JDfn Daily Digest - October, 1, 2008

House leaders believe progress is being made toward getting the $700 billion financial industry rescue bill through Congress, thanks partly to a provision increasing insurance for people's deposits. The plan was set for a Senate vote tonight after leaders agreed to add tax breaks for businesses and the middle class and increase deposit insurance in an attempt to revive the legislation rejected by the House. The vote is slated to take place at 7:30 p.m. (Eastern Time). Senators John McCain, Barack Obama and Joe Biden plan to return to Washington from the presidential campaign trail to vote for the measure.

A Federal Reserve official who twice voted against interest-rate cuts earlier this year said he'd be open to supporting further decreases in the Fed's federal funds rate target if necessary. Philadelphia Fed President Charles Plosser said he believes the economy is "more resilient" than many believe in the face of the worst post-war financial crisis.

The Mortgage Bankers Association reported that mortgage applications filed last week dropped a seasonally adjusted 23.0% compared with the previous week. Applications for the ended Sept. 26th were also lower than in the same week during 2007, down 28.4%. Applications to purchase a home were down a seasonally adjusted 10.9%, compared with the week before.

Despite a deepening housing slump and a lingering credit crisis, stocks for several major U.S. homebuilders managed to post surprising gains in the third quarter. Pulte Homes (PHM) led the sector with shares jumping more than 42 percent. Hovnanian Enterprises (HOV) posted a gain of 41 percent, Lennar (LEN) gained 28 percent and Toll Brother’s (TOL) shares rose more than 27 percent.

According to the ADP employment index, employment dropped by 8,000 in the private sector of the U.S. economy during September. Economists were expecting the ADP index to fall 65,000 after it lost a revised 37,000 jobs in August.

And outplacement firm Challenger Gray & Christmas said large U.S. companies announced plans to eliminate 95,000 jobs in September, 33% more than a year earlier. For the third quarter, layoff announcements rose 48% from a year earlier, the highest three-month total in nearly three years.

The Institute for Supply Management reported that the nation's manufacturers cut back production at a much faster pace than expected in September. This is the lowest level since October 2001. The ISM index plunged to 43.5% in September from 49.9% in August. This is the biggest drop in the index since 1984 and surprised economists. The consensus forecast of estimates was for the index to slip only a bit to 49.6%.

The Department of Commerce released its report on construction spending in the month of August, showing that spending was nearly unchanged, as an increase in spending on public construction offset a decrease in spending on private construction. Economists had expected spending to fall 0.5 percent.

Yum Brands (YUM) said that its company-owned Kentucky Fried Chicken, Taco Bell, Pizza Hut, Long John Silver's and A&W All-American Food locations in the U.S. will begin placing calorie information on their menu boards. Calorie information will be based on individual serving sizes and will be phased onto menu boards beginning this year and completed by Jan. 1, 2011.

Scheduled U.S. Economic Reports (Thursday)

Initial Jobless Claims (Week of Sep 27th), Factory Orders (Aug)

In Earnings News

Disruptions from back-to-back hurricanes in the Gulf of Mexico are expected to crimp third-quarter earnings for Schlumberger Ltd. (SLB), but the chief of the world's biggest oilfield services company said increased global exploration and other factors bode well for long-term business.

Actuant Corp (ATU) reported earnings in the fourth quarter rose to $34 million, or 54 cents a share, compared to $31 million, or 50 cents a share, in the same period a year ago. Analysts estimated, on average, earnings per share of 54 cents on sales of $425 million.

Pediatrix Medical Group Inc. (PDX) cut its third-quarter profit guidance and said it could no longer stand by its fourth-quarter outlook. The company said it now expects third-quarter profit between 81 cents and 83 cents per share. Analysts expected 85 cents.

Scheduled Earnings Reports (Thursday)

Constellation Brands, Marriott International, Shoe Pavilion, Lawson Software. Third quarter earnings season will begin on October 7th when Alcoa releases its quarterly numbers.

Stocks in the News

The Federal Agricultural Mortgage Corp. (AGM), commonly known as Farmer Mac, said that it has raised $65 million in capital through issuing senior preferred shares.

AT&T (T) is reorganizing the company structure into four divisions of consumer, business, infrastructure and diversified businesses.

Exxon Mobil (XOM) was upgraded to overweight from equal-weight by Barclays Capital as part of a broader note on the oil sector.

General Motors (GM) and Ford (F) are expected to be weak in September with some analysts suggesting the numbers may be the worst in several years.

Boston Scientific (BSX) was cut to underperform from neutral by Merrill Lynch.

Wal-Mart Stores (WMT) is cutting prices on popular toys and ramping up the opening of Christmas shops in its U.S. stores as the retailer tries to win sales from cash-strapped shoppers ahead of what could be the worst holiday season in 17 years.

Apartment Investment and Management Company (AIV) said damage caused by Tropical Storm Fay and Hurricane Ike on its property is expected to be in the $3 million to $6 million range, or about 3 cents to 6 cents a share, in funds for operations in the third quarter.

Rockwell Automation (ROK) will cut about 3% of its global workforce in a restructuring move.

Diebold Inc (DBD) said it filed all of its late financial reports with the Securities and Exchange Commission and raised its earnings outlook for 2008.

UAL Corp. (UAUA), parent of United Airlines, announced it is raising its liquidity to $275 million, through asset sales and financing.