CLOSING BELL

Dow 10172.98  -216.90, Nasdaq 2205.29  -60.41, S&P 1091.76  -24.72 

Today the market had its third straight day of losses and marked the biggest percentage loss in over two months. All major sectors of the market posted losses.

Tech fell -3.9% today as traders took profits feeling that all positive news is already priced into the shares.  As a result, better-than-expected earnings from Google (GOOG) 550.01, -32.97 and Advanced Micro Devices (AMD) 7.88, -1.11 were met with stiff selling pressure.

Financial stocks continue to be hurt by President Obama’s recent attacks against the sector.  The sector was down -3.3% today.  The sector has been under pressure since his announcements of a special tax levy’s and tighter restrictions.  Some traders are stating that the recent market selloff is a direct result of these statements.

Both General Electric (GE) 16.11, +0.09 and McDonald's (MCD) 63.39, +0.19 exceeded earnings expectations for the latest quarter and showed early strength, but their gains faded into the close. 

Advancing Sectors: (None) 

Declining Sectors: Tech -3.9%, Financials -3.3%, Materials -2.3%, Utilities -2.2%, Consumer Discretionary -1.9%, Energy -2.2%, Industrials -1.5%, Telecom -1.3%, Health Care -1.2%, Consumer Staples -0.3%

MORNING COFFEE

Administration Attacking Banks.  President Obama rolled out his plans for financial reforms, warning that the financial system is "still operating under the same rules that led to its near collapse." His proposals, which include limits on the size of banks and severely restrict proprietary trading. This comes after last week’s accouchement of a special tax levy aimed at financial institutions.  The news sent the financial sector into a free fall, with Goldman Sachs (GS), JPMorgan (JPM), Citigroup (C) and Bank of America (BAC) each falling more than -4%.

Earning Reports:

American Express (AXP): Reported Q4 EPS of $0.59 beating estimates by +$0.02, on revenue of $6.5 billion.

Capital One (COF): Reported Q4 EPS of $0.83 beating estimates +$0.38 on revenue of $4.4 billion.

Google (GOOG): Reported Q4 EPS of $6.79 beating estimates by +$0.29 on revenue ex-tax of $4.95 billion.  The company also said "As we enter 2010, we remain hugely optimistic about the internet and are continuing to invest heavily in technological innovation."

GE (GE):  ReportedQ4 EPS of $0.28 beating estimates by +$0.02 on revenue of $41.4 billion. “GE’s environment has improved and we saw some encouraging signs at year-end... Capital Finance is executing well in a difficult environment, earning $0.3B in the quarter and $2.3B. Every segment at GE Capital was profitable with the exception of Commercial Real Estate, which continues to operate in a difficult environment."

Upgrades/Downgrades

Upgrades

JPMorgan Chase (JPM) Citigroup upgraded their rating from Hold to Buy, with a target price of $48.00.

Downgrades

Google (GOOG) Collins Stewart lowered their rating from Buy to Hold, and changed their target price from $635 to $615.

Coverage Initiated

TJX (TJX) Deutsche Bank initiated coverage with a Buy rating and a target price of $43.00.

Coverage Reiterated/Price Target Changed

Google (GOOG) Deutsche Bank reiterated their Buy rating and changed their target price from $615.00 to $626.00

Goldman Sachs (GS) FBR Capital reiterated their Outperform rating and changed their target price from $205.00 to $190.00

·         Futures: Dow -0.2%. S&P -0.1%. Nasdaq flat. Crude flat at $76.05. Gold flat at $1,102.70.

·         

Asia, Nikkei -2.6% to 10,591. Hang Seng -0.65% to 20,726. Shanghai-1% to 3,129. BSE -1.1% to 16,860.

·         Europe at midday, London -0.8%. Paris -1.4%. Frankfurt -0.8%.

CLOSING BELL

Dow 10389.88  -213.37, Nasdaq 2265.70  -25.55, S&P 1116.48  -21.56

A tighter monetary policy in China and increased bank regulation combined with a poor employment report caused another day of big declines for the market.

China reported stronger-than-expected fourth quarter GDP growth and a sharper-than-expected spike in inflation; this led to thoughts that the Chinese government would tighten monetary policy.  Last week they did announce they would limit bank lending.  Tighter policy in China would slow the country's growth and slow the global economic recovery.

The thought of a slower global economy caused stocks and commodities to sell off.  Material stocks were hit hard again today after falling -3.6% yesterday they shaved off another 4.3% today.  The thought is, with a slower global economy materials will not be in demand.

Also a slower economy equals less energy being needed.  Energy stocks dropped -2.0% as oil prices were pushed to a near one-month low of $75.66 per barrel before they finished a -2.1% loss at $76.08 per barrel. Price erosion came in the face of a surprise inventory large draw of 4.7 million barrels during the week that ended Jan. 15.

Financials have been getting crushed and traded -3.0% lower. President Obama stirred concern for financials with the announcement that plans are being put together to ensure that no bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit. Further, the proposal will place broader limits on the excessive growth of the market share of liabilities at the largest financial firms. This comes on the heels of last week’s announcement by the administration of a new tax placed on financials companies.  Both of these actions would be a huge negative for big financial institutions. 

MIDDAY LUNCH

Dow 10396.65  -201.85, Nasdaq 2265.98  -25.55, S&P 1118.23  -19.88 

Stocks are having their worst back to back losses in three month.  Both yesterday and today have been underscored with broad-based selling in the face of better-than-expected earnings.

The positive impact of the earnings reports on the market was offset by renewed concern for tighter monetary policy in China.   China yesterday announced that they had instructed some of its banks to curb lending in order to meet capital requirements and prevent the country's economy from overheating.  Many believe that this could cause a double dip recession or at least stall the global recovery.

 

Financials are weak on news from President Obama that under new proposals banks will no longer be allowed to own, sponsor, or invest in hedge funds for proprietary profit.  This comes on earlier news last week to impose a fee on as many as 50 major financial companies to cover as much as $117 billion in losses from the federal government’s TARP program. The levy would not be applied to General Motors, Chrysler and other companies that also received TARP funds, but have not repaid the government. Companies getting hit hard are Goldman Sachs (GS) 158.75 -9.13, -5.46%, JPMorgan Chase 40.77 -2.64, -6.08%, and Bank of America (BAC) 15.56 -0.93, -5.64%

Materials stocks are presently in the worst shape of any major sector. In addition to broader market pressure, materials stocks have been hampered by weaker commodity prices. The sector is currently down -3.6%.

Oil prices have also been dragged down. Despite a surprise inventory draw, oil prices are down -1.9%

to $76.25 per barrel.

CLOSING BELL

Dow 10603.15  -122.28, Nasdaq 2291.25  -29.15, S&P 1138.07  -12.19 

Despite better than expected earnings reports the markets came under heavy selling pressure on concerns that the global recovery may stall.  It started last night with China, instructing some of its banks to curb lending in order to meet capital requirements and prevent the country's economy from overheating. That news weighed on Asian markets and European bourses, since it could slow the global recovery.

That weighed on both stocks and commodities and even led investors to seek safety in the U.S. dollar.  Support for the dollar helped the greenback gain +1.1%, but it only exacerbated the drain stocks and commodities.

Positive earnings surprises were reported by IBM (IBM) 130.25, -3.89, Coach (COH) 35.35, -2.10, Wells Fargo (WFC) 27.82, -0.46, U.S. Bancorp (USB) 25.01, +0.52 and State Street (STT) 46.28, +3.08 were among the more widely-held companies to top expectations.  However, Morgan Stanley (MS) 30.63, -0.53 came short of the consensus earnings estimate and Bank of America (BAC) 16.49, +0.17 had a deeper-than-expected loss.

Economic data was mixed today.  The December Producer Price Index (PPI) increased + 0.2% month-over-month, which was higher than expected. Monthly producer prices had spiked +1.8% in November.  Excluding food and energy, producer prices for December were flat from the previous month.  

Housing starts for December hit an annualized rate of 557,000, which is a lower than the expected rate of 572,000 units.

However, building permits hit an annualized rate of 653,000 in December. That was far higher than the annualized rate of 580,000 permits that the consensus had predicted.

Advancing Sectors: (None)

Declining Sectors: Energy -1.7%, Materials -1.5%, Tech -1.5%, Telecom -1.4%, Industrials -1.3%, Consumer Discretionary -1.2%, Utilities -1.1%, Consumer Staples -1.0%, Health Care -0.5%, Financials -0.1%

MIDDAY LUNCH

Dow 10544.36  -181.22, Nasdaq 2278.66  -41.77, S&P 1132.56  -17.67 

Trading today has been decidedly negative since the opening bell; bears have handed losses to more than 90% of the companies in the S&P 500. 

Today’s decline can be linked to news that China has instructed some of its banks to curb lending in order to meet capital requirements and prevent the country's economy from overheating. That news weighed on Asian markets and European bourses, since it could slow the global recovery.

The Dollar Index is up +1.1% in its best single-session move since a +1.7% surge in early December. The latest move comes on top of the greenback's +0.6% gain in the previous session.

The strength in the Dollar has hurt basic materials stocks, which have also been hampered by broader market weakness. The combined pressures have caused steel stocks to surrender -3.7% and gold stocks to drop -6.2%. Diversified metals and miners, are down -3.5%, collectively. The broader materials sector is down -2.5%, worse than any other major sector in the S&P 500.

Selling pressure is also intense among energy issues. Their slide comes on the fear that the global recovery could stall and softer oil prices, which are down -1.7% to $77.70 per barrel, these factors have conspired to take the sector to a -1.8% loss. Halliburton (HAL)  33.14 -1.48, -4.25%,  National Oilwell (NOV) 45.52 -1.56, -3.32%

MORNING COFFEE

Mass Votes In Republican.  In a major upset Scott Brown won a Senate seat in Massachusetts yesterday, putting into question President Obama's healthcare plan. Shares of healthcare stocks rose yesterday on anticipation of a Republican win.  Strategist say the election of a Republican to a traditionally Democratic state is a further sign that Americans do not like the direction that the current administration is taking the country.

FHA Tries To Stay Afloat.  The Federal Housing Administration announced stricter lending requirements and higher borrowing fees today.  The move is meant to shore up the agency's tanking finances and prevent the need for a taxpayer bailout. The FHA's reserves to cover losses have fallen to 0.5% or $3.6 billion of the $685 billion in loans outstanding. A year ago, its reserves stood at 3%, and Congress requires the FHA to maintain a 2% capital-reserve ratio.

Buffett Opposes Bank Levy. Warren Buffett said today that he opposes President Obama’s proposed levy on financial institutions because firms including Goldman Sachs (GS) and Wells Fargo (WFC) already repaid bailout funds.

“It just doesn’t make any sense to me,” said Buffett, whose Berkshire is an investor in Wells Fargo and Goldman Sachs. “What was done in the Fall of 2008 was to save the American economy. It wasn’t to save the banks.”

President Obama announced a plan last week to impose a fee on as many as 50 major financial companies to cover as much as $117 billion in losses from the federal government’s TARP program. The levy would apply to firms with more than $50 billion in assets including Bank of America (BAC) JPMorgan Chase (JPM) and Citigroup (C). The levy would not be applied to General Motors, Chrysler and other companies that also received TARP funds, but have not repaid the government.

“A tax that is enacted with the idea that a certain amount of vengeance will be achieved, I don’t think that will be a good idea,” said Buffett.

Unemployment To Remain High.  A report from a group of U.S. mayors suggests that while unemployment will likely peak in most U.S. cities this year, it will take many years before the jobless rate returns to the lows experienced last decade. In some areas, unemployment will stay at or above 10% through 2013, but "what is just as alarming as the double-digit unemployment in many of the nation's major metro areas is the lethargic rate at which it will recede once the job market turns around."

Economic reports to be released today are: Building Permits, Housing Starts, and the PPI numbers.

Earning Releases:

IBM (IBM): reported Q4 EPS of $3.59 beating estimates by +$0.12 on revenue of $27.2 billion.  The company also said it expects full-year EPS of at least $11.00 vs. $10.88.

Bank of America (BAC): reported a much larger than expected loss.  The company announced Q4 EPS of -$0.60 missing estimates by -$0.07 on revenue of $25.4 billion. Shares are down -1.1% in the premarket.

Bank of NY Mellon (BK): announced Q4 EPS of $0.59 beating street estimates by +$0.08 on revenue of $3.3 billion.

·         Futures: Dow -0.4%. S&P -0.5%. Nasdaq -0.6%. Crude -1.4% to $77.91. Gold -0.6% to $1,133.

·         Asia, Nikkei -0.25% to 10,738. Hang Seng -1.8% to 21,286. Shanghai-2.9% to 3,152. BSE -0.1% to 17,474.

·         Europe at midday, London -0.6%. Paris -0.7%. Frankfurt -0.4%.

CLOSING BELL

Dow 10725.43  +115.78, Nasdaq 2320.40  +32.41, S&P 1150.23  +14.20 

Today’s rally pushed stocks to a new 52 week high.  Stocks opened today in mixed fashion, but soon the buying kicked in and today’s advance remained broad based and strong into the close.

Health care was today’s best performer; +2.0%.  The thought is that a Republican election win to the vacant Massachusetts Senate seat could stall health care reform.  Companies benefiting today are: United Health Care (UNH) 34.98 +1.05, +3.11% Johnson & Johnson (JNJ) 65.49 +0.79, +1.22% Quest Diagnostics (DGX) 61.95 +1.36, +2.26%.

Tech was another strong source of support for the stock market. The Tech sector climbed +1.6% as IBM (IBM) 134.14, +2.36 hit a fresh 52-week high ahead of its quarterly announcement.  After the market closed the company beat both their earnings and revenue estimates.

The dollar had a gain of 0.5% today on worries that the U.K.’s AAA debt rating could be lowered.

Advancing Sectors: Health Care +2.0%, Tech +1.6%, Materials +1.6%, Telecom +1.5%, Utilities +1.2%, Consumer Discretionary +1.2%, Financial +1.1%, Industrials +0.9%, Energy +0.9%, Consumer Staples +0.6%

Declining Sectors: (None)