Market Summary: Tues. Feb. 19, 2008

We started the day off on a positive note from Wal-Mart, the world’s largest retailer, thanks to their strong earnings report – their Q4 numbers beat analysts’ expectations. This was taken as a very positive sign that the consumer was still spending. However, their full-year guidance of $3.43/share fell slightly short of analysts’ estimates. WMT was up 22 cents on the day. (Source: CNBC TV)

Oil was leading the market higher as crude prices touched $100. Oil and energy stocks, as well as many of the commodity-related stocks (agriculture, metals & mining, alternative energy) were up huge today. According to Bloomberg.com, “March crude oil rose $4.51, or 4.7 percent, to settle at $100.01 a barrel, a record closing price…Gasoline for March delivery climbed 4.4 percent to close at a record $2.6031 a gallon after an explosion shut down Alon USA Energy Inc.'s Big Spring, Texas, refinery. Natural gas advanced to the highest levels in 15 months on forecasts that colder weather in the eastern half of the U.S. will spur demand.” On CNBC today, an analyst was cautious about the huge run-up in crude prices saying that there are “supply concerns,” but also lots of “fund buying and speculation.” Gold, copper, and silver prices were also up big.

The inflation story is back once again. The story is two-fold: there is a growing world-wide demand for commodities (especially in China, India, Brazil, and Russia) and there are talks of supply shortages for many of these goods, specifically oil (Source: CNBC TV). If prices continue to rise the Fed will be forced to keep rates at 3.0% in order to keep inflation under control. Many of the financial stocks were down because of the possibility of no more rate cuts. The CPI number comes out tomorrow, and although it is from last month, will be a very telling indicator of what the Fed can or can’t do to stimulate economic growth at its next meeting. The rising commodity prices caused bonds to sell off (yields up).

The market turned in the afternoon, led by a downturn in tech stocks. According to Bloomberg.com, Apple “cut the price of its least-expensive iPod, the Shuffle, to $49 after sales of its media players slowed last quarter.” Also, Google had an alarming note in their recently filed 10K report. “As you'll recall, one reason Google gave for its light revenue in Q4 was the reduction of “accidental clicks.” Based on the language in the 10K, it appears this impact may continue in Q1 and beyond.” Google also stated that they “may continue to take steps to reduce the number of accidental clicks…and these steps could negatively affect our near-term advertising revenues” (Source: finance.yahoo.com). Google shares were down $21 on the day.

In other news, MBIA CEO resigned and will be replaced by the former CEO. Credit Suisse was down 5% after announcing “they had overvalued their holdings in asset-backed securities by $3B” (Source: Bloomberg.com).

Are more write-downs on the way? According Oppenheimer & Co., financial companies “may have to record $70B of additional costs if the bond insurers fail” (Source: Bloomberg.com).

After the bell, Hewlett-Packard reported strong earnings. They recorded Q4 EPS of 86 cents vs. analysts’ estimates of 81 cents. They had a 13% increase in revenue growth and a 38% increase in income. Shares are up 4.5% in after-hours trading. Also, Crocs was slaughtered in after-hours trading after giving lower guidance for ’08 and much higher than expected inventories. Medco Health Solutions was up 5% after they raised guidance and beat analysts’ expectations from Q4 (Source: CNBC.com).