Crude Oil Drops but Squeezes Producers

Crude Oil Drops but Squeezes Producers

The price of crude oil has plunged around $60 a barrel from its July high and analysts predict that a recession among the industrialized countries will move prices lower. Oil in New York headed for its biggest weekly decline since 2004. The Organization of Petroleum Exporting Countries (OPEC), which supplies about 40% of the world's oil, will conduct an emergency meeting in Vienna, Austria. They are likely to cut oil production in response to falling prices.

The United States, which consumes 24% of the world's oil, averaged about 18.7 million barrels a day for the past four weeks. This is the lowest since June 1999, according to an Energy Department report on October 8th. Therefore, despite a strong demand for oil in Asia and the Middle East, global oil consumption could flatten out next year. The economic turmoil doesn't seem to have an affect on the big state-run oil-exploration projects in the Gulf states because the national companies who are typically financing the projects are doing so with cash.

Walgreen Drops Bid as CEO Retires

Walgreen Co. pulled its proposal to buy Longs Drug Stores (Longs) for $75 a share in cash, for a total of $2.8 billion. This now leaves the door open for CVS Caremark Corp. (CVS) to move forward with their current bid of $2.7 billion for the acquisition of the 521-store company. Walgreen states that the withdrawal came after Longs refused to hold constructive talks. Longs refused to provide Walgreen with additional due-diligence materials after Walgreen made an offer on September 12th. Longs urged its shareholders to accept the offer from CVS instead. Longs and CVS feel that the Walgreen deal would face too much antitrust scrutiny from U.S. regulators.

Walgreen's Chairman and CEO, Jeffrey Rein, 56, retired this week and has been immediately replaced by board member Alan McNally, 62, until a permanent successor is named. The statement mentioned that Rein's sudden retirement was not due to health, ethical issues or the recent withdrawal of the bid for Longs.

Walgreen Co. (WAG) fell 3.6% this week closing at $23.22. Longs Drug Stores (LDG) closed this week at $70.82 while CVS Caremark Corp. (CVS) finished at $30.88.

Macy's Feels the Shopper's Woe

In a press release issued this week, Macy's, Inc. provided information on the company's business performance and updated its 2008 sales in light of the weakening economic environment and consumer confidence. The company noted that with the uncertain direction of the economy, predictions of future performance remain difficult. The company, owner of the Bloomingdale's chain, joins a list of retailers from J.C. Penney Co. to Nordstrom Inc., that have provided a modest profit forecast after their September sales fell short of expectations.

Macy's stated that while its own sales have declined, it has outperformed its rivals. The company had approximately $740 million in cash and cash equivalents at the end of September. The company expects to fulfill additional working capital needs through borrowings from its existing $2 billion bank credit agreement, led by Bank of America and J.P. Morgan, which is committed through August 2012. There are currently no borrowings under this credit agreement.

Macy's, Inc. (M) closed this week at $9.92. J.C. Penney Co. (JCP) finished at $22.62 while Nordstrom, Inc. (JWN) closed at $18.38.

The Dow started the week at 10,325 and closed at 8,451. The NASDAQ began the week at 1,947 and finished at 1,649. The S&P 500 started at 1,099 and ended at 899.

Treasury's Tug-of-War with Government Bailout Efforts

Treasury's Tug-of-War with Government Bailout Efforts

With the government's attempt to stabilize the tumultuous economy, Treasury prices started to slip at the beginning of the week and continued to fall through the end of the week. News of the government auctioning another $50 billion of debt to fund its financial rescue attempts resulted in Treasuries falling sharply on Thursday. Ten-year notes were on course for the biggest weekly drop since June.

Some traders sold government securities to raise cash for margin calls or made payment demands on assets purchased with borrowed money as U.S. stocks sank. "There's a scramble to raise cash that is affecting every asset class," said John Canavan, a fixed-income analyst at Stone & McCarthy Research Associates. "Deleveraging seems to be a big factor here."

The 10-year Treasury note began the week at 3.64% and finished at 3.86%. The 30-year Treasury bond began at 4.12% and finished at 4.14%.

Housing Data Picks Up, Slight Fall in Rates

Housing Data Picks Up, Slight Fall in Rates

Freddie Mac released its Primary Mortgage Market Survey for the week which showed that the 30-year fixed-rate mortgage (FRM) averaged 5.94%, down from last week when it averaged 6.10%. The 15-year FRM this week averaged 5.63%, down from last week when it averaged 5.78%. The fall in rates came following the close of the bond market.

"The latest housing market data showed some pickup in home purchase activity in August. Pending existing home sales in August rose 7.4%, reflecting the largest monthly increase since October 2001, and July's figures had an upward revision, according to the National Association of Realtors," said Frank Nothaft, Freddie Mac Vice President and Chief Economist. "More recently mortgage applications for both home purchases and refinancing grew slightly over the week ending October 3rd, reversing a two-week decline, based on figures from the Mortgage Bankers Association."

The 30-year loan rate started at 6.00% and finished at 5.97%. The 15-year loan began at 5.70% and finished at 5.73%. The money market fund began at 2.44% and finished at 2.42%. The $10,000 money market fund started at 2.70% and finished at 2.71%. The 1-year CD started at 3.70% and finished at 3.63%.

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