Market Summary: Mon. March 10, 2008

The financials, as well as Eliot Spitzer (NY Governor), stole the day’s headlines as more credit and liquidity problems surfaced.

Morgan Stanley cut earnings estimates for the major U.S. banks by $8.8B because of “severe” deterioration in the credit markets (Source: Bloomberg.com). There was also talk of job cuts at Citi (30,000) and Lehman Brothers (up to 5% = 1,430). Citi also announced they expect up to $9B more in write-downs.

Bear Stearns was the main laggard (down 11% on 4x the normal trading volume) because of rumors that the company was out of cash and might be insolvent. Bear Stearn’s CEO said “there is absolutely no truth to the rumors” and that their “balance sheet, liquidity and capital remain strong” (Sources: CNNMoney.com, Bloomberg.com).

Many of the mortgage and sub-prime lending companies got hammered because they are under an FBI investigation. Countrywide Financial, Ambac, MBIA, Freddie Mac, and Fannie Mae were the big losers.

Also, Fitch Ratings downgraded Washington Mutual’s long-term default to BBB from A-. Shares of WM closed at $10. The stock was trading as high as $45 in July 2007.

Not all of the day’s news was bad. McDonald’s reported that same store sales for February increased 11.7%. Also, the January Wholesale Inventory report came in at 0.8% when analysts were only looking for a 0.5% increase.

Something very important to note that was discussed on Fast Money. People are investing in crude oil futures almost as a safe-haven investment – just like the flight to quality in Treasuries. Many speculators are jumping back in because this is the only area of the market that seems to be going up in price. The upward and downward moves are going to be exaggerated, so if you can stomach the volatility and find a nice entry point, the energy complex might be a good place to put some money.

Some other important news…

- Thornburg Mortgage was down 55% after it was downgraded to “underperform.”

- Gasoline hits $3.19/gallon (national average)

- Crude oil rallies to $108/barrel à airlines very weak

- Goldman Sachs expects oil to reach $200/barrel

- NY Governor Eliot Spitzer is believed to be involved with a prostitution ring

- After the bell, Texas Instruments lowered its Q1 earnings and revenue forecasts

- China’s inflation rate hits 8.7%, higher than expected (Source: Bloomberg.com)

- The Blackstone Group, a huge private equity firm, announced earnings that were well below analysts’ expectations

- Well Point, a healthcare benefits company, lowered its Q1 guidance and the stock is down 20% in after-hours trading

DJIA 11,740.15 -153.54 (-1.29%)
Nasdaq 2,169.34 -43.15 (-1.95%)
S&P 500 1,273.37 -20.00 (-1.55%)
NYSE Volume 4,226,324,000

2-Yr Bond 1.47% -0.06
10-Yr Bond 3.46% -0.10
30-Yr Bond 4.45% -0.10

Dollar Index 72.993 -0.034
Crude Oil (Apr) 107.90 +2.75
Gold (Apr) 971.80 -2.40