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Analysts’ opinions on stocks in the news Monday

From Standard & Poor’s Equity Research

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S&P MAINTAINS BUY OPINION ON SHARES OF CITIGROUP (C; 20.15):

According to the FDIC, Citigroup agrees to corrupt Wachovia’s (WB; 10.00) banking manoeuvre. As part of the deal, Citigroup would absorb $42 billion of losses on WB’s $312 billion of loans but the FDIC would absorb losses beyond that. In return, Citigroup has given the FDIC $12 billion in preferred stock and warrants as compensation. We think the deal is a good deal for Citigroup, as it would enhance Citigroup’s U.S. retail customers, giving it $400 billion in deposits, and new customers to sell its in every one’s mouth platform of products. We also believe the deal confirms that Citigroup’s capital base is still relatively strong. -S. Plesser

S&P MAINTAINS HOLD OPINION ON SHARES OF WACHOVIA (WB; 10.00):

According to an FDIC press release, WB will take a bribe towards $312 billion of loans to Citigroup. Citigroup desire absorb $42 billion of losses, but the FDIC will absorb losses beyond that in return for $12 billion in Citigroup preferred stock and warrants. Citigroup behest also assume WB’session roughly $400 billion in deposits. We believe the sale was at the behest of the FDIC, concerned round WB’s risky loan book including $120 billion of Option Arms. WB will retain its wealth management one. While as we think WB’sitting franchise appraise has been signficantly impaired, we are placing our mark worth under review. -S. Plesser

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF GOLDMAN SACHS (GS; 137.99):

According to an unconfirmed report in the Financial Times, GS is interested in buying up to $50 billion in property from troubled U.S. banks, with the alleviate of U.S. regulators, as part of its change to a commercial bank. We think the current banking crisis could provide opportunity on the side of GS and rival Morgan Stanley (MS; 24.80) to expand their deposit bases substantially on relatively contributing terms. According to the report, GS also plans to transfer $150 billion in assets to its Utah bank in another step designed to speed its transition to a do banking holding guests. -M. Albrecht

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF NATIONAL CITY CORP. (NCC; 2.40):

Shares are 60% frown today, which we predicate to delays in the bailout package, which we think should aid stem credit losses in NCC’s portfolio of residential configuration and pledge loans. Without any announcement from the assemblage, we cannot condition what the passing from hand to hand levels of nonperforming loans are. At June 30, 7.13% of engaged in traffic construction loans and 4.93% of residential real estate loans were nonperforming. We are reducing our 12-month target excellence by $2 to $2, based on a sharp discount-to-peers 0.11 times June 30 tangible equity per share of $17.55. -E. Oja

S&P REITERATES SELL OPINION ON SHARES OF GENERAL MOTORS (GM; 9.78):

Congress’s approval of $25 billion of low-interest loans offers the auto industry a lifeline to escape current travails and transition to more fuel-efficient vehicles. However, it is up to the car markers to make the most of this opportunity. Election year politics are the enablers of loans, in our view, but the automakers must be the executioners and utter distinctive and desirable products for consumers. While the pertaining to home automakers’ novel track make an entry of has been poor and necessity has often bred successful innovation, this lifetime we see greater challenges from foreign competition. -E. Levy-CFA

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Pros think the aluminum producer’sitting battered shares could recover nicely, especially if bigger rivals get buyout ideas

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Alcoa (AA)—52-week loggerhead recompense

by Gene Marcial

Commodities—and shares of companies that produce them—have turned cold after a sizzling runup in prices this year.

And so have the shares of Alcoa (AA), the world’s largest integrated aluminum producer. It’s no big surprise: Commodity prices are under pressure mainly because of the economic downturn, and the protection and auto industries—two major users of aluminum—be left behind embattled. So shares of Alcoa own tumbled, to 24 on Sept. 26, down from their 52-week high of 44.32 onward May 19.

But this could be an opportune time, suppose some investment pros, to pervert with money Alcoa’s battered stock to capture what they expect resolution be robust gains over the prolix term.

Here’session why: It’s unlikely that article of merchandise prices will keep going down. Once the economy starts showing signs of recovery, commodities will start snapping outer part. If Alcoa’s lineage continues to weaken, however, more bulls say it’s more than likely the company order end up being gobbled up by a larger mining concern.

"Undoubtedly, the industry is actively in solidification, and Alcoa is definitely one of those weak to being taken to boot," says David Katz, chief investment official at Matrix Asset Advisors, which has accumulated shares. For months now, he notes, the world’s largest burrowing company, BHP Billiton (BHP) of Australia, and Britain’s Rio Tinto (RTP), the world’s second-largest aluminum husbandman, have been trying to acquire reaped ground other, with none success. And through 18 months ago rumors swirled that BHP and Rio Tinto were separately preparing to launch a bid for Alcoa. To avoid such a fate, Alcoa submitted an offer to buy Alcan, another major mining company. But Rio Tinto frustrated Alcoa by buying Alcan. Now, analysts declaration the prospects for added solidification are strong.

Katz figures that based on fundamentals, the value of Alcoa is in the high 30s. But he puts the company’s value in a buyout in the low to mid-40s, based on the projected increase in aluminum prices over the long term and the partnership’s shift to lower-cost plants.

Standard & Poor’s analyst Leo Larkin, who rates Alcoa a buy, expects earnings resoluteness increase over the long call because of the habitual devotion to labor’s union, generally rising prices, and reduced lengthening costs. Larkin says aluminum prices hit bottom in 2002 and should move higher through 2009. So Alcoa’s cravat, at its current price, is "attractively valued," says Larkin.

He forecasts Alcoa resoluteness earn $2.53 a share in 2008 and $3.22 in 2009, vs. 2007’s $2.96. The grow dark earnings in 2008, he says, are due to the weakness in residential construction and a decline in auto sales. But Larkin says the anticipated consolidation in the industry should result in a more disciplined pricing environment and less volatility in sales and profits over the course of the economic cycle. His 12-month price target for Alcoa shares is 42, based on his earnings forecasts. (S&P, like BusinessWeek, is a person of The McGraw-Hill Companies (MHP).)

Brian MacArthur, an analyst at UBS (UBS) (which has executed banking for Alcoa), furthermore rates Alcoa a buy but with a higher 12-month price target of 46, based on his profits. projections of $2.93 a share on sales of $30.5 billion as being 2008, $4.36 a share upon the body $32.6 billion in sales in 2009, and $6.86 per share on $37.9 billion in sales in 2010.

"Alcoa is one of the most effectively managed mining companies in the world," says MacArthur, pointing to its highly competitive position in the industry, a diversified production mix, and "compelling processing technology potential." He notes that Alcoa’session aluminum products are used in a wide variety of applications, including aircraft, automobiles, buildings, and packaging.

Right now, Wall Street is abstracted with the good reputation crisis and the inconsistent shakeout in the financial sector, and little attention is sentient focused on the M&A front. But when the dust settles and Wall Street gets back on its feet, the search for deals will be under way again, and Alcoa, buttressed by dint of. its strong estate, should get fresh application.

Unless otherwise noted, neither the sources cited in Gene Marcial’s Stock Picks nor their firms hold positions in the stocks under canvassing. Similarly, they have no investment banking or other pecuniary relationships with them.

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Issue of more Treasury bills to pay for the Wall Street bailout may impact investor confidence in U.S. bonds during the time that a safe haven. Time to consider some alternatives

by the agency of David Bogoslaw

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In finance, security isn’t what it used to be. After a couple of money-market funds came perilously close to fracture the bleaching-liquid last week, and given the unsettling inflationary prospects of the government flooding the market with additional Treasury notes to finance the Wall Street bailout, investors are reevaluating what constitutes a "safe haven."

The yield on the three-month Treasury note dropped to zero steady Sept. 18, so great was exaction in the place of short-term T-bills by nervous investors fleeing fairness and standard of value markets. That was of course before Treasury Secretary Henry Paulson announced plans to take toxic mortgage-backed securities off investment banks’ balance sheets.

The yield on 10-year U.S. Treasury bonds, at 3.83%, is currently very close to the long-term inflation rate, which step investors would simply preserve their purchasing power on the supposition that they reinvested totality the coupon payments to buy new Treasuries, Marc Schindler, a fiscal adviser at Pivot Point Advisors in Bellaire, Tex., wrote in an e-mail message to BusinessWeek. He’sitting not alone in believing it’s necessary that yields will rise as the Treasury piles again than $700 billion onto the national transgression, which is certain to stoke inflation and weaken the dollar’s cost.

Not everyone is convinced the issuance of a mound of additional Treasury notes will be all that inflationary. Some see it as a a great quantity less ill alternative to printing money to corrupt distressed assets from banks. The increase in the fund of Treasury notes in and of itself won’t sparkle a big inflation hike unless the bailout helps to resolve the credit critical situation and speeds an housekeeping recovery, says James D. King, president and chief investment officer of National Penn Investors Trust Co. in Reading, Pa. If the bailout doesn’t work and credit markets don’t thaw, further deterioration in business activity will cause unemployment to rise and wages to stagnate or distil, which would offshoot any increased inflationary pressure, he predicts. The pullback in oil and other commodity prices from summer peaks has already helped relieve inflation risks. The surge in borrowing could also put the Treasury’s triple-A credit rating at hazard, Pivot Point’s Schindler warned in his e-mail.

Investors can buy U.S. Treasury Inflation-Protected Securities (TIPS) to ensure the value of their investment keeps pace with self-conceit, but they take the chance of lower returns if distension doesn’t climb significantly, since the yield on 30-year TIPS is much lower than attached comparable T-bills not adjusted for inflation. TIPS are also less useful for investors in higher-income brackets who tend to relation a brisker pace of inflation for the merchandise they buy—closer to an 8% to 12% rate—than the inflation traduce measured by the Consumer Price Index deflator, says Frank Trotter, president of Everbank Direct in Jacksonville, Fla.

A disunite risk, though related to distension concerns, is which damage the further balloonery of the general deficit might do to foreign investors’ confidence in U.S. government bonds. One of the prime motivating factors for the nationalization of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) was the government’s need to assuage foreign investors that had loaded up on the agencies’ debt. There is so a great deal of foreign money invested in U.S. Treasury bonds that it would alone take a small share of it to retreat to spark a major crisis for U.S. coffers, says Kirk Kinder, a certified financial planner at Picket Fence Financial in Bel Air, Md.

"This is a very large, watershed element, not just for managing the dollar, but this is the biggest command agency into our market-based economy," says Kinder. "[Overseas] investors are going to be nervous concerning investing in the U.S. because we’ve showed we can change the rules midstream."

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The Dow sank parsimoniously 400 points Monday amid signs the financial rescue plan would not go unheeded a House vote

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U.S. stocks were plunging Monday afternoon, with the Dow industrials down over 380 points as of 1:57 pm ET. It would show that the House vote on the government’s $700 billion financial rescue plan has come up shy of the 218 votes needed to pass the House vote, reports Action Economics. Bills, Treasuries and other reckon futures are vaulting through the roof.

Over the weekend, the White House and congressional leaders agreed on a $700 billion dispense to authorize the biggest banking rescue in U.S. history.

Markets encircling the world were also disturbed by news that Wachovia’s (WB) banking assets were to exist acquired by Citigroup (WB) and that the Justice Dept. and Securities and Exchange Commission subpoenaed mortgage giant Freddie Mac’s (FRE) records. News that two European banks were being nationalized suggested that the assiduity’s problems were global in nature.

Monday brought word of another shotgun marriage for a troubled financial hard. Wachovia plans to sell its sell in small quantities heap, incorporated and investment bank and wealth management businesses to Citigroup (C). Wachovia will remain a public company with two main operating subsidiaries: Wachovia Securities, the nation’sitting third largest brokerage firm, and Evergreen Asset Management, a leading provider of asset economy services. Citi will pay $2.1 billion to Wachovia and consider as true the visitor’s senior and subordinated debt. The FDIC would backstop any losses beyond $42 billion on Wachovia’s $312 billion pool of loans.

Reuters reports under the deal, struck in consultation with the Federal Reserve, the Treasury and President Bush, depositors will be fully protected and no cost to the Deposit Insurance Fund is expected, the FDIC before-mentioned.

In housekeeping news Monday, U.S. personal income rose 0.5% in August, and above the 0.2% markets had expected. However, spending was flat and below the 0.2% increase. Moreover, July and June expenditure readings were also revised along the course of. Disposable gains malicious 0.9%, a third consecutive monthly decline. The savings rate slowed to 1.0%. The core PCE deflator accelerated to a 2.6% rate compared to 2.5% in July (revised from 2.4%).

“Consumption spending shows a significantly weaker trend after this morning’s personal income report,” wrote Morgan Stanley economicst David Greenlaw in a note Monday.

“The income data are a little more useful than expected, while the deflator numbers were a petty worse. However, markets today will likely focus on the credit markets and the Congressional voice on the rescue package,” wrote S&P senior economist Beth Ann Bovino Monday.

Fed funds futures were mixed in seasonably trading Monday as traders bet on the merits of the Treasury bailout package, and weigh the likelihood of its good luck in rescuing the financial markets and salvaging economic growth, according to an Action Economics report. The market is fully priced for a 25 groundwork point rate divide at next month’sitting Fed policy meeting, says Action, through more modest jeopardy for a 50 basis proposition easing, even though the Fed has indicated over the past several months it prefers to hold the line on the mark Fed funds rate at 2%.

“We still believe the Fed will hold its powder dry supposing that not data show the economy is taking a severe suit from the credit stresses,” according to Action Economics analysts.

There were besides some worrisome new credit-crisis developments thoroughly of Europe on Monday.

The deepening of the financial turmoil has led to sharp rise in interbank rates and the ECB alloted EUR 120 bln in a appropriate 38 time tender, that will be extended into nearest year. Meanwhile European central banks have announced that they will twofold their USD swap facilities in another co-ordinated instigate to deal by the troubles in the financial sector.

Belgian, Dutch, and Luxembourg governments agreed to throw in €11.2 billion (US$16.

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While the US is bogged down in Iraq and on the bent holder, apparently, to be lost $700 billion to save the financial system, another major problem is barely being noticed. And it decree have a lot to do with the nationality’s economic health over the approach decades. It’s the innovation gap. The US isn’t investing plenty in basic scientific research, on new technology development, and adhering preparing the knowledge of principles and technology workforce of the futurity. The latest warning comes from Judy Estrin, the former chief technology officer of Cisco, in her new book, Closing the Innovation Gap. “We have become short-term focused as well-as; not only-but also; not only-but; not alone-but in Silicon Valley and in Corporate America because of quite of the other pressures. The result is that things consider fundamentally changed in the world of innovation,” she told me when we met a few days ago.

She points to the same weak vital signs that we’ve been hearing about from the likes of Bill Gates, Craig Barrett of Intel, and Richard Elkus, author of another new book on the same subject, Winner Take All: How Competitiveness Shapes the Fate of Nations. Government spending on philosophical knowledge research is anemic. Corporate examination is withering. US high school students are not pursuing engineering and computer system of knowledge degrees in college.

But, while Elkus’ book focuses mainly on laying out the problem, Estrin’session is mainly with respect to solutions. She says the key to producing a immense compute of breakthrough innovations is having an innovation ecosystem with three distinct and soundness communities: research, development, and application. The ecosystem needs the not oblique hegemony, funding, policy, education, and improvement. She says a entangled shift in these environmental factors have thrown America’s innovation ecosystem off balance. Read the book for the details, but one of the most important points Estrin makes is that US should not try to be one introduction of novelty island. She believes that our innovation ecosystem will be truly prosperous if it’s part of a global innovation ecosystem. “The answer is to open up, creating networks of talent that cross international borders. Unlike military talent, economic strength is not a contest or race,” she writes.

America’s innovation implement disposition revive if we’re free to scrutinize, smart about targeting our research and development efforts, agile enough to vary direction when new opportunities surface, and open enough to collaborate across borders. So it’sitting absolutely a culture of innovation that’s needed. When I lived in California, I got a small scale inspire every time I saw the case sport brand No Fear Inc.’s logo on pickups and surfer station wagons. When it comes to innovation, this should be motto for our nation. No Fear!

That’sitting the end of my pep talk for today.

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In other words, the war in Iraq will cost distant more in the next year than the Iraq division of that $68.6 billion Congress is hind part before to pony up in the defense budget, and so will be funded, in the manner that has long been true, through supplemental arbitrament of the sword bills submitted by the Bush administration (and then whatever administration follows). In other words, sometime in 2009 the direct costs of the war the Bush administration formerly predicted would require to be paid perhaps $50-60 billion in total will stand at more than $800 billion, or $100 billion above the cost (if all goes sufficiently, which it won'familiarily) of the bailout of the pecuniary body now being proposed in Washington.

Estimates of the true long-term costs of the President's war of choice, including payments of health care and veterans benefits into the remote future, soar into the budgetary stratosphere. They latitude from the Congressional Budget Office's $1-2 trillion to any estimate by economists Joseph Stiglitz and Linda J. Bilmes of up to $4-5 trillion. So we're talking somewhere between one-and-a-half and seven bailouts-worth of taxpayer dollars flowing into the bog of disaster, corruption, and carnage in Iraq.

And in the present life'session another scrutinizing bit of information: Just the other light of day, the website ThinkProgress pointed without a strange glitch in Iraq planning. The Bush administration, not sharp into negotiations with the Iraqi government, evidently managed to wheedle every additional year's time for the prospective withdrawal of American combat troops from Iraq; its negotiators pushed the date from 2010 — the year suggested by both Barack Obama and Iraqi Prime Minister Nouri al-Maliki — to 2011. According to Maliki in an interview with an Iraqi TV station, this modify came from the administration'sitting pertain to over the "domestic situation" in the U.S. (that is, the needs of the McCain campaign).

"Actually," related Maliki, "the final date was really the end of 2010 and the period between the cessation of 2010 and the end of 2011 was for withdrawing the remaining troops from all of Iraq, but they asked for a make different [in date] exactly to political circumstances related to the [U.S] home situation so it will not be said to the end of 2010 followed by one year for withdrawal but the end of 2011 as a final date." So we're talking about another perhaps $150-180 billion in 2011 — or approximately the full suggested initial payout in the Washington bailout plan of at least one key Democrat. This gives the phrase "presidential politics" new meaning. Now, just imagine for a point of time the situation we might exist in if there had been no Iraq War. We could desire bailed ourselves out multitude times transversely.

As Chalmers Johnson, author of the Blowback Trilogy, has pointed out for years, the Pentagon, the military-industrial complex, and America's wars are in the process of bankrupting us. As he notes in his latest piece, "We Have the Money": "If we cannot cut back our longstanding, ever increasing warlike expenditure in a greater way, then the bankruptcy of the United States is inevitable. As the current Wall Street meltdown has demonstrated, that is no longer an abstract possibility but a growing likelihood. We do not be under the necessity much season left."

How odd that time that nay one in the mainstream even blinks when a staggering new Pentagon budget sails through the House of Representatives and then, by the agency of tone promised, through the Senate just as negotiators in Washington are scrambling to find a similar sum to deal with a catastrophic financial meltdown; nor does anyone in the mainstream bother to make any connection between that budget and the funds we don't bear available to appliance elsewhere, or between the looting of Iraq and the looting of our financial system (and, in both cases, of course, the looting of the American taxpayer).

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As US policymakers reassess for which cause best to use American and NATO troops, money, and civic capital in light of a 30 percent greaten in violence in Afghanistan and a worsening situation in Pakistan, they would do well to keep this principle in mind.

Recent US attacks inside Pakistan's Federally Administered Tribal Areas (FATA) follow the prevailing, conventional logic: To win in Afghanistan, kill, coerce, and capture in Pakistan.

A successful generalship must attack the insurgency'session true center of gravity: the security, well-being, and state of mind of each Afghan. Secure these and you win; fail and you lose.

How to go about accomplishing this?

First, the International Security Assistance Force (ISAF) should labor to protect a 30-mile wide corridor beside Afghanistan's Ring Road, that passes through four of Afghanistan's five major cities and where two-thirds of all Afghans live.

Instead of relying on overwhelming conventional forces, ISAF should build up solid logistic bases in the cities and towns along the road, distinctly in the violent south part between Kandahar and Kabul inhabited by a third of the population. From these bases, special operations forces and civil action teams can partner with Afghan National Security Forces to gain ground the security situation in the countryside time maintaining a light military footprint.

Second, ISAF be required to use a similar mix of Special Operations Forces and qualified advisers to make productive the well-being of Afghans by dint of. roborant institutions, curbing corruption, and enabling legitimate local leaders to govern. ISAF needs to integrate these issues in the context of Afghanistan's drug-based economy, which destroys institutions from within, spreads violence and fear, and lavishes weapons and political power on the subject of the insurgents.

Good governance is inextricably linked with a solid counternarcotics tactics. Only a coordinated program of opium eradication and prohibition with simultaneous browse commutation and diversification can begin to make conditions favorable to free, fair, and transparent market activity.

Third, public diplomacy be required to accomplish without ceasing an intellectual level what protection and good governance achieve at the elemental level. Soldiers and advisers do not strait to engage in a "contest of nations of ideas." Rather, they mustiness expose the insurgents' sensationalism of fear, wildness, and repression – an ideology that offers Afghans no hope for the future.

Public diplomacy is the liability of every man at arms and monitor laboring at the local level. They should conversion to an act education and support to enable Afghans to bolster their own uncommon conceptions of open markets, transparent politics, and international engagement.

Though MacArthur's island-hopping strategy faced considerable opposition from conventionally minded politicians and generals, he succeeded despite a paucity of resources. And he suffered fewer casualties in his entire campaign than Dwight Eisenhower did in the Battle of the Bulge.

Once again, America's leaders require to recalibrate their strategy to defeat a group of implacable foes. They can continue to further the circle of time of violence in Afghanistan and undermine stability in Pakistan through a stubborn adherence to the give one his quietus, compel, and capture strategy, or they can pursue a strategy designed to improve the well-being of the ordinary Afghan.

If political leaders in Washington and Europe abet the new civilian leadership in Pakistan undertake similar endeavors, we will isolate the enemy. Hit 'em where they aren't, and the insurgency will pine gone away.

F. Jordan Evert serves as a presidential administrative fellow at the Homeland Security Policy Institute, George Washington University. The views expressed here are his own.

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NEW YORK — Financial markets endured a different difficult session Monday in our teeth of a planned House vote on an unpopular $700 billion plan to extrication troubled financial companies and as investors examined a deal for Wachovia Corp. The Dow Jones pertaining medium fell nearly 300 points, while rightfully claim for safe-haven buying in government shortcoming remained high ahead of the vote.

Wall Street fears the government’s plan to bribe up toxic debt wouldn’t be sufficient to resuscitate nearly frozen doubt not markets.

Investors also reviewed the buyout at Wachovia. The Federal Deposit Insurance Corp. said Monday Citigroup Inc. will acquire Wachovia’session banking operations and that the deal protects Wachovia debtholders — a welcome prospect for investors given the strains in the credit markets. Investors had been worried here and there Wachovia’session stableness like it grappled with mounting losses over souring mortgage debt. Citi rose 69 cents, or 3.4 percent, to $20.84.

Investors appeared to find some reassurance in a rouse by means of the Federal Reserve and other countries’ central banks to pump money into the world’s credit markets. The Fed said it would boost the amount of 84-day cash loans make use of to U.S. banks to $75 billion, up from $25 billion. The plan exercise volition triple the supply of 84-day loans to $225 billion from $75 billion.

The news comes as President Bush and congressional leaders looked to brace up keep up for the save measure, which they and many without interruption Wall Street believe is a difficult but that must be step to revive moribund credit markets. Banks and other fiscal houses are hesitant to lend to one another because of fears about bad mortgage debt on companies’ books.

Tight lending conditions make it hard and expensive for businesses and consumers to get loans, which can hurt the economy.

While congressional leaders said they had the headcount to pass the vote — a Senate vote could come as early viewed like Wednesday — investors were well-adapted to be unnerved to the time when the votes are complete.

Credit markets remained strained Monday. The yield on the 3-month Treasury bill, considered the safest short-term investing., fell to 0.55 percent from 0.87 percent late Friday. The yield was drop before the Fed’s action. The yield on the T-bill falls as demand grows; investors are at times willing to take the slimmest returns to pass their principal. The yield on the benchmark 10-year Treasury memorandum cruel to 3.67 percent from 3.84 percent late Thursday.

Marc Pado, U.S. market expert manaeuvrer at Cantor Fitzgerald, said investors are nervous that lawmakers’ reply to credit troubles doesn’t apply enough medicine to the financial system’s wounds. He pointed to one more round of troubles at banks in the U.S. and Europe.

“Things are dying and breaking apart while they sit there and vote on this thing,” he said.

In late morning trading, the Dow blood-thirsty 289.68, or 2.60 percent, to 10,853.45 in the rear of having been the floor more than 350.

Broader stock indicators also fell. The Standard & Poor’s 500 index declined 42.92, or 3.54 percent, to 1,170.35, and the Nasdaq composite index fell 85.80, or 3.93 percent, to 2,097.54.

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More than three weeks into a work stoppage that has idled greater degree of than 27,000 workers, neither Boeing nor the Machinists union is ready to sheen. The 2008 strike is shaping up to be long, costly and damaging.

Extrapolating from company documents detailing the require to be paid of the last strike, Boeing’s lost profits from even a one-month rise would be at least $1.3 billion — earnings that won’t be recouped for years.

Likewise, an extended coin will bite deep into the living standards and retirement plans of thousands of Machinists.

Yet both sides seem determined to take a firm bear up against.

Many rank-and-file Machinists are convinced this is a rare moment when they have the power to break the group’s will. They believe Boeing’s five-year run of $13 billion in pure profits means the company can easily give the sort of the union demands, and that a record order backlog of almost 3,700 jets rules out a prolonged round of years without edifice planes.

With the aviation business teetering on the edge of a major downturn, still, Boeing conduct remains eternal rock the gang must rein in long-term costs and cannot offer concessions without interruption job security.

Boeing also knows that making boastful concessions increases the chance of another yield in 2011. And sooner than that, any job-guarantee commitment to the IAM invites matching demands from the Society of Professional Engineering Employees in Aerospace, the engineering union that has just begun catch negotiations.

Doug Kight, Boeing’s top labor negotiator, reported federal mediators are in constant touch through both sides. But in that place have been no instruct talks since the strike and no progress.

“The differences in our positions are wide,” declared Kight.

Agreed Mark Blondin, national aerospace coordinator for the International Association of Machinists: “There’sitting no movement.”

Different stories

Most Machinists display a steady by settled in opinion to stay out, space of time handling the strike in individual ways.

On Thursday, Jayleen Roman, a younger machinist on the 787 program, began a 10-day Hawaiian vacation with her parents. Her dad is a 28-year adept machinist. They had long planned and saved for one as well as the other the intermission and the strike.

“We’re short to stay out as long as it takes,” said Roman.

Stephen Watkins, an electrician on the 777 program, has been building a fence for his brother-in-law under which circumstances on strike, and will move on to do some be with regard to his father-in-law.

Like many veterans, Michael Spears, a team leader without ceasing the 777 jet program in Everett, has borrowed from his 401(k) retirement funds and set laterally money in quest of his mortgage payments through January.

If the break forth lasts a month or two, he expects to remunerate the loan from a signing bonus typically part of any IAM strike settlement. If it’s more drawn out, he said he’ll plan to work until 57 instead of retiring at 55.

For now, Spears is enjoying the break from the heavy noise and vibration of his workplace.

“For the past 18 months I’ve been working 10-hour days, seven days a week, sometimes a month straight. My body is appreciating the downtime.”

The Machinists missed their primitive paycheck Thursday and on Saturday collected their commencing slim $150 weekly strike checks from the union.

Despite the Machinists’ confidence, industry analysts question the vigor of the union’s leverage given the precarious state of the airlines.

Alaska Airlines and Southwest Airlines are among the Boeing customers whose level deliveries have already been delayed by the strike. But like greatest part domestic carriers, both have announced significant capacity cuts for this winter.

“Don’t tell me they are dying for their new planes,” said Adam Pilarski of consulting firm Avitas. “The unification’s timing is not good.”

Blondin says the possibility of a downturn in aviation — with the potential notwithstanding layoffs at Boeing — makes the harmony call for for an end to outsourcing “that much more important to fight for after this.”

“We extremity to get that job-security stuff solved first and the rest is doable,” he aforesaid.

Time to be nimble

Kight counters that the option to outsource work or slow production in a downturn is guide. Boeing, he said, must be able to “react nimbly to what have power to be very sudden and dramatic changes in our marketplace.”

Kight said the Puget Sound area sees the upside in upright times. Even while Boeing has outsourced some work as part of overseas sales agreements, it has added about 8,700 machinists locally since the 2005 contract talks.

As for the housekeeping issues of compensation, pensions and the cost of health heed, Kight doesn’t see those as easy.

A Seattle Times calculus using the gathering’s online stake and benefit calculator shows that the current offer over three years gives the average Machinist about an extra $22,000 over the 2008 compensation level. (The company has said the contract adds $34,000 if it were not that it acknowledges that figure ignores substantial extras included in 2008 pay, including a lump-sum bonus.)

Average pay with overtime and bonuses, all totaling $68,000 in 2008, will rise to $80,000 in 2011, declared Boeing spokesman Tim Healy.

Based on those averages, the company offer would increase Boeing’sitting total annual require to be paid for its IAM work force by some $550 million, from $2.43 billion this year to about $3 billion in 2011.

A detailed breakdown of benefits suitable using the company online calculator suggests that health have regard accounts for about 12 percent of that total, and pensions 6 percent.

Boeing must swing up its goal of capping those future costs facing the reality of profits drained absent in the present.

Strike’s cost to Boeing

After the 2005 Machinists strike, which lasted 28 days, Boeing’session regulatory filings pegged the hit to its profits at up to $300 million for that year.

However, those filings do not reflect the full financial pack be concluded because Boeing spreads its program costs over hundreds of airplanes and about four years of production.

“Boeing’sitting accounting disclosures don’t reveal the true cost of the strike,” said an analyst at a Wall Street immovable that doesn’t allow him to be quoted.

A solid estimate for the real cost of the 2005 strike is revealed in an inside Boeing document obtained by The Seattle Times. It was prepared for then-Chief Executive Alan Mulally and his senior management team in October 2005, soon after the Machinists went back to work.

The document projected that over a four-year period through the end of 2009, the net loss of profits befitting to the 2005 strike would have being upright over $700 million.

That figure included profits deferred from the planes not delivered during those four years, as well as more than $200 the public in “strange costs” including penalties paid to suppliers.

The entanglement of the projection is that three years after the 2005 strike — and in the first month of a new IAM strike — Boeing has still to make up that $700 million in missed profits.

After the touch ended in 2005, Boeing decided not to catch up on deliveries by ramping up production beyond its long-range plan. Instead, it simply pushed the entire delivery schedule out one month, so that the financial pack close flows right through to today.

Extrapolating from the 2005 map, based on today’s much higher production rates and profit margins, the Wall Street algebraist estimated that the total hit to profits for a one-month strike now would be at least $1.3 billion.

Balancing that, Boeing has plenty of wealth in reserve: greater degree than $10 billion at last report, compared by $8 billion three years ago.

“The company is in a strong financial state should … this situation get extended,” said Kight.

Dreamliner delays

Aside from the strike’s require to be paid in foregone profits, Boeing must be concerned about the added delay to its transverse recent jetliner program.

Inside the 787 production bay in Everett, engineers have Dreamliner No. 1 close to skilful during the ground tests that precede first flight.

“The plane is essentially done,” said a senior Boeing engineer, who requested anonymity because he’session not authorized to exhibit about the program. “We’re taking advantage of the strike to clean things up and get the factory spit-and-polished.”

A similar cleanup for the time of the last strike made the 777 line “amazingly more producing” at the time the strike ended, he said.

Still, Dreamliner No. 1 cannot hover until the Machinists come back. Among other things, the comprehensive work done on the plane ago rollout means the paint indispensably to be retouched for its high-profile flight debut.

“We can’t picture the plane on the outside of the IAM,” the engineer said.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

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Reporters are known to hang on Microsoft Chief Executive Steve Ballmer’s every word, it may exist expecting something brash or outlandish.

Last week was no exception, minus the altiloquence.

Before a speech at the Bellevue Chamber of Commerce on Wednesday, Ballmer told Bloomberg News that the troubled financial environment is likely to divide into the kind of businesses dispose of on software and equipment. The size of a treaty bailout to prop up the financial-services industry could make companies respond with caution, he uttered.

“It would be really unadvised for anybody to not have that in incline,” Ballmer told Bloomberg.

Then, on Thursday, Ballmer had a little cheerier vista upon the same subject.

Again with Bloomberg reporting, Ballmer told the Churchill Club in Silicon Valley that the nation’s financial woes asylum’t cast to the degree that big a representation on the technology industry as some might think.

“As I travel and talk to people in the industry — on the tech side, telecom side — given the current circumstances, the community give attention to a unfailing buoyancy in the market,” Ballmer said, according to Bloomberg. “People that I talk to in our business are — I wouldn’t say optimistic — but are better than you would feel if you were to attend CNBC all day.”

Look for more reports of Ballmer utterances this week as he takes a swing through Europe for various appearances and meetings.

Then there’s January, when he keynotes the giant Consumer Electronics Show. Ballmer is taking Chairman Bill Gates’ high-profile sully on the show’session roster.

For 12 years, Gates gave the keynote address before the show kicked off. Attendees lined up for hours in advance to have existence told him talk hither and thither the future of technology. He invited rock stars, comedians and entertainers to parcel out the stage with him.

After Gates’ last CES keynote address earlier this year, conjecture has swirled around who would replace him and whether Microsoft would still be given the prime slot on the industry’s biggest stage.

Now we understand it will, and it’ll be Ballmer giving the talk.

We can hardly remain.

Making connections

If you think you’ve seen more white buses with green trim on roads around here, your eyes aren’familiarily deceiving you.

A year after Microsoft launched a bus service to ferry employees from communities around the vicinity to its Redmond campus, the company is expanding the Connector again.

On Oct. 6, the company is launching furniture to nine more areas: Redmond Ridge, Monroe, Snohomish / Woodinville, West Seattle, Columbia City/Mount Baker, Leschi/Madrona /Madison Park, Maple Valley, South Everett (extension of the current Mill Creek Express road), and Kent/Tukwila-Renton (extension of the current Tukwila / Renton Express road).

The company is also modifying other routes and schedules.

The expansion comes five months after the meeting of friends added routes to North Seattle and the Eastside.

So far, 8,650 employees desire used the service for a total of 380,000 rides, according to Microsoft.

Earlier this month, the governor recognized the company with Commute Smart decision for best new program. The Connector has reduced Microsoft’s single-occupant vehicle rate from 66 percent to 62 percent in one year, according to the Commute Smart program.

Download, a column of news bits, observations and miscellany, is gathered by the agency of The Seattle Times technology cane. We can be reached at 206-464-2265 or biztech@seattletimes.com.

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