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Week in Review: October 26, 2007


A look back at the week that was...


Market Update

After last week's drubbing on Friday, investors returned this week with heightened anxiety as earnings season heated up. Friday's low of SPX 1490 was the "line in the sand" and the Bulls were able to successfully defend this level despite the recent credit turmoil highlighted by Merrill Lynch's (MER) massive write-down. Tech led the way after stellar earnings reports from Apple (AAPL), Microsoft (MFST), and EMC (EMC) as the NDX continues to notch multi-year highs.

Countrywide Financial (CFC) gave some relief to the Bulls on Friday as shorts were forced to cover after its earnings report, but clouds still hang over the financial complex. Next week's Fed meeting will be pivotal. With a 25bp expected, stocks could be vulnerable if that is all they get. Short term resistance and support levels on the SPX are 1540 and 1490 respectively. A break in either direction post-Fed should provide an indication as to the year-end direction of the Four Sisters.

The "Four Sisters'" Performance

ETF Watch

Top Headlines

Kohlberg Kravis Robers and Goldman Sachs (GS) announced that they will cancel their $8 bln deal to acquire Harman International (HAR). Both companies saw their share prices fall after the announcement early Monday morning. (10/22)

Existing Home Sales dropped 8% for the month of September, marking the lowest level in eight years. September`s report provided further evidence of the credit squeeze`s effect on the housing market. (10/24)

Durable Orders fell farther than expected by 1.7% for the month of September. The decline was led by a record 39% decrease in orders of defense goods. (10/25)

Earnings Snapshot

Merrill Lynch (MER) moved the markets lower in early trading on Wednesday morning after reporting a $7.9 billion write-down for subprime loans and related securities. Further disappointing news came in the company`s earnings announcement as the banking giant reported a 94% decrease in 3Q revenue from a year ago. (10/24)

American Express (AXP) remained unaffected by the recent credit crunch as the Dow component saw an 11% rise in income to $1.07 bln for the third quarter. The report sent shares soaring in early trading Tuesday. (10/22)

Apple (AAPL) shares reached all time highs this week after the tech giant reported a 67% increase in earnings for the fourth quarter. Apple said the strong results were fueled by the success of the iPhone and its carry over popularity into other Mac products. (10/22)

Amazon (AMZN) earnings soared to $80 mln for the 3Q, compared to $19 mln a year ago. Shares gapped higher on Wednesday after the news, but went on to correct to previous levels after the opening bell on Thursday on worries about upcoming holiday sales. (10/23)

Microsoft (MSFT) shares jumped 12% in early trading Friday after the entertainment and devices division reported a profit $165 mln for the first quarter, compared to a loss of $142 mln a year ago. This was this division`s first profitable quarter since 2005. (10/25)

Market Movers: Winners & Sinners

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No positions in stocks mentioned.

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