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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.671402 |
| Euro to US Dollar | 1.511716 |
| Japanese Yen to US Dollar | 0.011456 |
| Canadian Dollar to US Dollar | 0.954290 |
Stocks rallied today after the Federal Reserve cut interest rates for the second time in six weeks to help the economy weather stress from the housing slump and a weakening financial system.
The central bank cut its key federal funds rate to 4.5% from 4.75%. The rate is what banks charge each other for overnight loans and affects rates on everything from auto and business loans to credit cards.
At the close, the Dow Jones industrials were up about 138 points, 1%, to 13,930. The Standard & Poor's 500 Index was up 18 points, 1.2%, to 1,549. The Nasdaq Composite Index was up 42 points, 1.5%, to 2,859 -- its best close since Jan. 24, 2001.
The Dow finished October with a 0.25% gain. The S&P 500 was up 1.48%, and the Nasdaq rose 5.8%, its best monthly gain since July 2005.
For the year, the Dow is up 11.8%, the S&P has climbed 9.2%, and the Nasdaq has jumped a whopping 18.4%.
And, the Stock Trader's Almanac says, November is the strongest month of the year for the S&P 500, the second-strongest month for the Nasdaq and the third-best month of the year for the Dow.
Energy, financial, technology and materials stocks led today's rally; Google (GOOG, news, msgs) hit $707, a gain of 1.8% and its first close above $700. Its market capitalization -- the value of its shares outstanding -- is now $216.8 billion, 5th among U.S. companies, just ahead of Procter & Gamble (PG, news, msgs).
Microsoft (MSFT, news, msgs) had its best close since June 2001. (Microsoft is the publisher of MSN Money.)
At the same time, crude oil jumped about 4.6% to a record $94.53 because of a surprising drawdown of U.S. crude supplies.
Although the Fed's rate cut was expected, investors seemed cheered because the Fed indicated it stood ready to make additional moves to shore up the economy if necessary. (And with today's report showing better-than-expected growth in the economy in the third quarter, there were a few who wondered if the Fed really needed to cut rates.)
At the same time, however, it acknowledged that increases in energy and commodity prices "may put renewed pressure on inflation."
While the central bank didn't admit it, its big rate cut on Sept. 18 -- pushing the fed funds rate from 5.25% to 4.75% -- pushed the U.S. dollar lower against major currencies, especially the euro, and helped unleash a 20% run-up in the price of crude oil.
The Fed made its move, however, to maintain and build confidence in an economy that's been slowed noticeably in recent months by major slumps in the automotive, housing and, most recently, financial services industries.
"The pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction," the statement said.
Futures trading suggests that the Fed will cut rates one possibly more time at its Dec. 11 meeting.
Stock Charts (Year)
Nasdaq Composite Index
Microsoft
Stocks had been higher through the morning but faded shortly before the announcement. The rally resumed after traders had a half-hour or so to digest the statement.
While the rally was a signal that Wall Street was happy with the Fed move, CNBC's Bob Pisani said, many traders had hoped the Fed would trim the fed funds rate to 4.25%.
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The U.S. dollar did continue to move lower and may stop the Fed's rate cutting for now. The greenback hit a record low against the euro, which was trading at $1.4499, compared with $1.4445 on Tuesday. The U.S. dollar index, which measures the dollar against a basket of currencies, fell to 76.46, its lowest level in 11 years.
A falling dollar is great for U.S. exporters but makes exporting to the United States more expensive.
On Sept. 18, the Fed cut its fed funds rate from 5.25% to 4.75%, setting off a 336-point rally in the Dow. The fed funds rate had been at 5.25% for more than a year.
A move to cope with financial stress
The rate cuts come in an environment of continuing financial stress from the subprime-mortgage mess. A report released Tuesday showed U.S. consumer confidence slipped for a third straight month in October, while a second report said that home prices in August had their biggest drop in 16 years.Earlier this week, Stan O'Neal gave up his post as CEO of Merrill Lynch (MER, news, msgs) after the company wrote down the value of mortgage securities and related securities by some $8.2 billion in the third quarter -- an amount equal to 20% of its equity at the end of the second quarter.
UBS AG (UBS, news, msgs), the largest Swiss investment banking company, said it lost 726 million Swiss francs ($841 million) in the third quarter because of losses in U.S. subprime mortgages.
Including Merrill and UBS, banks and other financial institutions and related companies have announced write-downs of mortgage-related assets of at least $37 billion in September and October, an amount likely to grow much larger. The reason: So many financial institutions are still scrambling to understand what mortgage securities they own and figure out how much they might be worth.
At the same time, housing starts and sales and prices of new and existing homes have been falling rapidly in many markets, especially Florida, Nevada, California and hard-hit Midwestern states such as Michigan.
Starting this summer, many investors had refused to buy mortgage securities or commercial paper from mortgage lenders and others, forcing a near seize-up of the global credit system.
| Mon. | Fri. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $94.53 | $90.38 | $4.15 | 15.76% | 54.84% |
| Heating oil (per gallon) | $2.5078 | $2.4246 | $0.0832 | 12.06% | 56.94% |
| Natural gas (per million BTU) | $8.3300 | $8.0210 | $0.3090 | 21.25% | 32.24% |
| Unleaded gasoline (per gallon) | $2.3400 | $2.2571 | $0.0829 | 13.14% | 46.06% |
Energy, materials, financials and techs power the rally
Thanks to oil crossing $94 a barrel, Apache (APA, news, msgs) was up 4.9% to $103.81. Devon Energy (DVN, news, msgs) added 3.7% to $93.40, and ConocoPhillips (COP, news, msgs) rose 2.7% to $84.96.Stock Charts (Year)
Apache
Dow component ExxonMobil (XOM, news, msgs), which reports third-quarter earnings on Thursday, was up 0.9% to $91.99.
Gold closed at $790.30 an ounce, a level last seen in early 1980. That pushed Newmont Mining (NEM, news, msgs) up 9.6% to $59.90. Freeport-McMoRan Copper and Gold (FCX, news, msgs) added 3.2% to $117.68.
Google's move above $700 a share, big technology stocks continued to rally as well. In fact, the technology sector was the best performer of the 10 sectors of the S&P 500 in October, with a 7.2% gain. For the year, the group is up nearly 24%, just behind energy and materials.
Software giant Microsoft finished up 3.5% to $36.81, its best close since June 7, 2001. The gain was tops among the 30 Dow stocks. With a 25% gain for the month, Microsoft was also the Dow's leading stock for October.
Computer maker Dell Inc. (DELL, news, msgs) added 2.6% to $30.60, its first close above $30 since March 30, 2006.
Despite all the worry about the financial system, JPMorgan Chase (JPM, news, msgs) was up 1% to $47. Merrill Lynch rose 1.2% to $66.02, and Lehman Bros. (LEH, news, msgs) jumped 3.2% to $63.34.
The Amex Securities Broker/Dealer Index ($XBD.X) closed up 1.6% to 237.
GDP report: Economy better than thought
The economy grew at an annualized rate of 3.9% in the third quarter, the Commerce Department said this morning. That's the best performance in six quarters -- and well above economists' expectations for a 3.4% annualized pace. The economy grew at a 3.8% annualized pace in the second quarter.Today's report on the gross domestic product will be revised in late November and again in late December.
The so-called core PCE (personal consumption expenditures) deflator, which measures how much people spend on goods and services, rose to a rate of 1.8% from a 1.4% rate in the second quarter.
The deflator is the central bank's preferred inflation gauge. The Fed's comfort zone is a rate between 1% and 2%.
Google talking with Verizon, Sprint
Telecommunications giants Verizon Communications (VZ, news, msgs) and Sprint Nextel (S, news, msgs) may each be teaming up with search engine mammoth Google.Stock Chart (Year)
Verizon Communications
Google is in talks with Verizon's Verizon Wireless unit -- a joint venture with Vodafone (VOD, news, msgs) -- as well as with Sprint Nextel, The Wall Street Journal reported this morning. The phones would carry Google's operating-system software and applications like YouTube, Google search and Google Maps.
A deal between the two companies could present a major competitor to Apple's (AAPL, news, msgs) iPhone partnership with AT&T (T, news, msgs).
Google expects to launch its cell phone by the middle of next year, the paper said.
Verizon shares rose 1.6% to $46.07. Vodaphone was down slightly at $39.27, and Sprint was up 0.4% to $17.10.
Apple finished up 1.6% to $189.95.
Deutsche Bank profit rises
Deutsche Bank (DB, news, msgs) reported a 31% rise in profit for the third quarter, thanks to tax and capital gains.Deutsche Bank earned $2.34 billion in the quarter, ahead of a previous forecast for $2.02 billion the company had made in the beginning of the month.
The company took approximately $3.2 billion in write-downs on bad loans in the quarter.
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"The third quarter of 2007 was a period of exceptional turbulence in financial markets," Chief Executive Josef Ackermann said in a statement. Ackermann said that, while the company still faces challenges, Deutsche Bank had made "a positive start to the fourth quarter."
Shares of the German financial-services company rose 3.9% to $133.76.
'Shrek' helps DreamWorks
An ugly ogre helped boost profit at DreamWorks Animation Studios (DWA, news, msgs), the company said late Tuesday.DreamWorks earned $47 million, or 47 cents per share, for the third quarter -- up from $10.5 million, or 10 cents per share, in the same period last year. Analysts had been looking for earnings of 44 cents per share.
The film studio said that it made $92 million in revenue from "Shrek the Third" in the quarter, contributing to overall quarterly revenue of $160.8 million. The sales figures missed the consensus estimate of $165.6 million in revenue.
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For the fourth quarter, DreamWorks is banking on its next big animated feature, "Bee Movie," which opens Friday and stars Jerry Seinfeld, as well as on home video sales for "Shrek the Third." "Bee Movie" is expected to bring in $175 million in ticket sales in the U.S., Pacific Crest Securities analyst Evan Wilson told Bloomberg News.
Shares of DreamWorks were up 3 cents to $32.56.
| Mon. | Fri. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 3.820% | 3.850% | -0.030 | 3.24% | -21.80% |
| 5-year Treasury note yield | 4.167% | 4.053% | 0.114 | -1.47% | -11.36% |
| 10-year Treasury note yield | 4.475% | 4.383% | 0.092 | -2.27% | -4.99% |
| 30-year Treasury bond yield | 4.751% | 4.673% | 0.078 | -1.70% | -1.39% |
| Currencies | |||||
| U.S. Dollar Index | 76.50 | 76.73 | -0.23 | -1.45% | -8.03% |
| British pound in dollars | $2.0794 | $2.0687 | 0.0108 | 1.56% | 6.11% |
| Dollar in British pounds | £0.4809 | £0.4834 | -0.0025 | -1.54% | -5.76% |
| Euro in dollars | 1.4491 | 1.4445 | 0.0046 | 1.56% | 9.78% |
| Dollar in euros | € 0.6901 | € 0.6923 | -0.0022 | -1.54% | -8.91% |
| Dollar in yen | 115.36 | 114.63 | 0.73 | 0.53% | -3.08% |
| Commodities | |||||
| Gold | $795.30 | $787.80 | $7.50 | 6.04% | 24.66% |
| Copper | $3.4730 | $3.4815 | -$0.009 | -4.59% | 20.97% |
| Silver | $14.4380 | $14.3280 | $0.11 | 3.72% | 10.77% |
| Crude oil (NYMEX) (per barrel) | $94.53 | $90.38 | $4.15 | 15.76% | 54.84% |
Alcatel-Lucent announces job cuts
Telecommunications equipment maker Alcatel-Lucent (ALU, news, msgs) said this morning that it is cutting 4,000 more jobs.Just last week the company had announced 12,500 job cuts -- an effort to cut costs. Alcatel-Lucent is aiming to save $577 million by the end of 2009 with these cuts.
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Volumes we are seeing are not what we expected," CEO Patricia Russo said in a conference call, according to The Associated Press. "These are difficult but necessary decisions, and we will manage these reductions with care."
| Close | Oct. change | YTD change | |
|---|---|---|---|
| S&P 500 Index | 1,549.38 | 1.48% | 9.24% |
| Energy | 585.46 | 0.82% | 28.52% |
| Materials | 271.42 | 4.00% | 25.33% |
| Industrials | 371.33 | -0.51% | 15.09% |
| Consumer discretionary | 289.97 | 0.06% | -4.27% |
| Consumer staples | 294.91 | 1.84% | 9.88% |
| Health care | 419.21 | 1.97% | 7.84% |
| Financials | 452.30 | -2.10% | -8.68% |
| Information technology | 441.36 | 7.21% | 23.88% |
| Telecommunications | 175.99 | -1.18% | 13.44% |
| Utilities | 215.81 | 6.10% | 15.65% |
By Charley Blaine and Elizabeth Strott
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