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Market Recap: Bernanke and Friends Answer Bear Questions


Market finishes flat despite revelation of near collapse.

Stocks finished flat on a day where investors learned more details of the recent near- collapse of the nation's financial system. The Dow Industrials finished +20 points, or +0.16% to 12626, the S&P 500 closed +1.7 points, or +0.13% to 1369, and the Nasdaq Composite closed +1.9 points, or +0.08% to 2363.

Topping headlines today, top financial regulators gathered in Washington to testify on last month's Bear Stearns (BSC) rescue. Fed Chairman Ben Bernanke, Bear Stearns (BSC) CEO Alan Schwartz, JPMorgan Chase (JPM) CEO Jamie Dimon, SEC Chairman Christopher Cox, and others defended the intervention because a collapse would have shattered confidence in the financial sector and caused a long-term negative impact.

According to Reuters, when asked if the move was justified or simply a bailout with taxpayer money, Fed Chairman Bernanke responded, "What we had in mind here was the protection of the American financial system and the protection of the American economy. I believe that if the American people understand that we were trying to protect the economy and not to protect anybody on Wall Street, they would better appreciate why we took the action we did." See Mr. Practical's Market Manipulation Under Veil of Secrecy?

But Toddo noted the reaction in the markets as stocks gradually moved to session highs by early afternoon. "Our central bankers are telling us that the entire capital system was on the brink of Armageddon – and the conditional elements of such remain in place – but the market is shrugging it off. That's either really bullish or extremely bearish." Stocks further received an uptick after Merrill Lynch (MER) CEO John Thain told Japanese newspapers that the company did not need to raise any additional capital. Merrill stock surged nearly 5% on the news before settling +1.2% to $45.89. Other banking stocks traded higher before late-session selling pushed some stocks into the red. Notables include Lehman Brothers (LEH) falling -1.7% to $43.32. Morgan Stanley (MS) dropped -0.43% to $48.88, but the broader Philadelphia Bank index (BKX) gained +0.30% to $84.32. See Toddo's column A Game of Chicken: Who Will Blink First?

In tech, Research In Motion (RIMM) shares moved higher after the company reported solid fourth quarter profits. The maker of the BlackBerry mobile device said net income rose to $412.5 million or $0.72 per share from $187.4 million or $0.33 per share last year. Sales doubled to nearly $2 billion and the company guided higher first quarter estimates to $0.86 per share vs. previous forecasts of $0.75. RIMM shares added +5.7% to $122.46. Check out Minyanville Editor Andrew Jeffery's Blackberry Soars Despite Tough Economy.

Other notables in tech include Apple (AAPL) +2.79% to $151.55; Baidu (BIDU) +2.27% to $286.35; and Broadcom (BRCM) surged +5.47% to $20.83. Google (GOOG) fell -2.27% to $455.12, and Garmin (GRMN) fell -6% to $53.01. Read Toddo's Random Thoughts.

Elsewhere, Schering-Plough (SGP) shares surged after the drugmaker said it would cut 10% of its workforce and shut down facilities. The company said the cost-cutting moves would save it $1.5 annually. Earlier this week SGP shares plunged after doctors said the company's main cholesterol drug shouldn't be used over older, cheaper drugs. SGP finished +11% to $15.38.

Steel stocks moved higher after Goldman Sachs said that even though it raised its forecasts for steel prices in late March, those prices still appeared to be conservative.

"It's hard to ignore the possibility of several industries that might start to surprise if we become one of the world's low cost provides," said Professor Ryan Krueger. "According to several bears on the buck the U.S. will soon be a Third World nation. Well, membership does have some privileges."

AK Steel (AKS) hit a new 52 week high before settling +2.16% to $60.20. Steel Dynamics (STLD) closed +0.53% to $34.00, and ArcelorMittal (MT) added +1.21% to $82.48.

In commodities, Professor Adam Michael concluded inconsistent behavior in today's petroleum data.

"Today we found that the U.S. Strategic Petroleum Resource (SPR) rose to a record 700.9 million barrels, and is increasing at a rate of 62,000 barrels a day. Why would the U.S. be increasing reserves with oil over $100? The government's own Energy Information Agency projects crude to fall for the next two years, why wouldn't the U.S. wait for lower prices to top off our SPR? It didn't feel the need to keep filling after Katrina and oil was only $50/barrel…. Something is not adding up here…"

Crude oil declined -0.34 to 104.49. Gold added +8.5 to 903.70. Silver gained +0.210 to 17.390, and copper moved higher +0.90 to 389.75.

The dollar index fell -0.057 to 72.202.

For more Buzz insight, check out Minyanville's Buzz Bits.

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: DO, V, CLF, CRM, QQQQ, RSX, MA, RVBD, FLS, DVN, PCLN, ITRI, MSFT, CML, steel

Some bearish trade or investment ideas: LEH, FNM, MER, GOOG, BBY, gold

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