MOODY’S INC. $46.45, New York symbol MCO, has dropped by a third since the start of June due to the turmoil in the mortgage market. Moody’s charges bond issuers a fee for a credit rating, and the recent problems could hurt investor interest in new debt securities. The company could also face class-action lawsuits from subprime mortgage investors who relied on Moody’s ratings. Politicians will probably call for new controls on rating agencies, which could hurt Moody’s prospects. Our view is Moody’s will overcome these setbacks. But the stock could fall further in the next few weeks....

In our July 27 Hotline, I said that the market downturn that had just begun could carry on till October and knock another 5% to as much as 15% off the market indexes. That’s still my view. I doubt that the liquidity problems in subprime-related areas are going to spread. I do think that subprime lending is dead for five years or more. This will hurt real estate and related industries. But ultimately it could help the rest of the economy. That’s because former subprime specialists will go on to something more productive, and former subprime borrowers will quit overextending themselves on housing and instead spend their money on consumer goods, investments, education for their children and so on. However, for now through October, I’d say the market could suffer more damage. But it has dropped enough now that you might want to start buying. That’s especially so if you have a lot of cash. Of course, I could be wrong, so you should only put money in stocks that you can afford to keep in stocks for, say, three to five years. WAL-MART STORES INC. $43.49, earned $0.76 a share from continuing operations in its second fiscal quarter ended July 31, 2007, up 5.6% from $0.72 a year earlier. However, if you disregard unusual items, earnings were flat. Sales rose 8.9%, to $92.0 billion from $84.5 billion, partly due to a 15.7% jump in sales at its international operations....

WASHINGTON MUTUAL INC. $35.07, New York symbol WM, bundles its mortgage loans into securities and sells them to other investors. That helps it raise cash to make more loans. However, increasing volatility and rising interest rates in some debt markets are making it harder for Washington Mutual to sell mortgage-backed securities. This lack of liquidity has hurt Washington Mutual’s stock price in the past few weeks. But the company has steadily cut its exposure to the housing market since the start of the year. Cost cuts, growth in its retail banking business and the expansion of its credit card operations cut its reliance on mortgages and should let it keep paying its $2.24 dividend, which provides a 6.4% yield. Washington Mutual is still a buy for long-term gains....

DOW JONES & CO. INC. $58.21, New York symbol DJ, plans to merge with News Corp., now that enough members of the Bancroft family, which controls 64% of the company’s votes through Class B multiple voting shares, have agreed to accept News Corp.’s $60.00-a-share takeover offer. The deal should close by the end of the year, assuming stockholders and regulators approve. The shares continue to trade below the News Corp. bid, which suggests the chances of a competing offer are small. Dow Jones is still a hold....

STATE STREET CORP. $69 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 336.4 million; Market cap: $23.2 billion; WSSF Rating: Average) has completed its $4.2 billion all-stock acquisition of Financial Services Corp., which provides custodial and related services to institutional investors. To offset the extra shares outstanding, the company plans to buy back $1 billion worth of its stock in the next six months. Merger costs will hurt State Street’s earnings in the next year or two. But the acquisition makes it a leading service provider to private equity funds. The company also plans to focus on high-growth markets in Asia and Europe. It aims to soon increase overseas revenue to 50% of the total, from 43% in 2006....

CINTAS CORP. $38 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 158.7 million; Market cap: $6.0 billion; WSSF Rating: Average) earned $2.09 a share in its fiscal year ended May 31, 2007, up 8.9% from $1.92 a year earlier. Revenues rose 8.8%, to $3.7 billion from $3.4 billion. Outsourcing has hurt demand for workplace uniforms at factories. But demand for other services such as document management and first aid is still strong. Cintas is a buy....

SNAP-ON INC. $55 (New York symbol SNA; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 58.0 million; Market cap: $3.2 billion; WSSF Rating: Average) recently acquired the Business Solution division of ProQuest Co. This business helps car dealers cut down on errors by helping them electronically access the latest service bulletins and other data. Services like this now account for 30% of Snap-On’s profits. Thanks the new operations and a successful cost-cutting plan, Snap-On’s profits from continuing operations in the three months ended June 30, 2007 rose 50%, to $0.90 a share from $0.60 a year earlier. Sales grew 14.5%, to $711.9 million from $621.7 million. The latest quarterly earnings exceeded earlier forecasts of $0.74 a share, and the stock jumped 10%. It now trades at 19.8 times the $2.78 a share it should earn in 2007. That’s reasonable in light of Snap-On’s brand and loyal clientele....

Autodesk and Nvidia had to restate their reported earnings for the past few years to correct errors related to the timing of executive stock options. Fixing these accounting errors is a plus, but both stocks face some business uncertainty. AUTODESK INC. $44 (Nasdaq symbol ADSK; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 231.2 million; Market cap: $10.2 billion; WSSF Rating: Average) makes software that engineers and architects use to design machinery and buildings. The company has completed its review of its stock option plan, which cut its pre-tax earnings by an aggregate of $34.8 million from January 1988 to August 2006. It is now up-to-date with its financial reporting....

SYSCO CORP. $31 (New York symbol SYY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 618.0 million; Market cap: $19.2 billion; WSSF Rating: Average) is North America’s largest supplier of food and related products to restaurants, schools, hotels and hospitals. It has 400,000 customers in the United States and Canada, or roughly 15% of the foodservice market. Sysco is focusing on innovative new ways to expand sales. For instance, its salespeople recently began meeting with individual customers to get a better idea of their needs, and make them aware of Sysco’s other products and services. So far, sales to these customers tend to rise by 15% following a review. Sysco’s plan to expand its salesforce by 7% should also help it squeeze more sales out of existing customers, and find new ones....

HEWLETT-PACKARD CO. $48 (New York symbol HPQ; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 2.6 billion; Market cap: $124.8 billion; WSSF Rating: Above average) continues to expand its software operations. It has agreed to pay $1.6 billion for publicly traded Opsware Inc., whose software helps large organizations manage their server computers and databases. Hewlett has also agreed to buy corporate computing specialist Neoware Inc. for $214 million. The company had $12.3 billion ($4.70 a share) in cash at April 30, 2007, so it can comfortably afford these purchases....