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Market Recap: Bernanke Testifies as Markets Lose Morning's Gains


The Fed chairman caught some heat on Capitol Hill.

Stocks were higher for much of the day but a steady decline with accelerated selling in the last hours of trading forced major indexes into the red.

The Dow Industrials fell -45 points, or -0.36% to 12608, the S&P 500 lost -2 points, or -0.19% to 1367, and the Nasdaq Composite fell -7 points, or -0.36% to 2361.

The markets had a decent opening despite glum news from the International Monetary Fund. The Washington-based lender said this morning that it expected the U.S. economy to grow just 0.5% in 2008 citing the worst financial crisis in the United States since the Great Depression. The figure was down a full percentage point from its previous forecast in January. Forecasts for the Eurozone region were cut to 1.3%, down from January predictions of 1.6%, and global growth was expected at 3.7% with a 25% possibility of a recession. See Todd's Random Thoughts.

Elsewhere topping headlines today was Fed Chairman Ben S. Bernanke's testimony in front of Congress' Joint Economic Committee. In his prepared speech Bernanke admitted that growth prospects for the United States had diminished and that credit markets were still under "considerable stress." The Fed Chairman also suggested that fiscal actions could spur growth in 2009, and inflation is a concern, but the Fed did expect it to moderate. Get Mr. Practical's view on the economy in Time to Pay the Piper.

In specific action, most banking stocks finished lower. Lehman Brothers (LEH) fell -0.61% to $44.07. Wachovia (WB) dropped -1.04% to $28.61. Merrill Lynch (MER) closed -1.48% to $45.34. The broader Philadelphia Bank Index (BKX) lost -0.91% to $84.07. See Toddo's Quarterly Report Card: Grading the Tape.

Best Buy (BBY) topped analyst estimates with its performance in the fourth quarter. The largest U.S. electronics retailer said profits came in at $1.71 per share above expectations of $1.65. Revenues grew 4% to $13.42 bln due in part to higher sales of more-expensive laptops and video games. Although the profits was much a surprise, Professor Jeff Macke sounded much more cautious, "Consumer electronics is simply too suspect a space for folks to take BBY's word for much of anything, outlook-wise. File the stock in the dreaded "yeah, But" category. As in "yeah, it beat, but the consumer is dead and will stop buying TV's someday soon." BBY shares added +1% to $43.94.

Crocs (CROX) dropped after analysts at JPMorgan Chase cut their ratings on the company. According to Bloomberg, analyst Robert Samuels said in a note to investors that sales for the company may slow to 14% from 82% last year.

Medarex (MEDX) fell -18% to $7.63 after Pfizer (PFE) said it was discontinuing its Phase III trials of a similar cancer drug. For more, see Professor Kevin Tuttle's Winners & Sinners.

Gold stocks moved higher on the day. The Goldminers ETF (GDX) gained 4% while futures settled +2% to 902.20. Professor Lance Lewis had been expecting gold shares to outperform the metal.

"As I've said, look for the gold shares to recover faster from this correction than gold and make new highs again well before the metal does because they never fully discounted higher gold prices that we saw in 1Q 2008 anyway. The 'long GLD/short GDX' trade that many hedge funds have had on since October should also increasingly be squeezed as a result going forward as well."

Notable gainers in the GDX include Barrick Gold (ABX) +4.5% to $43.84; GoldCorp (GG) +6.5% to $39.91; and Harmony Gold (HMY) +5.4% to $12.14.

Elsewhere in commodities, crude oil gained +3.8% to 104.84. Silver added +0.580 to 17.470. Copper finished +6.25 to 388.85.

The dollar index declined -0.369 to 72.186.

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: ICE, NDAQ, ABV, TSL, V, AKAM, MELI, IDCC, CLF, GOOG, ARAY, TOO, VAR, INTC, GLW, Gold, Gold shares

Some bearish trade or investment ideas: MER, MS, GM, FCN, IBM, RVBD, gold

Hasta Manana, Minyans! Have a goodnight!
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