Market Talk

So, the news is pretty much the same as yesterday, but the stock market is rising today, where it fell yesterday. The euro, incidentally, is at about the same place today as it was this time yesterday (although it fell overnight,) but the stock market is rising today, where it fell yesterday.

What gives? We break it down for you on the Markets Hub.

- Hewlett-Packard’s (HPQ) suit against former CEO Mark Hurd looks “very much like it was filed in a fit of passion after hearing that Hurd had signed on with Oracle,” Reuters blogger Felix Salmon says. “There’s no tactical or strategic rationale for this: it’s just petulance, really.”

- “Hurd’s knowledge of H-P’s server and data storage-systems business will undoubtedly come in handy at Oracle, which has been aggressively moving into that very space ever since its acquisition of Sun,” Digital Daily blogger John Paczkowski says. “In that sense, Hurd’s hiring is a real coup for Oracle. Who better to put the screws to a rival than a former CEO with a bone to pick?”

- There are currently 161 potential IPOs on file that are hoping to raise $56B. Staggering numbers but, as Josh Brown points out at The Reformed Broker, not necessarily as great as they appear. “Between LBO retreads and the previously bankrupt, it remains difficult to get excited about the initial public offering dealflow, robust as the pipeline seems to be in dollar terms on the surface.”

- Former OMB Director Peter Orszag makes his debut as a columnist for the New York Times by advocating an extension of the Bush-era tax cuts for two years for the middle class, and even for the upper class if that’s what’s needed to get a bill through Congress. “Higher taxes now would crimp consumer spending, further depressing the already inadequate demand.”

- The labor force had little to celebrate this Labor Day, Robert Reich says. Organized labor is down, and non-organzed labor is facing joblessness and underemployment. “Face it: The national economy isn’t escaping the gravitational pull of the Great Recession.”

- If the market has been overly bearish lately, paving the way for relief rallies and such, it’s not really showing. John Hussman notes the VIX, which remains in relatively placid territory. “It’s difficult to look at the evidence and conclude that investors are excessively bearish, much less terrified here.”

- FCIC hearings revealed how reliant Lehman was on daily, short-term funding to cover longer-term costs. “It was a recipe for disaster, a trailer park in search of a tornado,” Barry Ritholtz writes at The Big Picture.

- “The truth is that the trouble in housing is not, for the most part, a demand-side issue,” Ryan Avent writes. “The problem is the millions of homeowners stuck in houses they can’t afford to sell. These households represent a significant shadow supply of foreclosures-in-waiting. I agree that it would be silly for the administration to try to support housing prices by offering more goodies to potential homebuyers. But it doesn’t follow that letting prices go their own way will magically get housing markets moving again.”

- “Newspaper advertising revenues are on track this year to dive to a 25-year low of approximately $26.5 billion, or 47% of the record $49.4 billon in sales achieved by the industry as recently as 2005,” Alan Mutter notes.

- What’s up with Google’s logo today?

- The multi-year deal pay-cable movie channel Epix and Netflix (NFLX) agreed to is “a major move for Netflix, and undoubtedly a nice cash infusion for Epix, which has struggled to get carriage deals from traditional cable operators,” MediaMemo blogger Peter Kafka says. “This deal may make Netflix more competitive with cable, but it’s not designed to threaten Hollywood’s DVD business.”

- Demand Media filing a $125M IPO at a reported $1.5B valuation shows making it in the online content business is a “long march to the big time,” Kara Swisher writes. “Hence, the IPO, which will give it both cash and stock to use to grow itself, either organically or via acquisition, all while keeping the costs of content creation lower and lower via innovative technology.”

- Small business optimism sharply declines for second straight month. “Businesses and households are losing confidence and are adjusting their spending and investing plans accordingly,” Ryan Avent says. “A chill has settled on expectations around the country. It will take credible policy steps to change the tune.”

- Former Hewlett-Packard (HPQ) CEO Mark Hurd’s severance package, which could be worth as much as $30M, is “appalling,” writes Nell Minow, shareholder activist and editor of The Corporate Library blog. “While most CEO contracts exempt poor performance as a reason for ‘termination for cause,’ there is no reason to permit a departure following an ethics violation to be characterized as a resignation — when the result is a $50 million payout that would otherwise stay in the corporate bank account.”

- Now that Mark Hurd is no longer H-Ps’ CEO, a “dirty little secret” has been revealed about H-P’s business model. “H-P is a sprawling, ungainly conglomerate of tech companies that have only tangential connections to each other and that generate the most tepid of synergies,” writes Kevin Kelleher at AOL’s Daily Finance blog.

- This won’t get the attention of the Hurd departure, but TechCrunch reports the man who designed the Palm Pre has left H-P for greener pastures. Peter Skillman’s exit is the latest in a string of departures from the recently acquired smartphone maker.

- Productivity unexpectedly posted its first quarterly drop in 18 months as output growth slowed and labor costs rose. “If you were looking for one more reason to wonder about the already shaky prospects for a recovery in the labor market, today’s report on second-quarter worker productivity is just the ticket,” James Picerno writes at The Capital Spectator.

- Don’t get too anxious about Google (GOOG) and Verizon’s (VZ) joint proposal: the net neutrality situation still hasn’t changed much, Stacey Higginbotham says at GigaOm. “The good news is nothing about this compromise has any teeth without the FCC deciding to make it part of its official rules on network neutrality.”

- Rail traffic rose 4.1% last month compared to July 2009, but was still 15% lower than in July 2008, Calculated Risk reports, citing data from the Association of American Railroads. “Rail traffic collapsed in November 2008, and now, a year into the recovery, traffic has only recovered part way,” Calculated Risk adds.

- Former Sen. Ted Stevens, along with eight others, die in a plane crash in Alaska.

- US GDP growth at 2% is unsustainable; economy either has to break higher or fade lower sooner than later, Stu Hoffman, chief economist at PNC Bank, tells Big Picture blogger Barry Ritholtz. “Just as a 747 cannot maintain altitude at 200 mph, neither can the economy sustain a 2% GDP,” Hoffman says. “So the captain of the plane must increase thrust and fly faster, or lose altitude and land. The economy…behaves the same way.”

- There were warning signs about former H-P (HPQ) CEO Mark Hurd that investors and the media largely ignored, writes Eric Jackson, founder and president of Ironfire Capital. He cites the “piggish behavior [Hurd] and his executive team were exhibiting at the expense of H-P shareholders,” in the form of excessive compensation and lavish perks in last few years. “In my book, if you’re piggish about the small stuff like expense reimbursements, you’re going to be piggish about the big stuff.”

- Disappointing jobs report last week as well as unfavorable monthly revisions don’t bode well for stock market and economic recovery. “Pending a change in policy mix which is anchored by meaningful structural policies, the equity market is unlikely to sustainably regain its composure and yield levels will continue to surprise on the downside,” says PIMCO CEO Mohamed El-Erian.

- S&P 500′s short-term uptrend remains intact. “Looking at the 15-day intraday chart, the index held the bottom of its uptrend channel nicely,” Bespoke Investment Group writes, noting technicals look pretty good this week. “It looks like traders are going to try and at least test the highs made last week.”

- “If you’re on Wall Street, and you’ve seen the stock markets recover and the banks go from virtual insolvency two years ago back to record profit numbers now,” then you may think the recession’s over, Rolling Stone’s Matt Taibbi says. But if you’re looking for a job “somewhere outside the Beltway and/or lower Manhattan, and you’re noticing that the only easy job openings this year were temp gig taking census surveys (and even those have dried up), then your view of things is going to be no way the recession has ended.”

- Investors should embrace the uncertainty and turmoil plaguing the economy rather than whine about it, Justin Fox writes at Harvard’s Business Review blog. “Think about the feelings of relative economic certainty and confidence that prevailed in 2006, or in 1999,” says Fox. “Investing right now may seem scary and dangerous, but chances are that it’s a lot less dangerous than investing three or four years ago.”

- Macroeconomic Advisers changes its stance on when it sees the Fed boosting rates, shifting to late 2011 from mid-2011. “Given our expectation that any downward revision to the forecast will not be ‘appreciable’ and that the recovery is not ‘faltering,’ we do not anticipate either easing steps or changes to the policy guidance,” Macroadvisers blog notes.

- About that whole “cash on the sidelines” argument, John Hussman says it’s nonsense. “Analysts are pointing to an apparent pile of corporate ‘cash on the sidelines’ as if these holdings of debt securities somehow make new corporate spending more likely.”

- AOL’s Daily Finance blogger Peter Cohan wonders how effective former H-P CEO Mark Hurd really was, especially since H-P’s cash and short-term investments have slipped from $13.9B to $13.3B and it’s long-term debt has jumped from $3.4B to $14B.

- Speculation swirling that the Fed this week could announce additional measures to boost the economic recovery. But University of Oregon economics professor Tim Duy isn’t so sure. “My baseline expectation is that the FOMC statement acknowledges the weakness in recent data, but leaves the current policy stance intact.”

Hewlett-Packard shares plunged in the first full trading session after an ethics scandal prompted the surprise departure of CEO Mark Hurd. But amid Monday’s steep decline, the mood surrounding the stock remains mixed. Dow Jones options guru Brendan Conway reports (subscription required):

Overall, Hewlett-Packard options trading leaned toward bullish call options, with traders picking up nearly 165,000, compared to 142,000 puts, according to Track Data. Trading was brisk as far out as November contracts, suggesting some investors expect H-P’s executive reshuffling to have a far-reaching impact.

There was plenty of bearish or protective trading as well. Most of the activity crossed the tape in small blocks typical of retail investors.

“The day’s trading reflected the uncertainty of who’s going to take over,” Oppenheimer & Co. Chief Options Strategist Michael Schwartz said.

H-P shares closed down $3.70, or 8%, to $42.60, a new 2010 closing low. Today’s decline marked the largest one-day dollar drop since September 2001 and largest one-day percentage decline since August 2004. HPQ has now fallen for five straight trading days and eight of the last nine. And the Dow, which finished up 45 points to 10699, would’ve gained 73 points if H-P had merely finished flat.

Analysts remain positive on H-P, but somewhat cautious on the stock.

“While we continue to like HP’s worldwide reach, leadership position in multiple technology sectors, these events (and sudden nature of the announcement) will cast a shadow over the story and the stock until a new CEO is chosen,” Janney Capital says.

Susquehanna says Hurd’s ouster “substantially” increases “operational risk” at HPQ. Firm shaves 12-month target to $50 from $58. Stifel Nicolaus also keeps HPQ at buy, but cuts target to $53 from $62 and says shares “likely to trade sideways until a CEO successor is named.”

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