BetterTrades Stock Market Summary - October 2, 2008

With turmoil continuing to stir the pot, today’s session throughout the markets proved to be highly volatile as patience for the bailout plan is running thin, economic releases which showed just how bad the economy is, and the lack of confidence in companies reporting their earnings, pushed the markets down more than 3% each by the close, with the NASDAQ as the hardest hit today, percentage wise. By the sound of the closing bell, the Dow Jones Industrial average plunged 348.22 points, or 3.22%, to end the day at 10,482.85, while the broader market indicators plummeted as well. The S&P 500 index dropped 46.78 points, or 4.03%, to 1,114.28, while the NASDAQ composite index gave back 92.68 points, or 4.48%, to end the volatile session at 1,976.72.

In what has become commonplace for the lack of uplifting economic reports, today’s release of jobless claims come as no exception. In their weekly release, the Labor Department announced their finding which showed that new applicants for unemployment increased last week, to its highest level in seven years. In the report, claims for unemployment benefits advanced by 1,000 to a seasonally adjusted tally of 497,000, well above economists’ expectations of 475,000. Today’s total reaches levels that haven’t been seen since the week of the 9/11 attacks. Other statistics within the report also showed that people who are continuing to receive benefits increased by 48,000 last week, and now total nearly 3.6M people.

Furthermore, the Commerce Department released their finding mid-morning, which showed the public that the orders received by U.S. factories plummeted in August due to the ever-increasing presence of the credit crunch. In the report, orders for manufactured items declined by 4%, and was the largest one-month drop since a 4.8% decrease back in October of 2006. The main culprit to the lack of orders were big-ticket items, such as aircraft orders, which plunged by 38%, and orders for automobiles, which declined by more than 10%.

Following last night’s Senate vote, which approved the proposed bailout plan, it now goes back to the House for their vote. The Senate’s vote, which added tax cuts and other incentives to the bill, passed by a 74-25 margin, will now rely on swayed votes from the House in order to set into motion the plans to infuse some $700B into the struggling financial sector.

As only a handful of companies are reporting earnings this morning, one of those, Constellation Brands Inc. (STZ), confirmed early Thursday morning that the company recorded a loss for the 2Q as the wine company took huge charges to revive operations in Australia. Constellation Brands is a leading international producer and marketer of beverage alcohol brands, with a broad portfolio across the wine, spirits and imported beer categories. The company is the largest multi-category supplier of beverage alcohol in the U.S.; a leading producer and exporter of wine from Australia and New Zealand; and both a major producer and independent drinks wholesaler in the United Kingdom. Well-known brands in Constellation's portfolio include Corona Extra, Pacifico, St. Pauli Girl, Black Velvet, and Fleischmann's. In their current findings, the company posted a loss of $23M, or $0.11 per share, compared to a profit of $72M, or $0.33 per share a year ago. If not for the revamping of the Australian vineyard, STZ would have posted earnings of $99M, or $0.45 per share. Revenues were stellar for the company this past quarter, increasing 7% to $956.5M. Within those figures, sales for branded wines increased 6%, and sale of spirits increased 4%. Analysts, in the meanwhile, were anticipating that the company post earnings of $0.44 per share on overall revenues of $964.5M. As the trading session concluded, shares of Constellation retreated in the day, slipping $1.90, or 8.8%, to end the day at $19.73 a share.

With consumer spending curtailed in the current economic condition, many travelers are taking day trips and fewer overnight trips, which in turn, hurt one of the larger hotel operators, Marriott International Inc. (MAR), as their 3Q income declined more than 28% from last year’s results. Marriott operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Ramada International brand names. In addition, the company develops and operates vacation ownership resorts under the Marriott Vacation Club International, Horizons, The Ritz-Carlton Club and Marriott Grand Residence Club brands, along with operating Marriott Executive Apartments, providing furnished corporate housing through its Marriott ExecuStay division and operation of conference centers. In their statement released before the markets opened today, Marriott affirmed net income of $94M, or $0.26 per share, versus a higher profit of $131M, or $0.33 per share a year ago. However, the company did sustain a charge of $29M during the quarter, and excluded from calculations, the hotel operator would have posted earnings of $123M, or $0.34 per share, beating analysts’ projections. Revenues, in addition, increased marginally, climbing from $2.94B to $2.96B, again beating expectations. In light of a slowing economy and lack of spending, Marriott gave guidance on full-year earnings that will be well below expectations, as the company foresees earnings between $1.48 and $1.60 per share, with analysts projecting $1.85 per share. On that, shares of MAR declined in today’s trade, giving up $1.34, or 5.3%, to end the day at $23.74 per share.

The last company to report their earnings before the bell today was Matrix Service Co. (MTRX), which made it known earlier today that the company posted higher 1Q earnings this year, than last year. Matrix provides specialized on-site maintenance and construction services for petroleum refining and storage facilities and water storage tanks and systems for the municipal and private industry sector. Owners of these facilities use the company's services in an effort to improve operating efficiencies and to comply with stringent environmental and safety regulations. In the company’s report, Matrix posted net income for the 1Q of $9.5M, or $0.36 per share, compared to last year’s results of $6.3M, or $0.23 per share. Contributing to the higher net income was the increase in overall revenues, which jumped 16% year-over-year to $186.7M. On average, analysts were anticipating that the industrial construction and repair company record earnings of $0.30 per share on total sales of $178.8M. looking ahead, the company also gave guidance for their full-year performance, citing that earnings should range from $1.35 to $1.60 on total sales between $800M and $850M, while analysts are predicting earnings of $1.50 per share on $812.2M in sales. Investors took heed of the guidance, which then pushed the shares of the company downward by the close, falling $5.12, or 27.9%, to end the session at $13.23 a share.

After the bell’s sound yesterday, Mosaic Co. (MOS) reported their company earnings, which showed that for the 1Q, earnings surged from last year’s results on the heels of higher selling prices and an increase in overall sales. Mosaic is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients. For the global agriculture industry, Mosaic is a single source for phosphates, potash, nitrogen fertilizers and feed ingredients. In the company’s release, Mosaic recorded quarterly earnings of $1.18B, or $2.65 a share, versus last year’s tally of $305.5M, or $0.69 per share. Revenues for the quarter skyrocketed, more than doubling from $2B last year, to $4.32B this year. analysts, meanwhile, were anticipating that the company post earnings of $2.94 per share on $4.11B in overall revenues. With the company posting results higher than what the company expected, overall figures still came in below analysts’ expectations, along with an analyst from Goldman Sachs reducing his target price to $115 and placing a “neutral” rating on the stock. With that, shares of the fertilizer maker plummeted in today’s trading session, giving up $27.86, or 41.3%, to end the day at $39.65.

Additionally, one other company that reported after Wednesday’s close was Standard Microsystems Corp. (SMSC), which acknowledged yesterday that the company 2Q profits decreased along with guidance for the upcoming 3Q, which fell below expectations. Standard Microsystems is a worldwide supplier of metal-oxide-semiconductor/very-large-scale-integrated circuits for the personal computer and related industries. Their integrated circuits are developed and sold for applications in PC input/output, PC connectivity, Local Area Networking, PC systems logic, and embedded networking. As stated in their earnings release, SMSC recorded quarterly earnings of $8.7M, or $0.38 per share, versus last year’s results of $9.3M, or $0.39 per share. Current results were hurt severely by the company’s income taxes that amounted to a $3.4M charge. With a decline in overall earnings, the company’ revenues also slipped, falling from last year’s total of $97.5M to $97.2M. analysts, in the meantime, were predicting that the company record earnings of $0.47 per share on total sales of $98.3M, which SMSC failed to meet. By the close of the markets today, shares of Standard Microsystems retreated handily, falling $2.75, or 10.8%, to close out at $22.81 per share.

On the heels of the Senate’s vote for the bailout plan, demand for crude still remains low, which in turn, set the price for a barrel of light, sweet crude for November delivery declined by $4.56 a barrel to settle at $93.97, after hitting as high as $100.37. In additional NYMEX trading, heating oil futures retreated $0.1004 to $2.7465 a gallon, while gasoline prices fell $0.0896 to $2.2704 a gallon. Natural gas for November delivery declined $0.191 to $7.537 per 1,000 cubic feet.

In Europe today, the ECB, European Central Bank, kept their interest rated unchanged today at 4.25%, despite the current state of their economy. With that said, the U.S. greenback responded positively on that news, sending the 15-nation Euro lower against the Dollar as it slipped to $1.3824 from late Wednesday’s price of $1.3977, while falling as low as $1.3745. In addition, the British pound also lost ground against the Dollar, retreating to $1.7655 from $1.7753. Adversely, the Dollar lost value against the Japanese yen, slipping from yesterday’s 105.85 to 105.27. In additional currency trade, the Dollar advanced against the Canadian dollar, rising to 1.0796 from 1.0618, along with moving higher against the Swiss franc, from 1.1226 to 1.1364.

With the markets taking another beating today, investors hurried their capital in the more secure, government-backs safety of bonds, which then pushed the Treasury markets higher by the closing bell. At the close, the benchmark 10-year note added 23/32 to 102 28/32 as its yield slipped to 3.65% from 3.74%, while the 30-year note jumped 1 9/32 106 2/32 as its yield dropped to 4.14% from yesterday’s 4.20%. Finally, the 2-year note advanced as well, adding 10/32 to 100 22/32 while its yield fell to 1.68%, down from Wednesday’s close rate of 1.82%.

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