Market Wrap-Up for Oct.5 (COST, BBY, MON, CSCO, FCX, MSFT, BBY, more)

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The market was able to continue yesterday's reversal trend higher, even following Moody's 3-notch downgrade of Italy's credit rating late yesterday afternoon. This move echoes S&P's downgrade of Italy a couple of weeks ago, so the markets weren't shocked by the Moody's call.

Whether or not we are entering the "bad news is good news" phase for the markets, yesterday's late-day spike (400-point upswing in the final 45 minutes of trading) as well as today's 1-2 percent gain in the indices will certainly help a lot of traders recover from the recent momentum stock swoon.

Looking at today's market action, earnings results painted a mixed picture for some well-known companies. Costco ( COST ) and Yum! Brands ( YUM ) ended lower, while Monsanto ( MON ) traded over $3 higher. Speaking of Costco, the company announced it will raise membership fees 10%. It's pretty amazing that the concept of paid memberships to buy (mostly) food products still helps deliver steady profits. You'd think this concept wouldn't resonate as much during tough economic times, but apparently it still does. Is the selection of products really different than at the large supermarket chains? I never really noticed all that much of a difference personally, selection-wise or price-wise.

In other news, positive Wall Street commentary helped lift stocks like CBS Corp ( CBS ), Marathon Oil ( MRO ), and Walt Disney ( DIS ). Tech giants like Cisco ( CSCO ), Oracle ( ORCL ), IBM ( IBM ) racked up nice gains as well. Speaking of tech giants, Microsoft ( MSFT ) came out after the close refuting any rumors it was kicking the tires once again in regards to an acquisition of Yahoo ( YHOO ). One of the most oversold sectors - commodities, racked up a second straight day of gains with stocks like CF Industries ( CF ) and Freeport McMoran ( FCX ) pacing the gains. There is a decent amount of traders that have been caught buying one too many dips in the sector, so there could be some more volatility ahead if the markets suddenly reverse back down.

Bad Business Move for Best Buy?

It's been a few days since I have read about Best Buy ( BBY ) being a value play (sarcasm), but the company recently announced they would be cutting their holiday season employee hiring program by 50% this year. On the surface, this move sounds like a good way to cut some fixed costs. But when you think about the Best Buy shopping experience, the move could backfire badly.

People that shop at Best Buy tend to have questions when it comes to electronics, so just imagine the frustration of trying to haul a knowledgeable salesperson down during the manic holiday shopping period. Then if you can navigate through that phase, the last thing you will want to do is wait on long lines to check out. Anyone who has switched to shopping online only (Amazon has taken a big slice of the consumer electronics space) will likely never step foot in a big box electronics store again. We'll see how it works out for Best Buy this year, but their recent announcement had me thinking about the move from a business person's standpoint. As you can see by my take, I don't think the move to cut their sales staff this holiday season will prove very successful.

Shopping, Then & Now

Speaking of shopping, it appears that "layaway" programs are making strong comebacks across various retail store brands. According to a survey released by ConsumerSearch.com, the majority (71%) of the 1,011 of consumers polled said they are open to using layaway programs in the next six months, and 42% said they'll do so for holiday gift purchases. This trend brings back memories of when I was a child and my parents would use the layaway strategy at the local "5 and dime" store. The money they'd spend was drawn from their "Christmas club" bank account as well - anyone remember those? Christmas club accounts were specialized accounts you could set up with your bank to make deposits throughout the year. At the end of the year, that money would then be used to purchases holiday gifts for friends and family members.

Last Hour Rumors Only Add to Volatility

Yesterday marked the third time in the past couple of months that FT.com (Financial Times) cited unnamed "sources" as saying European bank bailouts were on the horizon. The first FT story claimed China would bail out Europe and was refuted the next morning. Then two weeks ago, there was talk of a potential TARP-like bailout for some of the smaller European banks. That news, predictably, juiced the markets suddenly higher (but never materialized). Then yesterday, FT published another European TARP rumor, which once again lifted the markets off the lows and actually caused a near 400-point turnaround in the last 45 minutes of trading. That story was also refuted this morning by the ECB, by the way. I don't ever want to complain about market gains, but these constant false rumors are doing little to help us flush out the bad news from the markets once and for all.

Buying Time or Biting the Bullet

I went to bed last night and all I could think about is what would make the ECB (European Central Bank) consider doing their own version of TARP. That program in the U.S. did help our markets pop higher and get us off those March 2009 lows, but as you can see from the weakness remaining in the banks, the supposed solution has not had a long-lasting effect. And now, talk of a U.S. TARP Part II is making the rounds. I'm not sure how well such a plan would go over with taxpayers, not to mention the growing numbers of protesters across the nation that have risen up against such measures.

It's pretty clear to me that politicians are simply buying time with these bailouts. Keeping bad banks in business just isn't a sound practice, however. As we've seen in Japan, the decision to keep financial institutions on life support there has kept the Japanese economy in the doldrums for over two decades now. Maybe some members of the ECB are floating the idea out there to see how the markets react. If so, they'd better be very careful basing any decisions on a single-day market reaction.

Thanks for reading, and I'll see you tomorrow! P.S. Please pass this e-mail on to someone you think can use some financial motivation as well as being kept in the financial news loop that could affect them. Thanks again!

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Stocks

Referenced Stocks: BBY , CBS , CFR , COST , CSCO

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