Oversight and Government Reform panel said on Wednesday.

Edolphus Towns said "what infuriates people is when bosses at bailed out companies ... continue to rake in millions".

"It doesn't seem right that the people who caused this tragedy should be so richly rewarded."

Banks led the charge today after JPMorgan [JPM  47.16    1.50  (+3.29%)   ] crushed earnings expectations, delivering 82 cents a share — analysts had expected 52 cents a share.

Financials were the best performer of 10 key S&P sectors, up 3.3 percent.

Bank of America [BAC  18.59    0.78  (+4.38%)   ] was the biggest percentage gainer on the Dow, ahead of its earnings, due out on Friday. Citigroup [C  4.98    0.15  (+3.11%)   ] and Goldman Sachs [GS  193.16    5.93  (+3.17%)   ] report Thursday.

The JPMorgan beat came on the heels of Intel's [INTC  20.84    0.35  (+1.71%)   ] better-than-expected results after the bell yesterday. The chip maker also delivered a more bullish forecast than expected.

Railroad operator CSX [CSX  47.14    2.86  (+6.46%)   ] also beat consensus on its latest earnings report.

"Third-quarter results are, on the whole better-than-expected in general, and it's taken some people by surprise," Anthony Conroy, head trader for BNY ConvergEX, told Reuters. "Now, you're starting to see not only decent earnings but a little bit of growth."

After financials, the best-performing sectors were industrials and materials, up 2.6 percent and 1.9 percent, respectively.

Ford [F  7.66    0.04  (+0.52%)   ] shares climbed 0.5 percent after the auto maker reported record third-quarter vehicle sales in China.

After the bell today, we'll get a report from chipmaker Xilinx [XLNX  24.00    0.07  (+0.29%)   ].

Shares of American Airlines parent AMR [AMR  8.13    0.46  (+6%)   ] jumped after Barclays upgraded its rating on the stock to "equal weight" from "underweight."

In the news, Bloomberg LP has agreed to buy BusinessWeek from McGraw-Hill [MHP  29.27    0.95  (+3.35%)   ] for an undisclosed amount.

The Silicon Valley 150 is up 46 percent for the year. Intel finished the day up 1.7 percent, following an earnings report that topped analysts' estimates, the second consecutive quarterly improvement for the Santa Clara chip maker. Other valley stalwarts such as Cisco, Hewlett Packard and Apple all posted strong daily gains.

Nine of 10 industries in the S&P 500 advanced today, with financial shares jumping 3.4 percent as a group to the highest level since November 2008. Technology shares added 1.5 percent collectively and were the second biggest contributor to the rally.

JPMorgan climbed 3.3 percent to a one-year high of $47.16 after posting earnings per share of 82 cents, compared with the average analyst estimate of 51 cents in a Bloomberg survey. Investment-banking revenue from fixed-income jumped to a record $5 billion, compared with markdowns of $3.6 billion a year earlier, as Chief Executive Officer Jamie Dimon capitalized on his 2008 acquisitions of Bear Stearns Cos.

Banks, Default Swaps

Bank of America rose 4.4 percent to $18.59, the highest price since November 2008, and Wells Fargo & Co. advanced 4.3 percent to $31.34.

The cost of protecting bank bonds from default fell after JPMorgan's earnings fueled speculation the global economy is recovering from the credit crisis. Credit-default swaps on JPMorgan dropped to the lowest in a month, while a benchmark index tied to U.S. investment-grade bonds fell to an almost three-week low.

Intel rallied 1.7 percent to $20.83, its highest price in 13 months, after predicting fourth-quarter revenue of as much as $10.5 billion, topping the $9.5 billion average estimate in a Bloomberg survey. The company's gross margin, a measure of profitability, may reach the highest level this decade. [bn:WBTKR=AMD:US]

Advanced Micro Devices Inc. [], the second-largest chipmaker, jumped 2.8 percent to $6.25. The company will report quarterly results tomorrow. STMicroelectronics NV, Europe's biggest chipmaker, added 2.6 percent in Paris.

'More Optimistic'

Harley-Davidson Inc. rose 6.6 percent to $26.26. The biggest U.S. motorcycle maker was raised to "outperform" from "market perform" by Wells Fargo, which said shipments will increase in 2010 and 2011, used bike prices will stabilize in the first half of 2010, and the company will gain from lower operating costs.

"Last quarter what happened was companies were beating on earnings but they had forward guidance that was mixed, at best," said Michelle Clayman, chief investment officer at New Amsterdam Partners in New York, which manages $3 billion. "This time, you've not only got the earnings beat right now, but it sounds as if companies are more optimistic about their demand."

Macy's added 5 percent and Nordstrom climbed 2.5 percent as 25 of 28 chain-store companies in the S&P 500 advanced. The 1.5 percent decrease in retail purchases compared with the median economist forecast for a 2.1 percent drop, Commerce Department figures showed. Sales excluding automobiles climbed 0.5 percent, more than the median forecast of economists in a survey.

Energy, Transportation

Exxon Mobil Corp., the biggest U.S. energy company, added 2.3 percent to $71.84 for an eighth straight day of gains, its longest streak since 2003. Oil rose 1.4 percent to a one-year high of $75.18 a barrel in New York. Copper, lead and nickel also advanced, while gold slipped from a record.

Cameron International Corp., the second-largest U.S. maker of oilfield equipment, advanced 3.4 percent and Massey Energy Co., the fifth-biggest coal producer, gained 3.3 percent.

Transportation companies also rose, led by railroads, after CSX Corp. reported third-quarter earnings per share that beat the average analyst estimate by 4.8 percent. CSX, the third- largest railroad operator, jumped 6.3 percent to $47.06.

Union Pacific Corp., the second-largest railroad, and Ryder System Inc., the largest U.S. truck-leasing company, each increased at least 4.9 percent.

Conseco Inc. jumped 29 percent to $6.46. Paulson & Co., the hedge fund that bet against subprime mortgages, agreed to raise its stake in the life insurer by buying $77.9 million in stock and warrants.

Genworth Financial Inc., a life insurer and mortgage guarantor, climbed 9.7 percent to $12.12 for the biggest gain in the S&P 500. A National Association of Insurance Commissioners committee endorsed a request by U.S. life insurers for looser capital standards tied to slumping residential mortgage-backed securities. 

Due to the Columbus Day holiday, the Energy Information Administration's measure of crude oil inventories will be out at 10:30 am New York time on Thursday.

VIX22.86-0.13-0.57.

Oil,Gold & Currencies:

Crude oil for November delivery climbed as much as 76 cents, or 1 percent, to $75.94 a barrel in electronic trading on the New York Mercantile Exchange. That's the highest intraday price since Oct. 20, 2008. The contract was at $75.87 a barrel at 9:44 a.m. Singapore time. Yesterday, it rose 1.4 percent to $75.18 a barrel, the highest settlement since Oct. 14, 2008.

GOLD1065.10.40+0.04%.

The dollar hit a fresh 14-month low against the euro after strong quarterly earnings from JPMorgan Chase helped push the Dow Jones industrial average above 10,000 for the first time in a year, boosting investor appetite for riskier assets.

The dollar fell to a 14-month low against the euro as improving corporate earnings helped Asian stocks extended a global equity rally, encouraging investors to seek higher-yielding assets.

The yen dropped along with the dollar on speculation Goldman Sachs Group Inc. will today join JPMorgan Chase & Co. and Intel Corp. in reporting improving earnings and before a report forecast to show U.S. industrial output rose for a third month. Australia's dollar surged to a 14-month high after central bank Governor Glenn Stevens said he can't be too timid in raising interest rates as economic crisis passes.

"Good earnings and rising stocks underpin risk appetite," said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France's third-largest bank. "That will weigh on the dollar and yen as a funding currency."

The U.S. currency fell to $1.4949 per euro at 10:50 a.m. in Tokyo from $1.4925 in New York yesterday. It earlier touched $1.4958, the weakest since August 2008. The yen dropped to 133.63 per euro from 133.47; earlier it reached 133.91, the lowest since Sept. 24. Japan's currency traded at 89.41 per dollar from 89.44. Australia's dollar gained 0.5 percent to 91.93 U.S. cents, the highest since August 2008.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, sank 0.3 percent to 75.323, the lowest since August 2008.

Japan's Nikkei 225 Stock Average gained 1.9 percent, and the MSCI Asia Pacific Index of regional shares rose 1.4 percent.

Rising Stocks

The Dow Jones Industrial Average yesterday closed above 10,000 for the first time in a year after JPMorgan posted third- quarter earnings of $3.59 billion, or 82 cents a share, compared with analysts' estimates of 51 cents a share. Goldman Sachs is scheduled to report third-quarter results today.

"Negative dollar sentiment as a result of ongoing risk appetite is still very much in place," said Ray Attrill, global research director at Forecast Ltd. in Sydney. "Anticipation of good results in the financial sector has been one of the factors driving U.S. stocks."

The dollar fell against 14 of its 16 major counterparts as the Federal Reserve is expected to report U.S. industrial output rose 0.2 percent in September after gaining 0.8 percent in August, according to the median estimate of 75 economists in a Bloomberg News survey. The data is due tomorrow.

Fed Rates

Federal Reserve minutes yesterday showed some policy makers were open last month to boosting the central bank's $1.25 trillion mortgage-backed securities purchase program.

"The way the markets are interpreting good global news at the moment is to sell greenbacks," said Adam Carr, senior economist in Sydney at ICAP Australia Ltd., a unit of the world's largest broker of trades between banks. "The Fed is basically saying it's not going to raise rates anytime soon, so the yield advantage enjoyed by many other currencies including the Australian dollar or the euro is going to be around for a long time."

Benchmark interest rates are 3.25 percent in Australia and 1 percent in the euro zone, compared with 0.1 percent in Japan. The Fed's target rate for overnight bank loans is zero to 0.25 percent. It may start raising the fed funds target in the second quarter of 2010, according to analysts' forecasts compiled by Bloomberg.

The so-called Aussie surged amid speculation the Reserve Bank of Australia will add to last week's unexpected rate increase amid mounting evidence economic growth will accelerate.

"If we were prepared to cut rates rapidly, to a very low level, in response to a threat but then were too timid to lessen that stimulus in a timely way when the threat had passed, we would have a bias in our monetary policy framework," RBA Governor Glenn Stevens said in Perth today. "Experience here and elsewhere counsels against that approach."

Goldman Sachs Forecasts

Goldman Sachs said the U.S. dollar is likely to extend declines against the euro and most commodity-backed currencies over the coming six months, based on the greenback's correlation with cyclical assets and capital flows.

The bank now expects the Canadian dollar to reach parity with the U.S. currency in three months. The Australian dollar will peak at 95 U.S. cents and Brazil's real will trade at 1.65 to the dollar in three months.

The dollar weakened to C$1.0211 from C$1.0236, after earlier reaching C$1.0210, the lowest level since July 2008.

Bonds:

The price on benchmark 10-year notes ended down 24/32 at 101-21/32 after posting a session low of 101-17/32.

Their yield, which moves inversely to their price, was 3.43 percent, up 10 basis points on the day.

What to expect:

THURSDAY: IRS amnesty for offshore accounts ends; CPI; Empire State manufacturing; weekly jobless claims; Philly Fed; weekly crude inventories; Earnings from Citigroup, Goldman Sachs, Nokia, IBM and AMD

FRIDAY: Industrial production; consumer sentiment; Fed's Fisher speaks; Earnings from Bank of America, GE, Halliburton and Mattel

Dow at 10000 as Crisis Ebbs

A Rapid Recovery From Collapse, but Traders Voice Doubt About Bull's Staying Power

The Dow Jones Industrial Average surged to 10015.86, passing the symbolic 10000 level much faster than expected and racking up a 53% gain in just seven months.

Wednesday's trading marked the first time the Dow touched 10000 since October last year, when markets were unraveling after the collapse of Lehman Brothers Holdings. As recently as March 9, the Dow was at 6547.05.

Reaction this time was more muted than the first time the Dow closed above the 10000 mark, on March 29, 1999, when traders popped Champagne and passed around "Dow 10000" baseball caps. "People don't believe it, they don't trust it, they are nervous, they are anxious," said Andy Brooks, head of stock trading at money-management group T. Rowe Price. "Most of us can't believe the year we have just been through, where you made and lost so much money."

The Dow rose 144.80 points, or 1.47%, its best point and percentage gains since Aug. 21. Other stock indexes posted similar gains. Despite the milestone, analysts pointed out it means the market is no higher than it was 10 years ago. In fact, the Dow has moved above the 10000 mark 25 times before now, only to fall back to four-digit territory each previous time.

In Wall Street's sometimes upside-down logic, skepticism about stocks can be viewed as a good thing in the short run. It means there are plenty of people sitting on cash, who might change their minds and shift that money into stocks -- sending the market higher.

But in the longer run, many of the problems that worry investors will need to be resolved, such as the high levels of bad loans and securities on bank balance sheets, the weakness of the real-estate market and the nation's heavy consumer and government debt. "We don't see a catalyst that would immediately drive the economy lower, but there certainly is some risk that the market could retrace its gains" since they have come so rapidly, says Bruce McCain, who helps oversee $20 billion as chief investment strategist at Cleveland's Key Private Bank.

If anything, economic news has been better than expected, notably recent corporate profit reports. That was a good part of the reason for Wednesday's gain. Although profits remain well below levels of the recent economic boom, both Intel and J.P. Morgan Chase managed posted better-than-expected third-quarter results. Executives at both companies made guardedly optimistic comments about the outlook.

In addition, September retail-sales numbers were somewhat better than expected and businesses reported that they burned through inventories more rapidly than expected in August. "People were impressed with the results from Intel and J.P. Morgan, particularly J.P. Morgan," said Mr. Brooks of T. Rowe Price.

Continuing hopes for the world economy sent New York crude-oil futures up $1.03 a barrel to $75.18 a barrel, the highest late-day level in a year. The dollar continued its decline, as investors shifted from safer investments such as U.S. Treasury bonds and into foreign markets. Junk bonds continued their long-running rise.

In just seven months, the Dow has recovered almost half its 17-month decline of 7617.48 points from the record 14164.53 hit in October 2007. There are fundamental reasons for caution. The underlying economy is troubled, with banks still holding bad debts and foreclosures widespread. Consumer spending and borrowing, as well as employment, are expected to remain sub-par for some time.

Ned Davis Research has been comparing the current bull market to the one that ran from late 1974 through 1976, when the Dow rose 76%. Like the current rally, that one came in the midst of a troubled period for stocks. If this rally is similar, it would have longer to run, but most of the gains already would be made.

The median stock in the Standard & Poor's 500-stock index trades at about 20 times the company's profit for the past year, Ned Davis Research calculates, above the average of 17 since 1972. But that is below the level of 22 which has been a ceiling for stocks in recent years, the firm says. It calculates that the S&P 500, which rose 1.75% on Wednesday to 1092.02, could hit 1200 before it starts to look pricey. "We think the rally still has legs," says Ed Clissold, senior global analyst at Ned Davis. Like many research firms, the company is expecting some kind of temporary pullback given stocks' gain since March.

One oddity is that, historically, the levels of 10000, 1000 and 100 all have been stumbling blocks for the Dow, which has tended to stall around those levels. It first touched 1000 in intraday trading in the 1960s, but then spent well over a decade floundering. It didn't lastingly move past 1000 until 1982.

This time, apart from the economy's fundamental problems and the government's heavy debt, one thing that makes analysts nervous is stocks have spent only a few months since 1991 with their price-to-earnings ratios below average. Mathematically, it would seem likely that, at some point, the law of averages would kick in and stocks would stagnate or fall.

Many investors worry that, for stocks to begin a long-running bull market and put Dow 10000 permanently behind them, the economy would need to work through its problems and stocks would need to spend a more sustained period at below-average price-to-earnings ratios.

Other indexes have done even better than the Dow in the current bull market. The S&P 500 is up 61% from its 12-year low on March 9, though below its October 2007 record.

Technology stocks have been among the market leaders, and the tech-dominated Nasdaq Composite Index is up 71% over that period, although still less than half way back to its high in 2000.

Wall Street's joy hasn't been felt much yet on Main Street. Unemployment is mounting, which is normal in an economic recovery. Historically, the stock market recovers before the economy and employment doesn't rebound until later. In June, Federal Reserve Chairman Ben Bernanke made it clear that the recovery in financial markets was only a means to an end. "I care about Wall Street for one reason and one reason only -- because what happens on Wall Street matters to Main Street," he said on TV's "60 Minutes."

While some companies have reported an uptick in sales, most are generating profits by slashing costs and workers, an approach that has pushed the unemployment rate to nearly 10%, the highest level since 1983. "A lot of these profits are not because these firms are expanding revenues but because they're controlling costs by laying off workers," says economist Ed Leamer, director of the UCLA Anderson Forecast. "They're still acting as if we're not going to have a recovery.

Dow 10K good for psyche, but is that all?

The Dow Jones industrial average topped 10,000 for the first time in a year on Wednesday, piercing a level major investors see as merely psychological but which may serve as a buying signal to retail stock pickers.

The milestone points to the resiliency of the market's runup since the lows of early March and growing comfort with the economy's path. But investors warned that it could serve as a trap, something that galvanizes interest from regular investors while institutions pare back positions.

The Dow, an gauge of 30 blue-chip U.S. companies, has risen 52 percent from a 12-1/2 year low hit in early March and finished at 10,015.86. It last closed above 10,000 on October 3, 2008.

This the first time the Dow has risen above 10,000 since October 3, 2008, when capital markets were in turmoil. The next five days were all poor ones, as the index lost more than 18 percent of its value in that short time. The rebound is a sign that markets have moved beyond the tumult of late 2008, but the Dow is still down roughly 29.4 percent from its record close of October 2007.

* "The big question is: with the Dow at 10,000 will you see some of the fixed-income flows that have been driving the corporate bond market in the last 12 months be redirected into the stock market, but you need the psychology to encourage that," said Lawrence Glazer, managing partner of Mayflower Advisors in Boston.

"Investors do feel more confident and less fearful today than at any time over the last year."

* Institutional investors generally don't pay a whole lot of attention to when a major index rises or falls through big round numbers, preferring instead to view them as meaningless from a technical or fundamental perspective.

But smaller players making adjustments to their 401(k)s and day traders often translate a milestone such as 10,000 as a sign that more gains are possibly on the way, a view that sets the market up for a pullback in the event of disappointing surprises.

* "It's a distraction for the retail guy, for the unsophisticated. It's certainly not a distraction for the professional. The professional sees people wearing hats for a narrow index of 30 stocks," said John Kosar, market technician and president at Asbury Research in Chicago.

* If the Dow were to mount a further advance, the 10,000 level will serve as critical near-term support. But for that to happen, the index has to close above 10,000 for several days to give any confirmation.

On the other hand, Kosar said the current trend should continue for some time. "Until there's a tangible breakdown from these levels, the prior trend is likely to continue. That's the uptrend from March. Investors collectively have to decide if we are going to have a pullback here or we go to the next level."

* The 10,000 milestone has seemed a fait accompli for some time. However, faltering volumes and the market's sideways trading in recent weeks all suggest that the feat came with very little conviction behind it.

Another cautionary signpost is that while the Dow hit a fresh 2009 intraday high, the Dow Jones transportation index lagged.

* Market technicians are mindful of the impact of the changes that have occurred in the Dow over the past year after Citigroup, American International Group and General Motors were booted out of the blue-chip index.

The Dow is a price-weighted average, meaning its direction is dependent on the stock prices of each of its components, while the benchmark S&P 500 is weighted by market capitalization, or what a company is worth. The S&P 500 is now up 60 percent from its 12-year of March 9.

Thursday Look Ahead: Bears Are Sheepish

The Dow crossed 10,000, and suddenly Wall Street's bears grew quieter.

The widely-watched Dow Jones Industrial Average [.DJIA  10015.86    144.80  (+1.47%)   ] returned to a five-digit number for the first time since Oct. 3, 2008 on the back of a strong earnings report from JPMorgan, a better-than-expected September retail sales report, and a tech rally, fired up by Intel's strong earnings and forecast.

The Dow rose 144 or 1.5 percent to 10,015, while the S&P 500 [.SPX  1092.02    18.83  (+1.75%)   ] climbed 1.8 percent to 1,092, also the highest close since last Oct. 3. Financial stocks jumped 3.4 percent, and tech was up about 1.5 percent.

But is the Dow's year high a sign of encouragement or an exit point for investors?

Unlike its last two major trips above 10,000, the move is being met by a sea of skepticism. Yet anecdotally, more traders seem willing to believe that the market can continue in an upward trend for now, drawing strength from corporate earnings. And that's despite the sluggish economic recovery and growing unemployment. The Dow is up 53 percent since its March low.

BlackRock Vice Chairman Robert Doll also says the direction for stocks is higher for now.

"There's a huge wall of worry," Doll said on CNBC's "Special Report: Dow 10,000." "There's so much money on the sidelines, waiting for the pullback. We don't get it, t-the market goes up, and people have to put some money in."

"Look, there are a bunch of concerns out there. They are very legitimate, but in the short run, the cyclical positives are overwhelming that," Doll said. "When you get a JPMorgan, an Intel, a CSX, among others, reporting better-than-expected earnings, guess what? Stocks go up."

Look Ahead

Thursday's market will take its guidance from the financials. Wall Street profit machine Goldman Sachs [GS  193.16    5.93  (+3.17%)   ] reports earnings ahead of the bell, as does Citigroup [C  4.98    0.15  (+3.11%)   ], still a participant in the government's trouble asset relief program (TARP). After the bell reports belong to tech. Google [GOOG  535.32    9.21  (+1.75%)   ], Advanced Micro Devices [AMD  6.24    0.16  (+2.63%)   ] and IBM [IBM  128.44    1.42  (+1.12%)   ] all release numbers just after 4 pm New York time.

Closely watched weekly jobless claims are reported at 8:30 am, as is the consumer price index and the Empire State survey of New York manufacturing activity. The Philadelphia Fed survey is released at 10 am.

"For sure, the stream of economic data will take a back seat for the most part. Google will be intriguing. Goldman Sachs will be better than expected. Citigroup is a wild card," said Art Hogan of Jefferies.

Nokia [NOK  15.40    0.42  (+2.8%)   ], Charles Schwab [SCHW  19.28    0.30  (+1.58%)   ], Safeway [SWY  21.43    0.44  (+2.1%)   ], Harley Davidson [HOG  26.26    1.62  (+6.57%)   ], Southwest Airlines [LUV  10.04    0.46  (+4.8%)   ] and Winnebago [WGO  14.36    -0.05  (-0.35%)   ] also report.   

Hogan also said he believes the stock market will continue to move higher, at least temporarily.

"I think we continue to ramp up through the earnings season," he said. Then when earnings season ends, the challenges will be a lack of catalysts and concern about corporate profits in 2010.

Dow History

The first time the Dow closed above 10,000 was March 29, 1999, where it remained until May, 2002. It was a time of optimism. The stock market was full of opportunities and the technology bubble was just getting started.

The second time the Dow crossed back above 10,000 was December, 11, 2003. It was real estate then that was just starting to bubble, pumped up by the Fed's easy ways after the Sept. 11 attacks. The Dow moved back and forth across the 10,000 mark but stayed above that level steadily from Oct. 27, 2004 until Oct. 3, 2008. The highest close ever was 14,164 on Oct. 9, 2007, well after the credit crisis first appeared.

Technically, Dow 10,000 is meaningless, but traders say it still has a psychological value as a big round milestone.

"There's a big population that doesn't necessarily focus on this all the time and has been disenchanted with Wall Street. This is a reminder that things have gotten better," Hogan said.

Another reminder that things have gotten better was the Wall Street Journal's report Wednesday that Wall Street bonuses are back and bigger than ever. That topic will no doubt be big around Goldman Sachs' earnings report. The firm is expected to report earnings of $4.20 per share on revenues of $10.9 billion.

Markets Mayhem

As stocks rose, the dollar took a beating and bonds sold off. Gold was slightly lower, but oil gained 1.4 percent, taking it to $75.18 per barrel, its highest close of the year. The dollar slipped 0.6 against the euro, to a level of $1.4919.

Treasurys, meanwhile, saw sellers along the curve.

"We tried to trade higher and the long end had a bit of a bid coming out of the FOMC (minutes) and then it kind of turned around," said Brian Edmonds, head of interest rate trading at Cantor Fitzgerald.

Edmonds said the market will be watching claims and CPI, which is expected to be tame. He also said the bond market has seen some swift moves recently. Treasurys traded lower at the end of last week, then higher Tuesday and down again Wednesday. The 10-year was yielding 3.425 percent, up from 3.314 Tuesday.

"We kind of all thought last week one market had to be wrong, either equities or fixed income ... If you look right now, you say fixed income had it wrong," he said.

"It pretty much showed that maybe equities were right short term. The earnings were good. That certainly is driving the stock market, and we're (bonds) not being supported by the stock market. That's certainly taken some of the wind out of the sails," he said.

Stock Rally Likely to Continue, But Hedge Your Portfolio: Pros

It took the Dow over a year to get back to 10,000, but the rally that got it there may still not be over.

But while stocks may continue to rise, pros suggest that investors start looking for ways to protect their gains if the rally runs out of steam.

Market experts both on trading floors and at portfolio managers gave measured levels of importance to the latest market milestone. At the same time, they say investors shouldn't try to stand in the way of the Wall Street stampede.

"Big, round numbers on indexes or commodities are in fact important and trigger buys as resistance is overcome," says Jordan Kimmel, market strategist at National Securities in New York. "While this is not the first time we've seen Dow 10,000, it's still a very important hurdle to get past, to get through and to leave behind."

The first move past 10,000 on Wednesday literally lasted seconds, but the Dow later closed firmly above that mark. It was the first time in a year that the 30-stock bluechip index passed five figures and marked a return to where it was 10 years ago.

After such a volatile decade, the rugged resistance to 10,000 and the minor pullback afterwards did not go unnoticed on Wall Street. The move, in fact, fed into a mindset that while increasing numbers of investors are moving to net-long positions on the market, they're also getting more aggressive in trying to find protection should the rally begin to falter.

"The way that the bond market is acting right now, we're seeing a lot of money in the last couple of sessions coming out of Treasurys," says Dave Lutz, managing director of trading for Stifel Nicolaus in Baltimore. "If this trend continues we might fuel this right to the moon."

Lutz had felt recently that passing 10,000 might represent a sell opportunity. Now, he's placing more emphasis on finding ways to hedge against long positions if stocks fall from their lofty perch compared to the March lows.

"We're seeing volume very light," he says. "It seems like the market has gotten a little complacent and a little dull. One of the biggest Wall Street adages is you never sell a dull market. As we go over 10,000 I'm going to consider buying protection against positions that we have already on the books."

One of the more common ways for investors to shield against downside is through the Chicago Board Options Exchange Volatility Index [VIX  22.86    -0.13  (-0.57%)   ].

Often referred to as Wall Street's "fear gauge," the VIX reflects options activity on the Standard & Poor's 500 and generally falls as stocks go higher. The VIX value reflects how much it costs investors to buy protection; the measure peaked near 90 during the worst of the financial crisis, but a reading in excess of 30 generally reflects high volatility.

That relationship, though, could change, if the VIX buck historical trends and moves in unison as investors get increasingly suspicious about whether the rally can be sustained.

"It makes absolutely all the sense in the world to protect your portfolio at the moment," Paul Britton, CEO and founder of Capstone, said in an interview with CNBC. "No one buys this rally—it's based purely upon technicals, people are underweight equities and you should use volatility and the options instruments to lock in some of the gains that the bulk of the investors have made this year."

Investors are employing a variety of other strategies to combat moves lower.

The choices range from put options that would profit investors by selling if a stock hits targeted lower levels, while others are using covered calls and aggressive stop-loss placements that also limit the moves lower.

But there's also a bullish rage running through the market that has others, such as famed investor Jim Rogers, unwilling to step in front of the Wall Street runaway train.

Rogers said in a recent interview with Reuters that the market is "overdue for a correction" but he was not willing to short either stocks or commodities at this point. Rather, he said that Treasurys are a bubble likely to burst.

The view is shared by those who think that 10,000, rather than being a resistance or resting point for the market, actually could trigger another rally.

"I would anticipate maybe some backing and filling over the next couple of weeks after 10,000 is cleared," Kimmel says. "But I certainly expect 10,000 to become a distant signpost as we go significantly higher."

The Lost Decade of Stock Investing

Advisers sold us a bill of goods about the lasting value of real estate and stocks

Here we are again: the same place we were March 1999, December 2003 and various points in between. We stand, for the first time in a long time, with the Dow Jones Industrial Average rising above 10000 – 10015.86 at Wednesday's close to be exact -- and we are left wondering the same questions we did years ago: is it just a temporary rush higher or a new floor for the great heights to come?

If the last decade taught us anything, it's that whether the Dow is at 9999 or 10001, it only indicates that it will most certainly not be there the next day.

The business of predicting the stock market is better left to those foolish enough to think they can. Show investors a raft of positive economic and earnings data and watch them sell on the news. Show those same investors J.P. Morgan Chase & Co.'s worsening loan losses and watch the stock add 3%, as it did Wednesday.

Those of us in the media who watch the market love to make a big deal about how an index has reached a new round number. For us, it's a big occasion like getting a new pope, president or haircut. These things don't happen very often, we say.

Wall Street, with the help of the media, also likes create meaning where none exists. The Dow breaking 10000 is, we're told, a psychological barrier. But, other than the use of pop psychology parlance, what exactly does that mean? Have we found our inner bull or bear?

In its own alternative-universe way, it all makes sense. Up is down and down never happened. We've spent the last decade spinning our wheels only to find we were walking in place, even though the Dow swung from a high of 14164 in 2007 to the low of 6547 in March 2009.

The swings aren't that astonishing given the tiny pool of 30 companies that make up the Dow. But look at a chart of the S&P 500 with its much broader swath of America's corporate landscape. The volatility is just as extreme.

Broker promises

All of this ruminating on markets lurching forward and back is a distraction to a decade of lost innocence. Ten years ago, brokers told us to expect an average gain of 7% annually for our buy-and-hold stock portfolios and steady 5% gains for our real estate investments.

You might still be doing well if you bought your house early in the decade. If you bought between 2004 and 2008, when a wave of mortgages were made, you're probably lucky to be sitting on break-even or a small loss given the fall in the Case Shiller Composite Indexes.

The stock market hasn't been much better. If you invested $100 in the S&P 500 at the end of the last decade, you're happy with Dow 10000 but still hoping for a 34.5% rally before year end -- just to break even. You'll need a staggering 72% rally when adjusting for inflation.

Just about everything has passed the stock market. In 1999, crude oil was $16.44 a barrel compared to $74.80 today Gold was $280. It's about $1,064 today. On the bright side, the Dow's 13% decline looks better than the dollar, which has lost 28% of its buying power.

Expensive, unwanted stocks

The rally that brought us 10000 on Wednesday is full of doubts. By some measures, stocks are tremendously expensive. During the great bull runs of the 2000s, the price-to-earnings ratio of companies in the S&P 500 Index was between 20- to 30-to-1. At the start of October, the ratio was 140-to-1, on an as-reported basis, which includes writeoffs. When those one-time items disappear, that ratio is likely to revert to more-normal levels, although still expensive.

Even after some better-than expected earnings reports for the most recent quarter, something's got to give.

Despite the fervor, there are still trillions on the sidelines in money-market funds and many investors continue to be skeptical of the market.

In September, investors pulled $11 billion more from domestic stock mutual funds than they put in -- the biggest monthly outflow since March, the month that the bear market hit bottom. This trend continued for the first five trading sessions of October, when an additional $4.1 billion net was pulled out, according to Trim Tabs data cited by MarketWatch's Mark Hulbert.

If the Dow crossing 10000 has some of those investors worried they're missing the rally and contemplating a move off the sidelines, then we may soon be swooning about the Dow breaking through the psychological barrier of its all-time high. After that we can contemplate something that matters, like a haircut.

Dow 10K: Celebrating 10 Years of 0% Return

Congratulations investors. The Dow has hit 10,000 on October 14th, 2009. You now have made officially 0 percent return if you invested in this index when the Dow first hit this magical level in 1999.

Time to celebrate for sure!

To be fair, the current markets (and economy) have certainly shown signs of resilience which flies in the face of those who have consistently predicted doom and explosion even when evidence of a rebound became more clear. But does it matter really if the Dow is at 10,000?

Jim Rogers says the Dow [.DJIA  10015.86    144.80  (+1.47%)   ] could go to 20,000 but it wouldn't matter if the US dollar was worth far less. And if you think about recent trends in US dollar weakness and the growing chorus of echoes suggesting the dollar should be a secondary currency, it does make some sense that symbolic index numbers are a bit meaningless.

Many investors (including myself) think that while Dow and S&P numbers do matter, other indexes may matter more in the future. What about Shanghai 3000/4000/5000 or the Rogers International Commodity Index 3000/4000/5000? Take your pick but the point is this; it's all not about the United States anymore. Globalization isn't going away

We have consistently argued that the United States is not irrelevant and will not be anytime in the near future. Regardless of what the naysayers say, the US economy still makes up a huge part of the overall global growth story.

So, as markets recover and the resilient US economy shows it's not quite done yet, celebrate small victories like Dow 10,000. And it will be a well-deserved party in the future as well if you are adopting a truly a global investment strategy; one that invests in US markets as well as Europe, Latin America, Asia, and around the globe.

And in case anyone needed a reminder, mid-to long-term time horizons do matter. Six months ago, when the Dow was at 6,500, gloomy pundits were saying that there was no chance that the market would recover.

And 60 percent upside later, they are now saying there's no chance the market can hold on to gains. We shall see, but the bottom line is short-term guesses are just that: stabs in the financial dark. The longer you hold on to assets with a strategic long-term plan, the better chance you have to win in today's investment environment.

So three cheers for Dow 10,000, While the world economy certainly has not regained full strength it does appear that some normalcy is beginning to emerge. Dow 10,000 is merely a US signpost along a recovering global investment road.

And with volumes of negativity surrounding us every day, why not celebrate Dow 10,000. Small victories matter as well.

Dollar falls to 14-month low; Fed sees better economy

The dollar probed a new 14-month low on Wednesday after minutes from the Federal Reserve's September meeting highlighted the wide range of opinions among policy makers, though many raised their economic outlooks.

The U.S. currency, which has been used as a safe haven, came under pressure early on after news that U.S. retail sales topped estimates. The report further fueled confidence about a global recovery amid upbeat earnings from major U.S. companies and good economic data in Europe and Asia.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 75.29, -0.26, -0.35%) , which tracks the greenback against a trade-weighted basket of six major currencies, declined to 75.513, down from 75.941 in late North American trading Tuesday. The index touched the lowest since August 2008 in earlier trading.

There was no appetite for hiking rates at this meeting because "the cost of the economy turning out to be weaker than anticipated could be relatively high," the minutes said.

Strategists were looking for any indication of when the Fed may begin tightening monetary policy.

Some officials wanted to increase the amount of mortgage-backed debt they'll buy, while another wanted to end the program early. See more on FOMC minutes.

"For the time being, plans for increasing stimulus have taken the place of any serious discussions about exit strategies," Kathy Lien, director of currency research at Global Forex Trading, wrote in an email. "The dollar has not been able to benefit from good news or bad news."

Fed Vice Chairman Donald Kohn, in remarks Tuesday, warned that the economy will likely see a moderate recovery rather than a rapid, V-shaped snapback.

Retail sales The dollar slumped after U.S. retail sales, excluding automobiles, increased 0.5% in September, more than analysts surveyed by MarketWatch expected. Of less interest to the market, overall sales fell due to the end of the cash-for-clunkers program. See more on retail sales.

"The equity market and U.S. economy appears to have bottomed, with the U.S. consumer back on the mend," Michael Woolfolk, senior currency strategist at The Bank of New York Mellon, wrote in an email.

U.S. stock indexed opened higher after J.P. Morgan Chase /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 46.99, -0.17, -0.36%) and Intel Corp. /quotes/comstock/15*!intc/quotes/nls/intc (INTC 20.83, -.00, -0.01%) outpaced expectations. The Standard & Poor's 500 Index /quotes/comstock/21z!i1:in\x (SPX 1,092, +18.83, +1.75%) jumped more than 1.6% and the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 10,016, +144.95, +1.47%) topped 10,000 for the first time in a year.

Rising equities have spelled weakness for the U.S. dollar as investors abandon the former safe haven for riskier assets.

"Encouraging earnings reports and news Chinese exports fell at a slower than expected pace, helped maintain positive sentiment for risk-on trades," said strategists at Brown brothers Harriman.

Separate economic reports showing weak import prices and business inventories failed to stem the dollar's decline or stock's rise.

The U.S. dollar had been lower in earlier trading as Chinese and European data boosted investor appetite for risky assets, strategists said.

The dollar was volatile versus the Japanese currency and lately traded at 89.47 yen, compared to 89.82 yen late Tuesday. The Bank of Japan kept interest rates steady, as anticipated and raised its economic assessment.

The euro traded at $1.4916 versus the dollar, up from $1.4851 late Tuesday. The euro pressed above $1.49 for the first time in more than a year.

The statistics agency Eurostat said output rose 0.9% for the month, less than predicted but leaving it down 15.4% compared to August 2008. The annual figure was in line with expectations.

Upward revisions to data in previous months point "to a stronger picture than we had expected before today's release," said Marco Valli, chief Italian economist at UniCredit MIB.

China, U.K.

In Asian trading, a report showed China's trade surplus slid less than forecast in September.

Separate data showed China's exports contracted at a slower pace last month and led to speculation that estimates for third-quarter Chinese growth may be revised higher, which helped left the Australian dollar, said Jane Foley, research director at Forex.com.

The Australian dollar gained 0.9% versus the greenback to 91.41 U.S. cents, setting another 14-month high versus its U.S. counterpart.

The British pound climbed to $1.5975 from $1.5916. Data showed British employers shed jobs at a slower-than-expected pace in September. See full story.

Canadian loonie

Meanwhile, the U.S. dollar continued to slide toward parity with the Canadian currency, underlining expectations Canadian authorities may soon attempt to intervene to prevent its currency from strengthening further, analysts said.

The U.S. dollar fetched just 1.0277 Canadian dollars in recent action, down 0.6% from Tuesday and getting closer to parity, not seen since mid-2008.

"The [Bank of Canada] has until recently been successful in slowing Canadian dollar appreciation by warning of possible intervention, but markets have clearly stepped up their game," said Kenneth Broux, market economist at Lloyds TSB.

Asia:

Asian stocks rose for a third day, led by finance and materials companies, after JPMorgan Chase & Co.'s earnings topped estimates and Posco raised its profit forecast, boosting confidence in the economic recovery.

Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. climbed more than 2 percent, leading gains among financial shares. Posco, Asia's third-largest steelmaker, rallied 4.5 percent in Seoul after the company estimated higher earnings on increasing demand. Panasonic Corp., the world's largest maker of plasma televisions, gained 2.5 percent in Tokyo as Credit Suisse Group AG advised buying the shares. Woodside Petroleum Ltd. added 2.3 percent on higher commodities prices.

The MSCI Asia Pacific Index added 1 percent to 121.15 as of 9:47 a.m. in Hong Kong, heading for its highest close since Sept. 8, 2008. The gauge has climbed 72 percent from a more than five- year low on March 9 amid increasing signs stimulus measures around the world are reviving the global economy.

"The news out of the U.S., particularly companies such as JPMorgan, is boosting sentiment and banks are likely to be at the center of a move by investors back into the market," said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC Co. in Tokyo.

Japan's Nikkei 225 Stock Average gained 1.7 percent, while Australia's S&P/ASX 200 Index rose 1 percent. South Korea's Kospi Index added 1.2 percent. All markets in Asia advanced.

JPMorgan Earnings

Futures on the Standard & Poor's 500 Index added 0.1 percent. The gauge rose 1.8 percent yesterday to the highest since October 2008 following JPMorgan's earnings and as a government report showed sales at retailers fell less than economists estimated.

Financial companies led the U.S. advance after JPMorgan posted earnings per share of 82 cents, while analysts had forecast 51 cents. Investment-banking revenue from fixed income jumped to a record $5 billion as Chief Executive Officer Jamie Dimon capitalized on his 2008 acquisition of Bear Stearns Cos.

Bear Stearns and Lehman Brothers Holdings Inc. were among the biggest casualties of the credit crisis that has caused more than $1.6 trillion of losses at the world's biggest financial companies. Finance shares are the MSCI Asia Pacific Index's best performing group in the rally since March as concerns eased about the health of the industry.

Mitsubishi UFJ, Japan's largest bank by market value, advanced 2.5 percent to 497 yen. Mizuho, the country's third- biggest, climbed 2.3 percent to 181 yen.

Japan's Financial Services Minister Shizuka Kamei said yesterday a plan to provide debt relief to small borrowers will be covered by government guarantees against default, the Nikkei newspaper said, lessening the burden on the nation's lenders.

Seven-Month Rally

The MSCI Asia Pacific Index's seven-month rally has outpaced gains by the S&P 500 Index and Europe's Dow Jones Stoxx 600 Index. Stocks in the Asian benchmark are valued at 23 times estimated earnings, compared with 18 times for the S&P and 16 times for the Stoxx 600.

Posco climbed 4.5 percent to 538,000 won after lifting its operating profit forecast for 2009 by 23 percent yesterday amid signs steel demand is recovering. The World Steel Association said on Oct 12. that the global market will rebound 9.2 percent next year.

Woodside, Australia's second-largest oil producer, added 1.1 percent to A$53.22. Crude oil rose above $75 a barrel in New York for the first time in a year. The London Metals Index, a measure of six metals including copper and zinc, added 0.9 percent yesterday.

Nikkei 225 10,272.62     +212.41 ( +2.11%). (08.24 AM IST)

Japan's Nikkei stock average climbed 2.1 percent on Thursday, bolstered by exporters such as Sony Corp (6758.T) after robust U.S. company results and data pushed the Dow over 10,000 for the first time in a year.

Mitsubishi UFJ Financial Group (8306.T) and other banks gained in the wake of good results from JPMorgan Chase & Co's (JPM.N), boosting hopes other major Wall Street banks will report strong results this week. [.N]

U.S. retail sales, excluding autos, rose for a second month, offering cautious optimism that spending would support the economy as it struggles out of recession.

"Nobody thought that consumer spending would suddenly surge so these figures are pretty good, they verify a slow and steady recovery," said Hideyuki Ishiguro, a supervisor at the investment advisory section of Okasan Securities.

"But there are signs that the market may not rise all that much more today, particularly since foreign investors didn't seem to be all that keen on Japanese shares in comparison to other Asian share markets yesterday. I think there's still some concern about earnings." The benchmark Nikkei .N225 rose 212.41 points to 10,272.62, while the broader Topix rose 1.6 percent to 909.01.

The Nikkei surged through resistance that had developed around 10,140 -- the level of its 25-day moving average -- and market players said one key focus of the day would be whether it manages to close above that level.

Investor optimism about U.S. earnings, already strong after good results from Intel Corp (INTC.O) this week, was further bolstered when JPMorgan's quarterly profit rose sharply.

The Dow Jones Industrial average .DJI rose above 10,000 for the first time in a year, to 10,015.86 for a gain of 1.5 percent. Other U.S. indexes all rose more than 1 percent.

"Given the gains in the Dow and the general mood of global stock markets, it wouldn't be that surprising to see the Nikkei rise as far as 11,000," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "But Japan still lags overseas markets, and we're not seeing the same fund inflows that they are."

BANKS, EXPORTERS

Among banks, top lender Mitsubishi UFJ Financial Group (8306.T) rose 2.3 percent to 496 yen, No. 2 bank Mizuho Financial Group (8411.T) gained 1.1 percent to 179 yen and Sumitomo Mitsui Financial Group (8316.T) advanced 2.1 percent to 3,340 yen.

But some in the market were doubtful about how long this would continue, noting that the prospect of a loan moratorium proposed by Banking Minister Shizuka Kamei still hung over the market.

"Financial shares are likely to see some short-covering after the JPMorgan results, but fundamentally it's still too early to see a real recovery in this sector, and this will help limit the Nikkei's rise," said Kenichi Hirano from Tachibana Securities.

Attention is also on more U.S. financial results this week, including Goldman Sachs (GS.N) and Citigroup (C.N) on Thursday. [SP500/WK] [RESF/US]

Exporters climbed, with Sony up 3.8 percent to 2,605 yen, Honda Motor Co (7267.T) gaining 2.5 percent to 2,830 yen and Toyota Motor Corp (7203.T) rising 2.2 percent to 3,650 yen.

Elpida Memory (6665.T) jumped 5 percent to 1,285 yen after saying that it had posted an operating profit of 500 million yen in the three months to the end of September against a loss of 24.5 billion yen a year earlier.

"This Elpida news may be taken as a sign that the whole sector is likely to see earnings recovery, with autos also likely to do pretty well," said Ishiguro at Okasan Securities.

Trade was moderate, with 1 billion shares changing hands on the Tokyo exchange's first section compared with last week's morning average of 980 million.

Advancing shares outnumbered declining ones by more than 4 to 1.

HSI 22213.87 +327.39 +1.5%. (08.27 AM IST)

Hong Kong's benchmark Hang Seng Index broke above the 22,000-point level Thursday morning for the first time since August 2008, as property developers, banks and resource stocks rose following the Dow Jones Industrial Average's close above the 10,000-point level overnight. The Hang Seng Index was 1.6% in early trading at 22,238.77, taking gains into a third straight session, while the Hang Seng China Enteprises index rose 2% to 13,030.45. On the mainland, the Shanghai Composite advanced 0.5% to 2,985.57 after briefly rising above the 3,000-point level.

Chinese stocks open 0.82% higher on Thu

Chinese stocks opened higher on Thursday morning, tracking gains from the previous closing.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 2,994.89 points, up 0.82% or 24.36 points from the previous closing.

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.97% or 116.51 points higher at 12,092.42 points.  

 

BOC to provide RMB 80 bln in credit to China Shipping (15 Oct) 

The Capital Group raises stake in China's CRCC to 6.1% (15 Oct) 

Hang Seng Index opens 322 points higher on Thu (15 Oct) 

BMW's China sales up 31.8% in Jan-Sep (15 Oct) 

Tata to recruit more in China (15 Oct) 

Consortium to invest US$160 mln in Far Eastern Leasing (15 Oct)

Guangdong Dev't Bank reports RMB 2.78 bln in net profit for 2008 (15 Oct) 

Chinese stocks open 0.82% higher on Thu (15 Oct)

Hon Hai to supply Xbox 360 console (15 Oct) 

Elec-Tech International to raise RMB 1.53 bln via private placement (15 Oct) 

Yuzhou Properties eyes US$285 mln from HK IPO (15 Oct) 

Carrefour says no plan to withdraw from China (15 Oct) 

China's housing prices rise 2.8% in September

China receives $7.9 bln FDI in September

China's power consumption continues to rise in Sept.
 

INVESTMENT VIEW
Oil India: East Side Story
 
 
In the event natural gas prices are freed or raised by the GOI, as is the proposal now, Oil India's forecast EPS for FY11 will rise to Rs 154 thereby giving the stock a target price of Rs 1800 at roughly 11.5 times FY11 earnings.
 

Backdrop 

At 100,000 bpd Oil India is the second biggest crude producer in the country, next in line to ONGC. The GOI recently allowed Reliance to sell it's KG6 Gas in the country at $ 4.2 per MBTU. As compared to this both Oil India and Ongc continue to sell their Natural Gas at $ 2.4 per MBTU. A cabinet note has been prepared by the MoPNG to allow both Ongc and Oil to raise gas prices to match those of Reliance. Ultimately this move will lead to a decontrol of Gas price in the country, and will be Revenue and Earnings positive for both Ongc and Oil India.

 

We expect Oil India to create significant value from its current large oil and gas reserves and solid exploration abilities. With Oil at $ 65 a bbl, the 12 month target for the stock works out to Rs 1350 based upon 10XFY2011 Earnings. The targeted price will rise to Rs 1580 per share, if crude prices remain firm at $ 75 a bbl for an extended length of time.

 

The current market price of Rs 1189.80 discounts crude price at $ 60 a bbl in perpetuity, thereby assuming no upside. However, Q3 of CY09 has seen Crude remarkably resilient at and above $ 65 a bbl, and now at $ 74 a bbl. Thus current projections of most analysts are based on very low price of crude, which may turn out to be a fallacy.

 

Strong Cash Flow

 

Oil's EPS is likely to increase to Rs 123 in FY10 and to Rs 134 in FY11 versus Rs 101 in FY09 led by:1)higher crude price on a net realization basis 2)higher volumes and 3)a favourable subsidy sharing scheme.

 

Strong Earnings Outlook and Dividend Yield

Oil India is likely to generate strong free cash flows of Rs 62 bn over the FY2010-12 period. This assumes a increase in oil and gas production at 112,350 boe/d in FY12 compared to 97950 boe/d in FY09. Dated Brent crude at $ 65/bbl in FY10 and at $ 75/bbl in FY11. But as aforesaid, Crude quotes at $ 74/bbl at present, and hence Net Realisations for both FY10 and FY11 may ultimately prove to have been assumed on the lower side.  

 

An earnings surprise will ultimately push the stock much higher over a period of time, and closer to our upper band target price of Rs 1580 per share, an upside of 32 per cent.

 

Other positive price triggers:

 

-Oil India is selling natural gas at an average realization price of $ 2 per MBTU, which is likely to be raised to $ 5 per MBTU. A cabinet note has been prepared by the MOPNG for approval, consequent to which the entire Natural Gas market in the country alongside it's pricing and global linkages will be freed from price controls.  A free market price of Oil India's Natural Gas will add Rs 20 per share in EPS per annum. Raising the ultimate price target for the scrip to Rs 1800 or so.

 

-Upsides from exploration have not been considered in the above projections. In the recently auctioned NELP VIII Oil India won 6 more blocks. These are in addition to the 26 exploration blocks in India and 17 Overseas. An oil or gas find in these blocks will not only raise the figure of proven and recoverable reserves but add to the sustainability model of Oil India.

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
 

 

FUNDS DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	14-Oct-2009	4247	2803.22	1443.78

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	14-Oct-2009	1468.82	1665.73	-196.91

 

SPOT LEVELS TODAY

	5118.20	( 1.27 %)	63.95
		1	2	3
Resistance		5099.72	5145.18	5222.32
Support		4977.12	4899.98	4854.52

	17231.11		( 1.20 %)	204.44
			1	2	3
Resistance			17167.86	17309.05	17549.32
Support			16786.40	16546.13	16404.94

--

Arvind Parekh

+ 91 98432 32381

 

 

Market Outlook for 14th Oct 2009

 

INTRADAY calls for 14th Oct 2009

BUY Relcapital-950 for 985-994+ with sl 934

BUY KotakBank-799 for 815-839+ with sl 788

 

BUY LITL-521 for 540-547+ with sl 510

BUY Indiainfo-150 for 162+ with sl 147

 

Positional

BUY Bankindia-410 for 424+ with sl 404

BUY Cromptgreav-339 for 355+ with sl 332

BUY Indhotel-79 for 105+ with sl 72

BUY Kirlosoil-120 for 140+ with sl 115

 

Strong & Weak  futures

This is list of 10 strong futures:

DCHL, OFSS, IOB, Bajaj Auto, Lupin, Canara Bank, Sesa Goa, Titan, Indian Bank & LITL.  

And this is list of 10 Weak futures:  

Idea, RCom, Bharti Airtel, TV-18, Grasim, MTNL, Federal Bank, Suzlon, GVKPIL & HCL Tech.

Nifty is in Up trend

 

INVESTMENT BUY:

Buy SUNSHIELD CHEM (BSE Cash)  

Bulls may hold on gains today.

 

1 Week: Bullish, as per current indications.

 

 

1 Month: Bullish, as per current indications.

 

 

3 Months: Bullish, as per current indications.

 

 

1 Year: Bullish, as per current indications.

 

Buy MOUNT SHIVALIK (BSE Cash)  

Bulls may lose control today.

 

1 Week: Surprisingly going up, opposite to bearishness.

 

 

1 Month: Surprisingly going down, opposite to bullishness.

 

 

3 Months: Bearish, as per current indications.

 

 

1 Year: Surprisingly going up, opposite to bearishness.

 

NIFTY FUTURES (F & O):  

Below 5031 level, expect profit booking up to 4977-4979 zone and thereafter slide may continue up to 4925-4927 zone by non-stop.

 

Hurdle at 5069 level. Above this level, rally may continue up to 5085 level by non-stop.

 

 

Cross above 5137-5139 zone, can take it up to 5188-5190 zone by non-stop. Supply expected at around this zone and have caution.

 

 

On Negative Side, rebound expected at around 4839-4841 zone on down side. Stop Loss at 4788-4790 zone.

 

Short-Term Investors:  

Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop.  

 

BSE SENSEX:  

Lower opening expected. Recovery should continue.  

 

Short-Term Investors:  

Short-Term trend is Bullish and target at around 17671.82 level on upper side.

Maintain a Stop Loss at 16613.22 level for your long positions too.

 

SL Triggered.

 

Global Cues & Rupee  

The Dow Jones Industrial Average closed at 9,871.06. Down by 14.74 points.

The Broader S&P 500 closed at 1,073.19. Down by 3.00 points.

 

The Nasdaq Composite Index closed at 2,139.89. Up by 0.75 points.

 

India's currency markets were closed on Tuesday for a holiday due to elections in Maharashtra.

 

Interesting findings on web:

The Dow retreats one day after ending at a 1-year record. Weak bank stocks and a mixed J&J profit report weigh on Wall Street.

 

Wall Street struggled Tuesday as weakness in the financial sector and disappointment about Johnson & Johnson's results halted the Dow's attempt to reclaim 10,000.

 

US stocks closed slightly lower after recovering an early knock from indifferent third quarter results from Johnson & Johnson.

 

Goldman Sachs Group and Johnson & Johnson weighed on the banking and health-care industries Tuesday, engaging in a tug-of-war with a rallying materials sector that helped stocks close only slightly lower.

 

The Dow fell 14.74, or 0.2 percent, to 9,871.06. On Monday, it came within 69 points of the psychological barrier of 10,000, a level not seen in a year.

 

The Standard & Poor's 500 index fell 3.00, or 0.3 percent, to 1,073.19, its first loss after six days of gains. The Nasdaq rose 0.75, or less than 0.1 percent, to 2,139.89.

 

RUSSELL611.7-2.11-0.34%

 

TRAN3892.42-14.28-0.37%

 

UTIL376.86-2.39-0.63%

 

S&P 100496.43-1.22-0.25%

 

S&P 400699.85-3.01-0.43%

 

NYSE7031.87-19.29-0.27%

 

NAS 1001730.270.64

 

After the close, Dow component Intel (INTC, Fortune 500) reported quarterly sales and earnings that topped estimates.

 

The chipmaker also issued a bullish forecast, saying that it expects fourth-quarter revenue of between $9.7 billion and $10.5 billion vs. the $9.51 billion consensus. Intel also said it expects gross margins, a key measure of profitability, in the 59% to 65% range versus the 56.7% consensus.

 

Stocks slipped at the start as traders braced for the first big wave of quarterly results this week.

 

Stocks briefly turned higher in the late morning, before heading lower again.

 

With more than $3 trillion sitting in money market accounts and few better options, investors are feeling increasingly compelled to put cash into equities, said Rob Lutts, chief investment officer at Cabot Money Management.

 

"The common thought is that the market has run ahead of a recovery and that a correction is going to happen, but the reality is that the money has to go somewhere," he said.

 

"We probably are ahead of the fundamentals, but that doesn't mean we can't keep going higher," he said.

 

The Dow has been moving closer to 10,000, a key psychological barrier that could give stocks another leg up, or trigger a selloff. The market last closed above 10,000 a year ago, on Oct. 3, 2008.

 

Cisco Systems (CSCO, Fortune 500) said it is buying Starent Networks (STAR) for $2.9 billion in cash. Starent makes gear that enables wireless carriers to tie their networks to the Internet.

 

Google director Arthur Levinson has resigned from the Internet search leader's board, averting a potential showdown with government regulators over his overlapping job as a director for computer and gadget maker Apple, according to USA Today.

 

The market could also get a lift from comments by CSX Corp. CEO Michael J. Ward, who said the worst of the recession "is likely behind us" as the major rail operator reported quarterly results after the bell.

 

"The market only makes sense at these levels if earnings can grow at a decent pace," said Jerry Webman, chief economist at OppenheimerFunds Inc. "What we're hearing now is OK, but you don't get long-term earnings growth out of cost cutting."

 

Linda Duessel, equity market strategist at Federated Investors, said stocks could drift after the strong rally. "I don't know if we have to pull back so much as take a break," she said.

 

Investors have sent stocks higher in recent days on hopes that third-quarter earnings reports will signal that the economy is improving.

 

Howard Ward, portfolio manager for GAMCO Growth Fund in Rye, N.Y., said investors are likely to lock in some profits following a rally that propelled the S&P 500 index up 58.6 percent since March and that future gains will be more modest.

 

"The market is going to be grinding its way higher from here," he said. "The fire sale is over."

 

"People are on the edge of their seats," said Ronald Knipping, managing principal at the wealth management division of Rehmann, a Michigan-based financial advisory firm.

 

"The leading indicator is going to be revenue growth, and right now there's none."

 

J&J boosted its 2009 earnings guidance to a range of $4.54 to $4.59 per share, versus an earlier range that topped out at $4.55 a share. Nonetheless, investors focused on the negative and shares fell 2.5%.

 

Other Dow gainers included Home Depot (HD, Fortune 500), Chevron (CVX, Fortune 500), DuPont (DD, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500).

 

Goldman Sachs (GS, Fortune 500) slipped 1.5% after Merideth Whitney Advisors downgraded it to "neutral" from "buy."

 

That pressured a number of other financial shares, including Dow components Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Travelers Companies (TRV, Fortune 500).

 

Big banks should do well in the coming quarters, helped by strong trading activity, banking analyst Dick Bove said on CNBC yesterday. But, he cautioned that regional banks will take a hit from commercial real estate.

 

Today, FDIC chair Sheila Bair said bank failures will continue at a pretty good clip but shouldn't involve any more bailouts from taxpayers.

 

Zions Bancorp (Nasdaq: ZION), a Utah lender that operates in 10 Western states, rose 6 percent to $18.02 for the biggest gain in the S&P 500. The lender was rated "Outperform" in new coverage by Sanford C. Bernstein & Co., which said the company represents "quality in the junk pile."

 

Bank of America said it will waive attorney-client privilege and hand over legal documents related to its controversial merger with Merrill Lynch. The company has been under pressure from regulators for months to provide more information on the purchase.

 

CIT Group (CIT, Fortune 500) tumbled 11.5% after the lender's CEO said he would resign by the end of the year.

 

Wells Fargo (NYSE: WFC) lost 0.7 percent.

 

Housebuilders did better with Lennar, Pulte andKB Home leading the sector higher.

 

Within the index, Dow components Pfizer, off 32 cents, or 1.9%, at $16.78, and Merck, down 44 cents, or 1.3%, at 32.42, were two of its weakest as the Senate Finance Committee's approval of a health-care-reform bill weighed on the sector. In addition, Johnson & Johnson fell 1.52, or 2.4%, to 61.01, after the pharmaceutical company's third-quarter revenue came in shy of Wall Street's expectations.

 

With gold and other metals once again finishing higher, several metals stocks finished higher on the session. Gold miner Newmont Mining was strong, up 1.20, or 2.6%, at 47.68, while United States Steel gained 1.40, or 3.3%, to 43.81.

 

Also in the materials sector, AK Steel Holding rose 80 cents, or 4.1%, to 20.19, after Goldman Sachs named the coal company as a potential takeover target in its broad analysis of the mergers-and-acquisitions market.

 

Supermarket shares slumped Tuesday as analysts hit the sector with ratings cuts and downward earnings estimates. Among the analyst moves, Pali cut Supervalu to "sell" from "neutral," sending shares down 61 cents, or 3.8%, to 15.46, and also lowered its estimates on Safeway, which fell 31 cents, or 1.5%, to 20.99.

 

Health care stocks stumbled after J&J's report and as the Senate Finance committee approved a version of the health care overhaul bill.

 

The three biggest drags on the Dow were: J&J, Pfizer and Travelers.

 

The top three gainers were: Home Depot, Wal-Mart and AT&T.

 

Among 10 key S&P sectors, energy was the biggest gainer, up 1.2 percent.

 

In other deal news, the Comcast [CMCSA  15.36    0.08  (+0.52%)   ]-General Electric [GE  16.39    0.06  (+0.37%)   ] deal being discussed by the companies apparently includes two potential dates in which GE could unwind its stake in NBC Universal, the parent of CNBC, according to Reuters. GE shares eked out a gain of 0.4 percent.

 

Energy stocks joined the downturn despite the fact crude rose to a price of $74.87, a gain of one percent on the session. So far in 2009, oil prices have gained 65 percent, giving energy related stocks a boost. However, the Oil Services HOLDRs (OIH) fell 0.64 percent Tuesday to a price of $123.12. However, this is more than double the low of $60.96 reached in the past 52-weeks on the OIH.

 

Retailers were among the Dow stocks seeing the best gains Tuesday. Shares of Home Depot (HD) and Wal-Mart (WMT) gained 1.81 percent and 1.47 percent respectively.

 

UnitedHealth Group Inc. (NYSE: UNH), the largest health insurer by sales, tumbled 3.7 percent to $24.29 and Aetna Inc. (NYSE: AET), the third-biggest, lost 3.3 percent to $25.54. The group of six medical insurers has gained 2.4 percent so far this year, compared with the S&P 500's 19 percent advance, amid uncertainty about what effects the legislation will have on earnings.

 

Life insurers had the two biggest declines in the S&P 500. Hartford Financial Services Group Inc. (NYSE: HIG) and Genworth Financial Inc. (NYSE: GNW) declined at least 6.2 percent. Credit Suisse Group AG (NYSE: CS) analyst Thomas Gallagher said following what will likely be "strong results" in the third quarter, the "book value recovery trade will be largely over for the life insurance sector."

 

The bank cut MetLife Inc. (NYSE: MET) and Ameriprise Financial Inc. (NYSE: AMP) to "Neutral" from "Outperform," sending shares of both down more than 2.7 percent.

 

Shares of Stec Inc fell more than 8 percent to $24.30 near the close with no news to explain the action. Its shares have been under pressure since Wedbush analyst Betsy Van Hees issued a cautious Sept. 17 research note on the stock, said WhatsTrading.com option strategist Frederic Ruffy.

 

Hees cut the price target on the stock to $39 from $45 but maintained an "outperform rating."

 

For whatever reason, the latest share price decline seems to have stirred up some bottom fishers, as about 28,000 calls and 15,000 puts have traded on the stock, he said. He noticed buyers of the Oct $25 and Nov $27 call strikes leading the flow. The stock's average implied volatility rose to 88 percent from about 83.5 percent the previous session.

 

S&P 500 - Risers

 

Zions Bancorporation (ZION) $18.05 +6.18%

 

Lennar Corp. Class A (LEN) $15.12 +5.44%

 

A K Steel Holdings Corp. (AKS) $20.18 +4.07%

 

ITT Corp. (ITT) $53.15 +3.34%

 

Akamai Technologies Inc. (AKAM) $20.79 +3.29%  

 

 

S&P 500 - Fallers

 

CIT Group Inc. (CIT) $0.91 -12.50%

 

Hartford Fin Svc (HIG) $26.61 -6.73%

 

Genworth Financial (GNW) $11.04 -6.36%

 

Developers Diversified Reality (DDR) $9.35 -4.88%

 

MEMC Electronic Materials (WFR) $15.68 -4.62%  

 

 

Dow Jones I.A - Risers

 

Wal-Mart Stores Inc. (WMT) $50.58 +1.96%

 

Home Depot Inc. (HD) $27.50 +1.70%

 

AT&T Inc. (T) $25.93 +1.29%

 

Intel Corp. (INTC) $20.59 +0.93%

 

United Technologies Corp. (UTX) $61.94 +0.76%  

 

 

Dow Jones I.A - Fallers

 

Johnson & Johnson (JNJ) $60.92 -2.57%

 

Pfizer Inc. (PFE) $16.78 -1.87%

 

Travelers Company Inc. (TRV) $48.00 -1.70%

 

Merck & Co. Inc. (MRK) $32.42 -1.34%

 

Bank Of America Corp. (BAC) $17.79 -1.33%

 

Put volume popped up in discount broker Charles Schwab Corp ahead of its quarterly results expected on Thursday, suggesting some investors are taking a cautious stance. Its shares fell 1.5 percent to $18.98. Option volume was four times the average daily level with 20,000 puts and 4,027 calls traded. Directional sentiment based on order flow was 66 percent bearish, according to Trade Alert. The October $18 puts, which after today have three days of life remaining, have become the most popular and had volume of 10,314 contracts with 84 percent hitting ask-side, said WhatsTrading.com option strategist Frederic Ruffy. In that strike, the number of existing positions held by investors is 2,762, suggesting investors are buying to open positions. It also looked like opening buyers in the Oct and Nov $19 puts as well, he added. The option implied volatility moved up to 37.6 percent.

 

Dow component JPMorgan Chase (JPM, Fortune 500) reports results Wednesday morning. The financial company is expected to report a profit of 49 cents per share versus 11 cents a year ago.

 

Also Wednesday: reports are due on September retail sales, August business inventories and September import and export prices.

 

High unemployment, tight credit, vacant homes and idle factories point to a tepid U.S. economic recovery in which core measures of inflation are likely to slow further, the Federal Reserve's No. 2 official said on Tuesday.

 

"I don't think a V-shaped recovery is the most likely outcome this time around," Fed Vice Chairman Donald Kohn told the National Association for Business Economics.

 

VIX22.99-0.02-0.09%.

 

Oil,Gold & Currencies:

 

U.S. light crude oil for November delivery rose 88 cents to settle at $74.15 a barrel on the New York Mercantile Exchange.

 

COMEX gold for December delivery rose $7.50 to settle at $1,065 an ounce, a record close.

 

The dollar fell versus the euro and the yen.

 

The dollar traded near a 14-month low against the euro as signs the global economy is recovering spurred demand for higher-yielding assets.

 

The dollar may decline against the pound for a second day before a government report forecast to show U.S. consumer prices gained last month, curbing demand for safe-haven assets. The yen weakened against the greenback on speculation the Bank of Japan will keep interest rates unchanged today amid the nation's fragile economic outlook.

 

"Globally, things are improving," said Phil Burke, chief dealer for foreign-exchange spot trading at JPMorgan Securities in Sydney. "Risk will be supported, and the U.S. dollar will probably weaken."

 

The U.S. currency traded at $1.4846 per euro at 8:59 a.m. in Tokyo from $1.4854 in New York yesterday, when it reached $1.4876, the weakest level since Aug. 22, 2008. The yen was at 133.37 per euro from 133.26. The yen fell to 89.84 per dollar from 89.71. The dollar was at $1.5937 per pound from $1.5925.

 

The dollar may weaken as economists in a Bloomberg News survey forecast U.S. consumer prices rose 0.2 percent in September following a 0.4 percent gain in August. The Labor Department is set to release the data tomorrow.

 

Japan's central bank will leave its benchmark interest rate at 0.1 percent today, according to all 20 economists surveyed by Bloomberg News. The nation's producer prices fell for a ninth month in September as oil traded lower than last year's levels and demand for materials waned, the Bank of Japan said today.

 

The costs companies pay for energy and unfinished goods declined 7.9 percent in September from a year earlier after sliding a record 8.5 percent in August. The median estimate of 27 economists surveyed by Bloomberg News was for a 7.9 percent drop.

 

Bank of Japan

 

"The central bank won't be able to raise rates anytime soon as deflation concerns linger," said Toshiya Yamauchi, a Tokyo-based manager of the foreign-exchange margin trading department at Ueda Harlow Ltd. "This makes it easy for the yen to be sold as a funding currency."

 

Japan's consumer prices excluding fresh food slid 2.4 percent in August from a year earlier, topping July's 2.2 percent decline, the statistics bureau said on Sept. 29. The drop was the sharpest since the survey began in 1971.

 

Federal Reserve Vice Chairman Donald Kohn said yesterday that inflation and growth will probably stay below the central bank's objectives for some time, warranting very low interest rates for an "extended period." The bank is scheduled to release the minutes of its Sept. 23 meeting today in Washington.

 

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.1 percent to 75.877.

 

Bonds:

 

Treasury prices rallied, lowering the yield on the 10-year note to 3.32% from 3.30% late Friday, as bond markets were closed Monday for Columbus Day. Treasury prices and yields move in opposite directions.

 

What to expect:

 

WEDNESDAY: Allen Stanford court appearance; Weekly mortgage applications; government's report on retail sales; import/export prices; business inventories; Fed minutes; Earnings from Abbott Labs and JPMorgan

 

THURSDAY: IRS amnesty for offshore accounts ends; CPI; Empire State manufacturing; weekly jobless claims; Philly Fed; weekly crude inventories; Earnings from Citigroup, Goldman Sachs, Nokia, IBM and AMD

 

FRIDAY: Industrial production; consumer sentiment; Fed's Fisher speaks; Earnings from Bank of America, GE, Halliburton and Mattel

 

Wednesday Look Ahead: Will Intel, JP Morgan Take Dow to 10,000?

 

Intel's earnings beat should help stocks Wednesday but focus will quickly shift to J.P. Morgan's report, ahead of the opening bell.

 

"One down, a bunch more to go," said Tim Smalls of Execution LLC. Intel's strong after the bell earnings, and an upgraded fourth quarter revenue forecast, propelled it and other tech stocks higher in after hours trading.

 

J.P. Morgan is the first big financial to report and is seen as a bellwether for the recovering banking industry. It is viewed as the strongest of the banks and is a read on both the health of the broader financial industry and economy. J.P. Morgan is expected to earn $0.52 per share. Rivals Citigroup and Goldman Sachs report earnings Thursday.

 

If stocks find a reason to rally, the Dow is within easy reach of the psychologically important 10,000 level.  

 

Financial stocks were under pressure Tuesday, losing 1.1 percent after influential analyst Meredith Whitney downgraded Goldman Sachs to neutral and said take profits in the banking group ahead of earnings. For most of the day, the stock market traded sideways as the dollar weakened, and gold hit a new high.

 

The Dow finished at 9871, off 14, and the S&P 500 was off 3 at 1073. Gold rose $7.50 per troy ounce, to a Comex closing high of $1064.20. The dollar continued to slip, losing 0.3 percent against the euro to $1.4829. Treasurys, meanwhile, found buyers along the curve, pushing the 10-year's yield lower to 3.314 percent.

 

Intel reported profits of $1.9 billion or $0.33 per share, well above the $0.28 per share expected by analysts. Intel also raised its fourth quarter revenue forecast to $10.1 billion, above the $9.5 billion expected by analysts.

 

Ahead of its report, Intel earnings were the talk of the market, including whispers about how much improved its closely watched margins might be. The company reported gross margins of nearly 58 percent, above analysts expectations in the low 50s but just slightly shy of the 60 percent whisper number.

 

Intel [INTC  20.49    0.09  (+0.44%)   ] said it saw a strengthening pc market during the third quarter. Its comments on the economy were cautious but positive. Intel CEO Paul Otellini said in a release that the company's strong results "underscore that computing is essential to people's lives, proving the importance of technology innovation in leading an economic recovery."

 

Whether it leads a recovery or not, Intel's news was leading a tech rally in the after hours trading.

 

Rail company CSX[CSX  44.29    -0.62  (-1.38%)   ], meanwhile, also reported after hours. Its profit of $293 million, on revenues of $2.3 billion, was better than expected. The company noted in its comment that "the worst of recession is behind us." CSX shares jumped 3 percent.

 

Other companies reporting Wednesday are Abbott Labs[ABT  49.69    -0.31  (-0.62%)   ], WW Grainger[GWW  94.29    1.15  (+1.23%)   ] and Host Hotels[OSH  6.7    0.01  (+0.15%)   ], before the bell. Crown Holdings[CCK  28.75    -0.10  (-0.35%)   ] and Xilinx[XLNX  23.93    0.24  (+1.01%)   ] report after the bell.

 

Econorama

 

September retail sales are reported at 8:30 a.m. and are expected to be down 2 percent. The numbers are expected to look weaker than August because of the boost to auto sales earlier in the summer from the "cash for clunkers" program. Without autos, the number is expected to be 0.3 percent et higher.

 

"I don't think anybody's expecting anything really good," said Smalls. "I'm of the mindset that as long as it's not a disaster, it's ok."

 

Import prices are also reported at 8:30 a.m. and business inventories are expected at 10 a.m. The minutes from the Fed's last meeting are released at 2 p.m.

 

At 2:30 p.m., Fed Gov. Daniel Tarullo testifies on the state of banking before a Senate Banking subcommittee.

 

Jefferies Treasury Strategist John Spinello said comments on the state of the economy from Fed Vice Chairman Donald Kohn sent buyers into bonds Monday. While Kohn didn't appear to say anthing new, his tone seemed to rattle traders who saw less chance the Fed would raise rates soon.

 

Kohn said the jobs situation remains weak, and that is likely to weigh on the consumer. That comment followed on comments from St. Louis Fed President James Bullard that were also viewed as dovish.

 

Spinello said Treasurys were also rebounding after last week's sell off. "I think earnings will probably be pretty important, but there's not a real connect. I think if the stock market went down a lot it would probably favor bonds," he said, adding though its more likely stocks continue higher. "If it goes up, it wouldn't shock many people."

 

Traders will also be gaming the Senate health care bill, which was passed on by the Senate Finance Committee Tuesday afternoon. Insurance stocks, like United Health Care and Aetna, were lower on the news.

 

Intel's Earnings: Tech-tacular! Shares Leap

 

Intel reported profit and revenue that both substantially outpaced expectations Tuesday as the company's shares were halted in late trading.

 

Intel said after markets closed Tuesday that it earned 35 cents a share on revenue of $9.39 billion in the third quarter.

 

In the same quarter last year, Intel earned 35 cents a share on a topline of $10.217 billion.

 

Analysts who follow Intel had forecast earnings of 28 cents a share on sales of $9.037 billion, according to a consensus estimate from Thomson Reuters.

 

The world's biggest maker of microprocessors also forecast fourth-quarter sales of $10.1 billion, give or take $400 million. It put its fourth-quarter gross margin at 62 percent, plus or minus 3 percentage points.

 

Analysts polled by Thomson Reuters I/B/E/S, on average, expect fourth-quarter revenue of  9.5 billion and a gross margin of 56.86 percent.

 

After initially being halted in extended hours Intel shares jumped about 5 percent late Tuesday. Get the latest quotes for Intel here.

 

The stock rose 0.44 percent higher to $20.49 [INTC  20.49    0.09  (+0.44%)   ] during the regular Nasdaq session.

 

"You're starting to see signs of a recovery. You have the consumer side helping Intel. Looking into next year, Intel should have multiple traction from consumer, corporate spending, enterprise spending return, server refresh, you have Windows 7 and margins is the key to the story," Vijay Rakesh, an analyst at ThinkEquity, told CNBC. "Gross margins have rebounded and will continue to improve in the future."

 

Intel's results are generally seen as an important measurement of PC industry health, and in turn a sign of the trend in technology spending as a whole.

 

As the first major technology company to report calendar-year third-quarter earnings, Intel's results are closely watched for clues about technology demand among consumers and businesses. Intel's customers include the world's biggest PC and computer server makers.

 

Chipmakers like Intel have suffered in the global downturn as corporations have slashed IT spending and demand for electronics has collapsed, forcing companies to dial back production and lay off workers.

 

But there are signs of a sector-wide recovery. Despite lagging their year-ago figures, global chip sales posted their sixth consecutive monthly increase in August, according to the Semiconductor Industry Association. Analysts say September chip sales likely rose more than 6 percent from August on anticipated holiday demand, as well as chip orders ahead of the upcoming release of Microsoft's Windows 7 operating system.

 

Stock in arch-rival Advanced Micro Devices rose 5.4 percent after hours.

 

Several chip makers have raised current-quarter forecasts. Intel Chief Executive Paul Otellini said in September he thought personal computer sales would be flat to slightly up from a year ago—a signal end-demand was strengthening.

 

Health-Care Reform Clears One Hurdle, But Many More Remain

 

The Senate Finance Committee Tuesday passed a bill to reform the US healthcare system, President Barack Obama's main domestic objective.

 

Health Sector Winners, Losers in US Reform Bill

 

The U.S. Senate Finance Committee Tuesday approved its version of legislation to overhaul the nation's $2.5 trillion health care system.

 

Following are some of the health industry winners and losers based on the Senate committee's bill.

 

WINNERS

 

Drugmakers:

 

The pharmaceutical industry kept intact an $80 billion rebate agreement with Finance Committee chairman Max Baucus and the White House.

 

The industry successfully fended off a challenge that would have called on Pfizer, GlaxoSmithKline, Merck.

 

Inc and others others to give back $106 billion over 10 years in additional drug rebates under the Medicare insurance program for the elderly and disabled.

 

Hospitals:

 

Hospitals kept a $155 billion, 10-year deal with Baucus and the White House to accept lower government payments from the Medicare and Medicaid health insurance programs in exchange for what the industry hopes will be an increase in insured customers.

 

Analysts do not expect the deal to change much even as the bill is meshed with other proposals.

 

Health Care Companies

 

pfe16.80-0.30-1.75%64,198,463gsk39.67-0.11-0.28%2,137,739mrk32.45-0.41-1.25%19,673,064mhs55.53-0.13-0.23%2,391,621esrx81.040.12+0.15%1,549,689cvs36.740.34+0.93%9,869,739syk45.39-0.01-0.02%1,019,266mdt37.000.07+0.19%7,700,408bsx9.93-0.07-0.7%13,820,387lh66.39-0.71-1.06%806,503dgx54.29-0.32-0.59%895,471hum37.67-0.43-1.13%3,947,793ci28.72-0.92-3.1%4,314,561unh24.29-0.94-3.73%18,921,241aet25.56-0.86-3.26%9,306,688thc5.92-0.07-1.17%5,566,414uhs65.30-0.32-0.49%369,168

 

Hospitals, which include companies such as Universal Health Services and Tenet Healthcare were also exempted from any decisions made by an independent Medicare Commission that would set reimbursement rates and make other changes to the program.

 

Laboratory Testing Companies:

 

Laboratory companies were happy to see the committee's final bill drop a $750 million annual fee that had been included in Baucus's original proposal.

 

The fee would have hurt companies such as Quest Diagnostics Inc and Laboratory Corporation of America Holdings.

 

LOSERS

 

Health Insurers

 

The insurance industry can claim a partial victory because it lobbied to defeat amendments that would have introduced a new government-run health insurance program.

 

But the industry, which includes Aetna, UnitedHealth Group, Cigna and Humana , still faces more than $6 billion a year in fees.

 

What's Actually in Senate Health Care Bill

 

The U.S. healthcare overhaul passed by the Senate Finance Committee Tuesday has a price tag of $829 billion and calls for major insurance market reforms and payment system changes, as well as requirements for most citizens and legal residents to buy insurance. Here are the details of the bill.

 

Insurance Market Reforms

 

— Creates separate state-based exchanges for individuals and small businesses, with up to 50 employees, to shop for insurance.

 

—Four categories of minimum benefits would be offered.

 

—A policy offering catastrophic coverage for young adults, a "young invincible" plan, would be offered.

 

—Starting July 1, 2013, insurance companies would no longer be able to exclude people from coverage based on pre-existing conditions. Limited-benefit plans and lifetime limits on coverage would be barred. Insurers would be prohibited from rescinding health coverage.

 

— States could form regional exchanges.

 

— Beginning in 2015, states must open the business exchange to firms with up to 100 employees and may allow even larger businesses into the exchange beginning in 2017.

 

—Stand-alone dental plans can be offered through the exchanges.

 

Health Cooperatives, State Flexibility

 

—The proposal does not contain a government health plan, which is backed by Obama and liberal Democrats but opposed by Republicans and health insurers.

 

—The proposal provides for the creation of nonprofit "consumer operated and oriented" plans or cooperatives.

 

—The cooperatives would compete with private insurers in the individual and small-group insurance markets.

 

—States may establish a federally funded health plan for people earning from 133 percent to 200 percent of poverty-line income.

 

—States could "opt out" of some requirements if they meet coverage requirements by other means.

 

Mandates and Affordability Measures

 

— Beginning in 2013, most U.S. citizens and legal residents would be required to obtain health coverage.

 

—Provides a sliding scale of tax subsidies for people with incomes up to 400 percent of poverty to help buy insurance.

 

— Limits deductibles and out-of-pocket expenses. Limits put on a sliding scale based on incomes.

 

—Exemption allowed for those who cannot afford coverage if costs exceed 8 percent of income.

 

—Penalties for failure to purchase insurance would be phased in starting with $200 per adult in 2014. By 2017, the penalty would be $750 per adult.

 

—Medicaid, the healthcare program for the poor, expanded to qualify everyone up to 133 percent of poverty-line income.

 

—Employers not required to offer health insurance but firms with 50 or more full-time workers would pay a fee for employees who get subsidized exchange policies.

 

—No fee for workers enrolled in Medicaid.

 

—Tax credits provided for small businesses that help purchase health policies for employees.

 

Revenue-Raising Fees and Taxes

 

—An excise tax of 40 percent would be levied on insurance companies for health plans above $8,000 for singles and $21,000 for families. The tax applies to self-insured and group-market plans but not to plans sold in the individual market. Threshold indexed for inflation plus 1 percent.

 

—Insurance policies for retired people aged 55 and higher who are not eligible for Medicare and for workers in high-risk professions have a higher threshold of $9,850 for singles and $26,000 for family coverage.

 

—Health insurance providers collectively would pay an annual fee of $6.7 billion starting in 2010. The fee would be allocated by companies' market share.

 

—Pharmaceutical companies collectively would pay an annual fee of $2.3 billion, allocated by market share.

 

—Medical device makers collectively would pay an annual fee of $4 billion, allocated by market share. Some items sold at retail for less than $100 would be exempted from the fee calculation.

 

CSX Beats Wall Street Expectations; Shares Rise

 

CSX reported quarterly earnings on Tuesday that topped Wall Street expectations, sending its shares higher after the bell.  

 

 

Pay Czar to AIG: Cut Your Retention Bonuses

 

The U.S. Treasury Department is pushing American International Group to cut big pay incentives it claims were needed to keep staff but which have stoked a controversy over pay at taxpayer-supported firms.

 

Asia:

 

Asian stocks rose after a better- than-estimated sales forecast at Intel Corp. boosted technology shares, offsetting a decline among financial companies.

 

Samsung Electronics Co., Asia's biggest maker of chips, gained 1.6 percent after Intel's forecast, which followed the close of U.S. trading. JB Hi-Fi Ltd. rose 2.7 percent, leading Australian retail shares higher, after the company reaffirmed its revenue outlook and a consumer-confidence index jumped. Mitsubishi UFJ Financial Group Inc. sank 3.2 percent, leading declines by Japanese financial shares after Meredith Whitney said she was "far less bullish" on banks.

 

"The Intel result has been very encouraging," said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $75 billion. "Earnings are picking up, but people are waiting to see even more tangible evidence."

 

The MSCI Asia Pacific Index added 0.4 percent to 119.42 at 11:07 a.m. in Tokyo, with about three stocks advancing for every three that retreated. The gauge has climbed 68 percent from a five-year low on March 9 as Japan exited recession and growth accelerated in countries from China to Indonesia. The average price that companies in the index trade at has risen to 23 times estimated earnings from 14.3 times at the start of 2009.

 

Japan's Nikkei 225 Stock Average lost 0.3 percent to 10,051.13 as producer prices fell for a ninth month. South Korea's Kospi Index rose 1.2 percent, Australia's S&P/ASX 200 Index gained 0.7 percent and New Zealand's NZX 50 Index advanced 0.6 percent.

 

Computer Demand

 

Futures on the U.S. Standard & Poor's 500 Index climbed 0.9 percent today as Intel's forecast indicated computer demand is picking up. The S&P 500 slipped 0.3 percent yesterday, as revenue from Johnson & Johnson, the world's largest health- products company, missed analysts' estimates.

 

Samsung Electronics gained 1.5 percent to 768,000 won. Hynix Semiconductor Inc. rose 1.9 percent to 21,000 won.

 

Intel, the world's biggest chipmaker, said after the close of U.S. trading that fourth-quarter sales will likely be $9.7 billion to $10.5 billion, compared with the $9.5 billion average estimate in a Bloomberg survey. Gross margin, the percentage of sales remaining after the costs of production, was 58 percent in the third quarter, the company said, compared with its prediction of about 53 percent. The shares jumped 4.3 percent in after-hours trading.

 

JB Hi-Fi added 2.7 percent to A$19. Woolworths Ltd. rose 1.6 percent to A$29.30. An index of Australian consumer sentiment gained 1.7 percent to 121.4 points in October, according to a Westpac Banking Corp. and Melbourne Institute survey, suggesting the central bank's unexpected decision last week to boost interest rates won't erode household spending.

 

Financials Decline

 

Mitsubishi UFJ sank 3.4 percent to 484 yen, the biggest single drag on the MSCI Asia Pacific Index. A gauge of financial shares in the measure lost 0.5 percent. The sub-index has been the second-best performer of 10 industry groups in the past six months as concerns eased about more credit-related losses.

 

"The market is going to struggle to gain ground as investors look to lock in recent gains on financials," said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo.

 

Whitney, who left Oppenheimer & Co. this year to create her own firm, yesterday cut her rating on Goldman Sachs Group Inc. and recommended investors "lock in profits." The analyst predicted in October 2007 that Citigroup Inc. would have to cut its dividend, which the bank did in January 2008.

 

Japan's producer prices fell for a ninth month as oil traded lower than last year's levels and demand for materials waned. The costs companies pay for energy and unfinished goods declined 7.9 percent in September from a year earlier after sliding a record 8.5 percent, the Bank of Japan said today in Tokyo. The median estimate of 27 economists surveyed by Bloomberg News was for a 7.9 percent drop.

 

Nikkei 225 10,051.13     -25.43 ( - 0.25%).(08.29 AM IST)

 

Japan's Nikkei average lost 0.3 percent on Wednesday, dented by a slide in bank shares such as Mizuho Financial Group (8411.T) after their U.S. peers fell ahead of earnings reports from several major banks this week.

 

The benchmark Nikkei .N225 fell 25.43 points to 10,051.13, while the broader Topix slipped 1 percent to 892.21.

 

HSI 21688.85 +221.49 +1.03%. (08.32 AM IST)

 

Hong Kong shares advanced early Wednesday, shrugging off a weak finish for U.S. stocks overnight, as energy producers Cnooc /quotes/comstock/22h!e:883 (HK:883 11.72, +0.22, +1.91%) /quotes/comstock/13*!ceo/quotes/nls/ceo (CEO 148.65, +3.66, +2.52%) and PetroChina Co. /quotes/comstock/22h!e:857 (HK:857 9.80, +0.33, +3.48%) /quotes/comstock/13*!ptr/quotes/nls/ptr (PTR 122.67, +2.24, +1.86%) climbed on higher energy prices. The Hang Seng Index rose 1.1% to 21,701.55, while the Hang Seng China Enterprises Index added 1.2%, aided by an advance for mainland Chinese shares. The Shanghai Composite was recently up 1% at 2,964.85, also helped by energy stocks.

 

Chinese stocks open 0.32% higher on Wed

 

Chinese stocks opened higher on Wednesday morning, tracking gains from the previous closing.

 

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 2,945.67 points, up 0.32% or 9.48 points from the previous closing.

 

The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.34% or 39.87 points higher at 11,914.77 points.

 

 

China mulls lowering steel makers' taxes (14 Oct)  

 

Hang Seng Index opens 96 points higher on Wed (14 Oct)  

 

Shell, Shaanxi Yanchang to open 100 gas stations in NW China's Shaanxi (14 Oct)  

 

Bank of Ningbo to raise RMB 5 bln via private placement (14 Oct)  

 

The Capital Group cuts shareholding in Weichai Power to 11.61% (14 Oct)  

 

VW's China sales up 37% in Jan-Sep (14 Oct)  

 

Flextronics Int'l to recruit staff in mainland China (14 Oct)  

 

Chinese stocks open 0.32% higher on Wed (14 Oct)  

 

Li Ka-shing raises stake in Cheung Kong to 40.43% (14 Oct)  

 

Rusal hires BOC Int'l, VTB Capital to handle HK IPO (14 Oct)  

 

Changan Auto forecasts 150% growth in net profit for Jan-Sep (14 Oct)  

 

China's investment in west region to reach RMB 468 bln in 2009 (14 Oct)  

 

China International Travel Service to list in Shanghai on Thu (14 Oct)  

 

Hunan Valin Steel to issue 365-day bills on Fri (14 Oct)  

 

China Futures Exchange Center may be set up in Beijing (14 Oct)  

 

CDB may buy Stockfly Securities: report (14 Oct)  

 

 

China's imports, exports drop 10.1% in September

 

China's foreign trade continued to fall in September, but the rate of decline slowed sharply, the General Administration of Customs announced Wednesday.

 

   The total value of imports and exports for September was 218.94 billion U.S. dollars, down 10.1 percent from the same month last year.

 

   In August, the drop was 20.6 percent compared with the same month last year.  

 

 

Russia, China work on gigantic oil, gas co-op project

 

Bloomberg to buy 80-year-old BusinessWeek

 

U.S. to strengthen trade relations with India  

 

 

China to Curb Steel Production to Reduce Oversupply

 

China, the world's largest steel producer, is working on plans to curb excess capacity as the nation faces "severe oversupply," according to the nation's third-largest mill.

 

The government may have detailed plans on how to close obsolete mills, advance mergers and reduce the number of iron ore importers by the end of the year, Deng Qilin, the general manager of Wuhan Iron & Steel Group, said in an interview.

 

Steel prices in China have dropped 23 percent since reaching a 10-month high on Aug. 4, as overproduction offset rising demand created by government stimulus spending. Some steelmakers have incurred losses at current prices, Deng said.

 

"The government will impose strict measures to effectively close outdated mills and boost consolidation," Deng, also the chairman of the China Iron and Steel Association, said while attending the World Steel Association annual meeting in Beijing yesterday. "We bigger players will surely benefit from such a move."

 

Wuhan Iron & Steel Co., the Shanghai-listed unit of Wuhan Group, rose 2.4 percent to 7.55 yuan at 10:49 a.m. local time, taking the year's advance to 57 percent.

 

Chinese steel prices probably won't rebound for the rest of the year, Deng said. Hubei province-based Wuhan Steel may carry out annual maintenance which will reduce output, he said, declining to give details.

 

Record Output

 

Steel output in China reached a record this year as the government invests 4 trillion yuan ($586 billion) in the economy, spurring public works building. The nation's cabinet in August said it was studying curbs on overcapacity in industries including steel.

 

Demand may expand by 19 percent this year to 526 million metric tons, the World Steel Association predicted this week. Growth may slow to 5 percent next year, it said.

 

Mills in China may have the capacity to produce 700 million tons of steel a year now, Deng said. The overcapacity is affecting Wuhan Steel's expansion plans, he said.

 

The National Development and Reform Commission, China's top planning agency, is unlikely to approve a feasibility report on Wuhan Steel's planned 10 million-ton steel plant this year, Deng said. Without the approval, Wuhan can't start construction at the project at Fangcheng Port in the southwestern province of Guangxi, he said.

 

Premier Wen

 

"Premier Wen Jiabao has said to build the plant at an appropriate time," Deng said. "We will get the approval eventually, but not now. We have the patience and we can wait because the new mill, aiming at high-end products, would make us stronger."

 

Chinese steelmakers are facing rising import competition, with Japanese manufacturers "dumping" products in the country, Deng said. Japan is the world's biggest exporter this year, while China ranks only sixth and has turned into a net importer, he said.  

 

 

Steel exports to the U.S. and Europe plunged as much as 85 percent in the first eight months, the steel association said Oct. 12. The U.S. and European Union are slapping duties on Chinese imports after their producers claimed Chinese rivals benefited from unfair subsidies.

 

Wuhan Steel and Baoshan Steel Group, China's biggest mill, have asked the nation's commerce ministry to investigate imports of grain-oriented flat-rolled electrical steel from the U.S. and Russia, the ministry said June 1.

 

Price data show why BOJ unlikely to hike soon

 

Japanese wholesale prices fell 7.9% in September from the same month a year earlier, Bank of Japan data showed Wednesday. The pace of decline in the corporate goods price index moderated from August's record 8.5% drop. The wholesale price index was nearly flat in September from the previous month, rising by 0.1%. The fact that pressure remains on prices adds more evidence to the widely-held belief that the Bank of Japan will not change its interest rate policy anytime soon. However, at its two-day meeting which ends Wednesday, the BOJ policy board might may decide to discontinue its special liquidity-boosting steps to buy corporate bonds and commercial paper outright, as funding conditions have improved.

 

Recovery to be moderate, not V-shaped: Kohn

 

The economy recovery will be moderate and not a quick snapback commonly referred to as a V-shaped growth path, Donald Kohn, the vice-chairman of the Federal Reserve Board, said Tuesday.

 

"All told, I expect that the recovery in U.S. economic activity will proceed at a moderate pace in the second half of this year before strengthening some in 2010," Kohn remarked in a speech at the National Association of Business Economics meeting in St. Louis.

 

Difficult labor-market conditions are a key factor in his expectation that activity will be retrained going into 2010, he said. In addition, the financial headwinds holding back growth are likely to abate slowly.

 

The sluggish growth rate means the risk of further declines in the underlying rate of inflation are greater than the risk of increases, Kohn commented, justifying the Fed's decision to maintain rates at historic low levels.

 

The economic team at Goldman Sachs interpreted Kohn's remarks as a signal that rates would remain at historic lows."The implication is that Fed policy is on hold for quite a while, though of course there are the usual caveats about uncertainty and an assurance that the Fed has both the tools and the will to fight inflation if and when prospects point in that direction," the Goldman economists wrote to clients.

 

At its meeting in late September, the Federal Open Market Committee repeated that economic conditions are likely to warrant unusually low levels of interest rates for an extended period.

 

"I expect that the persistence of economic slack, accompanied by stable longer-term inflation expectations, will keep inflation subdued for some time," Kohn said.

 

The public's expectations of inflation are more likely to fall than rise in the current environment, he added.

 

Some Fed officials, known for being more "hawkish" about inflation, have questioned aspects of this notion of "slack," saying that it is hard to measure and that some production might have been destroyed in the recession.

 

Kohn pushed back, saying that in his view "the cumulative reduction in aggregate demand has been much greater than any possible cutback in potential supply."

 

But Kohn vowed not to take his eye off the ball. "This assessment and my outlook do not mean that my colleagues and I will not be looking carefully at any evidence that portends a potential pickup of inflation."

 

The Fed is prepared to act well before demand pressures or inflation expectations threaten price stability, he said.

 

 

 INVESTMENT VIEW

Tata Motors-The DVR Shares Allow A Cheaper Entry Into the Stock...BUY

 

BSE 570001; CMP Rs 426.70

 

 

Tata Motors was the first company to issue shares with DVR's in India. It had come out with rights issue of Rs. 4,147 crores to repay part of the short term bridge loan availed by its subsidiary for financing the acquisition of Jaguar-Land Rover from Ford.  

These DVR shares carry 1/10th of voting right of ordinary shares ( i.e. DVR shares to have only one voting right for every 10 shares held) and entitle the shareholder of 5 percentage higher dividend as compared to ordinary shares.

 

The DVR issue was done by the company at a price of Rs. 305 about 10% less than the issue price of ordinary rights at Rs.340. Trading in DVR commenced on November 5, 2008 on both the exchanges.

 

The price differential between DVR and ordinary shares has fluctuated from a premium of Rs.90.00 to a discount of Rs.150.00 (30% premium to 32% Discount).

 

The DVR's initiated with trading at premium and eventually started trading at discount with in a month. Currently Tata Motors DVR's are quoting at Rs. 426.70 and Tata Motors ordinary shares are quoting at Rs. 550.25, signifying a discount of Rs.123.55 w.r.t. ordinary shares.

 

The discount of Tata Motors DVR's as compared to the ordinary shares is steep and has a probable chance of it narrowing down.

 

The current price differential can offer a trading opportunity on the spread and one can initiate arbitrage opportunity arising out of the significant discount.

 

 

(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)

 

 

 

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Arvind Parekh

+ 91 98432 32381