U.S. MARKET AVERAGES

Consumer may be down on economy but investors are not. The day’s trading was dominated by news on falling oil prices, rising gasoline prices, bond yields jumping up and then down as Fed Chairman spoke and merger news between two healthcare companies. New home sales declined 9.9% in August from a month ago.

Trader digested morning news on decline in consumer sentiment as tracked by Conference Board. Consumer sentiment has been on decline, more than predicated by analysts, as consumers face rising gasoline prices and heating bill.

Twelve of the sixteen refineries in Houston area remain closed due to lack of power and other damages related to Hurricane Rita. Three refineries in Port Arthur, Tx and Lake Charles, LA owned by Motiva, Citgo and Valero have sustained damages.

Crude oil fell at close as none of the major oil companies have drawn oil from the Strategic Petroleum Reserve. Traders also noted that a substantial amount of oil is available from international reserves as well. Crude oil futures have fallen 8% from the August 30 peak of $70.85 per barrel but up 31% from a year ago. Gasoline was on the rise for the most of the day as refineries are still struggling to restart.

Homebuilders, energy, consumer discretionary and financial stocks traded higher during the session. Bond yields fell in the morning but rebounded after bond traders did not find any new information in the fed Chairman Greenspan’s comments delivered to a group of economists in Chicago. Ten-year bond yield after rising to 4.32% settled at 4.29%. Home builder stocks fell on the new home sales data release from the Commerce Department, but recovered at the end of the day from the day’s low.


MOVERS AND SHAKERS

Taser International Inc. (TASR: chart) fell 8.9% after the stun gun company said that a previously came out abuse by the Securities and Exchange Commission has now been viewed formal. The company also said that the examination has been expanded to include possible illegal receiving of material non-public information by some people outside of the company trying to manage the stock price.

WellChoice Inc. (WC: chart) jumped 6% due to a media report that another insurer WellPoint (WLP: chart) is planing to buy it for $6.5 billion in cash and stock. Wellpoint Inc, the largest health insurer, has agreed to acquire the five million members large New York based health insurer WellChoice Inc for $6.5 billion. Wellpoint is offering $77.23 in cash and stock for the shares of WellChoice, a 9.4% premium on the yesterday’s closing price of WellChoice stock.

Pepsi Bottling Group Inc. (PBG: chart) is expected to be in play, because the company reported third-quarter net income of $205 million, or 82 cents a share, as compared to $191 million, or 73 cents a share, for the same period in 2004. Analysts had been expecting earnings of 78 cents a share and the company planned record earnings per share for fiscal 2005.
J.P. Morgan rearranged its ratings on some oil companies today.

The broker upgraded Chevron Corp. (CVX: chart) to overweight from underweight, pointing the company's more desirable direction following the acquisition of Unocal.

The broker also upgraded BP (BP: chart) to overweight from neutral, citing the company's exposure to both U.S. refining and natural gas prices is allowing a benefit from the current product strength.

J.P. Morgan upgraded Royal Dutch Shell (RDS: chart) to overweight from neutral, because it believes the stock could be a good protection advantage given the broker's forecast of crude weakness later this year.

The broker downgraded Exxon Mobil (XOM: chart) to neutral from overweight, pointing the recent rise in the shares.

Total (TOT: chart) was downgraded to neutral from overweight to follow a non-impressive combination of valuation and potential catalysts in comparison to other stocks.

ECONOMIC NEWS

Consumer confidence plummeted in September, according to a report from the Conference Board, with concerns about Hurricane Katrina and soaring gasoline prices contributing to the decline.

The Conference Board said that its Consumer Confidence Index fell to 86.6 in September from 105.5 in August. With the decrease, the index hit its worst level since October of 2003. Economists had expected a somewhat more modest decline to about 98.0.

The report showed that consumers claiming business conditions are good fell to 25.2 percent in September from 29.7 in August, while those claiming conditions are bad rose to 17.7 percent from 15.1 percent. The employment picture was also less upbeat.

The Conference Board also said that the outlook for the next six months turned considerably pessimistic, with the Expectations Index falling to 71.7 in September from 93.3 in August.