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%.

Chicago, IL - April 29, 2009 - Zacks Equity Research picks Burger King (BKC) as Bull of the Day and Celanese Corp. (CE) as Bear of the Day. In addition, the analysts at Zacks Equity Research discuss the latest on AIG (AIG), Citigroup (C) and Bank of America (BAC).

Full analysis of all these stocks is available at: http://at.zacks.com/?id=2678

Bull of the Day

In the midst of a turnaround, Burger King's (BKC) customer traffic is beginning to decline, as diners move to food prepared at home and to competitors value meals, some of which are more extensive than Burger King's. Though these increasing economic headwinds heighten the risk in the company's turnaround, we think the plan is still viable and the shares valuation is compelling, albeit with substantial risk.

Now back in positive unit growth mode after four years of negative or no growth, BKC is poised, in our opinion, to grow earnings at a mid to high-teens CAGR over the next five years by accelerating unit growth, improving average unit volumes through restaurant remodels and new product launches and by expanding restaurant margins closer to those of McDonald's, the category leader.

Moreover, we think BKC shares offer investors an opportunity to participate in the fast-growing economies of Asia and South America, which are central to BKC's expansion plans but where it has a very small presence relative to MCD and Yum! Brands.

Bear of the Day

Celanese Corp. (CE) is a global hybrid chemical company based in Dallas. The company produces chemical substances and materials. The company concentrates in four different business segments targeting the consumer and industrial products market.

Weak market conditions drove a dramatic decline in overall global demand for many industries which affected Celanese operations. Recessionary trends, coupled with inventory destocking, resulted in sharp volume declines in the Advanced Engineered Materials and the Acetyl Intermediates businesses.

The company expects volumes to remain under pressure in 2009, even with the easing of inventory destocking. Thus, we rate the shares a Sell with a target of $10.00.

Recent Analysis from the Analyst Blog

Will the FDIC Be Super-Regulator?

In a speech to the Economic Club of New York yesterday, the Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair suggested that her agency was best suited to handle broad new powers being considered by the government to seize and restructure impaired, systemically important financial institutions before they threaten the broader system.

Government bailouts of companies like AIG (AIG), Citigroup (C), Bank of America (BAC) and others involving billions of taxpayer dollars have brought into focus the need to better handle the problem of "too big to fail" financial institutions. Regulatory reforms currently being considered include close supervisory oversight of risk-taking, risk management and the financial condition of such institutions.

Regarding the mechanism for resolution, Ms. Bair suggested the "good bank-bad bank model," where viable parts can be placed into the "good bank" using a structure similar to the FDIC's bridge bank, and the nonviable parts can be placed in a "bad bank" until they can be unwound or sold.

She stated that there is no need for another government agency to run the resolution program since the FDIC already has many years of experience resolving banks and closing them.

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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.

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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.

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Foreclosure activity saw a huge spike in the third quarter, as one in every 475 U.S. homes either received a default or auction sale notice, or was repossessed by a bank, according a report released yesterday (Thursday) by industry group RealtyTrac. It was a 71% jump over third quarter foreclosure activity in 2007 and a 3% increase from the second quarter of this year.

Foreclosure filings actually decreased 12% in September from August, but not due to an improving housing market.

“Much of the 12% decrease in September can be attributed to changes in…

The three banks jointly pledged to “cooperate in good faith to agree among themselves to secure orders where necessary in all applicable cases in all jurisdictions,” according to a statement from Wachovia.

The agreement was reached after consultations with the U.S. Federal Reserve, Bloomberg News reported. The “litigation standstill” will be in effect until noon EDT tomorrow (Wednesday).

Earlier in the day, Citigroup had filed suit against Wells Fargo and Wachovia for $60 billion in damages for breaching the exclusive negotiation period Wachovia had agreed to as part of Citigroup’s original offer for Wachovia’s retail banking operations.

It was the culmination of a day of legal wrangling, as Wachovia won an injunction in North Carolina state court to halt Citigroup from delaying the merger agreement with Wells Fargo.

Meanwhile, in New York, Citigroup’s court order, granted over the weekend to extend the exclusive negotiation period, was overturned in state appeals court. Citigroup promised to appeal the motion.

Wells Fargo’s $15 billion, or $7 a share, offer for all of Wachovia operations easily trumps Citigroup’s $2.16 billion, or $1 per share, offer for just Wachovia’s deposits, loan portfolio, and retail banking branches. The Citigroup offer did not include Wachovia’s A.G. Edwards brokerage unit or Evergreen Investment Management Co. LLC mutual fund family.

But as part of its agreement with Citigroup, Wachovia agreed to exclusive negotiation rights through Monday, Oct. 6. Wells Fargo’s offer was accepted on Friday, Oct. 3.

"We’re all working together with regulators… to come to a solution and outcome that serves the public interest, and I think we will have one today," Sheila Bair, head of Federal Deposit Insurance Corp., said at a banking economics conference yesterday, Reuters reported.

While the FDIC is not formally involved in the negotiations, it is working with all parties involved to reach a mutually beneficial agreement.

Hedge fund investor, William Ackman, who holds approximately 170 million shares of Wachovia, feels the Charlotte-based bank is more valuable if its retail banking business is sold separately from its asset management and brokerage divisions.

“This company is worth more, in our view, if it’s broken into pieces,” Ackman said, Bloomberg News reported. “It’s worth more because of the tax benefits created from the separation. It makes sense for Citi to continue buying the banking subsidiary and it makes sense for somebody else to buy the holding company.”

Another proposal divides Wachovia’s retail branches along geographic lines with a portion going to each San Francisco-based Wells Fargo and New York-based Citigroup.

Source: Temporary Litigation Halt as Citigroup and Wells Fargo Continue to Vie for Wachovia

• Oil prices rallied yesterday (Tuesday) jumping $4.27 to settle at $100.64 a barrel on the New York Mercantile Exchange, after earlier rising as high as $101.40. On Monday, prices fell $10.52 to settle at $96.37 - the second largest drop ever in dollar terms.

• Barney Frank (D-MA), the chairman of the House Financial Services Committee, yesterday (Tuesday) told policymakers that Sheila Bair, chairman of the Federal Deposit Insurance Corp., would seek to increase the deposit insurance limit to a level above its current $100,000 level, Reuters reported. The agency’s insurance fund stood at about $45.2 billion at the end of the second quarter.

• Prices of U.S. single-family homes fell a record 16.3% in July from a year earlier, according to the Standard & Poor’s/Case-Shiller Home Price Indexes. The S&P/Case Shiller composite index of 20 metropolitan areas fell 0.9% in July from June. Since the peak of the housing boom in July 2006, the index has dropped 19.5% the group said.

• Shares of Sovereign Bancorp Inc. (SOV) yesterday (Tuesday) shot up 70% with a gain of $1.62 to $3.95 on analyst upgrades and a new chief executive officer. Sovereign announced Paul Perrault would replace Joseph Campanelli as CEO, a move met with enthusiasm by stock analysts, Bloomberg News reported.

• Chicago Mayor Richard M. Daley announced the city had selected a consortium of investors headed by Citigroup Inc. (C) to privatize Midway Airport for $2.52 billion. The deal, approved by both the Federal Aviation Administration and the Transportation Security Administration, represents the first privatization of a major U.S. airport, The Wall Street Journal reported.

• Pfizer Inc. (PFE), the world’s largest drugmaker, yesterday (Tuesday) announced a refocusing of its research and development budget. Pfizer is looking to cut costs and focus on areas with potential high profits as it faces increased competition from generic drug manufacturers, The Associated Press reported.

Source: Global Investing Roundups Wednesday, October 1st, 2008