Wall St. Still A Rough Ride


The stock market had a little something for every type of thrill-seeking investor last week — some big ups, some big downs and some in-betweens as mixed economic data seemed to both spook and encourage investors at the same time. Cable stocks, in decline well before the market hit its rough patch in September, followed in lock step with the market.

The Dow Jones Industrial Average started the week on a high note posting its highest single-day point gain in history — 936 points — rising to 9,387.61 points on Oct. 13, leading some to believe the record losses of the prior week (when the Dow dipped almost 1,900 points and hit its lowest level in five years) would be largely erased. That gain was followed by a relatively moderate 76-point decline last Tuesday and a near record drop of 733 points on Oct. 15 (just 44 points off the all-time single-day point decline), followed by a 401-point gain on Oct. 16, as indications that inflation appears to be in check heartened some investors while factory orders and housing-market results continued to point toward a deep recession.

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Coming off Oct. 10 lows, the cable sector did show a gain of about 5.7% through Oct. 17. The sector is down about 24% for the year. The Dow finished last Friday down 127 points to close at 8,852.22, but finished the week up 4.7% (or 389 points), its first weekly gain in more than one month.

Miller Tabak media analyst David Joyce was encouraged by the gains media stocks have made in the past few days, adding that it appears that big sales made by some executives to cover margin calls, which had helped to drive down prices in the past, have eased for the time being.

“A bottom may have been put in place,” Joyce said, adding that the decline in cable stocks had been exacerbated by some executives, like Liberty Media chairman John Malone and Viacom and CBS chairman Sumner Redstone, who were forced to sell stock to cover margin calls elsewhere.

“The stocks are above the level where the triggers kicked in,” Joyce said. “I'd like to think the worst is behind us.”

At least for now.

Joyce said that reports that J.P. Morgan Chase is beginning to loan money again also is loosening up investor wallets, particularly for Cablevision Systems stock.

“I think that the credit markets are starting to thaw,” Joyce said. “I know it will be a long time away before Cablevision can actually sell an asset, but that is what Cablevision is trading on, the opening of the credit markets to allow a deal to happen.”

Among media stocks, Cablevision Systems was one of the biggest movers, Joyce said, up around 10% ($1.61 per share) last Friday, before closing at $18 per share, up 7.7% or $1.29 each. Cablevision shares have been hit hardest because of fears that the credit crunch would hamper the company in selling assets, one of its options in unlocking value at the company.

Joyce also said that cable shares should strengthen as the third-quarter earnings season approaches. Comcast is expected to be first out of the box, reporting third-quarter results on Oct. 29.

Joyce said that while some cable metrics could be on the decline — especially advertising revenue — the belief is that the third quarter should be relatively strong for cable operators.

“Advertising revenue and marketing expenses are probably going to be under pressure,” Joyce said of the third quarter. “As far as I can discern, things should be continuing the way they have been. I don't think there is any new round of market share grab by the telcos.”