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Market Recap: Flip Flop Markets; Stocks Close Lower


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

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.

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