U.S. MARKET AVERAGES

U.S. stock averages have been trading in the red since opening with the Nasdaq down 1%, followed by S&P 500 losing 0.8% and Dow posting the slightest decline of 0.6%. All ten economic sectors remain below the flat line. Throughout the whole session the market sentiment has been overshadowed by inflation concerns and new interest-rate hikes speculations. Investors then digested a great amount of economic data, which provided further pressure to the stock markets, although strong earnings report from Yum Brands cheered up trading.

European stock markets closed lower on heavy losses in mining and oil stocks with oil-heavy London's FTSE 100 down by 1.2%.

Government data release showed that crude-oil inventories dropped by 300,000 barrels in the most recent week, following a decline of 2.4 million barrels in the previous week. Gasoline inventories posted a sharp decline of 4.3 million barrels, rebounding from last-week’s 4.4 million-barrel advance.

The market composite index of mortgage loan application volume decreased by a seasonally-adjusted 1.1% for the week ended September 30, dropping to 713.5 from 721.2 in the previous week. The ISM said that its business activity index for the service sector fell to 53.3 in September from 65.0 in August.

The decline in biotech stocks has persisted through the morning and the sector is now lower by about 4%, all but reversing gains posted last week. The housing sector has also steadily moved lower through the morning,presently losing 3.4%, reaching its lowest level since June. Following the government's petroleum inventory report, energy stocks have fallen off, adding to substantial losses posted on Tuesday. The Materials sector declines by 1.9%. Tech sector posts a loss of 1% on ADC Telecommunications lowered Q4 earnings outlook.

There are very few sectors trading in the positive direction. The bank sector is holding close to the flat line and insurance stocks also post modest gains. Restaurant stocks are modestly higher on Wendy's (WEN: chart) rally, despite a drop in third-quarter.

MOVERS AND SHAKERS

The auto sector will be in focus today.

The carmaker General Motors Corp. (GM: chart) said it was selling its entire interest in Fuji Heavy Industries Ltd, which owns the Subaru car brand, because it intents to concentrate its Asia-Pacific strategy toward high-growth markets. The company said cash proceeds received and any potential gain on the Fuji Heavy sale will be recorded in the fourth quarter. At the same time, the Detroit news posted that General Motors and the United Auto Workers are close to an agreement that would save the company $1 billion in annual health care costs. General Motors dropped 3.1% yesterday.

The auto-parts maker Delphi Corp. (DPH: chart) declined 16.6% after New York Times reported the company will only keep from Chapter 11 bankruptcy protection if it can bring forth concessions from General Motors, its former parent, and from the United Auto Workers' union.

Viacom (VIA: chart) could gain because of the preliminary prospectus with the Securities and Exchange Commission filed for the separation of the company into two divisions. Viacom first planned this move in June and said its purpose is to unlock the value in its cable networks and filmed entertainment businesses. Viacom fell 1.1% yesterday.

Yum Brands Inc (YUM: chart) is also likely to gain because the company moved up its profit prospectus for 2005 due to achieved third-quarter results that were over analyst forecasts. The operator of Taco Bell, KFC and Pizza Hut fast-food restaurants added 1.8% yesterday.

The fast-food giant Wendy's International (WEN: chart) was down 2.4% after it announced a 5% lower third-quarter same-store sales and warned Hurricanes Katrina and Rita brought together with higher beef prices would narrow earnings for the period by 4 cents.

Bank of America cut Harley-Davidson (HDI: chart) to sell from neutral due to worries over rising retail inventory and slowing demand. Analysts also believe the lackluster customer response to the motorcycle maker's 2006 models will lead to decline in wholesale unit shipments.

Maytag (MYG: chart) was downgraded at Prudental to underweight from equal-weight, pointing breakable earnings, a more delicate macro environment and weakening consumer spending.

ECONOMIC NEWS

Crude oil inventories ticked down again in the most recent week, according to government data released Wednesday, though the decline was far less steep than in the previous week. Meanwhile, stocks of gasoline dropped sharply, reversing most of the gains it recorded in the prior period. The Department of Energy's Energy Information Administration revealed that crude oil inventories dropped by 300,000 barrels for the week ended September 30, falling to 305.4 million barrels from the 305.7 million barrels recorded in the previous week. This followed a decline of 2.4 million barrels for the prior week. Even with the recent declines, oil inventories remain 11.8% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week decline of 4.3 million barrels, the government said, reversing most of the previous week's 4.4-million-barrel advance. Gasoline stocks are now 4.6% below their levels of last year. Inventories of distillate fuel oil fell by 5.6 million barrels in the most recent week.

The ISM said that its business activity index for the service sector fell to 53.3 in September from 65.0 in August. While a reading above 50 still indicates growth in the sector, economists had expected a more modest decline to about 59.7.