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Market Recap: The Ultimate Bear Scare


Few resisted today's carnage.

Stocks finished another wild week with a whacky Friday. Equity markets opened higher for a brief moment as bulls were convinced that the Federal Reserve had inflation contained. But the sentiment was short-lived as news of the Fed and JPMorgan Chase (JPM) bailing out Bear Stearns (BSC) sent equity futures tumbling.

The Dow Industrials closed -194 points, -1.60% to 11,951, the S&P 500 closed -27 points, or -2.08% to 1,288, and the Nasdaq Composite finished -51 points, or -2.3% to 2,212.

This morning futures spiked after the Labor Department said the Consumer Price Index came in unchanged. Forecasts had called for CPI to rise by 0.3%. Core CPI, excluding food and energy also came in unchanged, where economists were expecting a rise of 0.2%.

Yet, many were skeptical. Mr. Practical said on the Buzz, "I don't know where the Bureau of Labor Statistics gets it s numbers, but they do not come anywhere close to mine. The BLS measure gas prices middle month to middle month. During the period, gas futures rose from 245 to 262 or 7%. The BLS says the number dropped 2%." For more read Professor Kevin Depew's Five Things You Need To Know.

But stocks tumbled after the Street learned of an unprecedented move by the Fed and JP Morgan to bail out Bear Stearns. BSC had fought off rumors of capital concerns all week but admitted today that its cash position had "significantly deteriorated."

"…in BSC, the dollars just weren't there," said Professor Adam Warner. "… Hindsight is 20/20, but in retrospect, the red flags were blazing. The premiums just got higher and higher this week, even as the CEO 'reassured' everyone and the stock stabilized to some extent." Shares of BSC lost nearly half its value to close -47% to $30.00

Few stocks resisted the carnage. Decliners outpaced the advancers on the NYSE over 5 to 1 and financial stocks were leaders to the downside. Other notable decliners included Lehman Brothers (LEH) falling -14% to $39.26. Morgan Stanley (MS) dropped -5% to $39.55, and Merrill Lynch (MER) fell -6% to $43.51. For more, read Professor Mish Shedlock's What Brought Down Bear?

A few high beta stocks performed relatively well. Apple (AAPL) declined -1.01% to $126.65. Google (GOOG) fell -1.3% to $437.50. Amazon (AMZN) slid -0.31% to $68.08, and Baidu (BIDU) closed -0.47% to $266.76.

Decliners included Garmin (GRMN) -3.5% to $56.50, Yahoo (YHOO) -2.8% to $26.72, and Microsoft (MSFT) fell -2.8% to $27.82.

Commodities seemed to be a safehaven today. Professor Lance Lewis noted after the CPI report, "If you believe that inflation was unchanged in Feb, I have some ocean front property in Arizona I'll sell you too. But this bogus data does give the Fed continued "cover" to ease aggressively next week. Don't be surprised if gold creeps over $1000 today…"

Gold settled +10.10 to 1003.90. Crude oil declined -0.12 to 110.21. Silver added +0.235 to 20.574, and copper gained +0.70 to 384.70.

The dollar index fell -0.419 to 71.653

For more Buzz insight, check out Minyanville's Buzz Bits.

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: S&P, OMTR, BIDU, CIEN, SEAC, SMN (inverse), FSLR, JOYG, FCSX, CY, Gold, Dollar/Euro

Some bearish trade or investment ideas: BSC, TKLC, DBC, MON, AGU, Preferreds (LEH, GS, JPM, MER), AEM, FXI

What a wild one. Have a great weekend!
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No positions in stocks mentioned.

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