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Minyanville's Market Recap: Merrill Drops A Bomb, Markets Fall


Merrill surprised investors with a GINORMOUS writedown. Markets end lower.

A late day rally failed to hold as stocks ended lower on the day. The Dow ended unchanged at 13,675, but the S&P 500 fell -0.24% to 1515, and Nasdaq Composite fell -0.88% to 2774.

Investors woke up to a big surprise as Merrill Lynch (MER) released its performance for the third quarter. The company reported the largest quarterly loss in its 93 year history as earnings per share figures came in at -$2.85 versus -$0.45 consensus. In addition, Merrill confirmed earlier rumors in the week of larger-than-expected write-downs disclosing $7.9 billion in losses due to an over-exposure in risky mortgage-related securities. The markets proceeded to punish Merrill as the stock closed -5.81%. Other financials were hit hard as well. Morgan Stanley (MS) fell -1.15%, Bear Stearns (BSC) fell -2.26%, and Citigroup (C) fell -1.46%. Another notable performance was Countrywide (CFC) as the stock fell to a new all-time low to $13.47. CFC recovered slightly to end down -8.11%. Toddo mentioned a number of these stocks on the Buzz this morning. Get inside his mind with his compilation, The Morning Buzz: Merrill's Mess, World Banks… Also read his article The Unusual Suspects.

Later in the trading day major averages seemed to gain steam as rumors of a fed rate cut began spreading on the Street. Professor Cooper was not convinced; however, and stated on the Buzz "Sounds like longs talking their book. Been there done that. What happens if it doesn't happen and it doesn't work this time? The problem is not a liquidity issue but a value issue." Get another market perspective with new Minyanville Professor Prier du Plessis' article Does the Big "R" Lie Ahead?

In other earnings news, Boeing (BA) reported 3Q $1.44 EPS vs. $1.24 cons. Revenues rose to $16.52 bln vs. $16.05 cons. Freeport McMoRan (FCX) also beat analyst estimates with EPS coming in at $2.52 vs. $2.28 cons. Revenues rose 209.7% year-over-year to $5.07 bln vs. estimates of $5.05 bln. General Dynamics (GD) reported 3Q estimates of $1.34 EPS vs. $1.26 cons. Revenues rose to $6.83 bln vs. $6.82 cons. As we continue to progress through earnings season, brush up on the fundamentals and read Professor Tatro's Seven Things to Look for in Fundamentals Trading.

In economic data, existing home sales came in less than expected at 5.04 mln versus 5.25 mln consensus. The figure marked a -8.0% month-over-month decline. Read Professor Depew's daily column Five Things You Need To Know for more analysis on these numbers.

Crude surged after the nation's weekly inventory report showed a decline in levels. Crude added 2.24 to 87.51 per barrel. Gold gained 4.2 to 767.3 and copper lost -4.85 to 346.50.

For more summaries click on Minyanville's Buzz Bits and Professor Tuttle's Winners & Sinners.

Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.

Some bullish trade or investment ideas: VMW, MER, RVBD, TRMB, MRK, AKAM, FFIV, AMZN, COH, ORCL, BRCM, GSS, CMG

Some bearish trade or investment ideas: GS, RTH, FCX, CFC, ALTR, MA, CSGP, QQQQ, QID, FNM, FRE, SPX, PNRA, OSX

Have you ever had a case of the Mondays on a Wednesday? Good night, Minyans! We'll see you tomorrow!
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No positions in stocks mentioned.

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