Market Wrap-Up

January 18, 2008

DOW 12,099.30 -59.91 (-0.49%) S&P 500 1,325.19 -8.06 (-0.60%)
NASDQ 2,340.02 -6.88 (-0.29%) 10 year Bond 3.648% +0.008

A strange thing occurred this morning, the stock market opened higher. There were three causes to the higher opening today. First, President Bush was expected to unveil his stimulus package for the slowing economy. Then General Electric (GE) $34.31 +1.10 (+3.31%) reported a better than expected earnings report and gave nice guidance for 2008. Also, IBM (IBM) $103.40 +2.30 (+2.27%) hiked their 2008 earnings forecast well above analyst expectation and had a nice report.

Sprint Nextel (S) $8.70 -2.87 (-24.81%) shares got hammered today after the company announced that it expects continued pressure on subscriber trends and profitably in 2008. The company will cut 4,000 jobs and close 125 stores.

In economic news, December leading indicators fell 0.2%, this follows November's 0.4% decline. Economists had expected only a 0.1% drop. The January preliminary University of Michigan Confidence came in at 80.5, which was higher than economist had predicted.

President Bush unveiled his stimulus plan to keep the US economy from falling into a recession. The $145 billion dollar plan calls for tax relief and other incentives including tax rebates of as much as $800 for individuals and $1600 for couples.

This week it appears that we have began to see the next shoe fall off from the sub-prime credit mess. Although the credit card companies are seeing an increase in defaults, remember American Express (APX) $43.61 +0.94 (+2.20%) and CapitalOne’s (COF) $39.68 -1.38 (-3.36%) announcements last week? The next shoe to fall appears to be the bond insurance companies.

AMBAC Financial (ABK) $6.20 -0.04 (-0.64%) shares have fallen $16.00 dollars or 72% since Monday. The company had a 52 week high of $96.10. First after stating that they would not cut their dividend they did. Also the company announced that they would seek $1 billion in capital to shore up its finances. Then they announced they would not seek additional capital. The company is also due to report their earnings next Tuesday.

MBIA (MBI) $8.55 -0.67 (-7.27%) announced its Aaa credit rating was placed under review for a possible downgrade at Moody's Investors Services yesterday. MBIA had a 52 week high of $72.02.

The street also had rumors that bankruptcy of a bond insurance company could occur. AMBAC and MBIA were downgraded to Hold from Buy at Citibank and Neutral from Buy at Bank of America. I am sure that their clients are happy, what happened to good old sell recommendations?

Monday the market will be closed in observance of Martin Luther King Jr. Day.

Next a flood of S&P 500 companies will be reporting their earnings, 85 in total. Companies to watch for are: AMBAC Financial (ABK) Bank of America (BAC), Johnson & Johnson (JNJ), DuPont (DD), Apple (AAPL), Pfizer (PFE), AT&T (T), Amgen (AMGN), Microsoft (MSFT) and Caterpillar (CAT).