Demand Drops Crude; Volkswagen Races Ahead; Yen’s Strength Sinks Stocks; Verizon Dials Up Gains; Sept. Home Sales Up; Wal-Mart Scales Back; Citi Rejects Goldman Merger

• Crude oil for December delivery declined 1.4% yesterday (Monday) with a 93-cent drop to close at $63.22 a barrel on the New York Mercantile Exchange. Oil futures are down 57% from the July 11 record of $147.27 and 31% down from a year ago, Bloomberg News reported.  “With all of the stock markets going down, there’s going to continue to be downward pressure,” said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. (MF) in New York. “There’s not a lot that can be done to stop this downward spiral right now.”

• Shares of German automaker Volkswagen AG (ADR OTC: VLKAY) skyrocketed over 120% yesterday (Monday) with a gain of $64.75 to close at $118.00. Porche SE (PINK: POAHF) announced late Sunday that it would increase its stake in Volkswagen to 75% in 2009, The Wall Street Journal reported. The sudden price spike was due in part to Volkswagen’s relatively small free float, as Porche is just shy of a 75% ownership stake and the German state of Lower Saxony controls 20%.

• The Japanese yen hit a 13-year high versus the dollar yesterday (Monday), trading at just under 94 yen to the dollar. Fear of the effect the strong yen would have on exports sent the Nikkei 225 to a 26-year low of 7,162.90 after losing 6.4% for the day. The key Japanese benchmark is down 53% year-to-date, BusinessWeek reported.

• Verizon Communications Inc. (VZ) announced yesterday (Monday) third-quarter earnings were $1.67 billion, or 59 cents per share, up from $1.27 billion, or 44 cents a share, for the same period the year prior. But Chief Executive Ivan Seidenberg cautioned that economic weakness and poor consumer demand would have an effect in the fourth quarter. “For the Christmas season, consumer spending will be somewhat lighter, and business spending will be somewhat curtailed,” Seidenberg said in a conference call, The Associated Press reported.

• New home sales posted an unexpected increase in September, the Commerce Department reported yesterday (Monday). New, single-family home sales rose 2.7% in September to a seasonally adjusted annual rate of 464,000 homes. Sales were still down 33% from a year ago and off almost 68% from the peak reached July 2005.

• Wal-Mart Stores Inc. (WMT) said yesterday (Monday) that it is slowing the pace of U.S. store openings and cutting back on capital spending in the face of economic headwinds, The Associated Press reported. The company plans to open 191 stores in the current fiscal year and between 142 and 157 stores in the next fiscal year. Wal-Mart opened 218 U.S. stores in fiscal 2008. Wal-Mart also plans $5.8 billion to $6.4 billion in capital expenditures this fiscal year for its U.S. division, down from $9.1 billion last year.

• Goldman Sachs Group Inc. (GS) Chief Executive Lloyd Blankfein called Citigroup Inc.’s (C) Vikram Pandit last month about a possible merger, but Pandit rejected the proposal, a source familiar with the situation told Reuters yesterday (Monday). Blankfein’s call was made shortly after Goldman got the approval to become a commercial bank on September 21 and with the knowledge of regulators, the source said.

Money Morning