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Week in Review: November 2, 2007


A look back at the week that was...


Market Recap

The action this week best describes how split this tape has become. Financials, broker/dealers, homebuilders, and lenders continue to get clobbered while leadership has been exhibited by tech, energy, and metals. Given the recent technical action, the upper-hand has shifted to the Bears.

As mentioned last week, "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." Well not only did this scenario play out, Bernanke was hawkish insinuating no more rate cuts for the time being. Important support and resistance levels to focus on for the SPX are 1490 and 1550 respectively.

In light of Friday's healthy jobs report, stocks did not respond like the Bulls would have liked. The negative sentiment needs to be respected as we enter into the last stretch of the year. If the financial complex continues to struggle, it will be tough for a year-end rally to occur.

The Four Sisters Performance

ETF Watch

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Top Headlines

Merrill Lynch (MER) CEO Stan O`Neal announced his official departure from the company early this week. O`Neal plans to leave amid controversy of merger talks with Wachovia (WB) without board approval and the recent write-down mess reported last week in the company`s earnings report. (10/29)

The economy continued to elude credit market and subprime worries this week as the Commerce Department reported better than expected 3Q GDP growth of 3.9%, marking the strongest performance in six quarters. Consumer prices also proved to be positive, rising 1.7% and staying within the Fed`s comfort zone. (10/31)

U.S. manufacturing saw a fourth straight month of slower growth according to the ISM Index released this week. The index fell to 50.9%, with apparel, petroleum and food leading 9 of the 18 industries reporting growth. (11/1)

Income and spending growth slowed in September with personal income rising by 0.4% and spending increasing by 0.3%. Core inflation, which excludes food and energy prices, also saw a rise to 0.2%. (11/1)

The FOMC cut both the Fed funds and discount rate by 25 basis points at their regularly scheduled meeting this week, leaving rates at 4.5% and 5% respectively. The Fed explained that the cut was necessary to protect the market from an expected growth slowdown in the near future. (11/2)

Payrolls rose by an astounding 166,000 in the month of October, easily eclipsing the consensus of 90,000. Also detailed in the labor department`s report was the unemployment rate staying steady at 4.7%. Strong growth in healthcare and food services led the way for the month, while banks and manufactures posted a decline in growth. (11/2)

Earnings Snapshot

Dow giant Proctor & Gamble (PG) reported a 14% rise in quarterly income over last year. Downy, Pampers and Gillette each posted strong gains in their respective brands to help lift profits. (10/30)

U.S. Steel (X) shares dropped sharply this week after reporting a 35% decrease in profit. Increasing raw material prices and Chinese competition combined to drag EPS down by $1.15.

Exxon Mobil (XOM) reported a 10% dip in 3Q profits this week as the company experienced its largest quarterly decline in three years. Rising oil prices are blamed for lower profit margins made in their refining operations.

Market Movers: Winners and Sinners

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