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Market Recap: Fannie Mae, "Substantial Recession", Starbucks, Stocks Close Up


Expiration Friday did not disappoint. Stocks were volatile, limping into green territory.

Stocks closed with a gain in another choppy session of expiration Friday. The Dow Industrials added +66 points, or +0.51% to 13176, the S&P 500 added +7.59 points, or +0.52% to 1458, and the Nasdaq Composite gained +18.7 points or +0.72% to 2637.24

Investor concern was evident even though the markets ended the session in green. Professor Cooper noted on the Buzz the markets were trading as if someone was "waiting for the next shoe to drop," as rumbling sounds continued to come from the credit markets. Bloomberg reported Fannie Mae (FNM) extended its largest two-day slide since 1987 after the company failed to reassure investors of further credit losses. The sentiment was further exacerbated when a note by Goldman Sachs' (GS) chief economist projected a $2 trln cut in lending, triggering a "substantial recession" due to tightened lending standards in the financial sector. Fannie Mae hit a new 52-wk low before pairing almost half of its losses for the day. The stock closed -5.4% to $40.69. The Philadelphia Bank Index (BKX) fell -0.85%. Goldman Sachs lost -0.78%, Bear Stearns (BSC) fell -0.87%, and Morgan Stanley (MS) lost -0.69%. For more, read Professor Depew's Five Things You Need To Know and Professor Shedlock's Goldman Sees "Substantial Recession" Risk.

In tech, sentiment was briefly helped with news of Cisco (CSCO) announcing an increase in buybacks. The company announced the board of directors approved an authorization of up to $10 bln in the stock repurchase program increasing the total amount to $62 bln. Cisco's performance seemed somewhat lackluster, however. The action in the stock had Professor Udall asking on the Buzz, "Another $10 bln and it's still under $30?" Cisco shares gained +2.18% to $29.94.

Further, Google (GOOG) did its part in lifting tech sentiment as the WSJ reported the company was potentially making plans of running its own mobile network. The article stated that Google was preparing financing in a potential bid for a chunk of the airwaves used for mobile and Internet services, a plan that could cost over $4.6 bln. Shares of Google closed +0.63% to $633.63. Other tech shares ended on a positive note. Apple (AAPL) added +1.27% to $166.39, and Research in Motion (RIMM) added +4.43% to $107.57,

In the retail space, Starbucks (SBUX) reported yesterday after the bell. Although the company reported performances in-line with expectations, it issued downside guidance for the next quarter. Professor Macke criticized management didn't under the problem. Shares of Starbucks hit a 52-wk low closing –3.86%. For more of Professor Macke's analysis, read Starbucks' Venti Troubles? Also be sure to check out Hoofy and Boo's report, Venti, Vidi, Vici!

In economics, net foreign purchases came in at $26.4 bln versus $71.5 bln consensus. Capacity utilization came in at 81.7% versus $82.1% consensus. Industrial Production declined –0.5% versus expectations of +0.1%.

In commodities, crude oil added +1.77 to 93.84. Gold fell –0.3 to 787, silver added +0.02 to 14.51, and copper added +7.5 to 319.90.

For more summaries, please read Minyanville's Buzz Bits.

Idea Flow

Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.

Some bullish trade or investment ideas: SPY, SCHW, DVAX, CVG, PRGN, QMAR, DRYS, VMW, ESLR, WAT, SPX

Some bearish trade or investment ideas: SBUX, T, NBR, PDC, OIH, JLL, MAN, FMD, UTHR, AMD, FNM, WFC, NFI, DSL

Hope y'all had a great day, Minyans. Have a great weekend!
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