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MV Weather Report: Obama's Budget Leaves Big Pharma Out in the Cold


Rain or shine, we review the day's biggest stock stories.

The story of the day was President Obama and his little budget book - if you think $3.6 trillion is little. Either way, the market did not like it. The S&P 500 reversed an early rally, closing down 12 points to 752.

Here is what Jeff Cooper had to say on today's Buzz and Banter.

"With the financials/banks and oils kickin' in, you would have thought the market would have had traction.

"S&P 780 on the chart shown this morning was a brick wall.

"Now traders may be wondering if we are doing a mirror image of yesterday with a strong run off.

"There's no edge here below 752 however.

If this is what the market does when the cycles are pointing higher, heads up in March."

The sectors hit the hardest by the plan were drugs and insurance: Humana (HUM), Aetna (AET), Merck (MRK), Johnson & Johnson (JNJ) and Lilly (LLY) were some of the biggest losers of the day.

Surprisingly, the banks where strong, but -- as I said yesterday -- they aren't big enough (in terms of market cap) to keep the broader market up. When Exxon Mobil (XOM) started selling off, the rest of the market went with it.

There was a lot of talk today about AIG (AIG) - particularly a story that the insurance giant was going to be split into government-controlled divisions. Head Minyan Todd Harrison had this to say:

"Given the size of the shoe, the government would likely change the rules of engagement with regard to CDS or mark-to-market. It's an invisible catalyst -- which I hate almost as much as loud chewers -- but we must always see and respect all sides."

(I sometimes chew loud myself - it happens.)

There was also a rumor that the government will back-stop approximately $300 billion of AIG's CDS liability. This could be the next shoe to drop, and I would expect a big move coming next week. For more on potential market reaction, see Fil Zucchi's great article today.

AIG will be the story of next week's action, but traders will key in tomorrow on the GDP report before the bell. The current consensus calls for the report to be down -5.4%, and it will shape early morning trading.

Its Thirsty Thursday, Minyans: Head down to SouthWest if you're in New York to enjoy a drink with Terry Woo.

Have a good night!
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No positions in stocks mentioned.

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