Top 10 News Items 10/27-10/31: Following One of the Worst Months in Stock Market History, Equities Posted a Late-Stage Rally; DJIA Finished October Down Only 13%

October 31, 2008 4:09 PM EDT
Here is a recap of the top news items from the last week:

1. Following one of the worst months in stock market history, US equities ended October with a strong rally. Prior to this week, the Dow Jones Industrial Average was down as much as 27% from the beginning of the month, but following this week's 14% rally, the index closed this spooky month down just 13%.

2. A highly anticipated and probably most closely watched economic indicator was released Thursday of this week: GDP. GDP for Q3 came in at down 0.3%, marking the first decline in US growth since 9/11. On a more positive note, however, the initial GDP number actually came in better than the Street's down 0.5% estimate.

3. The FOMC met this week on Tuesday and Wednesday, announcing a 50 basis point reduction in both the fed funds and discount rates. As most traders believed that a half point cut was needed, the markets had priced in the rate cut by the time the Fed policy statement was released Wednesday afternoon and the markets did not respond to the news on the day of the announcement.

4. Still in the heart of the Q3 earnings season, corporate results were somewhat mixed. Verizon (NYSE: VZ) results were mixed but the stock traded higher, finishing off this week about 18% higher; Whirlpool (NYSE: WHR) and Corning (NYSE: GLW) both beat estimates on the bottom line, but cut guidance, sending their stocks lower; Kraft (NYSE: KFT), Kelloggs (NYSE: K) and Proctor & Gamble (NYSE: PG) reported solid results as investors have certainly been jumping into defensive areas of the economy, such as consumer, non-cyclical; Exxon Mobil (NYSE: XOM) reported the largest quarterly profits in Wall Street history and First Solar (Nasdaq: FSLR), the best-of-breed solar company beat the Street and the stock surged about 24% the next day.

5. Speculation surrounding a General Motors (NYSE: GM)/Chrysler merger continued this week. Adding to the turmoil, reports were heard Thursday that 6 governors set letters to the Treasury seeking help with the automakers saying that the problems now facing the industry threaten to come "unimaginable disaster".

6. A massive short-squeeze pushed Volkswagon shares higher, making it the largest company in the world by market cap. Numerous hedge funds were caught up in the trade and suffered massive losses. Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) began sinking as investors started speculating that they were also involved, but spokespeople later came out from each company denying the accusations.

7. Consumer confidence fell to its lowest level ever -- 38 -- well below the Street's estimate of 52. Despite the extremely concerning number, stocks rallied nearly 900 points, marking the second largest point increase on record. Such a phenomenon brings to mind the Wall Street saying, "a market that rallies on bad news could signal a bottom".

8. Numerous regional banks announced that the government had approved them to enter into the Treasury's Capital Purchase Program. Just to name a few: Capital One (NYSE: COF) with $3.55 billion, Regions Financial (NYSE: RF) with $3.5 billion, Fifth Third Bancorp (Nasdaq: FITB) with $3.4 billion, SunTrust (NYSE: STI) with $3.5 billion and KeyCorp (NYSE: KEY) with $2.5 billion.

9. Considering the above news item (#8), Congress and regulators, including New York's Attorney General, Andrew Cuomo, made it clear that they were seeking information on Wall Street bonuses. The main issue appears to stem from speculation that the companies which will receive capital infusions from the government could be using them for less-concerning corporate matters.

10. American Express (NYSE: AXP) announced reengineering initiatives expected to produce cost benefits of approximately $1.8 billion in 2009. Specifically, AmEx said it plans to eliminate 7,000 jobs, cutting 10% of the workforce in an effort to cut costs. The Company also suspended its management level salary increases for 2009 and announced plans to institute a hiring freeze for open positions.

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Chrysler LLC, Goldman Sachs, Morgan Stanley, Federal Open Market Committee, Consumer Confidence Index, StreetInsider.com Top 10 News Items for the Week, Hedge Funds, Treasury Capital Purchase Program