Economic Committee

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Thursday, October 5, 2006 Presented by: Ya-hui Chang

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Federal Reserve Bank Treasury prices closed lower on speculation that the market’s current expectation of an interest rate cut by the Fed is overdone. Federal Reserve Chairman Ben Bernanke said Wednesday the burden from retiring baby boomers will strain the nation's budget and economy, unless Social Security and Medicare are revamped. U.S. Fed Funds Rate: 5.25% U.S. 10-Year Treasury: 4.58%

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International Markets Japan’s Firms Raise Outlook, Easing Fears of Sagging Economy Global oil and energy stocks were expected to come under pressure as crude prices retreated European shares were set to open slightly weaker on Tuesday, tracking technology-led declines in Asia and the United States.

Exchange Rates: 

Exchange Rates U.S. to Yen U.S. to Euro Wall Street barreled higher Wednesday, propelling the Dow Jones industrials to their second straight record high close -- but the dollar isn't budging much

Stock Index - Asia: 

Stock Index - Asia

Stock Index - Europe: 

Stock Index - Europe

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Consumer Goods – Staples & Discretionary Market Cap: 2590.6B (2590.5B) P/E: 30.23 (28.75) ROE: 16.29% (16.35%) Dividend Yield: 2.05% (2.19%) Long Term Debt to Equity: 1.16 (1.17) Price to Book Value: 2.97 (3.40) Net Profit Margin: 6.72% (6.75%) Price to Free Cash Flow: -21.81 (-18.22)

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Consumer Staples Restaurant stocks closed higher Wednesday after several chain operators reported strong September and third-quarter same-store sales. Wal-Mart (WMT) slipped 2% after the world's largest retailer lowered its September same-store sales growth estimate to 1.3%. Procter & Gamble Co. begins new facebook group “smile state” for crest whitestrips Supreme Court to review Phillip Morris V. Williams, Mayola to possibly place limits on punitive damages U.S. doughnut maker Krispy Kreme plans to begin dipping into the massive Chinese-speaking market Tuesday by opening a shop in Hong Kong.

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Consumer Staples

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Consumer Discretionary Shares of General Motors slipped nine cents to $33.32 Wednesday after GM chief Rick Wagoner and Carlos Ghosn, chief executive of Nissan Motor Co. and Renault SA, agreed the two sides were too far apart on the value of the potential tie-up and decided to stop the high-stakes talks which had been underway for two months. Volkswagen AG, Europe's biggest automaker, said Wednesday it has taken a 15 percent stake in truckmaker MAN AG and will use it to support cooperation between MAN and Swedish truckmaker Scania AB. The Tata Group plans to buy the Ritz-Carlton Hotel in Boston for US$170 million (euro135 million) in a move that will help the Indian business conglomerate expand its presence in the United States.

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Consumer Discretionary

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Industrial - Services VERSAR, Inc. announced today that it was awarded an additional $7.9 million for its Construction Oversight/Quality Assurance Program for the Air Force Center for environmental excellence in Iraq. Target Logistics acquires assets of Capitaland Express, Inc. Protiviti Inc., a leading international provider of internal audit and business and technology risk consulting services, has launched operations in India with the opening of offices in Mumbai and New Delhi. Trucking stocks traded higher Wednesday afternoon, following weeks of downward pressure due to bleak earnings outlooks and analyst downgrades. YRC Worldwide Inc. (YRCW) will host a conference call for shareholders and the investment community on Friday, October 27, 2006, beginning at 8:30 a.m. CT. Third quarter earnings will be released Thursday, October 26, 2006, after the market close.

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Industrial - Services Market Cap: 3044.8B (3023.0B) P/E: 26.27 (26.26) ROE: 14.10% (13.94%) Dividend Yield: 1.31% (1.3%) Long Term Debt to Equity: 1.30 (1.36) Price to Book value: 4.62 (4.68) Net Profit Margin: 5.57% (5.54%) Price to Free Cash Flow: -180.99 (-146.6)

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Industrial - Goods Airbus Parent EADS says A380 Superjumbo Jet will be delayed for another year Boeing-Lockheed launch venture gets antitrust OK Amcol Buys Several Facilities From Unimi General Cable creates new business segments; announces restatements 12,000 Goodyear Tire & Rubber Co. employees in 10 states may be locked out of their jobs or could go on strike if the company and its unionized workers don't agree on a new contract.

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Industrial - Goods Market Cap: 1272.7B (1257.5B) P/E: 23.02 (23.2) ROE: 15.39% (15.46%) Dividend Yield: 1.96% (2.02%) Long Term Debt to Equity: 1.71 (1.7) Price to Book value: -111.99 (-31.35) Net Profit Margin: 7.09% (7.08%) Price to Free Cash Flow: -63.01 (28.0)

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Financials Morgan Stanley purchased Nan Tung Bank in China to get a foothold in the domestic market Wells Fargo & Co. will buy renewable energy certificates to support generating 550M kilowatt-hours of wind energy for 3 years, making the bank the largest purchaser of renewable energy in the nation. Wachovia Corp. closed its merger with Golden West Financial Corp. on Tuesday Bank of America Corp.'s stock is trading in record territory, building on its steady rise over the past five years.

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Financials Market Cap: 5817.3B (5818B) P/E: 14.63 (14.12) ROE: 15.94% (16.12%) Dividend Yield: 2.77% (2.79%) Long Term Debt to Equity: 2.27 (2.26) Price to Book Value: 2.93 (2.86) Net Profit Margin: 14.69% (14.74%) Price to Free Cash Flow: 26.91 (-10.12)

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Utilities Progress Energy has completed the sale of its Winchester Energy natural gas business to Exco Resources Inc. for $1.2 billion. The California Public Utilities Commission approved rate increases for Southwest Water Co.: a 6.4 percent hike, which became effective in August and two more rate increases -- approximately 2.9 percent and 2.6 percent -- which will take place July 2007 and July 2008, respectively. Falling natural gas prices should have a positive effect on gas utilities this winter according to analysts.  This is due to the fact that most utilities make their profits on volume, rather than price.

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Utilities Market Cap: 944.4B (937.3B) P/E: 38.44 (38.47) ROE: 16.22% (16.14%) Dividend Yield: 4.11% (4.20%) Long Term Debt to Equity: 2.30 (2.31) Price to Book Value: 2.76 (2.74) Net Profit Margin: 8.98% (8.92%) Price to Free Cash Flow: -65.86 (-80.27)

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Health Care The U.S. Supreme Court on Wednesday heard drug maker MedImmune's patent dispute with biotechnology company Genentech, a case that could help determine the ability companies have to challenge patents in court. Lawsuits against Merck surge to beat two year filing deadline for Vioxx, putting current total up to 22,000. Data for GlaxoSmithKline drug Cervarix suggests it may prevent as many as 80% of cervical cancer cases. New England Journal of Medicine reports positive results from Dynavax’s (DVAX) ragweed allergy therapy trial GE Healthcare Launches New Platform for Automated Synthesis of PET Radiopharmaceutical

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Health Care Market Cap: 2578.2B (2569.2B) P/E: 33.02 (37.97) ROE: 14.64% (14.69%) Dividend Yield: 1.62% (1.62%) Long Term Debt to Equity: 0.52 (0.50) Price to Book Value: 5.10 (4.13) Net Profit Margin: 11.50% (11.54%) Price to Free Cash Flow: 94.04 (85.89)

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Health Care DJ US Health Care Index – 1 Month DJ US Biotech Index – 1 Month DJ US Pharma Index – 1 Month

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Information Technology Apple Computer Inc. CEO Steve Jobs apologized Wednesday for the company's past stock-option practices after a three-month internal investigation raised concerns over how some grants were handled between 1997 and 2002. Hewlett-Packard (HPQ) continued to make news headlines as their general counsel unexpectedly resigned ahead of the Congressional hearing. Sierra Wireless (SWIR) was under pressure today on the announcement of Intel partnering with Nokia to offer HSDPA modem technology in next-generation laptops. They say is was highlighted in their Q2 results note (July 28) and represents 'headline risk' vs. risk to SWIR fundamentals. 3M Co., the diversified manufacturer whose products include Post-it Notes and Scotch tapes, said Wednesday it agreed to acquire Biotrace International PLC, a U.K.-based manufacturer of industrial microbiology products, for $98 million.

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Information Technology Market Cap: 5488.3B (5478.6B) P/E: 28.87 (29.26) ROE: 14.81% (14.84%) Dividend Yield: 2.02% (2.05%) Long Term Debt to Equity: 0.61 (0.62) Price to Book Value: 6.50 (6.43) Net Profit Margin: 10.62% (10.64%) Price to Free Cash Flow: 25.96 (86.12)

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Basic Materials Xstrata, worlds 3rd largest copper producer, to raise $5.47B in special equity offering to finance takeover of Canadian mining company Falconbridge Ltd. Canadian aluminum producer Alcan Inc. to buy back 5% of its 376 shares outstanding Contracts for December delivery of bullion closed off $14.80 at $566.70 an ounce on the Comex division of the New York Mercantile Exchange. Exchange-traded funds that hold the metal fell in concert. (GOLD)

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Basic Materials Market Cap: 4331B (4224B) P/E: 13.09 (12.99) ROE: 25.45% (25.36%) Dividend Yield: 2.38% (2.46%) Long Term Debt to Equity: 0.44 (0.44) Price to Book Value: 3.61 (3.54) Net Profit Margin: 11.70% (11.67%) Price to Free Cash Flow: 50.84 (26.27)

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Energy Even though the Dow reached a record close on Tuesday, oil and oil stocks fell; the price crude oil dipped below $60/barrel. Brazil's state-owned oil company and two partners have confirmed significant quantities of light oil and natural gas in deep water about 280 kilometers off the coast of Rio de Janeiro, Exxon Mobil Corp. shut a processing unit at its Torrance, Calif., refinery Wednesday, following the release of some oil from equipment, according to a report to public safety officials. Veritas DGC Inc., a provider of geophysical information and services for the oil and gas industry, said Wednesday its fiscal fourth-quarter profit dropped sharply from a year-ago period boosted by a large tax-related gain. BP's shareholders have filed a lawsuit against the company for negligent management practices associated with the Prudhoe Bay oil field in Alaska.

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Energy (Major Oil & Gas) Market Cap: 1412.1B P/E: 8.50 ROE:28.10% Dividend Yield: 3.08% Long Term Debt to Equity: 0.28 Price to Book Value:2.93 Net Profit Margin: 10.70% Price to Free Cash Flow:58.90

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Energy

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Telecommunications Services Shares of Cincinnati Bell Inc. and Embarq Corp. fell Wednesday after a brokerage firm downgraded both companies, and most telecommunications stocks also tacked lower Cingular finishes absorbing network of AT&T Wireless Alltel completes $1.08B acquisition of Midwest Wireless AT&T develops new DSL service tier for basic internet users New telecommunications rules paving the way for cable television and telephone companies to directly sell phone, internet, and TV services over their networks went into effect Wednesday in Mexico.

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Telecommunications Services - Domestic Market Cap: 394.4B (401.8B) P/E: 18.30 (18.30) ROE: 12.70% (12.70%) Dividend Yield: 3.56 (3.47%) Long Term Debt to Equity: 0.82 (0.82) Price to Book Value: 8.79 (8.79) Net Profit Margin: 9.2% (9.2%) Price to Free Cash Flow: 79.90 (79.90)

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Telecommunications Services Foreign Domestic

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As of 9/29/2006