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Minyanville's Market Recap: UBS and Citigroup Show Their Cards, Stocks Surge


A number of banks showed their cards. Investors were scared at first but realized the worst may be over. Stocks surged on the day.

Stocks surged today. The Dow Industrials broke an intraday record touching 14,115 before closing at 14,087, a +1.38% gain. The S&P 500 finished up +1.33% to close at 1,547, and the Nasdaq Composite finished up +1.46% to close at 2,740.

The morning started off with Nasdaq and S&P futures in the red this morning as a number of banks issued negative warning statements on 3Q performances. UBS (UBS) started off the rounds stating it was writing off $3.4 bln and cutting 1,500 jobs due to subprime mortgage exposure and turmoil from the credit markets. Citigroup (C) followed, pre-announcing that 3Q earnings would fall 60% on a year-over-year basis for much of the same reasons.

Despite all the negative news, financial stocks soared as investors seemed to believe the worst of the 2007 credit crisis may be over. The Philadelphia KBW Bank Index (BKX) gained +2.17%. Notable individual stocks included Goldman Sachs (GS) which gained +2.88%, JP Morgan (JPM) gaining +2.16%, and Lehman Brothers (LEH) gaining +3.11%. Citigroup also finished the day with a +2.25% gain. Read Toddo's Random Thoughts from today as he wonders if this means the fourth quarter script is tilted towards the upside.

The smokin' financials seemed to pave the way for homebuilders. Many traders had been eyeing the homebuilders as the stocks had been trading below the levels prior to the Fed's 50 basis point rate cut last month. PIMCO's Bond Guru Bill Gross even stated in his regular report that he expected falling home prices to be the main driver of U.S. monetary policy for "several years." (From Bloomberg) Nonetheless, housing bulls took to the stage with the Philadelphia Housing Sector Index (HGX) gaining +3.15%. Ryland Group added +5.27%, Meritage Homes (MTH) added +4.04%, and Toll Brothers (TOL) added +3.30%. Professor Tatro updated Buzz readers on his TOL position, stating that he remained a bit cautious as he would "like to see more volume here on the move, but so far, so good." Professor Depew also happened to mention another homebuilder, Lennar Corporation (LEN) which happened to finish the day with a +2.74% gain. Read his daily Five Things You Need To Know as he talks about the "good ol' fashioned 'Leaseback'" in Lennar.

Tech stocks also did very well on the day. Apple (AAPL) gained +1.87% while Broadcom (BRCM) added +1.89%. Professor Udall noted on the Buzz that BRCM was likely riding the coattails of the Nokia (NOK)/Navteq(NVT) deal announced earlier today. For more of a summary of what happened on the Buzz & Banter, click here for Minyanville's Buzz Bits.

In commodities action, crude prices fell sharply by $1.44 to $80.22 a barrel. Gold futures gained $4.20 to finish at $747.00.

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: ECA, HK, NYX, NDAQ, NMX, ICE, BIDU, AAPL, CIEN, OPTM, INFN, QLGC, NTAP, FNSR, BZP, TOL

Some bearish trade or investment ideas: DECK, GRMN, TEX, WAG

Here's a preview of what's in store for Tuesday's trading session. Click here for the full trading radar.


10:00 Pending Homes Sales: Prior -12.2%


Before: PBG

The "Mondays" are over. Thank you for taking a moment out of the day to say "Happy Birthday" to Minyanville. Read how it all started in Toddo's Five Alive!

Have a great night and we'll see you tomorrow morning.
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No positions in stocks mentioned.

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