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Market Recap: Paulson Warnings, Volatility Party, Markets Fall


Paulson revealed more signals in housing. Markets were volatile as traders went home for turkey. Stocks fall.

Stocks fell, sending major averages to its lowest levels in three months. The Dow Industrials fell -166 points, or -1.28% to 12843, the S&P 500 fell -17 points, or -1.18% to 1422, and the Nasdaq Composite fell -25 points, or -0.99% to 2571.

The U.S. markets started on fragile footing as investors awoke to a global sea of red. Markets in Asia fell overnight with Hong Kong's Hang Seng leading the decline, closing -4.15%. Japan's Nikkei fell -2.46%, and India's Sensex suffered a dramatic session, finishing in the red -3.5%. European markets were of no avail as major indexes were also lower by the time investors awoke for the opening of the U.S. markets. U.S. Treasury Secretary Hank Paulson also compounded the pressures this morning as he said in an interview warning home-loan defaults would be "significantly greater" in 2008. Furthermore, the WSJ reported that Paulson suggested the mortgage-service industry enable a large group of borrows to qualify for loans with better terms. The move signaled a change in thinking as Paulson previously recommended the terms be restructured on a case-by-case basis. The Treasury Secretary defended his statements, stating his outlook evolved as he learned more about the situation. Read Professor Shedlock's Mothball Housing Strategy Doomed To Fail.

Economic data released this morning did little to help the markets as well. Weekly initial claims came in as expected at 330,000. Leading indicators decline -0.5% versus estimates of -0.3%. Michigan Sentiment was also released coming in at 76.1 versus 75.0 consensus.

Around midday the markets did seem to be poised for a rally but Toddo noted possible massive illiquidity as traders left early for the holiday. Furthermore, Professor Tatro noted that "I can't find a soul out there who is willing to embrace it, which makes me curious as to how long it will last." Nonetheless the markets lost steam before the close. For more, read Toddo's Random Thoughts. Also read Professor Warner's Volatility Partying Like It's 2002.

In retail, Abercrombie (ANF) was one of the bright spots in today's trading session as the company surprised beating analyst estimates. ANF finished up +2.72%. Gap (GPS) also beat expectations today, although the markets treated the stock much differently. GPS fell -6.14%. Retail Specialist Professor Macke questioned on the Buzz why the market was treating the stock so differently with Gap being the same turnaround story last night.

In commodities, crude oil fell -0.75 points to 97.29. Gold added +7.20 to 798.60. Silver lost -0.08 to 14.42, and copper continued a recent streak of underperformance falling -13.95 to 293.00. Professor Lewis explained on the Buzz that the base metal was GDP sensitive, and although prices could remain elevated due to rising inflation and overseas demand, it was clearly not the right environment to remain bullish.

For more Buzz summaries, click on Minyanville's Buzz Bits.

Earnings Review:

Abercrombie (ANF) reported $1.29 EPS versus $1.28 consensus on revenues $973.90 mln versus $990.50 mln consensus.

Deere (DE) reported $1.88 EPS versus $1.54 consensus on revenues $5.42 bln versus $5.23 bln consensus.

Gap (GPS) reported $0.30 EPS versus $0.29 consensus on revenues $3.854 bln versus $3.827 bln consensus.

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: CVS, TGT, BZH, C, BAC, JPM, FNM, GOOG, AMZN, GPS, MSFT, RIMM, COST, SYMC, CSCO, ORCL, CDS, YHOO, gold

Some bearish trade or investment ideas: GST, FCX, copper

Have a great Thanksgiving, everybody! See you on Friday!
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