We opened higher this morning, but selling pressures continued throughout the day to drive the major indexes down a little over 1%. This morning, there was a handful of neutral to good news that caused us to open higher. The Initial Jobless Claims number came in at 349K, just slightly higher than the expected 345K, Cisco was upgraded by Citigroup, Transocean was upgraded by Goldman Sachs, Terex, a construction and mining equipment maker, handily beat estimates and was up over 7%, and Research in Motion (RIMM) reaffirmed their Q4 guidance and said they expect “net subscriber account additions for the fourth quarter to be approximately 15% to 20% higher than the 1.82 million net subscriber account additions forecast by the company on Dec. 20, 2007” (Source Bloomberg.com).
At 9am, the market turned south on two pieces of data: the January Philadelphia Fed survey on regional manufacturing conditions and the crude inventories report/comments from Boone Pickens. The Phily Fed index came in at -24 when the market was looking for -10. Crude inventories rose to 4.2B barrels – higher than traders were expecting (Source: Bloomberg.com). Also, Boone Pickens, a legendary oil mogul, came on CNBC and said he was shorting oil and natural gas. Oil declined $2.36 on the day and energy stocks were down big.
Other news that weighed on the market included Starbucks announcing they will cut 600 jobs. JCPenney announced Q4 earnings that were in-line with analysts’ estimates, but their Q1 guidance was low. JCP opened up 5% and finished the day flat. Target was downgraded to sell by Citigroup (Source: Bloomberg.com)
Gold futures hit another all-time high on “inflation worries and a slowing economy.” Spot gold finished the day at $945.71 (Source: Bloomberg.com). The U.S. Dollar Index was also down big.
The new MBIA CEO came out and supported the idea of separating their municipal bond business from their CDO (collaterized debt obligations, also known as asset-backed securities) business (Source: Bloomberg.com). Whatever happens to MBIA and Ambac will drive the stock market. Whether they lose their AAA ratings, get capital infusions or government help, or split into multiple businesses, all eyes are on them.
Today’s sell-off was prompted by some poor economic data, but it seemed warranted given yesterday’s late afternoon rally on essentially no news. Bonds rallied big today, almost back to Tuesday’s level before they sold off on inflation concerns. There are no big earnings reports or economic data releases tomorrow, so expect the market to be lower at the open. Sentiment is very negative once again and the only thing really working now is stocks that benefit from rising inflation. All eyes will soon be on the Fed as their March meeting quickly approaches. If market conditions continue to deteriorate, don’t be surprised if the Fed steps in and does an inter-meeting cut like last time.
DJIA 12,284.30 -142.96 (-1.15%)
Nasdaq 2,299.78 -27.32 (-1.17%)
S&P 500 1,342.53 -17.50 (-1.29%)
NYSE Volume 3,592,700.75
2-Yr Bond 1.97% -0.160
10-Yr Bond 3.77% -0.125
30-Yr Bond 4.54% -0.067
Dollar Index 75.60 -0.515
Crude Oil 98.39 -2.36
Gold 945.71 +1.97
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