Negative news sinks stocks

The negative news I have been talking about all week caught up with the stock market. On Jan 31, Dow closed at 12,650. Today the Dow was down 315 to 12266, or down 400 points for the month! NAZ was down a whopping 60 & NYSE decliners were ahead of advancers better than 6-1, a red kind of day. I don't focus on NAZ stocks, but their leaders have taken a beating lately. Take a look at Dell (DELL), Microsoft (MSFT), Apple (AAPL ), Starbucks(SBUX), Google (GOOG), etc. The corp & economic scenario is getting ugly & housing, mortgage, loan, commodity prices, etc. problems don't look like they're going away soon.

The stock market plunge helped send Treasury prices higher. The yield on the 10 year Treasury dropped 15 basis points today to 3.52%. In the Treasury market that movement is considered enormous & is fueled by the classical "flight to safety." Gold is at record levels over 970 an ounce, spelling uh-oh for stocks going forward.

Stocks decline on negative economic news

Stocks sold off big on negative economic news. Dow is down 217, decliners over advancers 5-1 & NAZ is down 40. Consumer spending was weak. For the last 2 months, consumer spending was similar to late 2001 & the 2 months following Hurricane Katrina. Recession fears are key drivers in today's markets. This is really a part of a stream of negative news in recent weeks. The 100+ oil prices may be hitting the pumps soon with growing talk of $4 gas. Gloomy news will probably be with us well into the March.

American International Group (AIG), a Dow company, is down 3.37 on a negative report which includes a $5B+ loss in Q4. Dell's (DELL) earnings from last night are another major drag on the markets. Starting Feb at 12.4K, Dow has largely been in negative territory. The recent rally put it in the black, but now it's slipping back to near it's starting point.

Bank worries & job data sinks stocks

Worries about higher unemployment claims & bank failures sent stocks lower. Dow was down 112, decliners ahead of advancers 2-1 & NAZ dropped 22 bringing the 4 day winning streak to an end. Negative news got the better of investors. Dell (DELL) reported earnings after the close. Earnings were lower than expected & their outlook is gloomy to say the least. In after hours trading, the stock was down 4% or 77¢. If that wasn't enough, oil surged to a new record $102.59 a barrel. Some say technical factors are causing the last leg up for oil indicating the up move can not be sustained. True or not, the price increase still hurts.

According to AP, Ben Bernanke, the FED Chair, said:
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Federal Reserve Chairman Ben Bernanke said in testimony to Congress that while large U.S. banks will likely recover from the recent credit crisis, other banks are at risk of failing. Three small U.S. banks have already failed since the summer, when the lending industry started losing billions of dollars as mortgage defaults soared.

"Implying that some banks may fail stirs concerns for any investor who's familiar with financial and economic history," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "Investors have been very edgy about credit market conditions and banks' financial conditions. Very edgy. And this doesn't remove that edginess."
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No wonder stocks sank today.

Markets decline on weak economic data

Weak economic data brought out sellers sending stock prices lower. Dow is down 61, decliners over advancers 2-1 & NAZ is down 4. Fourth qtr GDP rose at only a 0.6% annual rate, below expectations. The Labor Dept reported unemployment claims rose 19K last week. The dollar keeps falling sending the Euro, among other currencies, to a record level over $1.51. The weak dollar is tricky to evaluate, but it sends an general signal of a weak economy. One negative for the stock market is foreigners owning US stocks see their investments decline in their home currency.

Freddie Mac (FRE) reported a larger than expected loss of $2.5B in Q4 due to mortgage defaults. However FNM & FRE are up over $1 each, boosted by yesterday's news about removing limits on mortgage lending. Sprint Nextel (S), down 64¢, reported a whopper loss of $29B. Business is weak because they're losing customers. Thornburg Mortgage (TMA), a major mortgage lender, fell 1.69 on news it's getting margin calls. This stock has been at low levels for months, following the initial wave of negative mortgage news last year. So far, the stock market has done very well this week considering the flood of ugly news releases.

Markets little changed

Markets were little changed. After the Dow spent much of the day in the black, it pulled back in the afternoon to little change. Dow & NAZ were each up 9 but decliners were a slightly ahead of advancers. Testimony before a congressional committe that the FED is ready for more interest rate cuts to help the economy was seen as a bullish sign, but that wore off later in the day. Bernanke, FED Chair, said the FED is more concerned about the weak economy than rising prices. Fannie Mae (FNM) & Freddie Mac (FRE) had been up sharply on the removal of lids for mortgage lending. However, that entusiasm also slipped after midday resulting in little price changes. The Alerian MLP index pulled back 3.63 to 292.52 (shown in the graph on the right), near the bottom of the recent trading range. 2 prominent companies had unit offerings today causing some of the decline. But selling in others could come from nervousness about the economy.

Commodities continue strong. Oil reached 102 but slipped back to close just under 100. Gold closed at 961 an ounce, up12 & another record. Agricultural commodites, i.e. corn, wheat & soybeans are at record leveles & these price increases will reach everybody. Tomorrow we'll see if more enthusiasm can overcome negative news stories.

FED signals another rate cut

Ben Bernanke, head of the FED, signaled another rate cut to help the economy. Dow is up 55, advancers ahead of decliners 3-2 & NAZ is up 14. Not bad considering the negative news releases. The Commerce Dept reported new home sales fell 2.8% in Jan. Fannie Mae (FNM) & Freddie Mac (FRE), after initial declines, rose on news that they will lift an investment cap to release billions for new mortgages. Earlier FNM released an ugly earnings report, they lost $3.6B in the last qtr & are looking for 2008 to be another tough year. Toll Bros (TOL) reported a major loss & this year started off weak for the third year in a row. That ties with today's announcement that new home sales fell for the third month in a row.

News about the economy continues gloomy, but that's not stopping buying today.

Stagflation worries

Stagflation may be returning (discussed in the attached article). 30 years ago, the US economy had the unusual combination of high inflation while the economy declined and unemployment rates were at extraordinary levels. Conditions aren't quite the same today, but commodity prices keep going up. Besides oil & gold, among others, agricultural commodities (corn, wheat & soybeans) are at record levels.

In the very early Wed markets, Japan & Australia are up following the lead from NY markets.

Staglation worries

Stagflation may be returning (discussed in the attached article). 30 years ago, the US economy had the unusual combination of high inflation while the economy declined and unemployment rates were at extraordinary levels. Conditions aren't quite the same today, but commodity prices keep going up. Besides oil & gold, among others, agricultural commodities (corn, wheat & soybeans) are at record levels.

In the very early markets, Japan & Australia are up following the lead from NY markets.