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Week in Review: October 12, 2007


A look back at the week that was...


Market Recap

The Four Sisters started the week on good footing as M&A activity made headlines and the Fed minutes showed growth concerns trump inflationary worries. On hopes of continued rate cuts markets rallied as liquidity driven names led the way, namely commodities and metals. Beta returned to favor as technology continues its upswing.

However, Thursday's sharp reversal in the afternoon shows just how fragile investor's emotions can be. After several straight up days, profit taking is normal, but yesterday's sharp sell-off came on increased volume and therefore increases the probability that a short-term top was established. It is also disconcerting that the RUS did not join the "party" and confirm its other Sister's breakouts. However as mentioned in last week's WIR, the LBO machine is back on and this favors more shareholder friendly actions and higher stock prices.

The "Four Sisters" Performance

ETF Watch

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Top Headlines

Credit markets are firming up as evidenced by M&A activity this week. Business Objects (BOBJ) announced early Monday that they would be acquired by German software maker SAP AG (SAP). Also announcing a buyout deal of their own was United Industrial Corp (UIC) as Textron Inc (TXT) has agreed to purchase the defense contractor. (10/8)

The Fed released the minutes from their pivotal September 18th meeting this week, reflecting a unanimous decision among board members to cut rates by 50 basis points. (10/9)

Wholesale inventories remained at record lows in the month of August, with wholesale sales increasing 0.4% and inventories rising by 0.1%. The inventory to sales ratio also remained at a low 1.11. (10/10)

Boeing (BA) announced this week that it will delay initial deliveries of its highly anticipated 787 Dreamliner by six months. The manufacturer cites integration problems as the reason for the delay. (10/10)

Earnings Snapshot

YUM Brands (YUM) astounded investors this week reporting a 20% increase in EPS growth. The company credits rapid growth in and other international markets for the strong results. (10/8)

Alcoa (AA) saw modest gains in 3Q income as the industry leader's income rose 3% from a year ago. The company cites a weakening dollar and higher energy costs as reasons for a decline from 2Q. (10/9)

PepsiCo (PEP) reported a 17% increase in 3Q income this week. Favorable currency conditions were a key contributor to their soaring profits. (10/11)

Dow component General Electric (GE) saw a modest rise in quarterly profit that met expectations. Shares were off 2% in early trading Friday morning. (10/12)

Market Movers: Winners & Sinners

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No positions in stocks mentioned.

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