Chicago, IL – November 20, 2009 – Zacks Equity Research highlights Principal Financial (PFG) as the Bull of the Day and Sohu.com (SOHU) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bank of America (BAC), Wal-Mart (WMT) and Sears Holding Corp.(SHLD).

Full analysis of all these stocks is available at http://at.zacks.com/?id=5506

Here is a synopsis of all five stocks:

Bull of the Day:

We are upgrading our recommendation on the shares of Principal Financial (PFG) to Outperform. The company's third quarter operating earnings were much ahead of the Zacks Consensus Estimate, driven primarily by the sequential improvement in domestic as well as global equity markets.

We believe that Principal's strong franchise within the pension sector, which is aided by its diversification both in terms of products and geography, positions it well to benefit from the gradual recovery of the credit market. However, rising unemployment is reducing the number of participants in existing employee benefit plans.

Though we are concerned about higher delinquencies in its commercial mortgage portfolio, we expect the company to benefit from its decent capital level and cost containment measures.

Bear of the Day:

While Sohu.com’s (SOHU) third-quarter earnings beat the Zacks Consensus Estimate and were in line with the company s own guidance, the outlook for the fourth quarter was far below expectation. The company's operating expenses have been steadily going up, which we fear could limit the growth in earnings.

Moreover, recent delays in game launches, weak ad spending, which is hurting the brand advertising revenue and intense competition pose a threat. Strength in its online games and portal business are expected to be the strongest drivers for growth beyond 2010.

Currently, we see limited upside for Sohu's revenue and earnings growth in the near term. We downgrade the stock to Underperform from our previous Neutral rating and set a six-month price target of $45.00.

Latest Posts on the Zacks Analyst Blog:

Initial Jobless Claims Flat(-ish)

With the pace of hiring as slow as it is, this hole in the safety net will have to be repaired as soon as possible. With no income, and more than six job seekers for every available job, those people are going to be in a world of hurt. Most Americans have very little in the way of savings to fall back on, especially outside of IRA’s and 401k plans. Tapping those would expose people to a 10% penalty and it would be considered taxable income for them. Yet many of them will probably be forced to do so, even if unemployment insurance is extended to them.

It is not just for humanitarian reasons that benefits should be extended. Without an income, people will have to do their banking at the local food bank, not at Bank of America (BAC), and even the local food bank needs a bailout these days. People will be hard-pressed to shop at even the Salvation Army, let alone Wal-Mart (WMT).

Extending benefits is one of the most effective forms of economic stimulus there is. It is far more effective than extending lavish tax credits to move-up homebuyers with incomes up to five times the national median. Unfortunately, the unemployed to not have as effective a lobby as the used home dealers (aka Realtors).

Sears Reports 3Q Loss 

Sears Holding Corp.(SHLD), the fourth largest broadline retailer in the U.S., reported a third-quarter loss of $127 million or $1.09 per share compared to a loss of $146 million or $1.16 per share in the year-earlier quarter. Although Sears managed to reduce its quarterly loss year over year, this was the second consecutive quarterly loss for the company.

The quarterly figures included non-recurring items such as severance charges related to store closings, impairment charges, and pension plan expenses. Excluding the one-time charges, net loss was $94 million or 81 cents per share during the third quarter versus a net loss of $114 million or 90 cents per share in the year-ago quarter.

Sears reported total revenues of $10.2 billion during the quarter compared to $10.7 billion in the year-earlier quarter. The decrease in year-over-year sales was primarily due to a decline in comparable store sales partially offset by the effect of foreign currency translation. Domestic comparable store sales decreased 2.3% during the quarter, with the Sears Domestic division accounting for a 4.6% decrease partially offset by a 0.5% increase in the Kmart division.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=5508.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5509.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Chicago, IL – November 20, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bank of America (BAC), MGIC (MTG), Fannie Mae (FNM), Freddie Mac (FRE) and The Gymboree Corp. (GYMB).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Thursday’s Analyst Blog:

Mortgage Delinquencies: Record High

The delinquency rate is going up much faster than foreclosures are being started. With unemployment high and rising, it is hard to see a lot of those delinquencies getting cured. Either the lenders will have to let people live indefinitely in their houses without paying (unlikely that the banks would be so generous) or we will see another huge wave of foreclosures coming.

The absolute number of houses that are either in foreclosure or 90 days or more past due now exceeds the number of existing homes available for sale. That is a huge overhang of shadow inventory (although some of it is out of the shadows and currently listed for sale) that should continue to put pressure on housing prices, even with all the extraordinary government support trying to prop up housing prices.

While unemployment is one serious driver of mortgage foreclosures because it affects the ability to pay, falling home prices are another driver. An underwater home is a home that is at high risk of going into foreclosure. It is simply economically irrational to continue to make payments on a $500,000 mortgage that is secured by a property that is only worth $400,000. This, then, continues the vicious cycle, where falling prices lead to foreclosures, which leads to more distressed supply, which leads to further pressure on home prices that in turn leads to yet more foreclosures.

The entire mortgage complex is not yet out of the woods. That complex includes the big banks like Bank of America (BAC), the mortgage insurers like MGIC (MTG) as well as Fannie Mae (FNM) and Freddie Mac (FRE). My inclination is to avoid all of them.

Gymboree Beats, but Outlook Down

The Gymboree Corp. (GYMB) reported its fiscal third quarter results after the closing bell on Wednesday. The company posted earnings of $34.8 million, a growth of 12.6% from $30.9 million recorded in the year-ago period. Earnings per share came in at $1.15, which topped the Zacks Consensus Estimate of $1.13.

Gymboree is a specialty retailer offering apparel and accessories for children under the Gymboree, Gymboree Outlet, Janie and Jack and Crazy 8 Brands, as well as play programs under the Gymboree Play & Music brand. At the end of October 2009, the company operated a total of 951 stores across the U.S., Canada and in Puerto Rico.

The company reported a nearly 2% increase in total sales to $269.1 million during the quarter, compared to $264.1 million in the year-ago quarter. The expansion was primarily driven by the addition of 78 new stores in the last one year period, partially offset by a 4% decline in same-store sales. During the quarter, the company opened a total of 25 new stores including six Gymboree stores, four Gymboree Outlets and 15 Crazy 8 stores.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

The Dow, which had slid as much as 77 points in the morning trading, closed down 11.11 points, or 0.1%, to 10,426.31.  The broader S&P 500 index slipped 0.52, or 0.1%, to 1,109.80, while the Nasdaq, hurt by the weakness in tech shares, fell 10.64, or 0.5%, to 2,193.14.  Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.37% from 3.33% late Tuesday.  Crude prices advanced 44 cents to settle at $79.58 per barrel.  Volume remained light, with only 1.063 billion shares trading on the NYSE, and declining issues ahead of advancers by an 8 to 7 margin.

Technology shares were under pressure after Autodesk Inc. (NASDAQ:ADSK) and Salesforce.com (NYSE:CRM) gave grim forecasts and BMO Capital Markets noted Research in Motion (NASDAQ:RIMM), the maker of Blackberry phones, faces increased pressure as consumers opt for cheaper phones.  However, shares in Sprint Nextel(NYSE:S) continued their forward run, jumping 6.7% after the previous session's 13% surge, on reports the company had paid off $1 billion in debt.

A weak housing report fuelled recovery concerns but shares in the sector managed to move higher after Citigroup (NYSE:C) raised Pulte Homes (NYSE:PHM) to “buy," saying the shares are "undeservedly out of favor." Citigroup raised its price target on the firm to to $12 from $11.  DR Horton (NYSE:DHI) rose 1.9% and Ryland (NYSE:RYL) advanced 0.8%, while Toll Brothers (NYSE:TOL) fell 0.9%. 

Financials also helped stem the retreat as hedge fund operator John Paulson noted in a quarterly post to shareholders that Bank of America shares will reach $29.81 by the end of 2011.

Seven of the ten S&P500 industry sectors moved lower Wednesday.  Tech shares slipped 0.6%, followed by 0.5% declines in basic materials, industrials, and utilities, 0.4% drops in oil and gas, 0.2% retreat in consumer services, and a 0.01% fall in consumer goods.  Stemming the retreat in the sector were financials, up 0.8%, and telecommunications, up 0.2%.  In a quarterly post to shareholders, hedge fund operator John Paulson said he expects Bank of America (NYSE:BAC) shares to double over the next few years.

Chicago, IL – November 18, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: American Express Co. (AXP), Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Capital One Financial Corp. (COF).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Tuesday’s Analyst Blog:

Mixed News for Credit Card Issuers

U.S. credit card issuers have reported a drop in the default rate for October, though delinquencies are rising as a result of continuing stress on consumers. While a decrease in the default rate reflects a decline in late payments in the first half of the year, the increase in delinquencies is bad news for the sector as it implies that the companies could experience more charge-offs in the coming quarters.

Consumers remain under stress as a result of the weakness in the housing market, combined with job losses. Recently, Fitch has also expressed its concern about the credit card issuers in the U.S. Fitch expects U.S. credit card issuers’ earnings to remain challenged over the near term as a result of soaring unemployment, bankruptcies and losses.

The default rate (or charge-off rate) has improved in October from the prior month. For American Express Co. (AXP) it was down 60 basis points (bps) to 7.8%, while for Bank of America Corp. (BAC) the rate dropped 103 bps to 13.22% in October. The situation was the same for JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Capital One Financial Corp. (COF). JPMorgan’s default rate declined 10 bps to 8.02%, Citigroup’s defaults fell 136 bps to 8.79% and Capital One's charge-off rate decreased 73 bps to 9.04%.

However, we are concerned about the rise in delinquencies which increased 34 basis points to 5.72% in October at Capital One, 26 bps to 4.95% at JPMorgan and 6 bps to 7.59% at Bank of America. However, delinquencies remain unchanged at American Express.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Chicago, IL – November 18, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: PNC Financial Services (PNC), Bank of America (BAC), Bank of New York Mellon Corp (BK), MasterCard (MA) and JPMorgan Chase (JPM).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Tuesday’s Analyst Blog:

BofA Continues CEO Hunt

Recently, William Demchak of the PNC Financial Services (PNC) was offered the position of the next CEO of the Bank of America (BAC). However, the offer was turned down by Demchak.

We suspect Demchak declined the offer as the pay package is likely to be among the least competitive in the industry, especially since the Obama administration's pay czar took the axe to seven institutions' pay plans, chopping the average high-end salary by 50%. Moreover, the bank is also operating under a memorandum of understanding with regulators, who are scrutinizing the top gun's every decision.

The present CEO of the Bank of America, Mr. Ken Lewis, is set to leave the position, stepping down at the end of the year. It may be noted that he succumbed to the pressure to resign after his company’s Merrill Lynch acquisition.

Earlier this month, Robert Kelly of the Bank of New York Mellon Corp (BK) was offered the role of CEO by the bank. Former Bear Stearns CEO Alan Schwartz is among those reportedly approached who turned down the CEO job offer, as did MasterCard (MA) President Ajay Banga. Others may include Moffett and Charlie Scharf, who runs JPMorgan Chase’s (JPM) retail operations, among others.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Chicago, IL – November 16, 2009 – Zacks Equity Research highlights Infosys (INFY) as the Bull of the Day and Myriad Genetics Inc. (MYGN) the Bear of the Day. In addition, Zacks Equity Research provides analysis on American International Group (AIG), Citigroup (C) and Bank of America (BAC).

Full analysis of all these stocks is available at http://at.zacks.com/?id=5506

Here is a synopsis of all five stocks:

Bull of the Day:

We are upgrading Infosys (INFY) to an Outperform rating with a target price of $57. Through the ongoing economic downturn, the company has invested in Research & Development as well as intellectual property-based solutions. It continues to focus on large deals targeted at organizational transformation where there is a dearth of vendor talent.

The company continues to win new customers and manages to keep its order book healthy. It is increasing its presence in the emerging markets of Mexico, Brazil, China and India from where an increasing proportion of revenue can be sourced in the coming years.

Finally, its solid balance sheet and cash flow generation provides support to our estimates.

Bear of the Day:

Myriad Genetics Inc. (MYGN) reported first quarter fiscal 2010 earnings of 31 cents per share, which was below the Zacks Consensus Estimate by a penny. The company had earned 25 cents per share in the year-ago period.

Myriad Genetics spun off its therapeutics business in July 2009 to focus on molecular diagnostics going forward. Although the molecular diagnostics business is performing well, we remain concerned about the slowdown in revenue growth in recent quarters.

The competition confronting Myriad Genetics products in the biotechnology and genetics testing field is also a concern. We have an Underperform rating on the stock.

Latest Posts on the Zacks Analyst Blog:

Pay Czar to Allow Competitive Pay

The U.S. Treasury's pay czar, who oversees compensation for the highest-paid employees at the firms that received U.S. taxpayer assistance, said on Thursday that he is concerned that pay cuts could obstruct the ability of these firms to retain and attract top talent. However, the pay czar would be open to requests to hire new executives at competitive industry rates.

The pay czar, Kenneth Feinberg, decides compensation packages for the highest-paid employees at the seven firms that have received substantial support from the Troubled Asset Relief Program (TARP). The pay restrictions were imposed on these firms to enable them to repay government money by controlling excessive pay.

The seven firms, whose top 25 earners received an average 50% lower pay last month by the order of the pay czar, are American International Group (AIG), Citigroup (C), Bank of America (BAC), Chrysler Financial, Chrysler Group LLC, General Motors and GMAC Inc.

Though all seven firms that are subject to such scrutiny have expressed concerns about the impact of pay limits, none of them has appealed to the pay czar.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=5508.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5509.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

The strength in US dollar, based upon its safe-haven appeal, undermined investors' appetites for riskier, high-yielding assets such as equities as upside guidance from DJIA components Wal-Mart and Hewlett-Packard failed to stem the retreat.

The Dow Jones industrial average fell 94 points, or 0.9%, to close at 10,197.47.  The S&P 500 retreated 11 points, or 1%, to close at 1,087.24, after climbing to an intraday high of 1,101.97.  The tech-heavy Nasdaq composite index retreated 18 points, or 0.8%, to settle at 2,149.02.  On the New York Stock Exchange, declining issues outpaced those that advanced in price by a four-to-one margin as volume slowed to 828 million shares.

Twenty-six of the thirty Dow average components ended lower, with energy and financial shares leading the decliners.  The CBOE Vix volatility gauge jumped 5.21% to 24.24.  Gold prices fell $8 to $1106.60. 

On the S&P 500, shares of financial companies were the second-steepest decliners among the 10 industry groups, falling 1.8%.  Bank of America (NYSE:BAC) dropped 2.3% to $16.06 and JPMorgan Chase (NYSE:JPM) fell 2.3% to $43.30.  Energy shares slumped 2% and led the decliners among 10 groups.  The falling shares wiped off an earlier advance in tech shares that was fueled by Hewlett-Packard Co.’s (NYSE:HPQ) takeover of 3Com Corp. (NASDAQ:COMS).

Meanwhile, the US Treasury said budget deficit widened to $176.4 billion in October, the largest October shortfall on record and the fifth largest monthly deficit ever.  Economists had expected a $150 billion shortfall.

The Dow Jones industrial average, which hit an intraday high of 10,341, advanced 44 points, or 0.4%, to close at 10,291.26. The S&P 500 added 6 points, or 0.5%, to close at 1,098.51, and the tech-laden Nasdaq composite rose 16 points, or 0.7%, to end the day at 2,166.90.  On the New York Stock Exchange, 19 stocks were higher in price for every 11 that declined

Nine of the ten S&P500 industry groups ended in the green, with financials (+1.3%), basic materials (+1.0%) and technology (+0.7%) leading the gainers.  Utilities fell 0.2%.  On the DJIA, Bank of America (NYSE:BAC) led the advancing issues as the firm’s CEO noted the integration of Merrill was running ahead of schedule, and will result in greater-than-anticipated cost savings in 2009.  Wal-Mart (NYSE:WMT) advanced 1.3% ahead of this morning's results.

Shares in home building companies rose after Toll Brothers (NYSE:TOL) said late Tuesday that signed contracts for new homes in its latest quarter jumped 42%.  Toll rose $3.02, or 16.4%, to $21.41.  Pulte Homes Inc. (NYSE:PHM) advanced 77 cents, or 8.1%, to $10.23, while Beazer Homes (NYSE:BZH) advanced 63 cents, or 12.4%, to $5.73.

Meanwhile, the greenback plunged to its lowest level since 2008 and ended the day just below $1.50 against the euro.  The steady decline in the greenback has been precipitated by continuing suggestions from the Fed that interest rates will remain low for an extended period as the recovery strengthens.  Across the globe, markets have interpreted this language as suggesting a mid-2010 timetable for raising rates. 

However, gold prices steered clear of wavering sentiment and hit an all-time high Wednesday at $1114.60 per troy ounce, up $12.10.  China reported greater-than-expected industrial output and retail sales, sending resource-related shares higher. Commodity prices also rose, with the broad-based, DJ-UBS index up 0.6% to 133.408. Crude prices gained, up 0.3% to $79.28.

Today's retailers' results will be an indication of consumers' appetites for goods.  Although the third quarter is seasonally slow, the current quarter numbers will be closely watched as the holiday season approaches.  Yesterday's reported loss at Macy's (NYSE:M) was less than anticipated; however, its raised fourth quarter guidance failed to meet expectations. Companies reporting results today include: Kohl's (NYSE:KSS), Nordstrom (NYSE:JWN), Urban Outfitters (NASDAQ:URBN) and another key consumer-driven firm, Disney (NYSE:DIS).
 

Chicago, IL – November 12, 2009 – Zacks Equity Research highlights Cisco Systems (CSCO) as the Bull of the Day and Potash Corporation (POT) the Bear of the Day. In addition, Zacks Equity Research provides analysis on JPMorgan Chase & Company (JPM), Citigroup Inc.(C) and Bank of America (BAC).

Full analysis of all these stocks is available at http://at.zacks.com/?id=5506

Here is a synopsis of all five stocks:

Bull of the Day:

Cisco Systems (CSCO) is a leading provider of IP-based networking and other products. The company's first quarter results were a significant improvement over prior quarters, with both revenue and earnings exceeding our expectations.

Of particular note is the growth in orders, which indicates continued business momentum. Improving operating performance, solid financials, a sound restructuring policy and new growth initiatives are the drivers behind our Outperform rating.

However, we caution investors about the increasing competition, market share losses, complicated decision-making process and integration risks.

Bear of the Day:

We downgrade Potash Corporation (POT), the world's leading producer of potash and fertilizer, to Underperform. The company has been hit hard by the global economic crisis, leading to weak demand and prices as farmers reduce their use of fertilizers. This has induced a sharp fall in profits for fertilizer producers.

Potash Corp.'s earnings declined 79% in the third quarter of 2009. The company expects fertilizer demand to remain weak for the rest of 2009, and plans to cut potash production. Potash Corp. has also lowered its expected earnings and slashed 2010 global potash demand expectations.

About 40% of global potash production capacity stands idle since the second half of 2008. The company also expects some of its capacity to remain curtailed in 2010.

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JPMorgan to Lift Salary Freeze

According to an internal memo to all employees, JPMorgan Chase & Company (JPM) will lift a salary freeze it put in place last year. The salary freeze was applicable for employees making more than $60,000 a year.

The decision to lift the salary freeze is a part of JPMorgan’s compensation review process, following its profits for last several quarters in its investment-banking operations.

The bank also intends to pay a $500 special award globally to employees who receive less than $60,000 a year.

Additionally, the bank also plans to add more than 300 staff to its branches to support a $4 billion increase in small business lending in an effort to help revive the U.S economy. Also, to boost new loans and refinancing, JPMorgan will hire 1,200 mortgage loan officers by the end of 2010. This addition will increase the company’s sales force by approximately 60%.

According to the company, lifting the salary freeze and hiring new employees will help it to increase access to working capital, term loans for expansion, commercial mortgages, lines of credit and business credit cards.

JPMorgan is among the large financial institutions that have already repaid government funds. In the second quarter of 2009, the company repaid the full $25 billion in preferred capital received as part of the Troubled Asset Relief Program (TARP). In fact, this has partly enabled it to take the recent decision to lift the salary freeze.

However, for many other firms, like Citigroup Inc.(C) and Bank of America (BAC), the full repayment of TARP money is uncertain at this point as they are facing a difficult situation.

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The Standard & Poor's 500 Index shed 0.01%, to 1,093.01 and the technology-laden Nasdaq Composite Index slipped 2.98 points, or 0.14%, to close at 2,151.08.  On the New York Stock Exchange, three stocks declined in price for every two that rose.  Volume was light as only 990 million shares exchanged hands.

Record low interest rates and a sliding dollar have helped stocks in recent months as investors have taken their focus away from some of the persistent worries of the economy.  Also, with the Federal Reserve continuing its highly accommodative monetary stance and the G20 finance ministers pledging to keep economic stimulus in place, risk appetites have received a boost lately. 

Of the $81 billion in Treasury auction scheduled for this week, yesterday’s $25 billion sale of 10-year notes witnessed decent demand, following robust demand for the $40 billion in 3-year notes on Monday. Bond markets are closed today for Veterans Day.

Shipping company FedEx Corp. (FDX) yesterday said it expects to ship more than 13 million packages on December 14, its busiest shipping day of the year.  United Parcel Service Inc (NYSE:UPS) said it sees growth in its volumes next year as the global economy recovers.  American Express (NYSE:AXP) said cardholder spending grew in October, with billing up 3%.

Meanwhile, Bank of America's (NYSE:BAC) Ken Lewis noted his firm is "keeping its head above water" this year.  Bob Toll of Toll Brothers (NYSE:TOL) noted, "Home buyers began to emerge from their bunkers in late March 2009 and the market continued to gain momentum up to Labor Day.  Since then demand has been volatile. This may be due in part to typical seasonality, but the more likely cause is concern about unemployment and the overall economy."

A number of Fed speakers yesterday sung the tone of caution, while mostly agreeing on the fragility of the economic recovery.  Both Lockhart and Yellen warned unemployment rate may remain high for the next several years.  Rosengren warned that with high unemployment levels, the US economy is not yet in a position to warrant exit strategies.  This morning Treasury Secretary Geithner reiterated the importance of the dollar strength for the health of the US economy.

The Dow Jones industrial average, which was well supported by strength in its all but one component, rose 203 points, or 2.0%, to a 13-month high of 10,227.  The S&P500 climbed 2.2% for its sixth straight session gain to 1093 and the tech-heavy NASDAQ gained 2.0% to close at 2154.  The market’s measure of volatility, the CBOE Vix, plunged 4.3% to 23.15.

All ten S&P500 industry groups ended in the green, led by gains in basic material shares (+3.5%) and financials (+3.5%).  Crude prices added $2.00 to close at $79.43 even as Hurricane Ida was downgraded to a tropical storm.  Gold prices went past the $1100 level, up $5.70 to $1101.40, as the metal shined brightly on its inflation hedge appeal.  At the same time, greenback took a beating on such concerns, declining 1.0% against a basket of currencies, to a 15-month intraday low of 75.04.  Shares of Freeport-McMoRan (NYSE:FCX) advanced 4.6%; Rio Tinto (NYSE:RTP) surged 5.9%.

A weak dollar helped shares of companies with large exposure to overseas markets.  Caterpillar (NYSE:CAT) jumped 4.2%, DuPont (NYSE:DD) gained 3.7%, Boeing (NYSE:BA) rose 3.4%, and General Electric (NYSE:GE) added 3.4%.

Financials rose 3.5% with American Express (NYSE:AXP) jumping 4.9%, Bank of America (NYSE:BAC) up 4.8%, Discover Financial Services (NYSE:DFS) up 5.9% and Capital One Financial (NYSE:COF) up 5.6%.  The Fed noted that of the ten bank holding companies that underwent US government’s stress tests only GMAC has raised its capital reserves sufficiently to meet the economic risks of higher unemployment and slowing growth. On Thursday, the FDIC meets to address the negative implications of an accounting rule change requiring credit-card firms to bring back on to their books card loans that are bundled into securities and sold to investors.

While the economic calendar remains light and corporate earnings schedule slim, Fed speak schedule is heavy, with Atlanta Fed President Lockhart slated to take the stage at 9:15 ET; San Francisco President Yellen at 10:15. Boston Fed President Rosengren is due to speak at 4:15, Dallas Fed President Fisher at 7:30 and Fed Governor Tarullo at 8:30.  Senate Banking Committee Chairman Christopher Dodd is expected to release a draft of the bill on financial regulatory reform.

Fortunately during recessions, the federal government usually will step in and provide emergency extended benefits. However this recession has gone on for so long, and we have so many long-term unemployed, that millions were in danger of losing even those extended benefits. Fortunately the Senate finally got around to extending those benefits for up to another 20 weeks (depending on the overall level of unemployment in that state). Still, unemployment benefits only replace a fraction of what people were earning before they lost their jobs. This means that as soon as people get their pink slips, they will reduce their spending. However, depending on how long they expect to be out of work, they do not bring their spending levels down all the way to their new unemployment insurance income level. There are all sorts of spending categories that are at least semi fixed. If you think you will get a new job soon, you don't cancel little Jimmy's ballet lessons, or Betty's karate lessons. Instead you draw down your savings and use your American Express (AXP) card more.

However, as the weeks go by and you get no response from all the resumes you sent out, more and more things start to go by the wayside. But still does it make sense to quit the country club and lose the $20,000 initiation fee you paid, especially now that you actually have time to use it? Well after a few months you have to bite that bullet too. In the meantime, your non-retirement savings are probably about gone. Going into this recession the savings rate had been close to zero, so it is a pretty safe bet that most people did not have a lot of savings outside their 401-ks or IRAs. You have probably run up your balance on your credit card, but the card companies are getting wise to that and are starting to cut back the available credit limits for millions of accounts. That is a wise move on their part individually, but collectively for the economy, it acts to reduce overall demand.

Oh, and since a big factor in your credit rating is how much credit card debt you have relative to your available limit, both increasing your balance and the bank cutting back your maximum availability will conspire to knock off more than a hundred points from your FICO score. In past downturns, especially recent ones, if the unemployed person were a homeowner, he could tap the equity in the house. Now with millions and millions of homes worth less than the amount of the mortgage, or at least very close to it, that option is not open. Indeed this time around it seems that people are more likely to go in the other direction.

To survive, they are simply not paying on their mortgage and waiting for the sheriff to show up at the door to kick them out. Given the huge numbers of people who are falling behind on their mortgages, and to political efforts to slow the rate of foreclosures, this is actually a very rational strategy. In many parts of the country it has been possible to live rent and mortgage free for well over a year before actually getting kicked out of the house. That can free up a lot of cash to spend on other things. However, it is very bad news for the banks that lent the money like Bank of America (BAC) and Wells Fargo (WFC). It is also going to become a serious issue for the Federal Reserve since it is in the process of buying $1.25 trillion worth of mortgaged backed paper. True, the paper is guaranteed by Fannie (FNM) and Freddie (FRE), but since the taxpayers own 80% of both of them, what is the difference? People have to start tapping their 401-ks and IRAs. While the stock market has recovered nicely, it is still far below its peak, making that option even more painful, along with the 10% penalty imposed if you start to withdraw money from those accounts before retirement age.

By the time people have been out of work for six months or more, they have usually depleted their financial resources. Remember that on average, someone who is out of work has been out of work for 26.9 weeks now, and half of all the unemployed have been looking for work for more than 18.7 weeks. That smashes any record prior to this downturn. At the worst point in the Reagan recession, half of all the unemployed were out of work for more than 12.3 weeks. In fact, since the median duration started being tracked at the beginning of 1967, the median duration has only been in the double digits for 36 of those 502 months, and 14 of those have been during his downturn.

To those who say the stimulus bill has not helped, tell that to the almost 5.6 million people who have been out of work for more than six months. If not for the emergency benefits in that bill, they would be left with no income as soon as they passed that mark. I suspect that the vast majority of people who are in that category assumed that they would have found a new job by now when they first got laid off, and thus did not cut back their spending as fast as, in retrospect, they should have when they first got their pink 
slip.



It is long term unemployment that is the hallmark of a recession. The graph below shows the number of unemployed (in thousands) in each duration group back to 1960. This is not adjusted for the rather substantial increase in the total population over that period, so some upward trend to the numbers would be normal. Notice how stable the pink short term unemployment line is. There are always people getting laid off, and people getting hired. In good times, the number of people becoming unemployed does not really fall that much, it is just that they don't stay unemployed for all that long. They are either able to find a new job quickly, or in the case of many manufacturing jobs, get called back to work by their previous employer.

The light blue line of moderate length unemployment (5 to 14 weeks) shows a little bit more cyclical behavior, but nothing like the two longer term measures, the yellow 15 to 26 week group and the dark blue over 26 week long term group. What is striking about this recession is just how high that long term dark blue line has soared. While these graphs do not have the recession bars in, I would note that the level of long term unemployment usually continues to rise for many months after a recession ends. The shorter term groups tend to turn down well before the long term group does. This means that the situation is likely to continue to get worse before it gets better.



When these people do return to work, it is highly unlikely that they will be earning anything close to what they were earning before they got laid off. Many will be homeless, without any savings and in pretty desperate shape. We have already seen a steep rise in the poverty rate, which rose to 13.2% in 2008 from 12.5% in 2007 (see Census Bureau: Poverty Rising and Income, Poverty & Health Insurance).

Among children, the poverty rate rose to 19.0% in 2008 from 18.0% in 2007. I would be shocked if it does not exceed the one in five level when the statistics come out next summer for 2009. Since health care coverage is largely tied to employment in this country, the rising number of unemployed means that the number of people without health insurance, already at 46.3 million in 2008, is likely to jump further. While it is true that the stimulus package did subsidize COBRA insurance by as much as 65%, by the time people are unemployed for more than six months, it is very difficult for most of them to be able to afford even those subsidized premiums. When those people get sick, their only option is to go to the hospital emergency room, which is a very expensive and inefficient way of being treated. It is not free either, the hospital will try to bill them for the services, and even send debt collectors on them, although in most of these cases they will be trying to get blood from a stone.

For many, it simply means that they go without treatment, other than over-the-counter medicines they buy at Walgreen's (WAG). If it turns out to be something more serious, it very often results in death. A Harvard study recently estimated that 46,000 Americans die prematurely each year because of a lack of health care coverage. That is a national disgrace.

While unemployment is a lagging indicator of the economy, it does play a role in the economy going forward. It will be very hard to sustain the surprisingly strong growth we have seen in recent months if we don’t start to see some improvement in the employment picture. Yes, huge improvements in productivity are good, but people on the ground need jobs.

The graph below (from http://www.calculatedriskblog.com/) tracks both the unemployment rate, which is rapidly approaching a post war record (10.7% in 1983) and the year-over-year change in employment, which is actually starting to turn up (become slightly less negative). As the horrific job losses of last winter start to roll off, that measure should improve more in coming months. But remember: job losses have been going on since December 2007, which is closer to two years ago than one year ago. That can make the year-over-year change a bit misleading. Even with the improvement, the year-over-year job change is still far worse than previous recessions.

The job losses were wide spread by sector. In goods-producing industries we lost a total of 129,000 jobs, including 62,000 construction jobs and 61,000 manufacturing jobs. Since the recession started we have seen 1.6 million construction jobs go away and 2.1 million manufacturing jobs. Just to put in context how devastating the losses have been in those areas, there are only 5.966 million construction jobs and 11.675 million manufacturing jobs left in the country. The sharp loss in manufacturing jobs is in distinct contrast to the ISM survey earlier this week that indicated that manufacturing jobs were expanding. It does look like ADP got it pretty much right in their survey on Wednesday when they predicted a total of 203,000 jobs lost, including 65,000 in manufacturing.

The service sector lost a total of 61,000 jobs. The bulk came from retail, which lost 40,000 jobs. That's not exactly what you want to see leading up to the holiday shopping season. Health care and education continued to buck the trend and added 45,000 jobs, including 29,000 in health care. In one encouraging sign, looking forward, temporary jobs increased by 44,000. At the bottom of a cycle those are often the first jobs to show an increase as employers realize they need more staff, but are not confident to add permanent employees. At least it is good news for firms like Kelly Services (KELYA).

The Unemployment rate, which is calculated from a different survey, painted a much gloomier picture, jumping to 10.2% from 9.8% in September and reaching its highest level since April of 1983. That survey showed the number of unemployed spiking by 558,000 in October, for a total of 8.3 million jobs lost since the start of the recession in December of 2007. Demographically all major groups saw their unemployment rate rise. For men, the rate is now 10.7%, an increase of 0.4% from September's 10.3% and up from 6.4% a year ago. For women, the unemployment rate increased to 8.1% from 7.8% last month and 5.4% in October of 2008. Teen unemployment soared to 27.6% from 25.9% last month and 20.7% a year ago.

It is true that a job for most teens means money to put in the gas tank (or maybe to spend on clothing at Abercrombie and Fitch (ANF)), not a matter of paying the mortgage or keeping the lights on. However those first jobs teach important skills for the future, like the importance of showing up on time. Unemployment rates in the high 20s are something you associate with third-world countries, not the U.S.

By race, the unemployment rate among whites is now 9.5%, up from 9.0% in September and 6.0% a year ago. Hispanic unemployment is now 13.1%, up from 12.7% in September. Among blacks, 15.7% are now unemployed, up from 15.4% last month and 11.3% a year ago. 

If one is looking for silver linings in the report, there are a few. The average manufacturing work week increased by 0.1 hour to 40.0, and average overtime increased by 0.2 hours. Employers will usually lengthen the number of hours their current employees are working before they start to add new staff, especially if those hours had already been drastically cut back. Also, for those with jobs, average hourly earnings increased by $0.05 or 0.3%, versus just a 0.1% increase last month. Over the last year average hourly earnings have increased by 2.4%. However, since people are working fewer hours, average weekly earnings are up just 0.9%. That does not provide a lot of firepower for people to take to the malls this Christmas season. The number of people working part time for economic reasons was unchanged at 9.3 million. That number had been increasing rapidly, so perhaps there is a little bit of stabilization on that front.

Still there are other measures in the internals of this report that are a troubling. One number that does not get nearly enough attention is the ratio of people working to the total population, what I like to call the employment rate. While it will never get close to 100%, unless you plan on eliminating child labor laws and have people in their 90s work, it is a very important measure. Ultimately it is the employed in a society that support everyone else, either directly or indirectly. The employment rate fell to 58.5% in October from 58.5% in September and 61.7% a year ago. The high for this cycle, was 63.4% in December 2006.

This cycle broke a long string of higher highs and lower lows stretching back over 50 years. That massive uptrend was largely the function of demographic changes that have largely played themselves out. Women are pretty much fully integrated into the work force and the baby boomer pig has pretty much moved through the python.

However, view this graph in conjunction with the first one. When a related measure, the civilian labor force participation rate was rising (it was unchanged in October at 65.1%), the rate of job creation (red line above) had to be much higher to generate the same unemployment rate (blue line above). The employment rate is now down to its lowest level since October 1983. Back then we still had large numbers of baby boomers that were trying to enter the job market for the first time, and far fewer women worked outside the home. 

This has easily been the worst recession from the point of view of employment since the Great Depression, even though the unemployment rate was marginally higher under Reagan, hitting 10.7%. Consider the next graph (also from http://www.calculatedriskblog.com/). It shows the job losses as a percentage of the prior peak employment levels for every recession since the end of WWII. We have now exceeded the prior record set by the 1948 recession in terms of depth. We were going through a huge structural adjustment in 1948 as we demobilized the wartime economy and shifted back to civilian production. Nothing of the sort is occurring now.

Also in all but four of the prior recessions, not only had we stopped losing jobs by this point, but we had actually gained back all the jobs lost and had more people working than at the start of the recession. Next month we will pass that mark for the 1958 recession. The scary part is that the three recessions that took longer than 22 months to get back above the prior peak employment levels are the three most recent downturns, the ones that stated in 2001, 1990, and in 1981. Further, each of those lasted longer than the one before. Since we are still losing jobs at a fairly rapid rate, it could be October 2011 before we have more people working than we did in December 2007, and that is if we were to match the record of 2001. If the pattern of lengthening the time to get back to even continues, it could be far longer than that. 

One of the most disturbing signatures of this recession is the length of time that people are out of work. There are now 5.594 million people who have been out of work for more than six months. The median duration of unemployment is now 18.7 weeks, a jump of 1.4 weeks from September’s 17.3 weeks. The previous record was set in June at 17.9 weeks, but prior to this downturn we have never seen anything remotely comparable to this level. The only other post-war recession that challenges this one in terms of severity is the 1981-83 downturn. The peak in the median length of unemployment in 1983 was just 12.3 weeks. A year ago we were at 10.6 weeks. The average (mean) duration of unemployment tells a very similar story. Since it is impossible to be unemployed for fewer than 0 weeks, the mean will always be higher than the median. On average if a person is out of work, he or she has now been out of work for 26.9 weeks, up from 26.2 weeks in September and 19.8 weeks a year ago.

As the chart below shows, it has historically been very rare for the average to exceed 20 weeks (and for the median to exceed 10 weeks). The only good sign I could find in the unemployment duration numbers was that the ratio of long term (over 26 weeks) to short term (less than 5 weeks) unemployed dropped slightly to 1.78 from 1.83 in September. However, let's not get too excited about that. A year ago it stood at 0.74, and prior to this cycle had never gone above 0.80. The reason for the decline was a 6.1% increase in the number of short term unemployed, which is disturbing since that number had been trending down. The number of long-term unemployed increased by 2.9% on the month and is up 146% from a year ago. If those long-term unemployed were members of the middle class, it is unlikely that they are any more, and as the length of their unemployment continues to grow, their chances of rejoining the middle class diminish. This long term unemployment is going to cause a serious increase in poverty. 

All in all, a disappointing jobs report. Yes we are making some progress, but it is not nearly fast enough. The unemployment rate is now far above the peak seen even in the "more adverse" scenario of the bank stress tests. People who are out of work for extended periods of time are going to have a hard time paying their mortgages. This means more foreclosures are going to be in the pipeline, and hurting the earnings of major mortgage lenders like Bank of America (BAC) as well as Fannie (FNM) and Freddie (FRE). By extension, it is also going to hurt us, the taxpayers, who now own 80% of both of them.

I’ve been thinking about the Schwab ETF launch all week, trying to figure out if it’s a game-changing event or an overblown bit of marketing. I think it’s a bit of both.

The big news, of course, is that Schwab is entering the ETF market and breaking new ground on fees. It has launched four ETFs that offer the lowest expense ratios in the world: As low as 0.08 percent for U.S. broad market exposure. The new Schwab Total Market ETF (NYSEArca: SCHB) and Schwab Large Cap Equity ETF (NYSEArca: SCHX) are now the lowest-cost mutual funds available to retail investors.

What’s more, Schwab is offering zero commissions for Schwab customers who buy or sell the ETFs.

That’s a big deal. Commissions are a huge hurdle for retail investors looking to allocate to ETFs. A retail investor placing $1,000 at a time should think carefully before buying ETFs: Even low commissions of $10/trade can eat up returns. A $10 commission on a $1,000 purchase is equivalent to paying a 1 percent load. For most investors, that cost can overwhelm the advantages ETFs offer in terms of low expense ratios and tax efficiency.

I’ve been writing about the importance of eliminating this commission hurdle for years, and I applaud Schwab for doing it.

(Of course, Schwab isn’t the first to eliminate commissions: Zecco offers zero commission trading, and both Wells Fargo and Bank of America will let you trade for free if you keep $25,000 in their money market funds. But Schwab is a well-established brand with a huge client base and a built-in distribution system. For it to offer zero commission trading with no major “catch” is a big deal.)

So it’s with a bit of hesitation that I say that, at least out of the gate, I do not expect these ETFs to gain a huge amount of assets.

We’ve seen firms like Fidelity and E*Trade try to swoop into the indexing world before with ultra-low-cost mutual funds, only to fail. I’m not sure retail investors brook much difference between expense ratios of 8 basis points and 10 basis points. At a certain point, for retail investors, you end up talking small numbers.

Those differences in expense ratios can be overwhelmed by factors like how well the funds track their benchmarks and whether the sponsoring firms arrogate securities-lending revenues on the portfolios. Schwab does have the skills to run excellent index funds, but it will have to prove itself as an operator of these ETFs for a while before people buy in en masse.

For larger investors, the critical question is how these funds will trade.

There will be huge swaths of ETF investors who will not go near these funds until they’ve established a large asset base and can provide the kind of limitless instant liquidity offered by funds like the S&P 500 (NYSEArca: SPY): Hedge funds, other mutual funds, day traders and the like will be willing to pay commissions to ensure access to the deep pools of liquidity these funds provide. So far, the Schwab ETFs have been trading at decent spreads. But larger investors may still be concerned about the costs and time involved in moving large block trades near fair value. There are ways to do it with any ETF, but it will be harder in SCHX than it is in SPY for some time.

At least initially, Schwab ETF assets will be driven more by long-term buy-and-hold investors. It’s ironic given that the funds’ key selling point is “free trading,” but I think that’s true. And the simple truth is that buy-and-hold assets grow slower than fast-money trading assets. So look for a slow build on the Schwab ETFs rather than any runaway asset train.

There is one thing, however, that’s for certain: Schwab’s huge push to market these ETFs to its clients and to the retail investing public will drive increased awareness of the ETFs in general. In that sense, I think the Schwab ETFs absolutely will help drive the next major leap in growth for the ETF assets.

And over time, I expect the Schwab funds will gain significant assets. It just won’t happen overnight.

Chicago, IL – November 5, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Time Warner Inc. (TWX), Fannie (FNM), Freddie (FRE), Citigroup (C) and Bank of America (BAC).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Wednesday’s AnalystBlog:

Time Warner Tops Zacks Consensus

Despite tough macro-economic conditions, Time Warner Inc. (TWX), the global leader in media and entertainment businesses, reported better-than-expected third-quarter 2009 results that topped the Zacks Consensus Estimate.

The quarterly earnings of 61 cents a share beat the Zacks Consensus Estimate of 52 cents, but dropped 6% from 65 cents delivered in the prior-year quarter. On a reported basis, including one-time items, quarterly earnings came in at 55 cents a share, sharply down by 38% from 89 cents posted in the year-ago quarter.

On account of better-than-expected results at its Content Group -- comprising Networks, Filmed Entertainment, Publishing and Corporate segments -- Time Warner boosts its business outlook. The company now expects its full year 2009 earnings to be $2.05 per share, up from $1.98 previously anticipated.

The Fed Stays on Easy Street

The Fed did back off its quantitative easing program slightly. It is done with the program of buying $300 billion of longer-term T-notes, and is continuing its program of buying $1.25 trillion of mortgaged-backed securities. It did, however, slightly reduce its planned purchases of Fannie (FNM) and Freddie (FRE) debt, from $200 billion down to $175 billion. In the overall context of the quantitative easing program, the reduction is trivial. It is, however, a sign that the program will not be expanded, nor is it likely to be renewed after the current program is completed by the end of the first quarter.

There had been a few Fed types who had been making speeches about the need to bring things back to normal sooner rather than later, but when the rubber hit the road, they are still on board with the program.

Overall, the Fed seems to understand that the weak economy is the overriding problem. Yes, things are getting better, but given the sluggish pace of improvement, this is not the time to be taking away the punch bowl.

This would be in keeping with historical precedent. Following the end of the 2001 recession, the Fed waited 32 months before it started to raise rates, and then it did so at a very gradual 25 basis points at a time. Following the 1991 recession it waited 35 months.

So assuming that the NBER eventually determines that the recession ended in July 2009, history suggests that the Fed will not begin to raise rates until the first quarter of 2012. The last two recessions were far milder than this one, which would argue that the Fed should stay on easy street for even longer this time around.

The problem is that keeping rates so low for so long the last time was a key factor in allowing the housing bubble to form. Still, the balance of risks seems to be on the side of an economic relapse, not of an overheating that causes inflation to soar.

Keeping rates low means that we will have a steep yield curve. A steep yield curve allows banks to make a lot of money, since their economic function is to borrow short term, and lend long term. The idea is that if the curve is kept steep enough long enough, even basket-cases like Citigroup (C) and Bank of America (BAC) will be come solvent again.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Chicago, IL – October 30, 2009 – Zacks Equity Research highlights CarMax (KMX) as the Bull of the Day and Genomic Health Inc. (GHDX) the Bear of the Day. In addition, Zacks Equity Research provides analysis on J.C. Penney (JCP), Macy’s (M) and Bank of America (BAC).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676

Here is a synopsis of all five stocks:

Bull of the Day:

CarMax (KMX) focuses on penetrating new markets through store openings. The company has kept its inventories closely aligned with sales trends, which has allowed it to optimize gross profit per unit besides offering great value to customers. These have helped the company to maintain a favorable position among its peer group.

CarMax has reported profit in the second quarter, reflecting a significant improvement from the Zacks Consensus Estimate. It has experienced a significant rebound in CarMax Auto Finance income to $72 million in the quarter versus a loss of $7 million in the prior year quarter.

These lead us to upgrade the stock to an Outperform recommendation with a target price of $25.

Bear of the Day:

Genomic Health Inc.’s (GHDX) lead product is Oncotype DX, which is used for early stage breast cancer patients to predict the likelihood of cancer recurrence.

Even though sales of Oncotype remain robust and the company remains optimistic about its prospects, we are highly concerned about the company's reliance on the product for growth. We believe that Genomic needs to expand its product portfolio in order to sustain growth.

Furthermore, we are also concerned about the company's weak pipeline. These concerns have caused us to downgrade the stock to Underperform.

Latest Posts on the Zacks Analyst Blog:

Continuing Jobless Claims Fall

Continuing jobless claims dropped by 148,000 to 5.797 million, which is the biggest drop we have seen in this cycle. Even extended claims dropped by 71,000 to 3.893 million. Thus combined, there are now 9.69 million people getting unemployment benefits.

However, even extended benefits don’t last forever, and an estimated 7,000 people a day are losing that last lifeline. In Congress, the House has passed an extension, but the Senate continues to dither as the extension is being filibustered. After cloture is invoked, those senators who think that having millions of Americans suffering is a good thing (builds character, you know) plan to offer all sorts of unrelated amendments related to Acorn to further delay the bill.

This delay is not only callous as a humanitarian matter, but it is very stupid economic policy. If people have no income, and they have already run down their savings, they can either starve or turn to "extra-legal" ways of getting income. They certainly can’t be spending a lot of money at J.C. Penney (JCP) or Macy’s (M). The bank that becomes important to them is the local food bank, not Bank of America (BAC).

Extended unemployment benefits are among the best targeted stimulus dollars there are. They go directly to people who are in the most need, and to people who are likely to spend them quickly, thus creating a multiplier effect.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=5508.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5509.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Chicago, IL – October 30, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bank of America (BAC), Citigroup (C), Motorola Inc. (MOT), China Mobile Ltd. (CHL) and Mylan, Inc. (MYL).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Thursday’s AnalystBlog:

Contributions to GDP Growth

While residential investment is still near a record low share of the overall economy, I have serious questions about the sustainability of the increase. The extension and expansion of the the tax credit by Congress might keep things going for the next few quarters, but after that things are likely to fall apart again. Just like we saw with the "Cash for Clunkers" (C4C) program, it is probably just encouraging those folks who might have bought later to buy now.

It is also tricking people into thinking that a house is more affordable that it really is -- just the way that teaser-rate ARM’s did, and we saw just how well that worked out. The FHA is handing out mortgages with only 3.5% down, and people can use the tax credit for that ridiculously small down payment. This has future disaster of biblical proportions written all over it. The next bailouts will not be of the banks like Bank of America (BAC) and Citigroup (C) but of the FDIC and the FHA.

Direct Government spending had a small but positive impact on overall growth in the 3Q, adding 0.48 points -- a fairly significant slowdown from the 1.33 contribution in the 2Q, but better than the 0.52 point drag in the 1Q. All the help came from Washington, not City Hall or the Statehouse.

Motorola Shows Signs of Revival

Motorola Inc. (MOT) today declared financial results for the third quarter 2009. Quarterly net income from continuing operations was $12 million or 1 cent per share, compared to a net loss of $397 million or 18 cents per share in the prior quarter. Third quarter adjusted (excluding special items) EPS was 2 cents, easily beating the Zacks Consensus Estimate of a break-even quarter.

Improvement in net income was primarily due to the huge reduction in operating expenditure. Quarterly total revenue was $5,453 million, down 27.1% year-over-year and also below the Zacks Consensus Estimates of $5,564 million.

Gross margin in the third quarter was 33.2% compared to 24.1% in the prior-year quarter and 31.1% in the previous quarter. Quarterly operating expenditure was $1.68 billion compared to a massive $2.26 billion in the year-ago quarter.

Quarterly revenue was $2 billion, down 15% year-over-year. Operating income was $199 million compared to an operating income of $263 million in the year-ago quarter. During the third quarter, Motorola conducted the world's first live 2.6GHz TD-LTE mobile demonstration for China Mobile Ltd. (CHL) and shipped 3.3 million digital entertainment devices.

Mylan Beats, Raises Outlook

Mylan, Inc. (MYL) reported third quarter earnings per share of 32 cents, above both the Zacks Consensus Estimate of 27 cents and 23 cents in the prior-year period. The company reported revenues of $1.26 billion, a 24% decline from the year-ago period.

However, the year-ago period included $455 million of revenue related to the sale of the product rights of Bystolic. Excluding this, total revenues increased 5.2% over the third quarter 2008. Revenues would have increased 9%, but for the unfavorable movement of foreign currency.

From this quarter onwards, Mylan has decided to report its results in two segments -- Generics and Specialty -- following the acquisition of approximately 24% of the remaining interest in Matrix and the related de-listing. The former Matrix segment has been included in the Generics segment. The Generics Segment, accounting for about 88% of total revenues during the quarter, increased marginally (3.7%) to $1.12 billion. Revenues from Specialty recorded a huge increase of 20.3% to $150.9 million.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

The Dow Jones industrial average oscillated within a 200-point range and briefly touched the 10,000 mark, before some profit taking saw the index squandering the earlier advance and ending the day 104-points lower.  Technology shares, only sector to have recorded gains last week, fell out of favor and slid along with the broader market.  The technology-laden Nasdaq retreated 12.62 points, or 0.6%, to 2,141.63.  The CBOE Vix, the market’s measure of volatility, witnessed its sharpest one-day percentage increase in a month.     

As risk-appetite fell and investors turned to safer bets, the greenback moved further from last Wednesday's 14-month low of $74.94, up 0.7% against a basket of currencies.  Weak demand prospects sent crude prices off $1.82 to a close of $78.68.

The S&P500 witnessed weakness in all ten industry groups, but notable laggards were financials (-2.3%), basic materials (-2.0%), and oil and gas (-1.6%).  A moderate 1.39 billion shares traded on the NYSE, sharply lower than last year's average of 2.28 billion, as declining issues beat those that advanced in price by a three-to-one margin.

Financials came under the hammer as Dick Bove of Rochdale Securities lowered ratings on a number of regional banks, including Fifth Third Bancorp (NYSE:FITB), Sun Trust Banks (NYSE:STI), and US Bancorp (NYSE:USB).  To add to the weakness, a Saturday WSJ article indicated towards disagreements between Bank of America (NYSE:BAC) and the government over capital requirements before the firm could repay its bailout funds.  Rumors surfaced the company might need to sell shares to repay the funds.  Furthermore, FDIC Chief Sheila Bair cautioned banks still face "serious challenges."

Shares in homebuilders also witnessed weakness as the government pondered over whether to extend or possibly wind down the first-time homebuyers' tax credit due to expire November 31.  Concerned about the state of housing minus the catalyst, investors sold off homebuilders' shares, sending Toll Brothers (NYSE:TOL) down 4.2%, Lennar (NYSE:LEN) down 4%, and Beazer Homes (NYSE:BZH) off 4.4%.

The Dow Jones industrial average rose 96.28 points, or 0.96%, to close at 10,092.19.  The broader S&P 500 index jumped 10.23 points, or 0.94%, to 1,097.91 and the tech-heavy Nasdaq climbed 19.52 points, or 0.91%, to 2,176.32, its highest point since September 26, 2008.  Market breadth was positive, with advancing shares ahead of decliners by a margin of three-to-one.  Only five of the DJIA thirty declined in price.

After the close, iPhone maker Apple Inc. (NASDAQ:AAPL) and Texas Instruments (NYSE:TXN) reported better-than-estimated numbers, fuelling hopes for the technology industry.  Last week Google Inc. (NASDAQ:GOOG) and Intel Corp’s (NASDAQ:INTC) numbers had come in above expectations.

Although there were some jitters last week after some major banks reported higher loan losses during the quarter, expectations that companies across a broad range of industries would report numbers above projections kept the momentum going.   Nevertheless, companies could find it relatively easy to beat analyst’s lowered bars of expectations and then turn in splendid performance in the future quarters as the economy moves into a recovery mode.

This week is likely to be decisive with 13 of the Dow 30 and more than 130 of the S&P 500 slated to report their results.  The numbers could well be the fodder for the next rally – or a downward spiral – even as a call for a 10-15% correction has gone unmet.  This morning's lengthy list of key corporate results, however, continues to surprise on the upside, adding fuel to the rally's fire.

On Monday, the S&P 500 broke above the 1100 mark before retreating a little to settle at 1097, its highest close since October 2, 2008. All ten industry sectors rose, led by gains in basic materials (+1.7%), utilities (+1.4%), oil and gas (+1.2%) and consumer services (+1.2%). 

Caterpillar (NYSE:CAT), due to report its earnings today, led the gainers with a 6% jump as analysts upgraded shares of Bank of America (NYSE:BAC) and RBC Capital that took price targets on the stock to $65 per share.  American Express (NYSE:AXP), due to report after the close Thursday, climbed 2.3% after FBR lifted its price target on the firm to $37 from $25.  On the downside, General Electric (NYSE:GE) shares fell 1.5% as questions continued regarding the price of the 20% stake Vivendi owns in NBC Universal.

Today's market action will be interesting to watch to find how the better-than-expected results from Apple (NASDAQ:AAPL) and Texas Instruments (NYSE:TXN) are seen by the broader indices.  Both companies posted strong results, beating top and bottom line expectations. Apple (NASDAQ:AAPL) said results were helped by record quarterly sales of Macintosh computers and iPhones, permitting earnings of $1.82 on strong sales of $9.87 billion.  The shares hit an all-time high of $204.  TI (NYSE:TXN) also bettered projections, reporting strong demand across all business segments.  The company reported earnings of 42 cents a share, ahead of estimates of 39 cents, as revenues of $2.88 billion beat estimates of $2.82 billion, and presented a sequential quarterly gain of 17%.

Today’s list includes Coca-Cola (NYSE:KO), SanDisk (NASDAQ:SNDK), Caterpillar (NYSE:CAT), DuPont (NYSE:DD), Pfizer (NYSE:PFE), Untied Technologies (NYSE:UTX), Yahoo (NASDAQ:YHOO), State Street (NYSE:STT), and Bank of New York Mellon (NYSE:BK).

Bank of America (NYSE:BAC) said it lost $2.2 billion during the quarter after it wrote down almost $10 billion in bad loans and General Electric’s (NYSE:GE) revenue numbers were below Street projections.  Higher loan losses aggravated investors’ concerns as Citigroup (NYSE:C) and JP Morgan (NYSE:JPM) had also reported higher loan losses during the quarter.  General Electric’s (NYSE:GE) results were impacted by lower earnings at its GE Capital unit.    

The 30-share Dow Jones industrial average fell 67.03 points, or 0.67%, to close at 9,995.91. The broad Standard & Poor's 500-stock index retreated 8.88 points, or 0.81%, at 1,087.68.  The tech-heavy Nasdaq composite index lost 16.49 points, or 0.76%, to 2,156.80.

Last week only 61 of the S&P500 released results, too early to signal trends, although the results were mainly above projections.  This week hundreds of companies report their earnings, and that could signal where the economy is headed in the times to come.  So far most earnings reports have beaten expectations.

Although nine of the ten S&P 500 industry sectors dropped Friday, on the week eight of the ten sectors managed gains.  Financials dropped 2.4% Friday, and ended off 0.2% for the week.  Oil and gas shares were the leading gainers during the week, up 5%, for a 20.2% year-to-date increase, as crude prices continued their advance, rising 95 cents Friday to $78.53 per barrel.  Crude prices have been rising on promising economic signs as well as the dollar's decline.  This morning China announced that its economy grew at a rate of more than 7% during the first nine months of the year and said it was comfortably placed to achieve its full-year target of an 8% GDP growth.  The greenback rose slightly Friday from a 14-month low.

This week 75 S&P500 firms are due to report their earnings, including today's results from Apple (NASDAQ:AAPL) and Texas Instruments (NYSE:TXN) after the close.  On Tuesday results are due from: Caterpillar (NYSE:CAT), Coca-Cola (NYSE:KO), DuPont (NYSE:DD), Pfizer (NYSE:PFE) and United Technologies (NYSE:UTX).  On Wednesday: Boeing (NYSE:BA), Freeport-McMoRan (NYSE:FCX), Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC).  On Thursday: 3M (NYSE:MMM), AT&T (NYSE:T), Credit Suisse (NYSE:CS), Dow Chemical (NYSE:DOW), McDonald's (NYSE:MCD), Merck (NYSE:MRK), and Travelers Cos (NYSE:TRV). Microsoft (NASDAQ:MSFT) reports its numbers on Friday.

• General Electric (NYSE:GE) reported third-quarter earnings of 27 cents a share ex-items, 7 cents above Zacks estimates, on revenues of $37.8 billion, a 20% drop which missed
estimates of $39.78 billion. CEO Jeff Immelt noted, "While it remains a tough environment for GE Capital, we are seeing signs of stabilization. Every segment at GE Capital was profitable with the exception of Real Estate, which is experiencing a tough environment but where we believe the risks are well understood and manageable"

• First Horizon National (NYSE:FHN) reported a third-quarter loss of 24 cents a share, versus Zacks estimates of a 34 cent loss, on revenues of $495 million

• Halliburton (NYSE:HAL) reported a third-quarter profit of 31 cents a share, a nickel above Zacks estimates, versus 76 cents a year ago

• Mattel (NYSE:MAT) reported third quarter earnings of 63 cents a share, a cent below Zacks estimates, versus 66 cents a year earlier on revenues of $1.79 billion. According to the firm, "As expected, revenues continue to be challenging this year due to the overall economic environment, retailers tightly managing inventory, foreign exchange rates and the lack of entertainment-inspired toy lines"

The Dow Jones industrial average closed above the 10,000 level for the second-successive day, edging up 47 points, or 0.5%.  The S&P 500 index edged up 4 points, or 0.4% and the tech-heavy Nasdaq composite ended the day virtually flat.  The gains in the Dow average were led by Microsoft (NASDAQ:MSFT) whose shares jumped 2.9%.  The Windows 7 is slated for release on October 22.

Among energy stocks, Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) shares climbed 1.6% and 1.5%, respectively, as crude prices jumped to their highest levels of the year.  Meanwhile, the US Department of Energy said gasoline stockpiles fell 5.2 million barrels per day last week, well below expectations of 700,000 decline.

Pfizer (NYSE:PFE) rose 1.7% after it completed its acquisition of Wyeth.

Nevertheless, weakness in financial sector shares, off 0.6%, hurt sentiment even as Goldman Sachs (NYSE:GS) reported estimate-topping numbers.  Citigroup's (NYSE:C) strong trading returns were overcome by increasing consumer loan losses.  Citi's (NYSE:C) CEO Vikram Pandit warned, "US consumer credit remains the number one issue affecting our near-term results." JP Morgan (NYSE:JPM) CEO Jamie Dimon warned that level of loan losses are likely to remain high. 

Tech shares also failed to advance, even as IBM (NYSE:IBM) raised its earnings outlook and reported numbers that were above Street projections.  Advanced Micro Devices' (NYSE:AMD) narrower-than-expected loss and the return of its core chip-making operations to profitability failed to lift sentiments either.  However, Google's (NASDAQ:GOOG) better-than-expected results were helped by return to sequential quarterly growth, a 5% increase in average cost-per-clicks over the second quarter, and a positive impact from the declining dollar.  Shares in Google (NASDAQ:GOOG) rose 3.6% in after-hours trading as CEO Eric Schmidt noted, "While there are a lot of uncertainties about the pace of [the] economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future."

Today's expected results include a number of significant results from companies such as Bank of America (NYSE:BAC), Genuine Parts (NYSE:GPC), General Electric (NYSE:GE), and Mattel (NYSE:MAT). Also reporting are: Halliburton (NYSE:HAL) and First Horizon National (NYSE:FHN).

Chicago, IL – October 16, 2009 – Zacks Equity Research highlights Semtech Corp. (SMTC) as the Bull of the Day and Washington Federal (WFSL) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bank of America (BAC), Hasbro (HAS) and Peabody Energy (BTU).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676

Here is a synopsis of all five stocks:

Bull of the Day:

Semtech Corp. (SMTC) is a fabless supplier of analog and mixed-signal semiconductor devices. Management has been diversifying the product portfolio, introducing new high-margin products and broadening the customer base.

July quarter results exceeded the consensus on both the top and bottom lines. Forward guidance is for 6-10% revenue increase in the October quarter.

Both revenue growth and margin expansion are expected to return in the second half of fiscal 2010 when the new product platforms gain traction. We are reiterating our BUY rating on SMTC shares.

Bear of the Day:

Washington Federal’s (WFSL) third quarter earnings were in line with the Zacks Consensus Estimate. However, the results significantly deteriorated from the prior-year quarter due to a huge increase in provision for loan losses, primarily in response to a deteriorating residential land and construction portfolio.

Credit quality drastically worsened during the quarter. However, declining deposit rates helped improve funding concerns to a great extent and capital position remained strong.

Though margin expansion and increased market share through acquisitions will be a great support going forward, we are concerned about the company's significant exposure to real estate markets and suspect that it will continue to experience credit quality deterioration. Therefore, we recommend the shares as Underperform.

Latest Posts on the Zacks Analyst Blog:

Initial Jobless Claims Fall Again

On the continuing claims front, there was also some apparent good news -- they fell by 75,000 to 5.992 million, the first time in many months that they have been below the 6 mlllion mark. However, the continuing claims only track regular state benefits, which run ot after 26 weeks. On average, people who are out of work have been looking for a job for over 26 weeks now, a situation that has not been seen since the end of WWII.

After the regular state benefits run out, then emergency Federal benefits kick in (a major element of the stimulus package). There are now more than 3.8 million people getting the extended benefits -- up 16,000 from last week (one week behind regular continuing claims, and two weeks behind inital claims). Anyone who claims that the stimulus is not working needs to be able to look at those 3.8 million Americans and their families and tell them that they would be better off if they had no income at all coming in right now -- that they are better off doing business at the local food bank rather than at Bank of America (BAC).

Even those extended benefits do not last forever, and people are starting to drop off the roles. Both the Senate and the House have passed measures to extend the benefits for a few more months, especially in high unemployment states, but they are still hammering out the differences in the bills, but it looks like something will be signed soon. Perhaps that will mean that their kids will get things for Chistmas made by Hasbro (HAS) and not Peabody Energy (BTU).

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=5508.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5509.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Gains in commodity prices helped some mid-session buying in energy and material shares but the overall weakness in financial and healthcare stocks kept sentiment in check.  Shares of UnitedHealth Group Inc. (NYSE:UNH) and Aetna Inc. (NYSE:AET) fell more than 3% as the Senate Finance Committee approved an $829 billion plan to overhaul the U.S. health system.  Johnson & Johnson (NYSE:JNJ) fell 2.4% after the company reported revenue that was below the Street expectations.  However, the company reported higher quarterly earnings, helped by cost-cutting measures and a one-time tax benefit; Johnson &Johnson also raised its full-year guidance.  Nevertheless, shares of the company led the decliners on the DJIA.

The Dow Jones industrial average, which traded 70 points lower in the morning, recovered some ground to close at 9871.06, off 0.2% or 14.74 points, its first decline in four sessions.  The S&P500 retreated 0.3% from a new 2009 high set on Monday.  The tech-heavy NASDAQ, however, finished the day virtually unchanged.  On the NYSE, 1.14 billion shares exchanged hands with decliners ahead of advancing shares by a three-to-two margin.

After Whitney’s downgrade, shares of Goldman Sachs (NYSE:GS) fell 1.5%, with Bank of America (NYSE:BAC) easing 1.2%, and Morgan Stanley (NYSE:MS) down 2.0%.

However, after the close, Intel's (NASDAQ:INTC), a DJIA component, results offered to ease some worries.  The company reported third-quarter earnings of 33 cents a share, versus Zacks estimates of 27 cents a share; the company reported revenues of $9.4 billion that was off 8.1% from last year, but bettered Zacks estimates of $9.0 billion.

CSX (NYSE:CSX), joining Intel (NASDAQ:INTC) in painting an upbeat picture.  The company announced third quarter earnings of 74 cents a share, down from 94 cents a year ago, but above Zacks estimates of 71 cents a share as revenues of $2.36 billion bettered estimates of $2.33 billion.

This morning, however, JP Morgan’s (NYSE:JPM) results showed an upside surprise as losses from the firm’s credit cards and other consumer loans businesses were offset by strong underwriting revenues.  Third quarter results were well ahead of Zacks estimates at 82 cents and were sharply up from last year's 9 cents a share.

The US dollar remained under pressure, falling to a fresh 14-month low yesterday.  Strong demand for $30 billion in 3-month and $30 billion in 6-month notes helped support Treasury prices.  Gold prices jumped $7.50 to $1073 and crude prices hit $74.

Companies reporting their results include: Abbott (NYSE:ABT), WW Grainger (NYSE:GWW), Host Hotels and Resorts (NYSE:HST) and Xilinx (NASDAQ:XLNX).

After a two-week selloff, fueled in part by concerns that the seven-month old rally had gotten ahead of any economic recovery, stocks got a boost last week following better-than-estimated economic numbers and Alcoa’s (NYSE:AA) surprise quarterly profit.  That helped investors set aside worries and extend the rally.  Meanwhile, White House economic adviser Lawrence Summers reiterated the Obama administration’s commitment to a strong dollar, citing recent comments by U.S. Treasury Secretary Timothy Geithner.

This morning’s stock futures show markets are headed for a higher opening as the busy week of earnings commences. Ahead of the market's open, Dow Jones industrial average futures are up 59 points, or 0.6%, to 9,866.  Standard & Poor's 500 index futures gained 7.30 points, or 0.7%, to 1,075.40, while Nasdaq 100 index futures rose 11 points, or 0.6%, to 1,736.50.

On Friday, the Dow Jones industrial average rose 78 points, or 0.8%, to 9,864.94 -- its highest closing level in a year.  The S&P 500 index gained 6 points, or 0.6%, to 1,071.49 and the Nasdaq climbed 15 points, or 0.7%, to 2,139.28.  On the New York Stock Exchange, advancing issues beat those that declined in price by a three-to-two margin.  For the week, the DJIA rose 4% and the S&P 500 index gained 4.5% - their best performance since July.  The Nasdaq advanced 4.5% during the week.

Last week's rally saw all but one of the S&P500 industry sector recording gains.  Only telecommunications shares failed to advance, and fell 5.9%, following AT&T's (NYSE:T) announcement that it plans to allow internet-based phone calls on phones including Apple's (NASDAQ:AAPL) iPhones.  The gains last week were led by basic materials (+8.4%), oil and gas (+7.6%), financials (+6.3%), industrials (+5.0%), tech (+4.9%), consumer services (+4.5%), consumer goods as well as utilities (+2.9%), and health care (+2.7%).  Financials rose after a Goldman Sachs (NYSE:GS) report recommended large-cap banks. Gains in industrial shares were helped by last week’s fall in dollar and Caterpillar's (NYSE:CAT) announcement that it plans to hike prices globally in 2010.  Retail shares rose after firms reported better-than-expected comparable monthly sales numbers.

This week sees the release of the first big batch of third-quarter earnings.  Companies reporting their numbers include Johnson & Johnson (NYSE:JNJ), Intel (NASDAQ:INTC), JP Morgan (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Nokia (NYSE:NOK), Google (NASDAQ:GOOG), IBM (NYSE:IBM), Bank of America (NYSE:BAC), and General Electric (NYSE:GE).

The net proceeds from the offer came to $159,788,000. All of the 2010 notes that were tendered have been guaranteed for payment by Willis. The holders of the 2010 notes will be entitled to receive tender offer consideration of $1,027.50 per $1,000 principal amount of the 2010 notes, plus any accrued and unpaid interest.

The notes, which are guaranteed by Willis Group Holdings, carry ratings of Baa3 by Moody's and BBB- by S&P.

Bank of America (BAC) and JPMorgan Chase (JPM) were the joint book running managers for the sale.

Willis intends to use the net proceeds from this offering to purchase any and all of Willis North America's outstanding 5.125% senior notes due 2010 that are tendered and accepted in a separate offering. Any remaining proceeds will then be used for general corporate purposes.

Willis Group Holdings' second-quarter profit of 52 cents per share was just a penny ahead of the Zacks Consensus Estimate. Results reflected growth in Global operations (7% organic growth) and International (5%), partly offset by a fall in organic commissions and fees in North America (down 8%). Weak insurance markets coupled with the deepening U.S. economic crisis led to a decline in the North American segment's commissions and fees.

However, the company is experiencing strong organic growth in revenues from its International business and Global segments, with steady client retention levels and momentum from the "Shaping Our Future" growth initiatives contributing to the organic growth.

While we expect Willis to benefit from the rate stabilization in the reinsurance segment, we anticipate top-line growth to be curtailed as a result of the overall less-than-robust economic environment. Nevertheless, the company's cost-saving initiatives and capital-bolstering moves bode well. Hence we have a Neutral recommendation on the shares of Willis.

The chart below shows the Counterparty Risk Index (CRI) history since the beginning of 2008. The index is an unweighted average of the credit default swap spreads of 14 major financial institutions. The left-hand scale gives the cost (in basis points) of insuring against default for a five-year term.

The three big spikes on the chart mark the near-failure of Bear Stearns (in March 2008), the Lehman default (September 2008) and renewed concerns over bank safety at the market’s nadir in March 2009.

If crises appeared at six-monthly intervals since last spring, this time we appear to have broken out of the cycle.

What about the individual banks that make up the index? Here is a chart, courtesy of CMA Datavision, of the CDS spreads of the U.S. bank members of the index, plus Barclays and Deutsche Bank, the leading players in the U.S. exchange-traded note market.

Citigroup now ranks as the riskiest U.S. bank, and JP Morgan as the least risky, though it’s fair to say that the CDS spreads have converged significantly and there is far less difference between individual names than there was a year ago.

For the record, here are the levels from earlier today, ranked from least to most expensive to insure against default: JP Morgan (72bp), Barclays (76bp), Deutsche Bank (82bp), Goldman Sachs (107bp), Bank of America (120bp), Merrill Lynch (137bp), Morgan Stanley (140bp) and Citigroup (200bp).

(The fact that the Merrill Lynch CDS trades at a slight premium to that of Bank of America, its owner, is interesting.  This reflects speculation that the broker may yet be spun off from the parent bank, in which case the CDS would follow the reference entity, Dave Klein of Credit Derivatives Research told me.)

The levels should matter to exchange-traded product investors: All of these banks except Citigroup underwrite exchange-traded notes.

Is the worst now over? As Gillian Tett noted in a column in last week’s Financial Times, the concentration of overall (gross) risk in the credit derivatives market amongst the leading banks has actually risen since the AIG bailout of last September, and regulators are still finding it difficult to assess whether banks are handling their net risk exposures sensibly.

And, in what sounds like the ultimate reinsurance spiral, banks have become net sellers of protection on sovereign debt; hardly reassuring if one remembers that the banks are themselves propped up by the governments concerned. Lloyd’s, anyone?

So, while the reduction in overall default risk so far this year will come as a reassurance to investors, these are charts that are worth keeping an eye on.

Every component of the index slowed, except for Supplier Deliveries and Backlog of Orders. More troubling, though, was the fact that the Employment component worsened to 46.2 from 46.4.

Nonetheless, the survey did signal that the economy is growing. If extrapolated, the September reading equates to GDP growth of 3.6%. However, the pace of recovery remains uneven, as was evident by the responses included in the survey:

"Business is picking up - lots of opportunities." (Primary Metals)

"Business remains slow, with no sign of improvement again this month." (Nonmetallic Mineral Products)

The ISM report comes out just as the IMF raised its projection for economic growth. The organization now expects the U.S. to increase output by 1.5% next year, slightly more than double the prediction made in July.

It is also worth noting that brokerage analysts have been raising their profit forecasts on several cyclical companies. During the past 4 weeks, the 2009 Zacks Consensus Estimate has been raised for 3M (MMM), DuPont (DD) and Packaging Corporation of America (PKG).

The upward revision in profit projections is even more widespread for 2010, with forecasts being raised on United Technologies (UTX) and Caterpillar (CAT).

Despite the bullish tone to forecasts, it is important to realize that the U.S. economy continues to rely on government support. New car dealers are suffering a severe Cash for Clunkers hangover. Taxpayers still own Citigroup (C), Bank of America (BAC) and AIG (AIG). Realtors are clamoring for an extension of the first-time homebuyers credit. And the Fed recently lengthened its program for purchasing agency-backed debt.

Therefore, while there is reason for optimism, investors should not let hope turn into euphoria. The recovery won't feel like a recovery to many Americans. It will also be marked by an uneven pace of growth, as the September ISM survey signals.

Every component of the index slowed, except for Supplier Deliveries and Backlog of Orders. More troubling, though, was the fact that the Employment component worsened to 46.2 from 46.4.

Nonetheless, the survey did signal that the economy is growing. If extrapolated, the September reading equates to GDP growth of 3.6%. However, the pace of recovery remains uneven, as was evident by the responses included in the survey:

"Business is picking up - lots of opportunities." (Primary Metals)

"Business remains slow, with no sign of improvement again this month." (Nonmetallic Mineral Products)

The ISM report comes out just as the IMF raised its projection for economic growth. The organization now expects the U.S. to increase output by 1.5% next year, slightly more than double the prediction made in July.

It is also worth noting that brokerage analysts have been raising their profit forecasts on several cyclical companies. During the past 4 weeks, the 2009 Zacks Consensus Estimate has been raised for 3M (MMM), DuPont (DD) and Packaging Corporation of America (PKG).

The upward revision in profit projections is even more widespread for 2010, with forecasts being raised on United Technologies (UTX) and Caterpillar (CAT).

Despite the bullish tone to forecasts, it is important to realize that the U.S. economy continues to rely on government support. New car dealers are suffering a severe Cash for Clunkers hangover. Taxpayers still own Citigroup (C), Bank of America (BAC) and AIG (AIG). Realtors are clamoring for an extension of the first-time homebuyers credit. And the Fed recently lengthened its program for purchasing agency-backed debt.

Therefore, while there is reason for optimism, investors should not let hope turn into euphoria. The recovery won't feel like a recovery to many Americans. It will also be marked by an uneven pace of growth, as the September ISM survey signals.

• After yesterday's close, Bank of America (NYSE:BAC) CEO, Ken Lewis, announced plans to retire. The bank also reported plans to sell its asset-management unit to Ameriprise (NYSE:AMP) for between $900 and $1.2 billion

• Goldman Sachs (NYSE:GS) received two brokerage upgrades

• Comcast (NASDAQ:CMCSA) denied reports of talks with General Electric (NYSE:GE) over the purchase of a stake in NBC Universal

• Cisco Systems (NASDAQ:CSCO) initiated a $3 billion cash offer for Norwegian video-conferencing firm Tandberg

• Microsoft (NASDAQ:MSFT) was removed from Goldman Sachs' (NYSE:GS) Conviction Buy List, with its "buy" rating maintained and a $30 price target

• Constellation Brands (NYSE:STZ) reported fiscal second quarter results of 45 cents up from estimates of 41 cents equaling last year's 45 cents

• After yesterday's close, Bank of America (NYSE:BAC) CEO, Ken Lewis, announced plans to retire. The bank also reported plans to sell its asset-management unit to Ameriprise (NYSE:AMP) for between $900 and $1.2 billion

• Goldman Sachs (NYSE:GS) received two brokerage upgrades

• Comcast (NASDAQ:CMCSA) denied reports of talks with General Electric (NYSE:GE) over the purchase of a stake in NBC Universal

• Cisco Systems (NASDAQ:CSCO) initiated a $3 billion cash offer for Norwegian video-conferencing firm Tandberg

• Microsoft (NASDAQ:MSFT) was removed from Goldman Sachs' (NYSE:GS) Conviction Buy List, with its "buy" rating maintained and a $30 price target

• Constellation Brands (NYSE:STZ) reported fiscal second quarter results of 45 cents up from estimates of 41 cents equaling last year's 45 cents

• MBIA's (NYSE:MBI) main bond insurance unit was downgraded by S&P to non-investment grade status

• Dell (NASDAQ:DELL) revealed a new, high-end, ultra thin PC

• Cameron International (NYSE:CAM) reported a $500 million subsea equipment deal with Petrobras

• Howard Shultz, CEO of Starbucks (NASDAQ:SBUX), offered high hopes for its Via Ready Brew instant coffee product, claiming it "perhaps the biggest opportunity" in the company's history, amid today's North American launch

• Walgreens' (NYSE:WAG) reported fiscal fourth quarter results of 47 cents ex-items, topping estimates of 39 cents, on sales of $15.7 billion

• Goldman Sachs (NYSE:GS) lifted price targets on several retailers, including conviction buys on Target (NYSE:TGT) and Macy's (NYSE:M)

• Citigroup (NYSE:C) started coverage of Dr. Pepper Snapple (NYSE:DPS) and Coca-Cola (NYSE:KO) with "buy" recommendations

• Bank of America (NYSE:BAC) upgraded Phillips-Van Heusen (NYSE:PVH) to a "buy" with a price target of $54

The Dow Jones industrial average jumped 124 points, or 1.3% and the broader S&P 500 index rallied 19 points, or 1.8% and the Nasdaq composite index advanced 40 points, or 1.9%.  The share gains were broad based with 28 of the 30 Dow components advancing.  On the New York Stock Exchange, four stocks rose for each one that declined in price.  Only 978 million shares exchanged hands on the NYSE.  Trading was light due to the Jewish holiday of Yom Kippur.     

In a spate of big corporate merger announcements, Abbott Labs (NYSE:ABT) said it will pay $6.5 billion for Solvay's pharmaceutical business, and Xerox (NYSE:XRX) offered to pay $6.4 billion in cash and stock for Affiliated Computer Services (NYSE:ACS).  Johnson & Johnson (NYSE:JNJ) said it will pay $444 million for an 18% stake in Crucell (NASDAQ:CRXL).  The announcements signaled corporations’ belief that equity markets still offer values, while economic conditions support a growth environment for purchases made.

The financial, basic materials, and oil & gas sectors were among the leading gainers yesterday.  Even as stock prices rose, Treasuries advanced and the corresponding yields fell, with the yield on the 10-year notes declining to 3.28% from 3.32%.

Yesterday's strength was broad-based with 28 of the DJIA's 30 components moving higher, and all ten S&P 500 industry sectors marking gains.  Financials (+3.4%) were the leading gainers, with American Express (NYSE:AXP) up 4.1% and Bank of America (NYSE:BAC) rising 3.7%.  Morgan Stanley (NYSE:MS) said it expects banks' credit losses to decline over the next 12-18 months, and noted large-cap banks are "largely done with capital repair."

Analyst upgrades also helped much of the rally yesterday, with Citigroup (NYSE:C) shares jumping 4.3% on an analyst upgrade. Cisco (NASDAQ:CSCO) rallied 4.4% after Barclays' (NYSE:BCS) upgraded the stock to "overweight" from "equal weight," citing prospects in Europe and momentum in the US. Applied Materials (NASDAQ:AMAT) jumped 3% on a Citigroup (NYSE:C) upgrade to "buy" on opportunities in its solar-power operations.  However, MEMC Electronic Materials (NYSE:WFR) shed 3.1% after Citigroup (NYSE:C) cut its rating to "hold" from "buy", noting recent poly production problems remain unresolved.

Last month, the SEC and BofA had reached a settlement on the charges that required the bank to pay a $33 million fine. But US District Judge Jed Rakoff condemned the deal, saying the corporate fine would further unfairly penalize the shareholders instead of the people actually guilty of misleading investors.

Both the SEC and BofA have defended the earlier settlement proposal as appropriate. But after Rakoff's ruling, the SEC weighed its options - to go to trial, drop the charges or attempt to renegotiate the deal with BofA.

The SEC also said that it could bring additional charges against BofA on the basis of evidence that might develop in course of the trial. This indicates that regulators may draft civil fraud charges against top bank executives in the coming weeks.

Bank of America, however, continues to defend itself by proclaiming that disclosures on the Merrill deal met all legal requirements. The bank had earlier agreed to pay a fine to avoid legal hassles with the SEC at a time of market uncertainty.

The SEC lawsuit comes as an added blow to Bank of America. The New York Attorney General's office is carrying out its own investigation into the Merrill deal and has been drafting what are likely to be civil fraud charges against top bank executives in the coming weeks. The bank also missed a Monday noon deadline to provide additional information about the deal to a congressional committee.

Separately, Bank of America agreed to pay $425 million to government agencies, including the Treasury Department, to exit an arrangement under which public funds might have been used to shoulder losses on risky assets worth $118 billion associated with the Merrill takeover.

This step was part of the bank’s broader effort to loosen various forms of government support. While the option was never used, the government has argued that the bank benefited from the promise of protection.BofA has been one of the largest beneficiaries of the federal bailout program, receiving $45 billion from a total of the $700 billion.

Bank of America did overpay for Merrill but the deal makes strategic sense now. BofA gained a global investment-banking platform, profitable retail brokerage addition and significant equity-underwriting capacity, all of which it lacked earlier. For the first half of 2009, Merrill contributed $1.84 billion.

We anticipate continued synergies from the company’s large scale operation and balance sheet restructuring. However, higher credit costs, various legal issues and worsening credit quality will be a drag on BofA’s upcoming results. As such, we are maintaining a Neutral recommendation on the stock.

The 30-share Dow Jones industrial average finished higher by 51 points, or 0.52%, at 9,829.87. The broad Standard & Poor's 500-stock index gained 7 points, or 0.66%, at 1,071.66 and the technology-laden Nasdaq composite index gained 8.26 points, or 0.39%, to 2,146.30.  Treasury prices rallied after the government’s successful auction of $43 billion in two-year notes.

Meanwhile, dollar continued its downward spiral against other major currencies, sending energy and material shares higher.  Gold and crude prices also advanced.  Gold reached $1014 per ounce, up $12.50, and oil, after a 3.3% plunge Monday, went above the $70 level, rising 2.6% to $71.55.  Volume on the NYSE was a modest 1.27 billion shares, with advancing shares ahead of decliners by a seven-to-three margin.

Among the ten S&P500 industry sectors, seven closed higher, led by financial shares (+2.2%), basic materials (+1.9%), industrials (+0.8%).  On the downside, telecommunication shares fell 0.6%, health care stocks eased 0.3%, and utilities edged 0.1% lower.

Twenty of the DJIA's thirty components finished higher yesterday.  On the Dow average, JP Morgan (NYSE:JPM) was the leading gainer, rallying 4.3% to $46.47 after analysts at Bank of America (NYSE:BAC) lifted their third-quarter earnings estimate on the firm to 49 cents per share from 46 cents per share.  Caterpillar (NYSE:CAT) shares jumped 3.6%, following the expected weak dollar benefit to foreign sales.  Bank of America (NYSE:BAC) rose 2.1% after Rochdale Securities’ Richard Bove raised the shares' price target to $25 from $19 due to the firm's recent moves to exit two federal guarantee programs.  However, rumors that CEO Ken Lewis might resign over the Merrill bonus saga kept the stock’s move in check.  Alcoa (NYSE:AA) rose 2.3% after analysts at Goldman Sachs (NYSE:GS) raised price target on the firm, citing projections for higher aluminum prices.

Analyst upgrades also benefited shares of Macy's (NYSE:M) (+5.1%); Citigroup (NYSE:C) lifted its rating on the shares to "buy" from "hold" on higher revenue expectations.  US Steel (NYSE:X) shares increased 4.6% after Bank of America (NYSE:BAC) changed its recommendation on the stock to "neutral" from "underperform," citing expectations the firm should return to profitability in 2010. Clorox (NYSE:CLX) shares gained 2.6% on speculation of a potential Procter & Gamble (NYSE:PG) bid.  AIG (NYSE:AIG) shares fell 5.4% in a late-session sell-off on talks of a possible secondary offering.  Goldman (NYSE:GS) shares rose 1.7% to $185.52, closing at its highest level since July 2008.

Of key interest today would be the much-expected FOMC policy report, due out at 2:15 ET.  Expectations that the Fed will maintain record low interest rate levels of zero to 0.25% are intact. Most expect the Fed language to support an ongoing accommodative stance.  Moreover, President Obama cautioned that unemployment could even get a little worse in coming months. Therefore, the Fed's $1.75 trillion asset purchase program is likely to remain in place to encourage the recovery's traction.

This morning’s stock futures indicate Wall Street is headed for a higher opening, helped by a rally in global stocks.  Ahead of the market’s open, Dow Jones industrial average futures rose 48, or 0.5%, to 9,766.  Standard & Poor's 500 index futures were up 6.20, or 0.6%, to 1,066.60, while Nasdaq 100 index futures rose 10.75, or 0.6%, to 1,738.50.  Ahead of the FOMC policy statement, trading is expected to remain range bound as traders look for more data before taking the plunge.  

Treasuries were mixed ahead of this week’s $112 billion note auction.  The 2-year rose 1/32 and the 10-year was off 3/32.  The dollar showed some strength, managing a 0.4% advance against a basket of currencies and sending the broad-based DJ-UBS commodity index down 1.8%, as crude prices went below the $70 level.  On the NYSE, declining shares were ahead of those that rose in price by a two-to-one margin on volume of 1.20 billion shares.

Seven of the ten S&P500 industry sectors declined, with health care (+0.6%), tech shares (+0.1%), and consumer services (+0.1%) ending the day in the positive territory.  The tech-heavy NASDAQ was the only outperformer among the major bourses, managing a 0.2% gain to 2138, helped by a Dell (NASDAQ:DELL) announcement to buy Perot Systems (NYSE:PER) in a $3.9 billion all-cash deal. Wal-Mart (NYSE:WMT) rose 1.6% as HSBC Holdings (NYSE:HBC) initiated coverage on the stock with an "overweight" rating and a price target of $61. Baird upgraded Celgene (NASDAQ:CELG) shares to "outperform," citing upside from strength of its Revlimid drug. Celgene shares closed up more than 5%.  General Electric (NYSE:GE) shares also rose, bucking the trend of both its financial and industrial counterparts, as Morgan Stanley (NYSE:MS) raised its price target on the stock $19, noting the company's improved risk profile.

Leading the indices lower yesterday were financials (-1.0%), oil and gas (-0.9%), commodities (-0.7%), as well as industrials (-0.6%) and consumer goods (-0.6%).  The Dow Jones industrial average, which was down 94 points in the morning session, closed down 41 points, hurt by its financial components, with American Express (NYSE:AXP) down 2.9% and Bank of America (NYSE:BAC) retreating 2.2%. Bank of America (NYSE:BAC) said it agreed to pay $425 million to terminate a tentative loss-sharing agreement with the government that had been established to facilitate its purchase of Merrill Lynch. However, the firm skipped a deadline to provide documents regarding that merger to a House panel.   Shares in AIG (NYSE:AIG) spiked 22% after a report from the Government Accountability Office noted the company is seeing stabilization following the government's bailout measures.  However, the report said it remains unclear when AIG would be able to repay those funds.

A $2.33 decline in crude prices also hurt share of commodity-related companies even as the greenback showed some resistance against a basket of currencies.  Alcoa (NYSE:AA) shares lost almost 1% after Macquarie warned of an unfavorable aluminum demand/supply outlook over the next six to twelve months.  Caterpillar (NYSE:CAT) declined 1.8% after reporting its global machinery sales plunged 48% in the three months to August.

• According to the WSJ, China's sovereign wealth fund is in talks to acquire a minority share of AES Corp (NYSE:AES)

• Johnson & Johnson (NYSE:JNJ) is reportedly in talks to lower the price tag of its $1.5 billion Elan (NYSE:ELN) bid

• Salix Pharmaceuticals (NASDAQ:SLXP) reported the successful outcome of two late-stage trials of the efficacy and safety of its rifaximin drug in relieving irritable bowel syndrome symptoms

• Bank of America (NYSE:BAC) lowered its rating on Campbell Soup (NYSE:CPB) to "neutral"

• UBS (NYSE:UBS) upgraded Motorola (NYSE:MOT) to "buy"

• Morgan Stanley's (NYSE:MS) CEO John Mack will be replaced before year-end by current co-president James Gorman

• Abbott Labs (NYSE:ABT) announced that it bought the 90% of Evalve that it does not already own for $410 million

• Bank of America (NYSE:BAC) cut its rating on Electronic Arts (NASDAQ:ERTS) to "neutral"

• Wells Fargo (NYSE:WFC) lowered its rating on AIG (NYSE:AIG) to "underperform" asserting the firm currently is trading "significantly" above book value

• National Semiconductor (NYSE:NSM) reported fiscal first quarter earnings of 13 cents a share, 6 cents above estimates on revenues of $314 million

• Apple's (NASDAQ:AAPL) San Francisco event once again saw the shares move lower, this year off 1%, despite the welcome appearance of Jobs, and iPod price cuts and improvements.  An 8 GB iPod Nano will include built-in video and an FM radio; price cuts of as much as $120 were made.  This morning JP Morgan (NYSE:JPM) upped its rating on Apple to "outperform" from "market perform," with a $200 price target

• Texas Instruments (NYSE:TXN) raised its third quarter earnings and sales guidance, with third quarter guidance increased to 37 cents to 41 cents a share from prior range of 29 cents to 39 cents a share; revenues guidance was lifted to $2.73 billion to $2.87 billion from prior $2.5 billion to $2.8 billion, with estimates at $$2.68 billion

• Vivus (NASDAQ:VVUS) noted its experimental obesity drug showed dramatic results in two late-stage clinical trials

• Disney (NYSE:DIS) reported improvements in local ad markets with increased activity from automakers nationally, although still anticipating lower theme park hotel bookings for the September quarter

• Monsanto (NYSE:MON) said it continues to see 2009 results from continuing operations at the lower end of its prior guidance of $4.40-$4.50; the Street has expected $4.41. For 2010 the company expects $3.10-$3.30, off consensus estimates of $4.12

• Yahoo (NASDAQ:YHOO) shares were upgraded by Bank of America (NYSE:BAC) to "buy," with a price target hike to $19 from $17

• BP (NYSE:BP) shares were lowered to "neutral" by analysts at HSBC (NYSE:HBC). The company's Tiber Field, last week's "giant discovery" 9km beneath the Gulf seabed, is unofficially estimated to