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Market Recap: Financial, Commodity Fears Drive Market Lower


Bulls got spooked in today's trading.

Stocks failed to follow through after yesterday's enormous rally. More fears emerged in the financial sector, coupled with expiration week volatility, and a sell-off in commodities pressured stocks to the downside.

The Dow Industrials fell -293 points, or -2.36% to 12099, the S&P 500 lost -32 points, or -2.43% to 1298, and the Nasdaq Composite closed -58 points, or -2.57% to 2209.

Equity markets were slightly higher on the open this morning with Morgan Stanley's (MS) first quarter earnings release. The second largest U.S. securities firm reported a 42% drop in profits but earnings fell less than expected. Stocks rose on the news but gains were gradually erased as fears from rival Merrill Lynch (MER) began to grip the markets on rumors that the bank would report $10-12 billion in writedowns. Professor Fil Zucchi noticed the suspicious activity in the options market: "…Apr 30 puts have traded 62,000+ contracts against open interest of 19.7k. Volatility is in the 200's. Talk is a large butterfly trade went up betting that MER will go to $30 by option expiry."

The rumors sparked a wave of selling in much of the financial sector which only intensified as stocks approached the closing bell. Merrill Lynch tumbled -11% to $41.45. Other victims included Lehman Brothers (LEH) -9% to $42.23, Goldman Sachs (GS) -5% to $166.49, and Capital One (COF) lost -4% to $49.46. Gainers include Morgan Stanley (MS) +1.4% to $43.45 and Wachovia (WB) +0.57% to $28.30. For context read Toddo's The Cat's Meow: The Other Side of Socialization.

Commodities were the other major headlines today. According to Bloomberg, gold futures plunged $59, the most ever. Some suspected the selling was due to disappointment the Fed didn't ease by more than 75 basis points. Nonetheless, gold shares plunged along with it. Notable decliners include Barrick Gold (ABX) dropping -8.7% to $45.25. GoldCorp (GG) fell -6.3% to $38.71. Agnico Eagle Mines (AEM) lost -8% to $68.12 and Gold Fields (GFI) declined -4% to $14.86. For more, read Professor Lance Lewis' column Yellow Metal Retreats and Professor Kevin Depew's Five Things You Need To Know.

Elsewhere tech shares declined. Apple (AAPL) fell -2.35% to $129.80. Garmin (GRMN) dropped -3% to $59.24, and Baidu (BIDU) fell -11% to $219.20. Todd mentioned BIDU today in his Random Thoughts.

Gold settled -58.50 to $945.80. Crude oil lost -4.94 to 104.48. Copper lost -12.05 to 365.00, and Silver fell -1.545 18.345.

The dollar index gained +0.529 to 72.101.

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: SPX, GOOG, SGP, GFI, AU, GOOG, MSFT, AAPL, MCD, SBUX, SYMC, MFE, SMN (inverse)

Some bearish trade or investment ideas: AEM, FCX, PCU, BIDU, SLB, BIDU, GLD, COF, MER, Crude, gold

Last day of the week tomorrow. Have a great night!

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No positions in stocks mentioned.

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