Housing, Jobs Data Weigh on Stocks

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The Fed would be smart not to wait for the full-blown effects of the housing downturn to hit the broader economy but move pre-emptively to cut rates by at least 25 basis points, and preferably 50 basis points, he said. A 50-basis-point cut make more sense, if only to avoid the need for a secret follow-up meeting to lower rates further after seeing more financial turmoil in the wake of a 25-basis-point cut, he added.

"The signs we're seeing in housing and financing [home purchases] are more important as leading indicators than coincident indicators that are in the Beige Book," McGlynn said.

Oil prices have remained firm as traders await the OPEC meeting next week, which is expected to leave production quotas unchanged. The potential for another inventory drawdown, when the Energy Information Administration's weekly numbers come out on Thursday, is also helping to buoy prices, even as concerns about slowing global growth persist, according to Action Economics. September West Texas Intermediate crude oil futures rose 65 cents to $75.73 per barrel.

Among stocks in the news on Wednesday, Costco Wholesale Corp. (COST) fell 4.2% after posting a 2% increase in stores open at least one year in August, much lower than estimates, and a 6% rise in total sales. Costco's report spurred selling across the retail sector, with Wal-Mart Stores (WMT) slipping to 8-year lows.

The latest casualty of the subprime real estate meltdown: The planned merger between mortgage insurers MGIC Investment Corp. (MTG) and Radian Group Inc. (RDN), which the two companies terminated Wednesday. The companies say that current market conditions have made the combination more challenging. An unprecedented number of margin calls in the first half of this year caused liquidity to dry up at C-Bass LLC, a joint venture in which each company owns a 46% stake. At the end of July, Standard & Poor's predicted the C-Bass impairment and the risky nature of Radian's portfolio were likely to derail the merger. MGIC was up 1.0% Wednesday, while Radian shares climbed 0.9%.

Shares of Applix Inc. (APLX) jumped 22.3% on news that the company has agreed to be acquired by Cognos for $17.87 per share, or about $339 million, subject to regulatory approvals.

MasTec Inc. (MTZ) shares fell 16.0% after it projected $265 million in revenue and 18 to 20 cents a share in earnings from continuing operations in the third quarter. The specialty contractor also revised its 2007 profit forecast to 78 to 82 cents a share, citing higher recruiting activity and training and modified compensation policies.

Tyson Foods (TSN) was down 12.9% after it cut its fiscal 2007 earnings outlook to 72 to 80 cents a share, citing higher-than-expected live cattle costs, a decline in beef revenues and higher live hog prices.

L.B. Foster Co. (FSTR) shares were up 10.8% on news that Canadian Pacific Railway has reached an agreement to buy the Dakota Minnesota and Eastern Railroad (DM&E), in which Foster holds a minority equity interest, for $1.48 billion. The acquisition will result in a total payment of about $277.3 million to Foster.

Forest Laboratories (FRX) shares rose 9.9% after the U.S. Court of Appeals affirmed its decision that about the validity of the U.S. patent covering escitalopram, the active ingredient in Lexapro and upheld the injunction preventing Ivax/TEVA's proposed generic product launch. The latest decision confirms Forest's and H. Lundbeck's patent rights for Lexapro.

World markets were trading mostly lower on Wednesday, with European equity markets falling on concern over banks' earnings due to the U.S. subprime mortgage crisis. In London, the FTSE 100 index fell 1.66% to 6,270.70. Germany's DAX index dropped 1.73% to 7,588.03. In Paris, the CAC 40 index plunged 2.14% to 5,551.55.

In Japan, the Nikkei index fell 1.60% to 16,158.45. In Hong Kong, the Hang Seng index rose 0.77% to 24,069.17. The Shanghai composite index was up 0.31% to 5,310.72.

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