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Market Recap: Markets Tank on Bad Cocktail


Citigroup, Merrill, Boeing, Apple... markets couldn't survive this lethal cocktail. Stocks tumble.

Stocks stunk it up on what was supposed to be a "Turnaround Tuesday." The Dow Industrials fell -277 points, or -2.17%, to 12501, the S&P 500 fell -35 points, or -2.49% to 1380, and the Nasdaq Composite fell -60 points, or -2.45% to 2417.

Citigroup (C) shares fell to multi year lows after the bank reported, this morning, quarterly earnings below expectations. The company announced $18 bln in subprime-related writedowns and cut its dividend 41%.

Yet foreign investments couldn't save the financials today. The Government of Singapore said it would buy $6.9 bln of the $12.5 bln preferred stock Citigroup was issuing. Also Merrill Lynch (MER) received a $6.6 bln infusion from Korean and Kuwaiti sovereign wealth funds. Citigroup closed -7.62% to $26.85. MER closed -5.29% to $53.01.

"In terms of both the Merrill and Citigroup, convertible transactions are 'ratchet' provisions," Minyan Peter said on the Buzz. "It gives the security holder the right to obtain better terms in the future under certain conditions. For existing Citigroup/Merrill shareholders, should such a further capital raise occur at a lower stock price, their dilution will be significantly compounded because of the ratchet... Shareholders in troubled financial services companies should not take this lightly."

The broader Philadelphia Bank Index closed -4.20% to $80.69. Other notables included JP Morgan (JPM) -5.29% to $39.17, Bear Stearns (BSC) -5.17% to $77.57. and Lehman Brothers (LEH) -5.90% to $55.71. For more, read Minyanville Editor Andrew Jeffery's Citi Underpins Consumer Struggles and Toddo's Answers I Really Wanna Know.

Tech stocks took a painful drubbing. Apple (AAPL) fell to its lowest level in two months after the company failed to impress investors at the company's Macworld expo. The stock lost -8.23% to $169.04. Other stocks included Research in Motion (RIMM) -9.0% to $87.67, Google (GOOG) -4.46% to $624.00, and Baidu (BIDU) -9.35% to $308.27.

In economic data, U.S. retail sales disappointed investors as well with figures declining -0.4% vs. Street expectations of 0.0%. Inflation data was also released. PPI month-over-month decreased -0.1% versus +0.2% consensus with core figures coming in inline with expectations. For more analysis, read Professor Depew's Five Things You Need To Know.

The final straw was possibly Boeing (BA). Late in the session the WSJ reported the company would likely announce additional delays in its 787 Dreamliner program. The news sent BA to a new 52 week low before the stock settled -4.67% to $77.86. The weakness spread to Boeing's subcontractors. Spirit Aerosys (SPR) fell -5.04% to $26.78. Allegheny Tech (ATI) lost -6.29% to $75.04; Precision Castpart (PCP) lost -5.83% to $117.24, and Goodrich (GR) closed -2.14% to $62.99. For insight on this topic, read Professor Bloudek's column written earlier this month, Boeing's 787 Production Concerns.

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: SNCR, FXI, AAPL, C, LM, REGN, DBA, JGP, SDTH, FCSX, AMAT, INTC, EMC, PDGI, WLT

Some bearish trade or investment ideas: AAPL, C, SPX, BOBE, JWN, NFLX, RIMM, PCU, BKX, financial preferreds (GS, LEH, BSC, X, MWR)

Tomorrow's Hump Day! See y'all in the morning!

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No positions in stocks mentioned.

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