Export orders were on the rise in October in China, suggesting a strengthening recovery and an opportunity to cut back on stimulus spending. The manufacturing measure grew at its fastest rate in the past year and a half, according to the HSBC (NYSE: HBC) purchasing managers' index. It increased to a seasonally adjusted 55.4 from 55 in September.

If you're looking for a reason behind the gain, it's all in the flow of capital. In addition to the government's economic stimulus package, $1.27 trillion in new loans were written to help deliver the country from the global financial crisis.

Do you feel good about $173 billion of your tax money helping to keep American International Group (NYSE: AIG) from going bust? If you made the decisions that put AIG at death's door you might be. But the odds are pretty good that you had absolutely nothing to do with AIG's failure and received not a penny of compensation during the time when its executives were reporting profits -- and getting millions in compensation that they're not paying back now that it's losing money.

That's one of the reasons why I was arguing on KCRW's To the Point that the U.S. ought to disclose who is getting the taxpayer money that goes to AIG. After all, they just got another $30 billion this week after reporting history's biggest quarterly loss of $61 billion. A professor on the program suggested that we should not disclose the names of the recipients because it would threaten the stability of the financial system. I thought this professor's argument was unpersuasive -- and now we'll get a chance to see who was right.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Adobe Systems Inc. (NASDAQ: ADBE) was upgraded following its Q1 release and guidance.
• America's Car-Mart Inc. (NASDAQ: CRMT) posted higher earnings in Q3 and same-store sales growth.
• AT&T Inc. (NYSE: T) was upgraded by an analysts who felt that consensus estimates are beatable.
• Berkshire Hathaway Inc. (NYSE BRK.A) suffered a big profit decline, its fifth straight quarterly decline.
• Blackstone Group (NYSE: BX) posted horrible Q4 results as the values of its portfolio shrank.

In the infamous words of Rod Roddy, HSBC Holdings (NYSE: HBC) come on down! You're next on the Earnings are Falling (or The Price is Wrong if you like).

The banking firm announced this morning that its 2008 profit fell some 70%, which is prompting the firm to halt most of its U.S. consumer lending business. HSBC's net profit fell to $5.73 billion from $19.13 billion a year ago. In North America, HSBC took a goodwill charge of $10.6 billion stemming from the restructure of the region. Taking this charge out of the equation, HSBC's profit dropped 18% to $19.9 billion. Experts had expected a pretax profit of roughly $20 billion.

Lehman Brothers (NYSE: LEH) is a dog of a brokerage house and a broken company. Yet, every time Wall Street turns around, some other financial company is considering investing in it. According to Reuters, "HSBC and the Chinese bank, along with top U.S. hedge funds, are competing with Korea Development Bank."

The fascination with Lehman is fascinating. While it may have a strong money management arm, the value of its commercial property portfolio is falling apart. It has the same kind of toxic mortgage-backed paper on its balance sheet as the one that plagues the balance of the financial industry. If they have any sense, top managers at Lehman will be getting out.

If investors are right about Lehman, the company may not make it. The stock trades at $16, down from a 52-week high of almost $68. With a market cap of only $11 billion, a $5 billion investment could push shares to below $9.

Credit markets are supposed to get worse this year. At least that is what the newspapers say. Lehman is as likely to be further damaged by that as any other large financial firm.

A few outside investors see something in Lehman that the markets don't. Perhaps they would be willing to share that with the rest of the world.

Douglas A. McIntyre is an editor at 247wallst.com.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• American International Group Inc. (NYSE: AIG) blamed another big loss on housing and credit markets.
• Barrett Business Services Inc. (NASDAQ: BBSI) beat Q2 estimates and raised its Q3 guidance.
• Fannie Mae (NYSE: FNM) Q2 loss was three times more than analysts had predicted.
• Freddie Mac (NYSE: FRE) big loss was due to loan write-offs, but revenue rose 10%.
• HSBC Holdings PLC (NYSE: HBC) reported a drop in profit and warned of more difficulties to come.
• InterContinental Exchange (NYSE: ICE) posted Q2 results that were in line with Wall Street expectations.
• Marvel Entertainment Inc. (NYSE: MVL) posted strong Q2 results on Iron Man and Incredible Hulk movies.
• Midway Games Inc. (NYSE: MWY) widened its Q2 net loss as revenues slumped.
• News Corp. (NYSE: NWS) posted strong Q4 results on asset gains, and warned of slower growth.
• Playboy Enterprises Inc. (NYSE: PLA) posted a worse-than-expected Q2 loss despite cost controls.
• Procter & Gamble Co. (NYSE: PG) healthy Q4 and full-year results beat analysts' expectations.
• RadiSys Corp. (NASDAQ: RSYS) easily beat Q2 expectations on strong demand for wireless products.
• Time Warner Inc. (NYSE: TWX) net income slumped on declining AOL subscriber fees (see transcript).
• Tyco International Ltd. (NYSE: TYC) beat Q3 earnings expectations and raised its full-year guidance.
• Whole Foods Market International (NASDAQ: WFMI) posted dismal results and suspended its dividend.

Stock futures were lower Monday morning ahead of a wave of economic data, a tropical storm and, most important, the Federal Reserve meeting and decision Tuesday.

Before the opening bell, the economic calendar includes personal income and spending data for June, as well as the core PCE deflator, an inflation gauge the Federal Reserve eyes closely. Factory orders for June are also due after the open. Oil prices were steady near $125 a barrel Monday as the market kept on eye on both tropical storm Edouard that could turn into a hurricane and hit oil facilities in the Gulf of Mexico, and on further developments in Iran. But most of trading today will likely be affected by expectations the Fed will not change interest rates Tuesday, and issue a neutral statement with the focus changing to the weak economy.

Bank troubles aren't over. HSBC Holdings PLC (NYSE: HBC) reported a significant profit drop as costs for bad U.S. mortgage loans mounted. "HSBC Chairman Stephen Green said the first half of 2008 saw one of the most difficult financial markets for decades." As long as the housing market slump continues, and before the bottom can be seen, no doubt the financial sector will continue to suffer. And given that only about 40% on the $1 trillion expected writedowns were taken, the challenges for financials are far from over. For now, HBC shares are dropping about 3% in premarket trading.

Will investors soon get over worries about losses from subprime mortgages? As Doug indicated this morning, the answer for now is "nope." Today overseas markets are definitely paying attention to renewed fears about credit markets. The Dow was down over 56 points yesterday and today, Asian market sectors including banking, brokerage and insurance took a plunge as well. Francis Lun with Hong Kong's Fulbright Securities told MarketWatch, "After the drop on Wall Street, people are wary about further write-downs related to subprime mortgages."

With earnings season just kicking off today with Alcoa's second quarter results after the close, should we also be bracing for worse-than-expected reports from banks and brokerages? Today hat's the sentiment in Hong Kong and other Asian markets, where the Hang Seng index fell 3.2% in overnight trading and the Nikkei lost 2.5%.

Asian regional markets were sitting on the same worries pressuring U.S. markets, according to David Cohen with Action Economics. He posited that most Asian indexes were under pressure "from the same forces weighing upon markets globally, hostage to oil prices, and fears of stagflation." This morning at least, investors are bracing for U.S. markets to get worse before they get better.

It says a mouthful when banks start to call for higher interest rates. The view of managements at financial companies may be coming around to the point where they believe inflation is a bigger problem than rates are.

According to Reuters, "The chief executive of Europe's biggest lender on Tuesday called on central bankers to raise interest rates in order to combat inflation." The head man at HSBC (NYSE:HBC) fears that there is no overall plan in the financial community to keep rising prices down.

The viewpoint about inflation is probably right, but that does not mean that governments will begin to up rates. In places like the US, where people are still defaulting on mortgages at record rates, and auto loans and credit card payments are under pressure, upping interest rates would be hard to swallow.

There is also the matter that increasing banking rates may do nothing to halt the spike in food and gas prices. These are being set, to a large extent, by demand outside the US, especially in developing nations. Messing with the cost of lending is not likely to fix that.

Douglas A. McIntyre is an editor at 247wallst.com and the author of the Ten Stocks Under $10 letter.

MAJOR PAPERS:

• The Wall Street Journal reported that a federal judge said that the government had "sufficient evidence" for a jury to conclude that a conspiracy to fraudulently boost the financials of American International Group Inc (NYSE: AIG) began with former CEO Maurice R. "Hank" Greenberg. That led to a transaction that artificially inflated AIG's loss reserves.
• Citigroup Incorporated's (NYSE: C) Falcon Strategies fixed income hedge fund is down 75%, the Wall Street Journal reported, bad news for the three U.S. banks that invested in it to help increase returns on employee life insurance. One of the banks, Fifth Third Bancorp (NASDAQ: FITB), is suing Transamerica Life and Smith Barney, both of whom helped to arrange the investment, and some are now questioning whether Citigroup will be forced to give back some of the investments as they have with individual investors.
• After it stopped offering some mortgages last month because it was swamped by volumes of new applications, the Financial Times reported that First Direct, a unit of HSBC Holdings Plc (NYSE: HBC), has resumed lending to new customers. The bank said it has continued to receive "significant interest" in its mortgages from existing customers.

OTHER PAPERS:

• In an effort to raise capital from shareholders, the Telegraph reported that Barclays Plc (NYSE: BCS) is considering a takeover bid for a rival in the U.S. or UK. Sources believe Barclays may attempt to acquire an investment bank, a struggling bank or a deal in a fast-moving economy. Potential names mentioned include UBS AG (NYSE: UBS) and Lehman Brothers Holdings Inc (NYSE: LEH).

MAJOR PAPERS:

• Lockheed Martin Corporation (NYSE: LMT) is expected to beat out The Boeing Company (NYSE: BA) for an approximate $1.8B contract to from the U.S. Air Force to build a new generation of navigation satellites, the Wall Street Journal reported.
• According to the Wall Street Journal, former American International Group Inc (NYSE: AIG) CEO Maurice R. "Hank" Greenberg is pressing the troubled insurer to turn the company around. He says that he and other major shareholders have "deep concern about the persistent and seemingly endless destruction of value at AIG."
• Hybrid Capital Second, a Morgan Stanley (NYSE: MS) investment vehicle, increased its stake in internet start-up Livedoor to 18.15% from 12.76% in March, the Financial Times reported, superseding the company's founder, Takafumi Horie.

OTHER PAPERS:

• After it incurred $3.2B of bad debts in the first three months of the year, the Telegraph reported that Knight Vinke, an HSBC Holdings Plc (NYSE: HBC) shareholder, has renewed calls for the bank to shed its U.S. consumer finance business.

MAJOR PAPERS:

• The Wall Street Journal reported that a spokesperson for New Corporation (NYSE: NWS) said the company has dropped out of the bidding for Tribune Co's (NYSE: TXA) Newsday. This leaves Cablevision Systems Corporation (NYSE: CVC) as the apparent winner of the auction.
• According to people familiar with the matter, the Wall Street Journal reported that American International Group Inc's (NYSE: AIG) airplane-leasing unit is considering a split from the company. The people said International Lease Finance Corp have grown "increasingly concerned" the company will be hurt by AIG's financial troubles.
• Royal Dutch Shell Plc (NYSE: RDS.A) and Spain's Repsol YPF SA (NYSE: REP) are pulling out of one of Iran's biggest gas projects, the $10B-plus development of phase 13 of South Pars, the world's largest gas field, the Financial Times reported.

WEB SITES:

• Bloomberg reported that HSBC Holdings Plc (NYSE: HBC) set aside a smaller-than-forecast $3.2B for bad loans in the U.S. The bank also said its Q1 profit was higher than Q107.

MOST NOTEWORTHY: HSBC Holdings, WPP Group and Aware were today's noteworthy downgrades:

• Morgan Stanley downgraded HSBC Holdings (NYSE: HBC) to Underweight from Equal Weight to reflect expected losses at the company's U.S. unit.
  
• ABN Amro cut WPP Group (NASDAQ: WPPGY) to Hold from Buy as they expect slowing top-line growth from stagnant marketing budgets.
  
• Merriman downgraded shares of Aware (NASDAQ: AWRE) to Neutral from Buy after DSL royalty revenue declined for a third straight quarter.

OTHER DOWNGRADES:

• Goldman removed McDonald's (NYSE: MCD) from its Conviction Buy List.
  
• Suntrust downgraded Goodrich Petroleum (NYSE: GDP) to Reduce from Neutral.
  
• Merrill lowered Grupo Aeroportuario (NASDAQ: OMAB) to Neutral from Buy.

MOST NOTEWORTHY: Sunoco, Ryanair and HSBC Holdings were today's noteworthy downgrades:

• JP Morgan downgraded Sunoco (NYSE: SUN) to Underweight from Neutral citing expected margin pressure due to high leverage to sweet crude. Goldman also downgraded shares of Sunoco to Neutral from Buy.
  
• Deutsche Bank downgraded shares of Ryanair (NASDAQ: RYAAY) to Sell from Hold as they believe the European airlines sector will trade well below book value until the companies deal with higher oil prices.
  
• UBS cut HSBC (NYSE: HBC) to Neutral from Buy to reflect the potential for higher losses at the company's household unit and weak performance at its U.S. bank.

OTHER DOWNGRADES:

• Broadpoint lowered MTS Medication (NYSE: MPP) to Neutral from Strong Buy.
  
• HSBC cut Southern Peru Copper (NYSE: PCU) to Neutral from Overweight.
  
• Goldman downgraded CNH Global (NYSE: CNH) to Neutral from Buy and PetroChina (PTR) to Sell from Buy.

TheStreet.com's Jim Cramer wonders -- can we handle this giant's failure?

As always, it is Citigroup (NYSE: C) (Cramer's Take). My smartest guys tell me that Citigroup has billions in assets it can sell, that there is ample opportunity for the company to reliquify, that Vikram Pandit has things under control and the slow bleed cuts are going to work to get costs down.

Now I have total confidence in Treasury, particularly in Bob Steel, to take care of the shorts and to create brilliant shotgun marriages that reward the rich banks and punish the poor.

BUT, I have no faith in Citigroup, which because of the moronic acquisitions and bizarre off-balance-sheet liabilities may technically be insolvent. When you consider it is too big to fail, you have to begin to wonder -- what's the plan if it can't make it? How far can forbearance go? Will we tolerate this bank being majority-owned by the sheiks or the communist Chinese? Seems far-fetched, but when I read Meredith Whitney's words this morning over at OPCO I know that the losses are going to be too big for the current base of capital.