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Consumer products conglomerates Colgate-Palmolive and Procter & Gamble faced off today with quarterly earnings releases. Although P&G beat analysts’ earnings expectations by one cent a share, the news was largely overshadowed by Colgate. It surpassed earnings estimates by two cents a share (a beat that should have been higher but for non-recurring tax issues) and clearly outshone P&G with strong growth and a brighter outlook. Meanwhile, P&G failed to impress with third-quarter guidance that fell below Street estimates and planned price hikes to offset expectations for higher commodity prices, which are less of a threat to Colgate on account of its continually improving margins.

P&G’s blemish, analysts agreed, is its beauty segment.

“We believe that 20% of P&G’s beauty portfolio is causing 100% of its growth challenge,” said UBS analyst Nik Modi, singling out cosmetics, hair color and professional products.

That may raised some eyebrows considering P&G’s beauty brand portfolio. The Dow component boasts billion-dollar brands: Head & Shoulders, Olay, Pantene and Wella among consumer favorites like CoverGirl, Max Factor, Herbal Essence, Noxzema and Clairol.

According to Credit Suisse’s P&G coverage initiation report from Nov. 27, 2007, beauty is the company’s second-largest reporting segment by revenue and hair care is its most important category with 24% of global market share.

That explains why analysts fixated on the beauty segment’s lower-than-anticipated growth at 3%.

The company’s hair care acquisitions, in particular, have been losing their luster. Since the company acquired Wella and Clairol, it has struggled with the brands, said Credit Suisse analyst Filippe Goossens. “P&G still has not been able to fully learn the professional hair care market,” he said.

Analysts point to a possible turnaround in the hair colorants category stemming from new products, such as Nice’n Easy Perfect 10 hair color, slated for the second half of 2008.

Overall, P&G’s second-quarter report wasn’t expected to weigh too heavily on the household products heavyweight. The Cincinnati-based company, after all, holds enough products and brands to single-handedly stock a corner store.

“P&G absorbed 150 bps of higher materials cost and still delivered operating income in-line, helped by lower SG&A (selling, general and administrative) expense despite higher advertising as a percentage of sales,” said Merrill Lynch analyst Christopher Ferrara. He expects the company’s price increases and planned Folgers coffee spin-off to be positive for its outlook. Ferrara set his target stock price at $78, citing the company’s “leading brand portfolio, extremely defensive characteristics and competitive sales and earnings growth.”

With the stock market swinging wildly and volatility surging, 2008 could well turn out to be the year for UltraShort exchange-traded funds.

Eight out of the top 10 best-performing ETFs tracked by Morningstar as of Jan. 30 belong to the UltraShort ProShares family. Three of them tracking the technology sector have gained the most: The UltraShort Semiconductor ProShares ETF (SSG) is up 39.2% on the year, while both the UltraShort QQQ ProShares (QID), which tracks the Nasdaq 100 Index, and the UltraShort Technology ProShares (REW), are up 32.2% in the first month of 2008.

Among the rest of the top 10 performers: UltraShort Russell 2000 Growth ProShares (SKK), which tracks small-cap U.S. equities, rose 25.5% in January, UltraShort Oil & Gas ProShares (DUG) gained 24.6%, UltraShort MSCI Emerging Markets ProShares (EEV) advanced 21.8%, and UltraShort Russell MicCap Growth (SDK) rose 21.5%.

UltraShort ETFs, seen as bearish market trackers, follow many popular market indexes and return double the negative market return, earning 20% if the market falls 10%. They allow investors to better hedge and seek profit during market downturns.

“Because UltraShort ProShares offer built-in magnified short exposure to an index, investors can ‘go short’ with a single ETF trade,” said Michael Sapir, CEO of ProShare Advisors LLC. “Whether the strategy is to capitalize on a trend or hedge against the risk of a decline, magnified exposure means the investor can commit half the dollars to potentially obtain the desired level of exposure.”

If, for 90 days, investors can sit tight while the market seesaws wildly, they could be rewarded if stocks follow recent patterns. Put it down to relentless American optimism, central bank intervention or the recovery of housing prices. Aside from the steep drop in 1994, the Dow Jones industrial average since 1992 has recovered and moved higher 90 days after the biggest point losses of the year, according to research from Thomson Financial.

Shorter-term gains were fewer, but in some cases substantial: They ranged from a 12.12% advance in the 30-day period following the July 19, 2002, drop of more than 390 points, to a modest 0.52% increase in the month after a 191-point drop on April 15, 2005.

In the 90-day period, the gains range from a 1.15% gain after the Dow dropped more than 214 points on May 17, 2006, to a nearly 21% jump following the Asian currency crisis in the summer of 1998, according to Thomson Proprietary Research. ”While it is difficult to actually pinpoint which session will be the single-worst-trading session of a given year, recent history illustrates that markets often rebound after the drop,” according to the report. “This may assure some investors that the best day for equities is still ahead.” (Click the chart below to enlarge.)

So far in 2008, the biggest drop in the Dow was the 306.95 points, or 2.5%, the index lost on Jan. 17, when it closed at 12,159.21. Nearly nine trading sessions later, the Dow was trading 3.1% higher at 12,549.

An earlier Thomson research report showed that heavy January losses in the Dow might foretell a small chance for positive returns in the ensuing February-to-December period.

The real estate finance industry has evolved into one of the strongest and most sophisticated of global markets, according to the Mortgage Bankers Association. Wall Street may take issue with that assessment as recent multibillion dollar write-downs have stemmed from subprime woes and the repackaging of mortgage-backed securities. But “the mortgage industry took major steps during the third quarter in helping those borrowers who could be helped,” said Jay Brinkmann, vice president of research and economics for the MBA in a study of third-quarter mortgage foreclosures and loss mitigation activities.

In examining the nearly 400,000 foreclosures started during the period, Brinkmann determined that about 63% of borrowers couldn’t be helped because the properties weren’t occupied by the owners, some borrowers didn’t respond or couldn’t be located, and others defaulted despite already having a repayment plan or loan modification in place. The study showed that an estimated 166,000 subprime adjustable-rate mortgage foreclosures were started during the third quarter, but only 50,000 fell into the “those who can be helped” category. In comparison, 90,000 repayment plans were renegotiated and 13,000 loan modifications were done, for a total of 103,000.

“Of the net 50,000 foreclosures, many of these likely occurred due to the traditional reasons for default (loss of job, divorce, illness or excessive debt burden relative to income), not just the impact of rate resets, thus eliminating any possible benefit of a rate freeze,” Brinkmann said.

The study concludes that it is likely that the number of loan modifications for subprime ARMs will continue to grow as the number of subprime ARMs with rates resetting peaks in the first half of 2008. “More importantly,” Brinkmann said, “during the third and fourth quarters of 2007, several legal, accounting and regulatory impediments to more widespread modifications were removed, which should also lead to more increases in the loan modification numbers going forward.”

That’s good news for subprime borrowers with ARMs - that is, as long as they aren’t out walking the dog, buying groceries, or filling up the gas tank when the lender calls.

Wall Street is looking at a lower open Thursday after heavy losses at bond insurer MBIA Inc. fueled credit concerns, with a disappointing outlook from Amazon.com Inc. also undermining sentiment.

According to spread bettors IG Index, the Dow Jones industrial average is expected to open down 115 points at 12,328. Separately, S&P 500 futures dropped 7.80 points to 1,342.80, while Nasdaq 100 futures dropped 13 points to 1,798.50.

On Wednesday, a still-anxious Wall Street closed lower sacrificing the advance it made after the Federal Reserve cut interest rates half a percentage point.

The industrials finished down 37.47 points, or 0.3%, at 12,442.83, while the Nasdaq composite index fell 9.06, or 0.38%, to 2,349. The S&P 500 index dropped 6.49, or 0.48%, to 1,355.81. The yield on the 10-year benchmark note fell to 3.63% from 3.68% late Tuesday, while crude oil rose 69 cents to settle at $92.33 a barrel on the New York Mercantile Exchange.

ECONOMIC DATA:

• Fourth-quarter employment cost index, 8:30 a.m. ET, +0.8% estimate
• Initial jobless claims, 8:30 a.m. ET, 318,000 estimate
• Personal income for December, 8:30 a.m. ET, +0.4% estimate
• Personal spending for December, 8:30 a.m. ET, +0.1 estimate
• National Association of Purchasing Management-Chicago index for January, 9:45 a.m. ET, 52.0 estimate

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AFTER-HOURS ACTION:

After the closing bell Wednesday, Amazon.com said fourth-quarter profit more than doubled, helped by fast-growing international sales. Starbucks Corp. said fiscal first-quarter profit rose by less than 2%, and it detailed plans to open fewer domestic stores but more overseas. Aflac Inc. forecast 2008 profit below Wall Street expectations, after reporting 2007 fourth-quarter growth that missed estimates.

Wal-Mart is an easy target. People love to rail against the company, the big-box retailing mentality it represents. Central to the typical lament is a hearkening back to a simpler time when mom-and-pop stores dotted Main Streets across America. The irony of this, of course, is that Wal-Mart was once one of these stores, springing to life as a tiny variety chain in Arkansas and growing into world’s most dominant retailer. And, sorry Wal-Mart haters, but the company still seems to have its edge.
Witness Tuesday’s announcement of an “economic stimulus plan” for U.S. shoppers. It’s a topical, well-timed marketing ploy, unveiling price cuts ranging from 10% to 30% in the week before the Super Bowl. This comes just as the federal government is pushing a $146 billion package through Congress that promises to pay the majority of Americans $500 each - moms and pops alike - urging them to go out and shop.

Wal-Mart even provides a shopping list for “game fans” that it says will feed a party of 10 for under $50. For bigger spendthrifts, the company is even willing to offer no interest for 18 months on purchases of $250 or more with its branded credit card, meaning you can buy that huge LCD television and watch both this year and next year’s Super Bowl on it before paying. It’s a shrewd move. The most recent estimate from the Retail Advertising and Marketing Association’s 2008 Super Bowl Consumer Intentions and actions survey is that Super Bowl viewers plan to spend $10 billion on TVs and furniture this year. This figure represents the purchase of nearly 4 million TVs ahead of the showdown between the New York Giants and the undefeated New England Patriots, along with nearly 2 million pieces of furniture.

At Deutsche Bank,analyst William Dreher Jr. gave the plan the touchdown sign, saying it represents a positive step in the retailer’s increasingly aggressive advertising and promotional strategy. “What makes this announcement so brilliant is that Wal-Mart is stepping up their visibility ahead of three very large consumer spending events – the Superbowl, Tax Season, and the Fiscal Stimulus checks,” Dredher Jr. said.

Wal-Mart is scheduled to report its fiscal 2008 results on Feb. 28 and analysts are looking for sales of $377.29 billion for the year. Sales for the 48 weeks ended Jan. 4 were up 8.6% to $348.13 billion when the company reported its holiday numbers on Jan. 10 so it already has good field position. This promotion could push them into the endzone.

As the Federal Reserve has dropped the Fed funds rate like a stone in recent weeks, all signs are pointing to a massive refinancing boom in the months ahead. Adding to the volume will be the economic stimulus package soon to land on President Bush’s desk.
The package calls for an immediate (maybe by late May, as immediate as the federal government gets) payment to taxpayers, and for mortgage borrowers a higher ceiling on jumbo loans that Fannie Mae and Freddie Mac can insure.

Under the plan, the cap on mortgages, which will expire at the end of the year, jumps to about $730,000 from a current $417,000. The effect will be to get major loans off the books of struggling banks and free up credit in the market for the bigger, nonconforming loans.

But can Fannie and Freddie, under strain to hold up their own liquidity levels, afford to take on the much larger mortgages, especially in a market where house prices are falling?

The faltering housing market has led to share prices of GSEs, or government-sponsored enterprises, like Fannie and Freddie, and the mortgage finance sector, to lose about 20% so far in 2007.

Fannie Mae’s credit costs should be substantially higher in 2009, according to Credit Suisse, given the increases in delinquencies in November and the significant fall-off in portfolio sales in December - to $3.6 billion from $16.3 billion in November.

Also, say Merrill Lynch analysts, “roughly half of the jumbo mortgages out there are interest-only, which Fannie and Freddie have restrictions on.” Add to that the rule that GSEs require at least 20% equity, “and again this makes the extent of the cap-raising initiative less than meets the eye.”

Though the GSEs will be selective in financing jumbos mortgages, Bear Stearns said the temporary injection of liquidity will boost business at Fannie Mae and Freddie Mac. “It could also provide further evidence to the Congress and critics that the companies are important and valuable sources of mortgage market liquidity,” the analysts said.

Wall Street is on track Wednesday to hand back some of the gains made over the last two sessions amid investor jitters ahead of a Federal Reserve decision on interest rates.

Yahoo Inc. is set to fall big after the Internet search company warned its turnaround efforts may still take another year to pay off. Results from Dow Jones industrial average components Boeing Co., Merck & Co. and Altria Group Inc. also will supply an early focus.

According to spread bettors IG Index, the industrials are expected to open down 21 points at 12,459. Separately, S&P 500 futures fell 2 points to 1,360.10, while Nasdaq 100 futures dropped 8 points to 1,804.

Wall Street advanced sharply Tuesday as the Federal Reserve opened a two-day meeting expected to bring another interest rate cut to revitalize the U.S. economy. The Dow rose 96.41 points, or 0.78%, to close at 12,480.30, while the Nasdaq composite advanced 8.15, or 0.35%, to 2,358.06. The S&P 500 index gained 8.34, or 0.62%, to 1,362.30. The 10-year Treasury note’s yield increased to 3.66% from 3.58% late Monday, and a barrel of light sweet crude rose 65 cents to $91.64 a barrel on the New York Mercantile Exchange.

ECONOMIC DATA:

• Advance fourth-quarter gross domestic product, 8:30 a.m. ET, 1.2% estimate
• The Federal Reserve ends its two-day interest-rate policy meeting. A decision on interest rates is expected at 2:15 p.m. ET.

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AFTER-HOURS ACTION:

After the closing bell Tuesday, Yahoo reported a 23% decline in fourth-quarter profit and said it plans to lay off 1,000 workers. Allstate Corp. reported a 37% drop in fourth-quarter profit. Boston Properties Inc. said its results grew in the fourth quarter to beat Wall Street expectations, but predicted first-quarter and full-year performance below analyst estimates.