The Mid-Week Stock Report

10/10/07

By Dave Harris

It's been a mixture of earnings reports. Aluminum maker Alcoa (AA) kicked off the unofficial start to the earnings season after yesterday's closing bell. Although the third quarter rose to .63 cents vs. .61 last year, results missed the street expectations. Earlier this week Yum Brands (YUM), the KFC and Taco Bell chain, said profit increased by 17 percent on strong sales in China. That's where the real growth is. Here in the states the restaurants could use some improvement. Still, that stock has higher to go here, so it's a buy. YUM closed up .15 cents at 38.11 per share today. Meanwhile Chevron Texaco (CVX) lost .72 cents to close at 92.08. The oil and gas company warned that third quarter profit would be lower on shrinking margins. If you want a good oil company, Halliburton (HAL) is my recommendation. At 12 times earnings, HAL is too cheap here.

After yesterday's record close for the Dow and broader S&P, stocks gave some of it back and finished mixed. The Dow Jones Industrials fell 85.84 to 14,078.69. The NASDAQ rose 7.70 at 2,811.61. The S&P 500 fell 2.68 to close at 1,562.47.

The minutes from the September 18th FOMC meeting indicated nobody opposed the 50 basis point rate cut at the discount and Fed Funds level. It looks like we're getting another cut in rates next meeting. Expect continued upside in stocks here. In other economic news, new and existing home sales are going to be worse than expected according to the National Association of Realtors. We knew that already. I reiterate my sell rating on the home builders such as Lennar (LEN), Toll Bros. (TOL) and KB Home (KBH).

I'm still recommending the industrials, tech and some financials. Caterpillar (CAT) closed 1.35 lower at 81.16 today. That stock should be at 90. Google (GOOG) and Apple (AAPL) are still buys. With a 4.9 percent yield, Bank Of America (BAC) is looking pretty attractive.

This Friday watch for September retail sales for consumer strength. Also that day wholesale inflation comes out with a reading on business inventories.