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Market Recap: Flip Flop Markets; Stocks Close Lower

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The market's recovery was sideswiped by the Treasury. Stocks close lower.

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Investors disregarded the oversold conditions in the markets and continued the selling. The Dow Industrials fell -34 points, or -0.28% to 12466, the S&P 500 fell -7.75 points, or -0.56% to 1373, and the Nasdaq Composite fell -23 points, or -0.95% to 2394.

The markets had begun to recover in late-day trading as chatter circulated that the nation's lawmakers would rush a proposal to President Bush for an economic stimulus package. Although details of the package were not available, the general consensus, according to Senator Chuck Schumer, is a package that includes broad-based tax rebates, targeted tax cuts for the middle class, extending unemployment insurance and food stamps, business tax cuts for job creation, and federal assistance to states.

The markets received a steady lift from the news, but some at the 'Ville were skeptical. "Wouldn't the proposed $150 bln stimulus package be perceived as negative for the dollar (government bailing out)?" Toddo asked, "And, if so, doesn't the fact that the dollar is higher today suggest that the market is more worried about deflation?"

Mr. Practical responded, "Yes on both. The real market understands that government stimulus will do nothing to the real economy. This is credit crunch and new debt can't get in. That is deflation, while a stimulus package is just bad for the dollar. So you get both… when it happens!"

But just as the buying activity steadily increased, all the market's gains for the day were wiped out as headlines of the Treasury not supporting increased loan limits for Fannie Mae (FNM) and Freddie Mac( FRE) hit the tape. The selling pressure, however, wasn't enough to push the stocks into red. FNM closed +2.75% to $37.30, and FRE finished +2.02% to $31.35. For more on deflation, read Toddo's Random Thoughts.

In economic data, the CPI rose 0.3% in December less than November's 0.8% gain. Core CPI, which excludes food and energy, advanced 0.2%. For more, read Professor Depew's Five Things You Need To Know.

Commodities were weak today. Crude oil slid lower -0.93 to 90.97. Gold tumbled -21.40 to 881.00. Silver fell -0.398 to 15.807, and copper lost -5.85 to 316.15.

For more summaries, click on 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: INTC, SPX, MON, INTC, QMAR, AKAM, FFIV, LAZ, FIG, BX, GROW, AMR, LCC, REGN, IBB. Crude, gold

Some bearish trade or investment ideas: SPY, GLD, BIDU, crude, OIH, XLE, MOS, POT, OIH, GOOG, AAPL


Time flies when we're having fun, eh? Good night, Minyans!

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No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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