You can find Debbie Downers in the stock market as well. Today’s example is Mattel (NYSE: MAT). After it reported lower earnings and an 11% drop in sales, it dragged Hasbro (NYSE: HAS) down with it.

The reasoning behind most of these moves is that the pressures hurting one company in a sector should be impacting the competition as well.

But that isn’t always the case.

We can find numerous examples of companies in the same industry with the same pressures that deal with those challenges differently. Southwest Airlines (NYSE: LUV) was able to put up considerable numbers over the past year as it’s competition suffered greatly. It did this by hedging its oil costs correctly.

Maybe Hasbro hasn’t done the exact same thing as Mattel – and will report similar earnings figures? But who’s to say they did. As smart investors, we cannot assume that is the case. As of this writing, Mattel is down 16% and Hasbro is down 9%.

Lets think about that, a 9% percent drop on no information about their business model. It’s the kind of emotional movement that value investors love.

Source: Mattel’s (NYSE: MAT) New Doll: Debbie Downer

This from Money Morning:

Although bank-to-bank loan rates fell for the sixth-straight day yesterday (Monday) – decreasing fears that the corporate-lending market was going to seize up – a new reality has emerged: As the song says, “only the strong will survive.”

Strong companies will navigate the uncertainties of the markets in the months and years go come; weaker players will falter, fall into bankruptcy, and get gobbled up by larger, more-healthy companies.

“This is unequivocally, absolutely, positively” the new reality, says R. Shah Gilani, a retired hedge-fund manager and Money Morning contributing editor who has emerged as a top expert on the global credit crisis. “And the unspoken reason is that even after the credit crisis has been alleviated, it will not be over.”

If the credit markets continue to improve as they have been over the past week or so, then the more-creditworthy companies should discover that loans are easier to get, and carry a lower interest rate, to boot. As Money Morning has been reporting, the London Interbank Offered Rate (LIBOR) – a benchmark rate for short-term loans – has been dropping. Yesterday, LIBOR for three-month dollar loans fell for the sixth straight day, declining 0.36 percentage points to reach 4.06%.

The recent decline in LIBOR — which establishes lending costs for individuals and for businesses — reflects a growing trust in the financial sector after governments around the world have guaranteed billions of dollars worth in bank debt and have also unveiled plans under which they will buy stakes in weak and foundering banks.

“The general economy was weakening, and that weakening has taken a turn for the worse,” Robert DiClemente, an economist at Citigroup Inc. (NYSE:C), told The Associated Press. “And any company that was already facing more-challenging business conditions, when they’re confronted by tighter credit, it gives them one less degree of flexibility.”

LIBOR Lessons

The LIBOR decrease has helped ease some investor demand for U.S. Treasury bills – considered the ultimate in safe investments. The yield on the three-month T-bill surpassed 1.0% for the first time in nearly two weeks, rising to 1.12% yesterday from 0.82% late Friday.

The U.S. Treasury Department auctioned $25 billion in three-month bills at a discount grate of 1.25%, up from 0.50% last week, and another $26 billion in six-month bills at a discount rate of 1.80%, up from 1.10% last week, The AP reported. Those higher rates for short-term government debt suggest “continued healing in the credit markets,” Tony Crescenzi, an analyst with Miller Tabak & Co. LLC., wrote in a research note to clients yesterday.

As investment funds slowly take money out of safe assets, they are turning to assets that carry a bit more risk – presumably for a better return.

Indeed, Miller Tabak’s Crescenzi noted that yesterday’s mortgage-backed securities market signaled “increased risk taking.”

And the market for commercial paper — the unsecured debt that companies sell for short-term financing — continued to improve. Commercial paper rates were generally down 0.20 to 0.40 percentage points for key issuers tapping the market Monday, including American Express Co. (NYSE:AXP), General Electric Co. (NYSE:GE), HSBC Finance (ADR: HBC), AT&T Corp. (NYSE:T) and The Coca-Cola (NYSE:KO), Kevin Giddis, managing director of fixed income at Morgan Keegan & Co. Inc., told The AP.

Just a few weeks ago, even stronger companies like AT&T were having trouble selling paper for longer than overnight. Now, investors are starting to step in and buy paper with 30-day and 60-day maturities, Morgan Keegan’s Giddis said. On Oct. 27, the Federal Reserve is scheduled to start buying commercial paper from issuers that can’t find buyers in the market. 

Against this still-slightly-uncertain credit-market backdrop, companies are going out of their way to broadcast their financial strength – and ability to be financially flexible – to the capital markets.

For instance, engineering-and-construction giant The Shaw Group Inc. (NYSE:SGR) said it was able to amend its credit facility so it can use up to $200 million as collateral for letters of credit. Trucking company Werner Enterprises Inc. (NASDAQ:WERN) emphasized that it is a “debt-free company.” And U.S. toymakers Mattel Inc. (NYSE:MAT) and Hasbro Inc. (NYSE:HAS) both underscored they have little debt on their books and have plenty of cash available.

Even so, both Werner and Mattel conceded that they may feel the credit-crisis pinch – albeit indirectly – because so many of their suppliers and customers have not been able to obtain financing of their own.

Source: Although Bank-to-Bank Loan Rates Fall for the Sixth Straight Day, Only the Strong Will Survive

• Halliburton Co. (HAL) yesterday (Monday) announced a third quarter loss of $21 million, or 2 cents per share, compared to a gain of $727 million, or 79 cents a share, for the same period in the prior year. The Houston, Tex.-based oil and energy services firm attributed the loss to financing expenses including $693 million in costs related to the redemption of convertible bonds, Bloomberg News reported.

• Toymaker Hasbro Inc. (HAS) posted a gain of $138.2 million, or 89 cents a share, for its fiscal third quarter, compared with a profit of $161.6 million, or 95 cents per share, which included a tax benefit of 17 cents per share for the same period in 2007. Due to its popular Star Wars action figures and Playskool line of toys for preschoolers, Hasbro beat analyst expectations of 86 cents per share, despite the tough retail environment, Reuters reported.

• The Conference Board yesterday (Monday) announced its U.S. index of leading economic indicators gained 0.3% in September, after dropping 0.9% in August. “The extreme volatility in the financial market, and the near freeze-up of credit, will no doubt weaken the economy further,” said Ken Goldstein, labor economist at the private research group, MarketWatch reported. “But latest data suggest that conditions in the non-financial economy are not falling apart.”

• Jet Airways Ltd., India’s largest private airline, decided to cancel plans for a layoff of 1,900 workers after the plan received harsh criticism from the Indian government and local labor unions. The airline said it would reinstate the 800 flight attendants already let go, The Financial Times reported, and discontinue plans to fire an additional 1,100 workers. Praful Patel, India’s aviation minister, called for a reduction in jet fuel taxes to help the struggling carrier.

• Netflix Inc.’s (NFLX) third-quarter profit surged 30% the company said yesterday (Monday) in a statement. Netflix earned $20.4 million, or 33 cents per share, for the three months ending in September, compared with $15.7 million, or 23 cents per share, in 2007. Revenue rose 16% to $341 million, from $294 million last year.

• U.S. home prices will fall 8%-10% further before they show signs of stabilizing, Fitch Ratings Inc. said yesterday (Monday). National home prices have declined a full 22% from the peak hit in 2006, the agency said in a note. Fitch has a peak to trough forecast for prices to decline 30% according to Reuters.

• A U.S. jury yesterday (Monday) found Parmalat SpA guilty of defrauding Citigroup Inc. (C) in a case stemming from the Italian dairy company’s 2003 collapse, Reuters reported. Citi was subsequently awarded $364.2 million in damages.

• Merrill Lynch & Co. Inc. (MER), the biggest U.S. brokerage, plans to cut about 500 jobs in its trading division, people with knowledge of the situation told Bloomberg News. The cuts equate to about 1% of the company’s 60,900 employees, and include traders and institutional salespeople in the firm’s fixed-income and stock departments.

Source: Global Investing Roundups Tuesday, October 21st, 2008

Fortunately, the analyst consensus holds that the economy expanded at a faster pace than the 1% rate of the first quarter, putting us safely outside of recession territory. Investors get another view inside the struggling labor market where layoffs (mainly among financials) have resulted in overall job contractions for five consecutive months.

Economists hope for another positive showing for manufacturing from the ISM index, especially on the heels of last week’s strong durable goods data. Finally, Exxon-Mobil Corp. (XOM) and Chevron Corp. (CVX) headline this week’s installments in the ongoing earnings season as investors get a reprieve from the weak financial releases and see just how much record oil and gas prices have padded the pocketbooks of those energy-sector executives [Click here for additional insight on Chevron, in Money Morning’s new “Buy, Sell or Hold” feature.]

Market Matters

The Federal Communications Commission late Friday approved the $3.3 billion merger of Sirius Satellite Radio Inc. (SIRI) and XM Satellite Radio Holdings Inc. (XMSR), a move that means the still-nascent industry might actually be able to operate at a profit. [Please click here for a complete news story on this satellite radio merger posted elsewhere in this issue of Money Morning.]

With the immediate threat of a Freddie Mac (FRE)/Fannie Mae (FNM) failure looking less and less likely, investors were able to focus more on the heart of earnings season. Thus far, the results have been mixed (or confusing) at best. Of course, financials took top priority (again) as the nation’s largest bank by asset size, Bank of America Corp. (BAC), saw its profits decline by more than 40%, much to the delight – that’s right, delight – of investors who feared much worse. Wachovia Corp. (WB) followed up with a trifecta of bad news:

• A greater than expected loss.
• A dividend cut.
• And some employee pink slips.

And yet, its stock price was up for the week as investors began to believe the worst of the news may be behind us (a feeling that will only last until the next bit of bad news hits).

Outside of the financial world, investors had plenty of reasons to grin. Heavy equipment-maker Caterpillar Inc. (CAT), oil giant ConocoPhillips (COP), communications staple AT&T Corp. (T) and the world’s biggest drugmaker Pfizer Inc. (PFE) each announced strong earnings. Even Internet retailer Amazon.com Inc. (AMZN) shrugged off prospects for weak consumer activity and raised its year-end forecast. Southwest Airlines Co. (LUV) accomplished what none of its competitors could do by reporting its 69th consecutive profitable quarter, thanks to some “ingenious” hedging moves. On the downside, US Airways Group Inc. (LCC), UAL Corp. (UAUA), and JetBlue Airways Corp. (JBLU) suffered along with the rest of their winged brethren; Costco Wholesale Corp. (COST) showed that even discounters can struggle during dire times (apparently consumers can’t afford bulk purchases); and Ford Motor Co. (F) posted its worst quarter – ever. [Please click here for a “Buy, Sell or Hold” analysis of Ford shares elsewhere in today’s issue of Money Morning.]

United Parcel Service Inc. (UPS) had trouble dealing with the higher gasoline costs, while Texas Instruments Inc. (TXN) lowered its outlook for the year. Some reports required a tad bit more analysis. While Apple Inc. (AAPL) rejoiced over its “best June quarter for revenue and earnings” in its history, it disappointed investors with a weaker-than-expected end-of-year forecast.

Toymaker Hasbro Inc. (HAS) benefited from strong demand for “Iron Man” products, though management worried about the holidays as the company finds itself forced to pass along higher gas prices to consumers. Merger talks resurfaced (another sign of business optimism) as drugmaker Roche Holding Ltd. (OTC ADR: RHHBY) will acquire the remaining shares in Genentech Inc. (DNA) it doesn’t already own. Finally, Carl Icahn will have more say in the future of Yahoo! Inc. (YHOO) deals as he and his “cronies” will be given three seats on that “infamous” board.

Consumers got an even greater reprieve from recent energy woes as oil prices continued their decline, and crude even dropped below $123 for the first time in several weeks. Likewise, gas prices declined to just above $4 a gallon nationally (a drop of 10 cents per gallon) as the higher weekly inventory report revealed a continued slide in demand, and as service stations owners looked to regain those gas-guzzling customers.

While investors tried to make sense over the recent earnings reports, some took solace in the lower energy prices, and hope the “trend” continues as summer travel winds down and the holiday shopping season approaches.

A surprisingly weak housing report put a damper on the newfound optimism from the oil decline and prompted some late-week selling that moved the Dow Jones Industrial Average Index into the red for the week. Still, the general mood seems to be changing, as investors are more willing to dip their toes back into the equity pool – though let’s hope they do so without badly stubbing their toe in the process.

• Yahoo! Inc. (YHOO) agreed to give three spots on its board of directors to activist investor Carl Icahn, a vocal opponent of the way current Yahoo management handled a buyout offer from Microsoft Corp. (MSFT). Icahn will fill one board spot himself, while the Yahoo board will select from Icahn’s pre-approved list of nine potential candidates to fill the other two spots, Bloomberg News reported.

• XM Satellite Radio Holdings Inc. (XMSR) yesterday (Monday) announced better than expected net subscriber gains for the second quarter, Reuters reported. XM added 322,000 new net customers during the quarter, up 17% from the same period the year prior.

• The Conference Board’s index of leading economic indicators slipped 0.1% in June, MarketWatch reported. “The domestic economy is showing no sign of strength,” said Ken Goldstein, labor economist at the Conference Board. “The deep financial crisis, a prolonged, intense slump in housing, high gasoline and food prices, weak consumer confidence and a weak dollar are all combining to produce unrelenting downward pressure on economic activity.”

• Crude oil for August delivery gained $2.32 to close at $131.20 on the New York Mercantile Exchange on news of a possible hurricane and continued political tensions with Iran. “We’re watching Tropical Storm Dolly because of the strong possibility that it will strengthen and head into the Gulf,” Tom Bentz, a broker at BNP Paribas SA (OTC ADR: BNPQY) in New York, told Bloomberg News. “The meeting with Iran ended in a stalemate. There were hopes that tensions might subside, instead they are being cranked up.”

• Toymaker Hasbro Inc. (HAS) said yesterday (Monday) that second-quarter profit rose to $37.5 million, or 25 cents per share, from $4.8 million, or 3 cents per share, a year earlier. Sales jumped 13% to $784.3 million from $691.4 million. Analysts expected sales of $675.4 million, the Associated Press reported. North American sales rose 11% and international sales were up 15%.

• Corn prices sank to a seven-week low yesterday (Monday) after crops continued to rebound from last month’s flooding, an indication that some relief may be on the way for consumers who are facing higher prices for meat, dairy and other foods. December corn prices fell 17.5 cents to $6.11 a bushel on the Chicago Board of Trade, after earlier falling to $6.03, the lowest since May 29, the Associated Press reported. Corn has plunged about 20% in the last month.

• Kendrick Wilson, a senior Goldman Sachs Group Inc. (GS), investment banker will take a leave of absence to advise U.S. Treasury Secretary Henry Paulson Jr. on the nation’s banking crisis, Reuters reported yesterday (Monday). Wilson, a vice chairman of investment banking and chairman of Goldman’s financial institutions business, has played a key role advising banks on capital raising and reorganizations.

• American Federation of State, County and Municipal Employees President Gerald McEntee sent a letter to Citigroup Inc. (C) chairman Sir Win Bischoff, Friday asking that the company break itself up. McEntee said a place to start could be to break up Citigroup into two separate entities – one for securities and investment banking, and one for retail banking, Reuters reported.

Source: Global Investing Roundups Tuesday, July 22nd, 2008

• Merck & Co. Inc. (MRK) reported yesterday (Monday) that it its first-quarter profit rose to $3.3 billion ($1.52 per share), nearly double the $1.7 billion (78 cents per share) earned a year ago. The drug maker cited a $1.4 billion payment from AstraZeneca PLC, a partner drug company.  Excluding that and other one-time items, Whitehouse Station, N.J.-based Merck earned 89 cents per share in the latest quarter the Associated Press reported.

• Arch Coal Inc. (ACI) turned in one of its best quarters ever yesterday (Monday) after earnings nearly tripled in the first quarter to $81.1 million. The company earned just $28.7 million over the same period last year. With demand for coal rising due to Asia’s rapidly expanding economies, Arch estimates that global coal demand will outstrip supply by 25 million to 35 million metric tons, according to Forbes.

• Northwest Bancorp Inc. (NWSB) reported first-quarter earnings of $12.6 million, up from $11.3 million last year, Thomson Financial reported. The bank holding company said its profit in the latest quarter reflects a gain of $409,000 related to Visa Inc.’s (V) initial public offering.

• First quarter profit for Bank of America Corp. (BAC), the second largest bank in the United States, dropped 77%, the third consecutive quarterly profit decline and short of analysts’ expectations.  “The first quarter was much worse than our expectations three months ago,” Chief Executive Officer Kenneth Lewis said on a conference call, Bloomberg reported. “It’s too early to strike up the band and say that happy days are here again.”

• Shares for Ohio-based bank National City Corp. (NCC) plummeted almost 28% yesterday (Monday) after the company slashed its dividend to 1 cent and agreed to sell a $7 billion stake in the company at a 40% discount to a group of investors. The bank’s previous dividend was 21 cents. The bank also reported a first-quarter loss of $171 million, BusinessWeek reported.

• Mattel Inc. (MAT), the largest global toymaker, announced its first loss in three years yesterday (Monday) due to higher production costs in China. Mattel posted a net loss of $46.6 million, or 13 cents per share for the first quarter, missing analyst estimates that had anticipated a 1 cent profit per share. The stock dropped over 8% to close at $20.00.

• Hasbro Inc. (HAS) posted a surprise gain yesterday (Monday) on the strength of movie-related toys such as Transformers action figures. The toy firm beat analyst expectation with a 13% increase in revenue to $704.2 million. Earnings were $37.5 million or 25 cents per share. The stock soared 9% to close at $34.65.

• Shares of MF Global Ltd. (MF) dropped over 10% yesterday (Monday) to close at $12.88 on news that several analysts lowered profit guidance on the exchange-listed futures and options broker. Analysts polled by Thomson Financial, on average, estimate a fourth-quarter loss of 6 cents per share, The Associated Press reported.