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Market Recap: BAC/CFC Combo Lifts Markets


Markets were flat for the morning. Bernanke tried but it was the BAC/CFC combo that sent the markets rallying.

Comments from the second most powerful man in the world failed to give a sustained lift to the markets, but rumors of Bank of America (BAC) buying Countrywide (CFC) reported by the Wall Street Journal helped pushed major indexes to the highest level in two days.

The Dow Industrials added +117 points, or +0.92% to 12853, the S&P 500 added +11.20 points, or +0.79% to 1420, and the Nasdaq Composite finished +14 points, or +0.56% to 2488.

The markets were flat for much of the day but received a lift when statements by Fed Chairman Ben Bernanke hit the tape. In Bernanke's first comments since late November, the chairman said the 2008 outlook had worsened and risks were more pronounced. He also stated that the Fed was disappointed with the December jobs data and was prepared to act in a decisive manner. The Dow rallied over 100 points on the news. "What a world, eh?" Toddo said on the Buzz, "the most powerful man in finance … is effectively downgrading his outlook for the economy and the market, on cue, tosses on a rally cap." For more, read his Random Thoughts.

But the buying quickly flamed out with the markets settling to the levels prior to Bernanke's comments. It was the rumor of Bank of America (BAC) in advanced talks to acquire Countrywide Financial (CFC) that sent the markets surging to two-day highs. CFC surged as much as 75% on the news before settling +51% to $7.75. BAC finished +1.45% to $39.30. The news lifted stocks in the banking sector. The Philadelphia Bank Index (BKX) added +2.13% to $83.77. Notable performances included Lehman Brothers (LEH), +5.15% to $57.82, Bear Stearns (BSC) +3.92% to $77.75, and Goldman Sachs (GS) +2.69% to 196.91. Read Toddo's Jungle Boogie.

Gold and silver surged to their highs. "Ben is going to print, but don't worry, as he's also going to 'monitor inflation' while he does it, said Gold Specialist Professor Lance Lewis, "Not too surprisingly, spot gold and the HUI are making new all-time highs in the wake of Ben's comments." Gold finished +11.90 to 893.60, and silver added +0.439 to 16.173.

Crude oil declined -1.42 to 94.25 and copper fell -0.35 to 326.10.

The dollar index fell -0.552 to 75.866.

Click on Minyanville's Buzz Bits for more summaries of today's action on the Buzz.

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: RIMM, BIDU, SPY, NDX, GSS, COST, MW, SIRI, AAPL, LFC, PWRD, LLNW, XOM, HUI, BKS, SDTH, gold

Some bearish trade or investment ideas: CRUDE, HRS, DRYS, AKAM, BIDU, GOOG, AAPL, FMC

TGI Friday tomorrow! Woo hoo! Good night!

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No positions in stocks mentioned.

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