Companies featured in the current edition of the newsletter: ECOI, FMTI, GNBT, HJHO, ICLK, ITUI, LPHC, PCFG, PLKH, TAGS, TKO
Wall Street joined stock markets around the world in a huge sell-off last week, sending major market indexes to their lowest levels in more than five years on the belief that a punishing economic recession is at hand. A factor that may have contributed to the downturn was forced selling by hedge funds needing to meet margin calls and redemption requests. The Dow Jones industrial average ended the week down 473 points, or 5.4%, bringing its year to date loss to 37%. The S&P 500 finished the week down 64 points, or 6.8%, giving it a year to date loss of 40%. The Nasdaq composite index ended the week down 183 points, or 10.5%, bringing its year to date loss to 41.5%. The Russell 2000 index finished the week down 60 points, or 11%, and a year to date loss of 38.5%.
To illustrate how brutal the global selloff has been, the U.S. indexes have actually outperformed many of their counterparts around the world. In the U.K., the FTSE 100 is off 40% as the British economy slides into recession, the French CAC 40 is down 43% and the German DAX 47%. European markets are at five-year lows while the Dow and S&P are at least holding above their 2003 lows. In Asia, the Nikkei 225 has dropped 50% to 7,649.
Emerging markets have suffered even steeper declines, with Russian stocks down 76%, Brazil off 50% and China down 65%. Perhaps one hopeful sign is that sharp declines in commodity prices, including oil, which is down over 50% from its summer peak of $147 a barrel to $64, could bring inflation down at the consumer level. Another favorable technical factor suggests the possibility of a short-term bounce. The S&P trades 25% below its 50-day moving average, which has happened just five times since 1928. Each time it resultied in a rally.
While large-cap stocks have been decimated, the picture is even bleaker for small and micro-cap issues, many of which are down 70% or more in the past 12 months. One possible silver lining is a rules change affecting market makers which is expected to be implemented next month. It would require that market makers execute trades for Bulletin Board and Pink Sheet securities at the best possible price, similar to the requirements on the major exchanges. Currently, there is no best execution requirement on OTCBB and Pink Sheet stocks, potentially allowing market makers to unduly benefit on customer orders.
The earnings results for the third quarter were almost completely dismissed as the market, in its forward-thinking ways, fixated on repeated reminders that there was a lack of visibility into the fourth quarter and that companies were looking to preserve cash to navigate their way through an indeterminate period of uncertainty. Earnings and revenue guidance ranges, when provided, were typically wide as companies concluded the uncertain economic environment meant there would be a good deal of variability in their reported results. Apple and Amazon.com provided cogent examples of that stance. The fourth quarter EPS guidance range provided by Apple was $1.06 to $1.35. Amazon.com, meanwhile, said its fourth quarter operating income should be anywhere from $145 million to $305 million.
Fed Chairman Bernanke contributed to the sense of uncertainty about the timing of an economic recovery when he told the House Budget Committee Monday that the economy is likely to be weak for several quarters and that there was some risk of a protracted slowdown. He said this when casting his support for the idea that Congress should consider a second stimulus package. On the heels of Bernanke’s testimony, the Federal Reserve announced the creation of a $540 billion Money Market Investor Funding Facility to complement other funding facilities aimed at increasing liquidity in the important commercial paper market. The new facility is a worthwhile add-on to the mass of initiatives that have been put in place in the effort to stabilize the financial system. Still, it did little to shift the market’s negative perspective on the near-term economic outlook.
Testimony late in the week from former Fed Chairman Alan Greenspan, which included his belief that a further significant rise in layoffs seemed inevitable given the damage done by the financial crisis, didn’t help matters. General Motors, Chrysler, Yahoo!, Merck, and Xerox were among the notable companies that announced plans to cut staff. Separately, The Wall Street Journal said Goldman Sachs was preparing a plan to cut about 10% of its workforce as it deals with a pronounced industry downturn.
What should investors look for this week on the corporate front? The corporate calendar remains very busy, with Goodyear Tire (NYSE: GT), Sysco (NYSE: SYY) reporting earnings Monday before the bell. Automatic Data (NASDAQ: ADP), EDS (NYSE: EDS), MasterCard (NYSE: MA) and Viacom (NYSE: VIA) will announce results Monday after close. Tuesday will feature announcements from Archer-Daniels (NYSE: ADM), Dean Foods (NYSE: DF), Emerson (NYSE: EMR), MGM Mirage (NYSE: MGM), Tenet Healthcare (NYSE: THC) and Avis Budget (NYSE: CAR). Devon Energy (NYSE: DVN), Donnelley & Sons (NYSE: RRD), Duke Energy (NYSE: DUK), General Motors (NYSE: GM), Sara Lee (NYSE: SLE), Time Warner (NYSE: TWX), and Time Warner Cable (NYSE: TWC) will all report results Wednesday before the bell, followed by announcements from Cisco Systems (NASDAQ: CSCO), Hertz Global (NYSE: HTZ), News Corp (NYSE: NWS), Sunoco (NYSE: SUN), and Whole Foods (NASDAQ: WFMI). Thursday before the bell AutoNation (NYSE: AN), Cardinal Health (NYSE: CAH), DIRECTV (NASDAQ: DTV), DISH Network (NASDAQ: DISH), Fannie Mae (NYSE: FNM), Nortel (NYSE: NT), PG&E (NYSE: PCG), Toyota Motor (NYSE: TM), and Tyco Electronics (NYSE: TEL) will report their earnings, followed by announcements from Anheuser-Busch (NYSE: BUD) during trading hours. American International (NYSE: AIG) will report Thursday after close. Ford Motor (NYSE: F), Sprint Nextel (NYSE: S) and Con Edison (NYSE: ED) will announce results on Friday.
The most significant economic event this week is the Federal Reserve’s decision on interest rates expected to be announced Tuesday afternoon. Expectations are for a 50 basis point cut in the Federal Funds rates, although federal funds futures forecast a 26% probability that the Fed will reduce rates 75 basis points. The economic calendar also include September New Home Sales being released Monday morning at 10:00 a.m. Consumer Confidence for October will be reported Tuesday morning at 10:00 a.m. Wednesday schedule begins with September Durable Orders being announced at 8:30 a.m., followed by weekly Crude Inventories at 10:35 a.m. Coming Thursday before the bell will be the Q3 GDP & Chain Deflator, the Q3 Employment Cost Index, weekly Initial Claims, and the September Personal Income/Spending. The Chicago PMI and the October Michigan Statement will be released Friday at 9:45 a.m. and 10:00 a.m. respectively.
A Recent recommendation by the American Diabetes Association for the treatment of Type 2 diabetes could contain significant implications for Generex Biotechnology Corporation (NASDAQ: GNBT)’s Oral-lyn, as the ADA emphasizes the early use of insulin. Since Type 2 diabetics are less likely to use injection methods, which are less desirable for patients still not suffering the full effects of the disease, it could serve as a catalyst for the adoption of non-injectable methods, such as Generex’s Oral-lyn, which provides the ability to deliver insulin without the use of a needle. The stock finished the week unchanged at $0.29.
ecoSolutions Intl (OTCBB: ECOI), a developer of environmental-friendly consumer materials, announced that it has received notification that its shares of common stock were approved for quotation on the Over-the-Counter Bulletin Board. The company’s shares will trade on the OTC Bulletin Board under the same ticker symbol, ECOI that the company’s stock previously traded under. The stock remained unchanged for the week to close at $0.35.
Forbes Medi-Tech Inc. (NASDAQ: FMTI), a life sciences company focused on evidence-based nutritional solutions, announced that the company received a letter from NASDAQ stating that it has decided to temporarily suspend enforcement of the bid price and market value of publicly held share requirements, given the extraordinary current market conditions. As a result, Forbes will now have until June 22, 2009 to regain compliance with the minimum bid price requirement. The stock finished the week unchanged at $0.26.
Halcyon Jets Holdings, Inc. (OTCBB: HJHO), a leading arranger of private aviation services, announced preliminary net revenue for the months of August and September 2008. The company generated revenues for the two months, which are seasonally among the slowest of the year, of $9.4 million, an increase of 470% as compared to $2 million in the same two months in 2007. Revenue improved as a result of increased client usage of the company’s private travel and concierge services. The stock rose by $0.02 for the week, to close at $0.07.
interCLICK, Inc. (OTCBB: ICLK), the fastest growing ad network in the US, and BlueKai, the online industry’s first data exchange focused on intent data and consumer control, announced a partnership aimed at increasing scale and targeting precision for online advertising campaigns across interCLICK’s ad network. interCLICK was invited to be a beta partner for the recently-launched BlueKai Data Exchange and is now fully leveraging the world’s largest repository of intent data to enhance campaign performance for its agency and advertiser clients. Furthering the strength of this partnership, both interCLICK and BlueKai are members of the Network Advertising Initiative and adhere to high standards for consumer privacy and choice. In addition, interCLICK and BlueKai websites both provide access to the BlueKai Registry, an online tool that brings consumer participation and choice to the forefront. Via this tool, consumers can see the information that has been collected about them and have the ability to edit their online preferences or opt-out completely. The stock finished the week unchanged at $1.25.
i2Telecom International, Inc. (OTCBB: ITUI), a leading developer of award-winning patented and innovative high-quality mobile applications and services, announced the release of its MyGlobalTalk Global SIM card service. The SIM card allows users to change phones by simply removing the SIM card from one mobile phone and inserting it into another mobile phone or broadband telephony device. The MyGlobalTalk Global SIM card will allow customers to save up to 90% in mobile phone charges when calling outside the United States to end points worldwide with reasonable prices starting at $0.29 per minute. Travelers can use the MyGlobalTalk Global SIM cards to make international calls without paying roaming fees. In addition, there are no inbound charges in approximately 140 countries, and the MyGlobalTalk Global SIM card is universal in all countries. The stock fell by a penny for the week to close at $0.08.
LocatePLUS Holdings Corp. (OTC: PKHC), a business-to-business and business-to-government provider of public information located in Beverly, MA, was recently accepted as an affiliate member of ACA International, the Association of Credit and Collection Professionals, formerly known as the American Collectors Association. As an affiliate member, LocatePLUS demonstrates its commitment to supplying quality goods and services to the credit and collection industry, as well as pledging to meet the highest standard of business ethics and financial responsibility. Shares fell by $0.01, to finish the week at $0.02.
Pacific Gold Corp. (OTCBB: PCFG), a company that engages in the identification, acquisition, exploration, and mining of mineral properties, primarily gold and tungsten, announced that it has completed a sale of its fleet of Komatsu Haul trucks. A portion of the proceeds from the sale were used to redeem convertible debentures previously sold to Yorkville Advisors. The principal remaining on the original face value of the $2,440,000 in notes sold to Yorkville is now $267,000. The company also reached an agreement with Yorkville Advisors to adjust the repayment terms of the convertible notes originally issued in February 2007. Yorkville Advisors has agreed that no installment payments on the notes will be made until January 15, 2009 unless the price of PCFG stock is above 1.5 cents per share for at least 8 of the 10 days prior to an installment payment being due. The stock traded below $0.01 for the week.
ProLink Holdings Corp. (OTCBB: PLKH), the world’s leading provider of Global Positioning Satellite golf course management systems and digital out-of-home on-course advertising, announced that Renditions Golf Course in Davidsonville, Md., now features the ProLink Solutions GPS system used at many of the world’s most famous golf courses and plans to participate in ProLink’s exclusive national advertising opportunity. Shares fell by $0.03 for the week, to close at $0.17.
Tarrant Apparel Group (NASDAQ: TAGS), a design and sourcing company for private label and private brand casual apparel, was notified that NASDAQ has suspended its bid price and market value of publicly held shares requirements for continued listing on the exchange through Friday, January 16, 2009. NASDAQ will not take any action through January 16, 2009 to delist the company for the bid price deficiency. If the company is still deficient in bid price at the close of business on January 16, 2009, NASDAQ will contact the company to reschedule a hearing before a Nasdaq Listing Qualifications Panel. The stock remained static for the week to close at $0.53.
Telkonet, Inc. (AMEX: TKO), the leading provider of innovative, centrally managed solutions for integrated energy management, networking, building automation and proactive support services, has won a prestigious contract with Columbia Sussex, the leading national developer and manager of more than 70 hotels and casinos across 30 states. Columbia Sussex has installed the Telkonet SmartEnergy system in 1,300 rooms at three hotels: the Doubletree in Rochester, New York; the Sheraton in Philadelphia City Center; and the Westin in St. Maarten, with additional properties scheduled for TSE implementation by the end of the year. After a comprehensive analysis of competitive product offerings, TSE won on the basis of its inherent flexibility, scalability, and simplicity, easily interfacing with all the various types of HVAC systems throughout the Columbia Sussex hotel properties. Shares fell by $0.04, to finish the week at $0.12.