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Market Recap: Financials Downgrade Financials, Gloomy Housing, Gloomy Spending


Financials were under pressure today due to Goldman's ratings cut on Citi. Real Estate continued to be gloomy. Markets fall to lowest in three months.

The markets fell to their lowest levels since the height of the summer's credit turmoil. The Dow Industrials fell -218 points, or -1.66% to 12,958, the S&P 500 fell -25 points, or -1.75% to 1,433 and the Nasdaq Composite fell -44 points, or -1.66% to 2,593.

News from the financial sector weighed on stocks. A Goldman Sachs (GS) downgrade of Citigroup (C) did not sit particularly well with bulls as the investment bank reduced Citi's rating from "Neutral" to "Sell" on Monday, stating the banking giant would likely face additional write-downs. The ratings cut hit Citigroup shares particularly hard as the stock closed -5.88% to $32.00. Other lackluster performances included the Philadelphia Banking Index (BKX), which hit a new 52-wk low, closing -2.38%. Bear Stearns (BSC) fell -5.07% and Merrill Lynch (MER) fell -3.99%. Toddo noted the performance of Countrywide Financial (CFC) likely becoming "a single digit midget." For more insight, read today's Random Thoughts and Minyan Peter's Bank Debt Downgrades.

In related news, the markets received more hints of the housing sectors with the release of the NAHB Housing Index. Figures for November came in at 19 versus expectations of 17. Levels below 50 show that respondents to the survey below overall conditions as being poor.

The markets also received insight into the housing sector with the quarterly performance of Lowe's Companies (LOW). LOW's figures came in below analyst estimates at $0.38 EPS versus $0.41; revenues were also lower at $11.56 bln versus $11.78 bln consensus. Professor Depew noted on the Buzz that Lowe's CEO cited deterioration of the housing markets, tightened lending standards, and disruptions in the credit markets as reasons for its below-consensus performance. Professor Depew noted "Of course that story is nothing new... but what was new... was the acknowledgement of how housing spreads to other areas of consumer spending and sentiment..." Lowe's stock hit a new 52-wk low, closing -7.56% to $23.12. Home builders suffered on the day. The Philadelphia Housing Sector Index (HGX) fell -5.26% and Ryland Homes (RYL) fell -7.16%. Toll Brothers (TOL) fell -4.99%. Lennar (LEN) and Pulte Homes (PHM) both fell -8%. Get other thoughts from Professor Depew in his daily column Five Things You Need To Know.

In commodities gold fell -9.0 points to 778. Silver fell -0.35 to 14.16. Copper slid -17.40 to 302.50. Crude oil gained +0.80 to 94.64. Professor Adam Michael cautioned on the Buzz, however, of a divergence between crude price and Chinese imports, noting the last two times it happened, crude corrected 20% and 24% respectively.

For more Buzz summaries, click on Minyanville's Buzz Bits and check out Professor Tuttle's Winners & Sinners.

Earnings Review:

The following companies reported after the bell today.

Hewlett Packard (HPQ) reported $0.86 EPS vs. $0.82 cons on revs of $28.3 bln vs. $27.43 bln cons.

Medtronic (MDT) reported $0.58 EPS vs. $0.56 cons on revs $3.12 bln vs. $3.079 bln cons.

Nordstrom (JWN) reported $0.59 EPS vs. $0.52 cons on revs $1.97 bln vs. $1.96 bln cons.

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: SCHW, YHOO, AMTD, SPY, FRE, UNH, MSFT and XAU.

Some bearish trade or investment ideas: LOW, MS, FNM, HBC, BIDU, GOOG, AAPL, SPX, LDK, VMI, LVS, WYNN, MA, BZH, HOV, SPF, LEV, TOA, TWB, CFC, SBUX, BIDU and crude oil.

It's always a sunny day in the 'Ville. We'll see you tomorrow. Have a great night!
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