Chrysler-GM Bailout Rejected

On Friday, Reuters reported that the Bush Administration would not approve approximately $10 billion in funds to aid a potential General Motors Corporation (GM) merger with Daimler Chrysler (DAI). The funds were rumored to include some type of ownership stake in the merged company. These recent statements have placed the two struggling automotive companies at an impasse as merger discussions which have been ongoing since September. Some sources claim that no further negotiations between the companies will take place until the Nov. 4th Presidential elections conclude.

In the meantime, private equity firm Cereberus Capital Management, the recent majority owner of Chrysler, is likely to restart talks with Nissan-Renault. Cereberus Capital Management supposedly views Nissan as a backstop to an outright acquisition of Chrysler by GM.

Chrysler (DAI) closed this week at $34.50. General Motors Corp. (GM) closed this week at $5.78.

Burger King Profits Rise

Burger King Holdings, Inc. (BKC) managed a quarter profit increase of 2% despite rising commodity costs and other expenses that have been problematic for most restaurant chains. Although the prices of these commodities (such as beef, chicken, cheese and cooking oil) have dropped since the end of July, they are expected to weigh down profits for the foreseeable future with a steady 5% to 7% annual increase.

Last quarter's $602 million revenue reached $674 this quarter. The resulting 38 cents per share earnings were one penny shy of Wall Street estimates. Burger King's growth stems from a worldwide sales boost helped by raising prices in certain markets, value menu items, breakfast and late-night menus. Domestically, the industry's No. 2 hamburger company introduced new products such as the Steakhouse Burger and a Kids Meal featuring Kraft Macaroni and Cheese. Internationally, they also offered a limited-time Whopper sandwich. Current economic conditions may be helping the company as many consumers are cutting costs in various ways, including cutting back on dining-in experiences in favor of fast food. The company also announced expectations to add 350 to 400 new restaurants in 2009.

Burger King (BKC) closed this week at $19.88.

Chevron's 3Q Profits Double

San Ramon, California-based Chevron (CVX) reported its largest quarterly profit in its 129-year history this Friday. The oil industry produced huge third-quarter gains across the board, largely a product of the record $147+ per barrel prices in July that remained above $100 throughout the quarter. The $7.89 billion profit for the quarter has more than double the previous year's $3.72 billion profit, topping analyst forecasts and increasing shares.

Chevron's good news, however, has already been tempered due to the drastic drop of oil futures to $67 a barrel. Even so, prices are likely to head lower still. A number of economic reports suggest demand for energy will continue to erode. For example, Americans drove several billion fewer miles in August of 2008 than August of 2007, according to a recent Department of Transportation report.

Chevron closed this week at $74.60.

Treasurys Fall to Erase Previous Gains as Stocks Improve

Treasurys fell Friday, pushing short-term yields higher. Stocks closed the week much higher, reflecting signs that credit conditions are beginning to improve. Although bond prices normally trade higher during economic uncertainty as investors anticipate inflation, bonds are also used as a safe harbor during credit crises and sharp stock drops. This week, the Dow Jones Industrial Average rose 144 points and gained 11.3%.

As expected, the consumer spending report showed consumer spending declined 3.1%. The Federal Reserve's half percentage point reduction on Wednesday, together with the Bank of Japan's interest rate cut confirm the worldwide impact of recent economic events.

The 10-year Treasury note began the week at 3.70% and finished at 3.97%. The 30-year Treasury bond began at 4.09% and finished at 4.37%.

Inflation Dwindles and Interest Rates Ease

Freddie Mac released its Primary Mortgage Market Survey for the week. It showed that the 30-year fixed-rate mortgage (FRM) averaged 6.46%, up from last week when it averaged 6.04%. Last year at this time, the 30-year FRM averaged 6.26%. The 15-year FRM this week averaged 6.19%, up from last week when it averaged 5.72%. A year ago at this time, the 15-year FRM averaged 5.91%.

"Long-term mortgage rates followed long-term Treasury bond yields, higher this week, pushing fixed-rate mortgages up to levels of two weeks ago," said Frank Nothaft, Freddie Mac Vice President and Chief Economist. He also commented, "The Federal Reserve's one-half percentage point cut in the discount rate and federal funds target rate on Wednesday was widely anticipated in the financial markets and is likely to keep short-term interest rates low. Consequently, initial interest rates on ARMs, which tend to be set relative to other short-term rates, may remain near current levels."

The 30-year loan rate started at 5.96% and finished at 6.46%. The 15-year loan began at 5.59% and finished at 6.10%. The money market fund began at 2.47% and finished at 2.47%. The $10,000 money market fund started at 2.81% and finished at 2.82%. The 1-year CD started at 3.59% and finished at 3.56%.

Stocks - Chrysler Cutting its Workforce Again
Bonds - Treasurys Soar as Stocks Dive
Interest Rates - Inflation Dwindles and Interest Rates Ease

Stocks - Rite Aid Gets a Warning from the NYSE
Bonds - Treasury Gains Soften as Stock Market Rebounds
Interest Rates - Largest Rate Increase Since 1987 for 30-Year FRM

Stocks - Crude Oil Drops but Squeezes Producers
Bonds - Treasury's Tug-of-War with Government Bailout Efforts
Interest Rates - Housing Data Picks Up, Slight Fall in Rates

Stocks - The Battle for Wachovia
Bonds - Landmark Legislation Raises Treasurys
Interest Rates - Long-Term Rates Stagnant, Short Term Rates Adjust Down

Stocks - WaMu Blues
Bonds - Triumph of the Treasury
Interest Rates - Rates Reverse Course