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Market Recap: CFC Spooks Markets; Stocks Plunge


Investors were already nervous with recession fears, but Countrywide rumors spooked the markets. Stocks plunge.

U.S. stocks fell in what was supposed to be Turnaround Tuesday. The Dow Industrials plunged late in the day settling down -238 points, or -1.86% to 12589, the S&P 500 fell to its lowest levels in five months, down -25 points, or -1.84% to 1390, and the Nasdaq Composite closed -58 points, or -2.36% to 2440.

Rumors of Countrywide Financial (CFC), the nation's largest mortgage lender, seeking bankruptcy protection shattered the confidence of financial bulls. The news sent CFC's stock to plunge taking along with it the broader markets before the stock was halted. CFC did issue a statement around midday denying the rumors, yet the markets were not convinced as the stock fell as much as 35% before settling at $5.05 for a -28% decline.

The Philadelphia Bank Index closed -4.03% to $80.59. Brokers JP Morgan Chase (JPM) and Bear Stearns (BSC) hit new 52 week lows. JPM closed -3.97% to $39.70, and BSC fell -6.66% to $71.17. Even bellwether Goldman Sach (GS) fell victim closing -2.69% to 189.50. For context read Minyan Satyajit Das' article This Credit Crunch Has Bite.

Any recovery attempt was quashed by negative comments from AT&T (T). "Just as the coast seemed clear AT&T threw a grenade into the fray... have you ever seen a market so hyper-sensitive to headlines?... one thing is certain, few have any conviction one way or the other," said Professor Jeffrey Cooper. CEO Randall Stephenson said the company was experiencing the effects of "softness" in the consumer business. But the company tried to ease investor concern stating that its mobile-phone unit was not experiencing negative effects due to weakness in the economy. T shares closed -4.56% to $39.16. Read Professor du Plessis' Stocks Are Excellent Predictors of Recession.

In the homebuilding space, KB Homes (KBH) reported 4Q results of -$9.99 EPS. The figure was not comparable to analyst estimates of -$1.08. But revenues fell 31% to $2.07 bln beating estimates of $1.77 bln. Shares of KBH fell -9.20%. That in concert with disappointing Pending home sales figures further pressured stocks. Pending home sales for the month of November fell -2.6% vs. expectations of -0.7%. The Philadelphia Housing Index (HGX) fell -4.36%, Ryland Group (RYL) lost -4.9%, and Meritage Homes (MTH) led to the downside losing -14%. For more on the economic data, read Professor Depew's Five Things You Need To Know.

In commodities, crude oil gained +1.24 per barrel to 96.33. Silver added +0.505 to 15.685. Copper surged +12.85 to 325.35, as well as gold adding +18.00 to 880.00. Check out Professor Lance Lewis' article Banro Corp, A Gold Junior On The Move.

For more summaries from the Buzz and Banter, 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: WYNN, CMED, OMG, BPZ, IWW, GLW, NEWP, OMCL, SKF, FMD, OMG, FCSX, ESLR, HGX, NSU, ASA, ARAY, CSCO, GLW, FDO, BMRN, GLD, gold

Some bearish trade or investment ideas: SOX, TLT, IEF, XLU, BSC, C, MS, KBH, CFC, AMGN, CIEN, MOS, CF, DECK, PCU, CFC, AXA, ALL

We'll see you tomorrow! Good night!

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No positions in stocks mentioned.

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