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Market Recap: Stocks Fall Even With Talk of a Fiscal Stimulus Package; Dow Drops 300 Points


Stocks failed as soon as Bernanke hit the stage. Dow falls 300 points.

Stocks tumbled on increased growth concerns ahead of a possible Fed fiscal stimulation package. The Dow Industrials fell -306 points, or -2.46% to 12159, the S&P 500 fell -39 points, or -2.90% to 13333, and the Nasdaq Composite lost -47 points, or -1.99% to 2346.

The carnage began in the financial sector. This morning Merrill Lynch (MER) reported results for its fourth quarter. The company reported a loss of -$12.57 EPS as well as $15 bln in writedowns. Analysts had expected a loss of -$4.93 EPS. Merrill's stock fell -10% on the day with other financial stocks tumbling. Goldman Sachs (GS) lost -3.30% to $190.98, Morgan Stanley (MS) fell -4.5% to $45.25, Bear Stearns (BSC) dropped -5.83% to $74.44, and Lehman Brothers (LEH) closed -5.86% to $54.66. The broader Philadelphia Bank Index (BKX) dropped -4.71% to $78.75.

"How bad can it get?" asked Toddo, "Much worse, in my view, but not in a straight line, if my sense is right. I will simply ask you to remember that when the inevitable arrives. After all, we may be going to hell in a bucket... but we should always try to enjoy the ride."

For more of his ideas, read A Minyan Tale: The Perfect Storm Into Expiration and today's Random Thoughts.

The markets steadily took a beating today as Fed Chairman Ben Bernanke testified on the U.S. economy. Bernanke stated that downside risks were more pronounced as the outlook for 2008 had worsened, and that housing drag would likely continue for a good part of 2008. Bernanke also vaguely spoke of a fiscal stimulus package. For more, read Professor Depew's Five Things You Need To Know. Also check out Minyan Editor Andrew Jeffery's Will Congress Jolt The Economy?

Economic Data

The Philadelphia Fed declined to -20.9 from -1.6 in December. In housing, building Permits came in at 1068K versus 1135K consensus and Housing Starts was also less than expected, coming in at 1006K versus 1145K consensus. Homebuilders were mixed on the news. The Philadelphia Housing Index (HGX) fell -1.85% to 122.67. The largest gainers were Meritage Homes (MTH) adding +4.34% to $8.41, Pulte Homes (PHM) adding +2.86% to $9.70, and Ryland Group (RYL) adding +2.50% to $25.81.


In commodities, crude oil lost -0.91 to 89.93. Gold fell -4.10 to 877.90. Silver gained +0.123 to 15.930. and copper lost -0.90 to 315.25.

"Silver is up nearly a percent with gold off a tenth of a percent," Professor Lewis said around midday. "Divergences between the two that favor silver are generally followed the next day by a rally in both, in my experience (and vice versa when gold is outperforming silver. It's just a short-term indicator, and not a certainty by any means, but it is a pattern I've noticed play out time and time again."

For more on this space, read his column, Gold Could Be Putting in a Low.

Check out Minyanville's Buzz Bits for more summaries.

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: AAPL, REGN, IBB, MRK, MO, Gold

Some bearish trade or investment ideas: MARS, DJIA, RUT, MER, FNM, FIG, JWN, MON, ABK, BIDU, SPX, POT, GE

Tomorrow should be another fun one. It's expiration Friday. Have a good night!

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No positions in stocks mentioned.

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