U.S. MARKET AVERAGES

Morning doldrums in the market quickly turned into steep losses at the close. Concerted campaign of inflation fight by three regional Fed Reserve presidents, report on slower growth in service economy and uncertainty in the energy region of Gulf of Mexico all contributed to the market slide at the end of the day.

On Tuesday three Federal Reserve Bank presidents comments as interpreted by market suggested that fighting inflation could lead to higher interest rates. Market also paid a close attention to the slow down reported in the service economy by ISM survey this morning. Mortgage loan application declined for the week ending Sept 30th by 1.1%. Department of Energy reported that inventories of crude oil, gasoline and distillate declined in the same week and much of the region’s production facility of oil and gas remains shut.

Auto sector was under focus as GM declared in a news conference in Tokyo that it will sell its entire stake of 20% in Fuji Heavy industries. The cash generation move was widely seen as declining fortunes of General Motors.

Refiners, miners, coal producers, casinos led the decliners of the day. Not a single sector was spared in today’s sell-off.

P F Chang’s China Bistro (PFCB: chart) reported restaurant sales declined less than 1% for the existing location. Market had feared worst and stock jumped 9.56% at the close. Decline in customer traffic was off-set by a 1% rise in price at the menu. Stock has declined 31% in less than three months from the peak of $65.12 before today’s rise.

MOVERS AND SHAKERS

The carmaker General Motors Corp. (GM: chart) said it was selling its entire interest in Fuji Heavy Industries Ltd, which owns the Subaru car brand, because it intents to concentrate its Asia-Pacific strategy toward high-growth markets. The company said cash proceeds received and any potential gain on the Fuji Heavy sale will be recorded in the fourth quarter. At the same time, the Detroit news posted that General Motors and the United Auto Workers are close to an agreement that would save the company $1 billion in annual health care costs. General Motors dropped 3.1% yesterday.

The auto-parts maker Delphi Corp. (DPH: chart) declined 16.6% after New York Times reported the company will only keep from Chapter 11 bankruptcy protection if it can bring forth concessions from General Motors, its former parent, and from the United Auto Workers' union. The bailout could cost several billion dollars.

Viacom (VIA: chart) could gain because of the preliminary prospectus with the Securities and Exchange Commission filed for the separation of the company into two divisions. Viacom first planned this move in June and said its purpose is to unlock the value in its cable networks and filmed entertainment businesses. Viacom fell 1.1% yesterday.

Yum Brands Inc (YUM: chart) was one of the few stocks to rise. The company earnings were up 16% on strong growth in China. The operator of Taco Bell, KFC and Pizza Hut fast-food restaurants added 1.8% yesterday.

The fast-food giant Wendy's International (WEN: chart) was down 2.4% after it announced a 5% lower third-quarter same-store sales and warned Hurricanes Katrina and Rita and together with higher beef prices would narrow earnings for the period by 4 cents.

Bank of America cut Harley-Davidson (HDI: chart) to sell from neutral due to worries over rising retail inventory and slowing demand. Analysts also believe the lackluster customer response to the motorcycle maker's 2006 models will lead to decline in wholesale unit shipments.

Maytag (MYG: chart) was downgraded by Prudential to underweight from equal-weight, pointing weak earnings, a more challenging macro environment and weakening consumer spending.

ECONOMIC NEWS

Crude oil inventories ticked down again in the most recent week, according to government data released Wednesday, though the decline was far less steep than in the previous week. Meanwhile, stocks of gasoline dropped sharply, reversing most of the gains it recorded in the prior period. The Department of Energy's Energy Information Administration revealed that crude oil inventories dropped by 300,000 barrels for the week ended September 30, falling to 305.4 million barrels from the 305.7 million barrels recorded in the previous week. This followed a decline of 2.4 million barrels for the prior week. Even with the recent declines, oil inventories remain 11.8% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week decline of 4.3 million barrels, the government said, reversing most of the previous week's 4.4-million-barrel advance. Gasoline stocks are now 4.6% below their levels of last year. Inventories of distillate fuel oil fell by 5.6 million barrels in the most recent week.

The ISM said that its business activity index for the service sector fell to 53.3 in September from 65.0 in August. While a reading above 50 still indicates growth in the sector, economists had expected a more modest decline to about 59.7.

The slowdown in the pace of growth in the sector was partly due to a slower rate of growth in new orders, with the new orders index falling to 56.5 in September from 65 in August. New export orders and imports also increased at slower rates. Additionally, the report showed a notable slowdown in the pace of employment growth, with the employment index slipping to 54.9 in September from 59.6 in August.

The ISM noted that only eight of 17 non-manufacturing industry sectors report increased activity in September compared to 13 that reported increased activity in August.