Bulls and Bears Battle it Out on Wall Street; "Bailout" Bill Goes to House

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• Down does Frazier, Down Goes Frazier... The market is doing its best imitation of that classic boxing match between Muhammad Ali and Joe Frazier. The bulls and bears are pummeling each other. One day we are down big and the next day we are up big. It is hard to tell who is winning. Yesterday it was the bears that had control. Stocks were down across the board with the Dow down nearly 350 points. With the House on hold for the bailout, the attention of traders focused on economic news that was less than stellar. Small cap stocks led the way down with the Russell 2,000 index of smaller companies falling more than 5%.
• The House is expected to vote on the bailout bill at noon today. The sweeteners, otherwise known as earmarks that candidates for President have vowed to eliminate, appear to be convincing those opposed to the deal to vote yes. I would highly doubt this gets to the floor without a slam dunk amount of votes in hand to approve. Leadership does not want a repeat of what transpired earlier this week. A crisis mostly of confidence does not need to see our central government fall on its face. Rightly or wrongly what is needed is decisive action.
• Hold your horses Wachovia (WB). It looks like you will be part of Wells Fargo (WFC) now instead of Citigroup (C). The big difference is WFC is stepping up without asking for help from the government and the small detail of $7 in WFC stock representing an 80% premium over the close yesterday. This big switch is unusual to say the least, but these are unusual times. I would only say that for WFC to step up like this the bailout deal must be all but approved. There is no way they step up to the plate without knowing something gets done.
• Employers cut 159,000 jobs from the economy in September, much more than the 100,000 lost jobs expected by economists. It is the worst number in 5 years. Unemployment stuck at 6.1% for the month. Hourly wages grew by .2% as opposed to the expected .3%. The combined news will be received positively by Wall Street. Traders will be glad the number was not worse and lower hourly wages opens the door for a rate cut. I suspect once the bailout bill is approved we should see the central bank take action to avoid a recession. They are no longer worried about inflation setting the way for a rate cut.
• Look for the dollar to gain strength today. French Prime Minister, Francois Filon stated that the world was at the edge of the abyss. While it may seem like the US is at the center point of the crisis, other parts of the world are starting to wake up to the rippling effects of our troubles. Believe it or not the United States will be considered a safe haven during this period. That means investors will be clamoring for dollars. Given that inflation is no longer an issue look for dollar gains for the remainder of the year.
• We can end the week with this news: Anheuser-Busch (BUD) stated that beer sales grew during the third quarter. That should be no surprise as spirit sales generally increase during periods of crisis. As uncertain the landscape we can still be comforted by a nice, cold beer. U.S. beer shipments to wholesalers increased by 2.3% and sales to retailers gained 3.6%. I think I might just go have one of those beers myself. Have a nice weekend.

by The Freshman |  10/03/08  |  Stocks: BUD, C, WB, WFC,