Another month is now behind us and it seems that the hangover from Cash for Clunkers took a few months to hit the market. Sales were relatively muted and, after reading the releases, it felt like something was missing.

Cash for Clunkers is now a distant memory, and if the previous months were any indication, it would have been a good memory with few negative ramifications. However, for the first time, despite easy comparisons, auto sales showed signs of that dreaded hangover. There is no question that sales have stabilized, but sequentially, every automaker we monitor saw a sequential decline, which is in stark contrast July, August and October. We hate the term less bad, but we again have to use it as sales have been slowly building off the bottom of earlier this year.

By David Urani

Mortgage applications went up a touch last week, with mortgage rates for a 30-year fixed rate loan hitting 4.79%, down from 4.82% the previous week. Rates are back down near the record lows we saw earlier this spring, aided by loose monetary policy from the Fed and other liquidity measures in the mortgage market. Remember, these efforts are yet another one of the many "bailouts" being exercised on the housing market these days in addition to tax credits and foreclosure prevention programs. Both refinance and purchase applications were up week to week, and activity in general is roughly on par with that of 2007, although the balance has shifted more towards refinances while purchases are still at low levels.

In March, the White House launched its $75 billion Home Affordable Modification program (HAMP) to get struggling homeowners refinanced into new loans with lower monthly payments to slow down the wave of foreclosures hitting the housing market. Since that time, we have been given incremental updates on the plan, which now has more than 650,000 homeowners enrolled in a three month trial for the program.

However, the numbers we haven't seen yet, and which are supposed to begin being published in December, are the number of borrowers who have passed the trial period and been enrolled in the full program. Preliminary reports of the program indicate that the number of borrowers who have been given the green light for the full program numbers is just in the tens of thousands. Initial feedback from mortgage servicers indicates that roughly 30% of trial participants may go into the full program, although it is too early to say. The Department of Housing and Urban Development expects roughly 375,000 borrowers to be in the full program by the end of the year. Nevertheless, foreclosures are still running at a rate of more than 300,000 per month and are expected to hit new records until the middle of next year.

The market is scheduled to get the November monthly auto sales figures Tuesday during the trading day, and the expectations are for a better month than October.

During the last month, Ford (F) and General Motors saw higher sales year over year, while Toyota (TM) and Honda (HMC) saw their sales flat compared to October of 2008. The weak spot continued to be Chrysler, which saw sales decline more than 30%.

The market is in that holiday daze. Stocks were just moseying along with traders pouring out early or simply not in at all Wednesday (or the rest of the week). There was a ton of economic data out Wednesday that for the most part canceled themselves out; on balance the news was okay but nothing to propel the market higher. The buzz is still all about gold and speculation that India is ready to step back up to the plate and pick up the remainder of that block put up for sale by the International Monetary Fund. That would be another tranche of 201.3 tons (Mauritius picked up 2 tons) at an all-time high. (Already, India's central bank is up $800.0 million on its November 3 purchase of $6.7 billion tons.) Interestingly, there were some high profiled earnings results that could have swayed the action, but for the most part, if investors were excited by the results they didn't bid up rival companies.

By the way, there is serious scorn for those companies that missed the Street, even those that missed by only a penny. (Click to enlarge)

By David Urani

The Mortgage Bankers Association reported that mortgage delinquencies and foreclosures hit another quarterly record in the third quarter (after setting another record during the second quarter). The percentage of all mortgages that are at some stage of delinquency is 14.4%, up from 13.2% the previous quarter. I don't think these numbers are particularly surprising to anyone; we all knew foreclosures and the likes are still worsening, especially with unemployment still on the rise. However, this is just the proof that housing is indeed still a major problem for the economy, and probably our single biggest risk for going into that dreaded double-dip recession.

With a straight face the White House wants us to believe it's going to create more entitlement programs while cutting waste, fraud, and abuse. At face value, it's a far-fetched notion to be sure, but in the real world it's just a false pledge. Yesterday, the Office of Management and Budget reported that government waste surged by $26.0 billion to $98.0 billion. Some of the (official) blame goes to a new modeling system and overall government spending, but what's going to happen when the healthcare scheme kicks in? We are looking at billions of dollars in waste, fraud, and abuse. The plan at one point was supposed to bring down the cost of healthcare, right? By the way, the majority of waste in the government (drum roll)...Medicare.

click to enlarge

There have been many exciting football players in the history of the National Football League, but maybe a handful can claim to be as electrifying as Barry Sanders. Drafted third in the 1989 draft, he was not only one of the best ever but he was humble as well. Case in point; he took himself out of the last game of the season although he only needed 10 yards to win the rushing title. Something like that would never happen these days when it's all about "me" and reality television shows.

Still, even with his reputation for being humble few could understand when he called it quits at the height of his career. It took years before the tight-lipped Sanders confessed to quitting because of a culture of losing in the Detroit Lions organization, saying it was too much to deal with. Sanders went on to say that the culture robbed him of his competitive spirit and he saw nothing to suggest things would ever get better. He began crying at the end of his last game.

The market is hanging in there which to me is a lukewarm buy signal because stocks should be under more pressure. The housing data was really something of a disappointment and there wasn't anything on the earnings front to capture the imagination or spark a move higher. Stocks have been down all session long, and the periodic bounces haven't triggered sustained buying. Still, sellers have the option to blow out here and count their cash. Yesterday, there were more hints at a late move higher that I'm not seeing so far today.

Housing Data Details

By Brian Sozzi

Yesterday afternoon I provided a detailed checklist of what investors should be looking for from the spate of retailer earnings reports this week. Let me add a few observations:
* It's important that Target (TGT) had positive customer traffic in 3Q09; it speaks to market share gains amid a new low price consumer message and the prospect for higher margins in 2010 as consumers migrate from the consumables departments to home/apparel.
* Abercrombie & Fitch (ANF) earnings from last Friday were interesting in that management noted they are planning inventory up slightly for the spring. This rate, somewhere around 5.0%, is a glimpse into the still unknowns surrounding consumer spending. Such a low stock of goods in the warehouses and backrooms will lead to volatile comparable store sales results, though potential gross margin upside.
* I am not a big fan of deep discount retail stocks, recently downgrading my rating on 99 Cents Only Stores (NDN). These companies have benefited greatly from increased leverage over their supplier base and transportation partners, not to mention deflationary consumable goods prices. With sector valuation at a premium relative to better situated retailers like Target (TGT) and Wal-Mart (WMT), the deep discount sector appears extended here as gross margin gives back a fair amount of 2009 gains.
* Don't be fooled by these in line and outright conservative EPS guidance outlooks by a few retailers. These companies have planned promotions, driven scant inventory positions, and are poised to maximize margins at the expense of sales generation.
Side note: Just think for a moment when you enter a discount store, what are the first areas that you pass to get to the food aisles? The answer: higher margin departments such as health and beauty aids and apparel. Retailers are a clever, clever bunch.

In a time when government bailouts have become commonplace, an act of true capitalism has found its way back. There is no question that the auto industry was completely decimated by the economic crisis. Seeing as the industry is pivotal to the U.S. economy, the auto makers got government handouts in the form of direct cash infusions (some for equity) while others saw government incentive spending which boosted sales.

Following the food chain for the auto industry, one could argue that the cash for clunkers program helped auto parts suppliers too, but it was the industry’s only form of “bailout.” The Auto Task Force and President Obama denied the auto parts suppliers industry its own bailout, however, the government did lend a helping hand guaranteeing many of the owed payments from the auto makers. So without direct government aid, many auto parts suppliers were forced into bankruptcy, and if history has showed us anything, it would be a long arduous trip back out of bankruptcy for these companies. More recent examples are the problems with Dana Corporation (DAN) and Delphi, which are still struggling to emerge from bankruptcy.

By Brian Sozzi

As to be expected, the Wal-Mart (WMT) operating machine was in full swing in the October quarter (full conference call transcript here). A continued focus on driving productivity throughout the organization, such as reducing the height of inventory in the stores to more efficiently operating the Wal-Mart private truck fleet helped to expand gross margin nicely year over year despite the impact of consumables deflation, resumption of higher energy prices, and aggressive pricing maneuvers.

Six straight days of gains for the Dow Jones Industrial Average is impressive, but yesterday's session is the inverse of recent days that began slow or even under pressure only to fight off resistance and close in the plus column. It goes without saying (or writing) that the market needs to take a pit stop, or for some a freefall, to get back to the long-term trend.

Of course, that being said, there is also an underlying angst that the market can't stall or can't afford to be down for too long. Considering how quickly the NASDAQ Composite gave up 5.0% just a couple of weeks ago there is certain fragility to the rally that has been built on very light volume.

Employment has been in the spotlight all this week, with the Bureau of Labor Statistics' employment report (a.k.a. the "big one") coming out on Friday. We all know more six digit job losses are in store for months to come, so even if it's "less bad" than the previous month there's not going to be anything to cheer about.

The staffing sector for instance has had a disappointing earnings season. Robert Half (RHI), TrueBlue (TBI), MPS Group (MPS), and Kforce (KFRC) all reported soft third quarter sales, most of them decreasing from the second quarter or falling short of consensus. In n all five of Robert Half's major segments, for example, year over year comparisons weren't even "less bad", they were basically the same as the second quarter. Not only were the third quarter results lackluster, but check out their guidance for the fourth quarter:

By David Silver

After yesterday's freefall into the close, the market is acting a little better today, and we are roughly where we were before the market started to fall apart at approximately 3 PM yesterday. The Dow slipped below the psychologically important 10,000 level, and has been struggling most of the morning to stay above that level. The Dow is outperforming the other indices, as the S&P 500 is flat and the Nasdaq is in the red as the jump in initial jobless claims, falling oil, and a strengthening greenback pressure parts of the market. eBay (EBAY) posted a 29% drop in profit and released disappointing guidance for its fourth quarter, and those results are pressuring the Nasdaq this afternoon. After yesterday's shaky session, this morning has shaped up to be a defensive rally in the Dow.

Yesterday, the President rolled out another plan to get loans to small businesses. I'm glad that it was a low key event because it was but a very small step in the right direction. The President said all the right things about the role of small business, and he could have said so much more since they are the backbone of our economy. Just think, I can't remember the last time the Challenger Gray survey reported big businesses hiring employees. That said, the latest offering from the Administration misses the point, and maybe that is on purpose. The SBA itself is such an antiquated agency and needs to revamp the way it goes about assessing risks and qualifications. Moreover, small banks are reluctant to do business with the government and TARP, which explains why none have taken the bait thus far.

On the topic of TARP, the most recent news on those giant too-big-to-fail banks that got your tax money is another heartbreaker. According to an article, the 22 biggest TARP recipients haven't increased their small business lending; instead they've cut their outstanding balances by $8.0 billion. Keep in mind that TARP banks spent $77.0 million on lobbyists and $37.0 million on federal campaign contributions last year, making the TARP payout a pretty good return on investment. I don't fret about lobbyists and such but I do fret about the lack of respect afforded small businesses and the fact so much money has been sprinkled elsewhere. We were promised trickle up economics, but that hasn't been the case at all...the exact opposite in fact.

Although the past several months have shown an improving sales environment for housing that has raised most of our hopes, recent data supports the idea that the housing market is still tipped precariously on the edge of re-disaster.

Make no mistake, similar to the cash for clunkers program in August, the housing market has been kept active with a cocktail of government programs. Like most others, we agree that the outlook has been getting better and some progress is being made, but there is still a lot of work to be done. And, even though I generally oppose spending taxpayer money, now is no time to pull the plug on the lifelines.

The market is fixated on the less than desirable housing-related reports out Tuesday morning. Such below-consensus readings on starts and permits are a shot across the bow for regulators to cut the smooth talk and extend the housing tax credit. Whether the tax credit has had a huge impact on overall housing demand in recent months is not very supported in the statistics (low mortgage rates arguably a bigger component). But, much could be said about bolstering market psychology, in this case that of homebuilders. Maybe it is time to expand the program to not just first time buyers making less than $75,000.

The recent rally in the price of crude oil is faltering Tuesday. The dollar actually started to rally in value versus a basket of other international currencies, and this is causing a shift out of the commodity asset class of which crude oil is included. Also causing some of the selling pressure Tuesday was the fact that it closed in on the $80 per barrel level. Oil and other commodities have an inverse relationship with the value of the dollar. As it stands, oil traders and investors have been taking their cue from the rally in the broader equities market and allocating more capital to the oil trade. The fact that the Dow Jones Industrial Average recently hit, and surpassed, the psychologically important 10,000 mark served as a source of encouragement to investors that the economy is on the mend. As such, the logic goes that this portends an eventual increase in activity which will ultimately lead to a ramp in the demand for energy.

It was really a low-key session considering all the moving parts from robust corporate earnings, financial regulation on the horizon, the plunging dollar, and constant state of flux that has become the U.S. consumer. It's a lot to soak in for anyone, but really difficult for investors that may have missed this rally. This is where pride becomes an insidious vermin eating away at decision making, once again paralyzing so many investors that have been voyeurs throughout this magic ride. Unfortunately, for them, the lack of pomp at once again crossing Dow 10,000 may abate their decision to continue to "sit this dance out." In the meantime, the stock market is always in a state of war, sellers think they know things buyers don't and vice versa and along the way, it's not good enough to have a decision but they must also impose their will.

This is the glorious war that is the stock market, where rules from the Marquis De Queensberry and Sun Tzu simply don't apply. The interesting thing is that the smoke from the carnage keeps many would-be players at bay, especially when the shorts have the upper hand. Right now, however, the bulls have the edge and the smoke should have come from the thundering herd of individual investors looking to get in the game. They simply haven't. According to Morningstar, individual investors have only put a net $14.5 billion into equity mutual funds this year while loading up on bond funds to the tune of $254.6 billion. According to the Investment Company Institute, American investors were dumping stock funds as fast as possible. Of course, we know now they should have been buying with the same resolve. Even though there have been net positive inflows since March the amounts are small indeed.

Last week Alcoa (AA) posted its earnings results and the market was pleased, but trepidation greeted investors this week as many continued to wonder how much longer the good news would last. How much longer can a stock market that seems completely detached from reality continue to rally? Well, one thing seemed clear to me coming into this so-called earnings season; it wasn't going to be enough to miss on the top line and manipulate a beat on the bottom line and be rewarded. Case in point, yesterday before the market opened there were a couple of companies that posted results that missed on the top line but beat on the bottom line. These household names saw their share prices hit hard:

• Dominoes Pizza (DPZ): -10.00%
• Johnson & Johnson (JNJ): -2.43%