Market Recap: Freaky Friday, Stocks Fall
Freaky Friday. Investors were fearful to take stocks home for the weekend. Stocks Fall.
Another ugly Friday for the bulls as investors digested the news of the Bank of America (BAC) for Countrywide (CFC) deal.
The Dow Industrials lost -246 points or -1.92% to 12606, the S&P 500 fell -19 points, or -1.36%, and the Nasdaq Composite lost -48 points, or -1.95% to 2439.
"It puts BofA in the mortgage business in size," noted Minyan Peter. "There will be huge cost saves. This clearly nationalizes BofA's footprint... the short term risk: things get worse from here. The long term benefit: oligopolistic national mortgage pricing."
But Mr. Practical was less than sanguine. "We are starting to see the first steps in nationalization of the U.S. banking system. Large institutions are being 'cajoled' into buying smaller ones. They could wait for bankruptcy to buy the assets, which would be smart, but they aren't as I believe the show is worth much to Washington... As the bad assets are pooled we will eventually see some type of government bailout or quasi-nationalization of the banking system. Banks literally have no capital left." BAC finished the day down -2.04% to $38.50, and CFC fell -18.3%.
Merrill Lynch (MER) made headlines this morning as well. The NY Times reported the company would likely report $15 bln in writedowns, surpassing expectations of $12 bln. Yet Toddo noted on the Buzz 15 minutes into the trading session, "MER is green... This is bullish action, Minyans, keep your eyes peeled." MER finished the day up +5.11% to $54.69. Counterpart Bear Stearns (BSC) rose +3.19% to $79.90, and the Philadelphia Bank Index (BKX) inched up +0.32% to $94.04.
Get Toddo's view in his column Freaky Friday Potpourri and check out Professor Depew's Five Things You Need To Know.
News of Tiffany & Co. (TIF) and American Express (AXP) cutting earnings outlooks were the more likely culprits in today's selling. "Why does [this] 'matter'?" asked Toddo, "Unlike subprime, this is a hit to the 'haves,' which have thus far enjoyed the lifestyles of the rich rather than struggle to exist." TIF shares plunged -11% to $35.80, and AXP fell -10% to $44.00.
In commodities, Crude oil continued its decline falling -1.02 to 92.69. Silver added +0.10 to 16.273. Copper gained 2.25 to 328.35.
Gold hit the $900 level for the first time. Gold Specialist Professor Lance Lewis had the following to say on the Buzz.
"Operation Printathon began back in September when the Fed began to ease and will no doubt move into a higher gear very soon…the cost of all this is going to be even more inflation, higher long-term rates, and a weaker dollar in the long run. Gold is going to absolutely love such a printathon.. shares are already hitting new all-time highs again today."
Click on Minyanville's Buzz Bits for more summaries of today's action on the Buzz.
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: MER, BSC, IWW, SPY, STV, SDTH, ASA, BAC, TNH, AGU, MON, TRA, SEED, XMSR, SIRI, LLNW, Gold, Gold shares, Agency Preferreds
Some bearish trade or investment ideas: C, AKAM, CMG, MCD, SPF, Crude, Financial Preferreds (C, MER, LEH, GE, BAC, WB, MS), Gold, Gold stocks
Minyans all around the world! Be safe and have a great weekend!
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