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Before The Bell: Merrill's Eye Opener; Retailers In The Weeds


Merrill may reveal an eye-opening $15 bln in writedowns. Retailers finish off a disappointing year. Futures are lower.

Morning Perspective: Merrill's Eye Opener

Yesterday rumors of Bank of America (BAC) acquiring Countrywide (CFC) caused the markets to rally to the highest levels of the day. This morning that sentiment has been knocked down with news that Merrill Lynch (MER) may suffer $15 bln in writedowns. The NYT reports Merrill is expected to disclose these losses when it reports next week according to insiders and is currently in talks with other parties in raising funds. The company may be forced to sell its assets in an effort to raise approximately $4 bln. Wall Street was expecting Merrill to disclose $12 bln in writedowns for the quarter. Read Prof. Mike Shedlock's How Does One Invest For "Muddle Through"?

From the Bull Pen: Bulls notice State Street Corp. (STT), a finance play nearing 52-wk highs in the midst of a subprime meltdown. Sell-stops in the near term may be placed below $78.

From the Bear Cave: Bears playing the downside in MER can set buy-stops above yesterday's high ($53). Citigroup (C) is also an option; sell-stops above $30.

Retailers In The Weeds

The WSJ reports U.S. retailers capped an abysmal performance for the year with its December same-store sales. Although not as bad as expected, this year's result was still the worst in at least four years with a holiday season slump of the worst in five years. The performance confirmed analyst predictions that retailers would suffer due to consumers being hit by rising energy prices and falling home values. For more, read Retail Specialist Prof. Jeff Macke's article Retailers on Santa's Naughty List.

From the Bull Pen: Professor Macke said, "In a retail stock environment where apathy passes for bullish, Costco (COST) stands alone as best-of-breed… and just maybe, the only retailer you can own with any conviction in 2008." Sell-stops may be placed below $65.

From the Bear Cave: Wal-Mart (WMT) is approaching multi-year resistance at $50. Those attempting downside plays may set buy-stops on the other side.

Click on Minyanville's Spotlight Stocks for more company-specific ideas.

Quick Check Around the World

Asian trading closed with the Hang Seng -1.34%, Nikkei -1.93%, Sensex +1.19%, Taiwan -0.35% and Shanghai +0.52%.

A look across the pond finds the CAC -0.46%, DAX -0.34%, FTSE -0.76%, ATX -1.16%, Swiss Mkt. -1.02% and Stockholm -0.49%.

A Look At Commodities

Crude oil continues its decline falling -0.45 to 93.23. Gold is up +0.20 to 893.80. Silver is up +0.439 to 16.173, and copper is higher +0.25 to 326.35.

The dollar index is up +0.077 to 76.005.

As of 8:15 AM EST, S&P and Nasdaq futures are lower by 8.30 and 8.75 respectively to 1412 and 1952.

On the Radar


8:30 Export Prices ex-ag: 0.8% prior
8:30 Import Prices ex-oil: 0.7% prior
8:30 Trade Balance: -$59.4 bln cons
2:00 Treasury Budget: $52.0 bln cons.

Click here for the full trading radar.

Work hard and play hard, Minyans! Good luck!

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No positions in stocks mentioned.

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