Afternoon Review

The Dow Jones Industrial Average posted the second largest one-day point gain of 889 points as bargain hunting fueled the afternoon rally on moderate volume.

The Boeing (BA) machinists’ eight-week strike appears to be coming to an end as union negotiators unanimously support BA’s contract proposal, which the machinists will vote on within five days. Workers get a 15 percent raise and bonuses totaling at least 8,000 in the first three years, while health care costs freeze for employees at the 2005 level. Changes were also made to the three key areas of outsourcing the union had identified, including parts-delivery by suppliers within factories, job security for maintenance workers, and the ability to bid for more projects in the future.

BA retained most of the flexibility they need to manage their business and the four-year contract (contracts usually are three years) gives BA an extra year of peace with 27,000 machinists that have struck four times since 1989. BA will start final negotiations with their 21,000 engineers on October 29. BA’s engineers have threatened to strike over similar disputes with job security and compensation.

BA advanced 15.46 percent. Goodrich (GR), a supplier for Boeing, was also lifted by the news and gained 15.76 percent on the day.

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McGraw-Hill (MHP), owner of Standard & Poor’s, gained 12.71 percent after having better earnings than expected. 3Q profit dropped 14 and lowered its full-year forecast as a global credit freeze dries up demand for new debt ratings. MHP cut 270 jobs in 3Q, bringing the yearly total to 1,000. The financial-services unit recorded a 14 percent drop in sales after capital markets seized up at the end of the quarter. The dollar volume of new bond issuance dropped almost 70 percent in the U.S. during 3Q, led by an 83 percent slide in September, according to estimates from Goldman Sachs.

CEO Harold McGraw said S&P is managing conflicts of interest in its business, improving ratings transparency, and making more information available to the public. He expects the SEC to announce new rules for ratings companies next month.

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Investors cheered Johnson Controls’ (JCI) decision to shut down an Ohio factory in December as General Motors closes the SUV plant that relies on the parts. Closing down the Ohio plant that employs 330 workers, is part of the commitment JCI made in September to start paring output and jobs. JCI also announced they will close down a Kentucky plant in mid-2009 that makes metal parts for seats. JCI ended the day up 12.02 percent.

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Cynosure (CYNO) declined 21.76 percent today after reporting 3Q revenue that missed analyst estimates. Management acknowledged that the healthcare equipment industry (and especially the aesthetic industry) is not immune to the current economic turmoil. CYNO is continuing to invest in direct sales and marketing infrastructure in North America, Europe, and Asia. International product revenue increased 29 percent in 3Q compared with the year-ago period. Lower gross profit margins are a result of CYNO reducing prices to “better manage their inventory.” Balance sheet has no debt and plenty of cash. CYNO is aggressively investing in its business to create a global brand.

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Wal-Mart (WMT) had its biggest jump in 20 years (up 11.07 percent) after it said it is “operating from a position of strength” with its strategy of moderating store growth and increasing operating cash flow. At WMT said today that capital spending for fiscal 2009 is projected to decline 13 percent to $13 billion and store growth is expected to slow in 2009 and 2010 as part of its capital efficiency model, which WMT said has made them “far better prepared for current economic conditions.” While WMT pares back U.S. spending, they plan to increase international capital spending in emerging markets. WMT’s CFO said the current year’s sale growth is approximately 8 percent and he sees next fiscal year sales growth of 5 to 7 percent.

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AT&T (T) advanced 13.2 percent after Morgan Stanley boosted the holdings of the company in their model U.S. equity portfolio.

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Transocean (RIG) was down most of the day on news that Northern Offshore Ltd. canceled the $750 million purchase of two semi-submersible drilling rigs from RIG after it was unable to obtain financing. RIG finished the day 4.14 percent higher.

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Despite poor 3Q earnings results, Fidelity National Information Services (FIS) climbed 27.27 percent as the payment processor forecasted earnings that exceed analyst estimates.

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Reinsurance Group of America (RGA/A) rose 11.27 percent on news that it will be added to the S&P Midcap 400 Index.

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Peter Lazaroff, Junior Analyst