Midday Lunch

Dow	10298.66	+18.13	(+0.18%)
Nasdaq	2198.11	+19.88	(+0.90%)
SP 500	1098.39	+2.32	(+0.21%)
10-yr Note	-9/32	3.51%
NYSE	Adv 1248	Dec 1682	Vol 1.03 bln
Nasdaq	Adv 1286	Dec 1289	Vol 1.2 bln

All three indices are in positive territory on very heavy volume due to Quadruple witching options expiration.

Losses are steepest among consumer staples stocks, which are now down 1.2%. Campbell Soup (CPB) Co 32.74, -0.57 has been a primary drag on the sector this session.

Positive earnings from Research In Motion (RIMM) 70.00 +6.54, Oracle (ORCL) 24.31 +1.43 are helping the  tech sector to fare the best this session. The sector is up 0.8%. Financials (+0.3%) and energy (+0.2%) make up the only other two sectors to sport gains.

Crude oil is higher this session trading at 73.54 +0.89 off from the session highs at $74.69 per barrel. 

There are unconfirmed stories that Iranian troops have entered a disputed area of Iraq and seized an oil well.  Well number 4 is the largest producing well in Iraq.  Iran is denying the reports.  

MORNING COFFEE

RIM not affected by iPhone and Droid

Research In Motion (RIMM) The maker of Blackberry cell phones reported earnings of 1.10.  Analyst had estimated earnings of only 0.69.  The 59 percent increase in third-quarter income was boosted by new subscribers and record sales of its smart phones.  

Oracle beats estimates

Oracle (ORCL) beat earnings estimates by 8.33% reporting earnings of 0.39. Revenues rose 4% from the year-ago period.  President Safra Catz said on the earnings call “We're really seeing a recovery,".

Accenture reports mixed results

Accenture PLC (ACN) reported earnings of 0.67 which beat estimates of 0.65.  The company future guidance was mixed.  The company raised their full year earnings to 2.67-2.75 per share, above estimates of 2.64-2.72 citing improving momentum.  The company did say it expects their second quarter revenues to come in below Wall Street’s estimates.  

Nike running strong

Nike (NKE) reported better than expected earnings on cost cutting, streamlining operations and reduced marketing.  The company reported earnings of 0.76, traders were looking for earnings of only 0.71. 

Banks troubles continue

There is more trouble for banks as FINRA investigating information from Citigroup (C), JPMorgan (JPM), Morgan Stanley (MS) and other securities firms. The regulatory body is looking at how the firms disseminate stock ratings and research. The probe is an expansion of one of the one at Goldman Sachs (GS), in which FINRA  their largest clients may have received trading tips that benefited certain clients.

Earnings Before the Bell

Carmax (KMX) Carmax reported earnings of 0.24 per share beating estimates by 0.08.  Revenues came in at 1.73B.  The shares are up 4% in the premarket.

·     Futures: Dow +0.3% to 10306. S&P +0.4% to 1098.50. Nasdaq +0.3%.

    Feb. crude +1.6% to $75.30. Gold +0.3% to $1,111.

    30-year Tsy +0.11% to 119-02. 

    Euro +0.2% vs. dollar. Yen flat. Pound+0.3%.

·    Asia: Nikkei -0.2% to 10142. Hang Seng -0.8% to 21176. Shanghai -2%to 3114. BSE -1% to 16720.

·    Europe at midday: FTSE +0.6% to 5250. CAC +0.1% to 3836. DAX+0.6% to 5877.

CLOSING BELL

Dow 10308.26  -132.86, Nasdaq 2180.05  -26.86, S&P 1096.08  -13.10,

The markets sold off today on a rally in the dollar against foreign currencies and weakness in the financial sector.  The dollar gained 1.1% against other currencies after S&P downgraded Greece’s debt to BBB+ from A- and traders decided to lock in profits for the year.  This led gold and commodities prices to fall today.  

The Financial sector fell 1.8% today after Citigroup’s (C) 3.20 -0.25 stock offering was priced at 3.15 a 9% discount to the previous day’s close.  

The led the Federal Reserve to put off selling their $5 billion dollar stake in the company.

Also pressuring Financials was analyst Meredith Whitney, when she lowered her earnings outlook on both Goldman Sachs (GS) 160.93 -4.06 and Morgan Stanley (MS) 29.12 -1.22.

FedEx (FDX) 84.47 -5.48 (-5.61%) announced earnings the beat the streets estimates coming in at 1.10, the street had estimated earnings of 1.06.  But traders were disappointed with the company’s guidance going 

forward.

Research In Motion (RIMM) 63.46 -1.21 The maker of Blackberry cell phones reported earnings of 1.10.  Analyst had estimated earnings of only 0.69.  The 59 percent increase in third-quarter income was boosted by new subscribers and record sales of its smart phones.  Shares surged more than 12% in after-hours trading.

Accenture PLC (ACN) 41.66 -0.18 reported earnings of 0.67 which beat estimates of 0.65.  The company future guidance was mixed.  The company raised their full year earnings to 2.67-2.75 per share, above estimates of 2.64-2.72 citing improving momentum.  The company did say it expects their second quarter revenues to come in below Wall Street’s estimates.  Shares were down 2.40% in the after hours.

Nike (NKE) 63.25 -0.80 reported better than expected earnings on cost cutting, streamlining operations and reduced marketing.  The company reported earnings of 0.76, traders were looking for earnings of only 0.71.  Nike shares rose 3.3% in afterhours trading.

For the eighth consecutive month, the Conference Board's Leading Indicators Index posted positive growth.  The index jumped 0.9% in November after increasing only 0.3% in October. Economists expected the index to increase 0.7%.  The index has now overtaken its July 2007 peak and signals a strong recovery in 2010. 

For the second consecutive week, new unemployment claims moved higher. The advance figure for initial claims for the week ending Dec. 12 increased 7,000 to 480,000.  Economists expected the figure to decline by 8,000 to 465,000.  The increase in initial claims shows that the labor sector is still strained.

The Philadelphia Fed Business Outlook rose to 20.4 in December from 16.7 in November. Economist had forecast the index would increase to 17.5.  The index has remained positive for five consecutive months and signals continued growth in the manufacturing sector.

Midday Lunch

12:00 ET Dow 10342.87  -98.25,   Nasdaq 2184.97  -21.94,    

S&P 1099.21  -9.97

The dollars strength today is the main cause for the decline in the market.  For weeks now the market has been moving in an inverse relationship to the Dollar Index.  Today’s strength in the dollar, I believe is a result of traders locking in profits of foreign currencies before year end.

The financial sector is also not helping the market after Citigroup (C) 3.20 -0.21 stock offering was met with 

a cold shoulder by Wall Street and the Fed.

Gold and commodities are also under pressure today from the stronger dollar.  Gold prices are down 2.7% to $1105.40 per ounce. Commodities are down 1.2%, as measured by the CRB Commodity Index.

Leading Indicators Better than Expected

For the eighth consecutive month, the Conference Board's Leading Indicators Index posted positive growth.  The index jumped 0.9% in November after increasing only 0.3% in October. Economists expected the index to increase 0.7%.  The index has now overtaken its July 2007 peak and signals a strong recovery in 2010.

Initial Claims Rise

For the second consecutive week, new unemployment claims moved higher. The advance figure for initial claims for the week ending Dec. 12 increased 7,000 to 480,000.  Economists expected the figure to decline by 8,000 to 465,000.  The increase in initial claims shows that the labor sector is 

still strained.

Philly Fed Index Shows Expansion

The Philadelphia Fed Business Outlook rose to 20.4 in December from 16.7 in November. Economist had forecast the index would increase to 17.5.  The index has remained positive for five consecutive months and signals continued growth in the manufacturing sector.

MORNING COFFEE

Citigroup’s shame.  Citigroup (C) confirmed Wednesday it priced a massive 5.4B share sale at $3.15, generating net proceeds of $17B. The Treasury, which was slated to sell $5B in stock concurrently, shelved its plans after pricing was lower than the $3.25/share it paid, extended the lock-up period on its 7.7B share stake to 90 days from 45, and said it expects to exit its stake over the coming 12 months. The low price and size of the offering is just another sign that management just wanted to exit TARP and it’s pay restrictions.  Shares --8.1% to $3.17 premarket.

BofA’s has a new boss.  Bank of America announced that Brain Moynihan, currently the head of retail operations will replace Ken Lewis as CEO at the end of the year.

Fed Keeps Interest Rates Unchanged.  The Federal Reserve Announce yesterday that they would keep interest rates unchanged at 0.00%-0.25%.  The Fed said that they would keep rates low for an extended period of time and that “Economic activity was picking up” and "Deterioration in the labor market is abating."  The market sold off on the news fearing interest rate hikes in the near future.

Earnings Before the Bell

FedEx (FDX) EPS 1.10, Estimates 1.06, Year ago EPS 1.58

General Mills (GIS) EPS 1.54, Estimates 1.54, Year ago EPS 1.36

Earnings After the Bell

Accenture (ACN) Estimates 0.65, Year ago EPS 0.74

Nike (NKE) Estimates 0.71, Year ago EPS 0.80

Oracle (ORCL) Estimates 0.36, Year ago EPS 0.34

Research In Motion (RIMM) Estimates 1.04, Year ago EPS 0.83

·    Futures: Dow -0.45% to 10343. S&P -0.6% to 1099. Nasdaq -0.6% to 1789.

·    Jan. crude -0.8% to $72.07. Feb. gold -1.3% to $1,121.

3 30-year Tsy +0.61% to 118-07. 10-year +0.36%. 5-year +0.24%. 2-year+0.12%.

   Asia: Nikkei -0.1% to 10163.8. Hang Seng -1.2% to 21348. Shanghai -2.3% to 3179. BSE -0.1% to 

1 16894.

·   Europe at midday: FTSE -0.9% to 5272. CAC -0.6% to 3854. DAX -0.7% to 5864.

   Euro -1.3% vs. dollar. Yen flat. Pound -1.3%. Loonie -0.7%.

CLOSING BELL

Dow 10441.12  -10.88   Nasdaq 2206.91  +5.86   S&P 1109.18  +1.25

The stock market started the day off on the plus side helped by a weaker dollar but the gains faded after the Federal Reserve released their statement from the Federal Open Market Committee (FOMC).

The Federal Reserve had decided to hold interest rates at a record low and pledged to keep them there for an "extended period" to keep the recovery going and drive down double-digit unemployment. The Fed rate stands at 0.00%- 0.25%.

The Fed reported the economic activity is picking up and that the deterioration in the labor market is abating.  The Fed also said it expects to wind down some emergency lending programs when they are set to expire next year. 

Commodities remained strong. The CRB Commodity Index gained 1.6%, its best by percent in three weeks, and helped the materials sector outperform.

Energy stocks where strong today.  

They advanced 0.5% as oil prices closed 2.8% higher at $72.68 per barrel.

The November Consumer Price Index increased 0.4% month-over-month, which matched economist consensus.  The Core rate, which excluding food and energy, came in flat.  Economist had expected a 0.1% rise in the Core rate. Since the CPI data generally matched expectations, it didn't cause any meaningful stir in the broader market.


Homebuilders performed well today on data the home starts for the month of November matched estimates, coming in at 574,000 units.  Building permits came in at 584,000 which topped estimates.


Adobe Systems (ADBE) closed at 37.86 +1.50 (+4.10%) after reporting better than expected earnings and Best Buy Inc (BBY) 41.29 -0.24 (-.22%) also topped their earnings estimate but closed down for the day. 


Tomorrow morning, two economic reports are scheduled to be released before the open:  Initial claims (consensus 465K) and Continuing claims (5180K).


Nike (NKE) and Accenture (ACN) are scheduled to report their earnings.

Fed Keeps Interest Rates Unchanged

The Federal Reserve has announced that they will not change interest rates and keep the Fed rate at 0.00-0.25%.

The Federal Reserve has decided to hold interest rates at a record low and pledged to keep them there for an "extended period" to keep the recovery going and drive down double-digit unemployment.

In a more upbeat assessment, the Fed says the economy has "continued to pick up" and that "deterioration in the labor market is abating," a nod to the recent slowdown in the pace of layoffs.

The Fed says it expects to wind down some emergency lending programs when they are set to expire next year.

Midday Lunch

Dow	10485.33	+33.33	(+0.32%)
Nasdaq	2216.22	+15.39	(+0.69%)
SP 500	1114.70	+6.77	(+0.61%)
10-yr Note	+9/32	3.55%
NYSE	Adv 2112	Dec 856	Vol 487 mln
Nasdaq	Adv 1656	Dec 937	Vol 951 mln

Stocks are trading off their earlier highs still the tone remains positive as advancers outpace decliners. 

Housing starts jumped 8.9% in November from 527,000 to 574,000. That was in-line with the median estimate. The rise in starts came in the face of declining sentiment among homebuilders.

The CPI rose 0.4% in November, in-line with the consensus estimate, the jump in prices was solely due to increases in gasoline prices.  The core prices which exclude food and energy posted no increase. Economists' median estimate called for a slight 0.1% increase in the core rate.

S&P announced they lowered the debt rating on Greece from A- to BBB+.

Adobe Systmems Inc. (ADBE) reported earnings the beat estimates by 5.41%.  Reported EPS $0.39, Consensus EPS $0.37

Best Buy Co. (BBY) reported earnings the beat estimates by 23.26%.  Reported EPS $0.53, Consensus EPS $0.43

The Federal Reserve will announce their decision on interest rates at 2:15PM.  Most economist believe they will leave interest rates unchanged at 0.00%-0.25%.

MORNING COFFEE

Headlines

Ben Bernanke was awarded Time Magazines Person of the Year Award

EU ends 10yr Microsoft antitrust battle without fining the company. Microsoft agreed to provide European Windows users with greater choices of web browsers.

Banks get more time on new capital rules. Banks around the globe could get ten years to transition to the new capital rules that take effect in 2012. the Basel Committee on Banking Supervision is expected to issue new proposals to toughen financial regulations, which had raised concerns about banks scrambling to raise capital quickly. The new rules will likely take a broader view on the definition of liquid assets and core capital, while the minimum capital threshold will likely be raised to help buffer against future losses.

Bernanke downplays inflation. High U.S. unemployment and unused manufacturing capacity suggest that there's still plenty of slack in the economy and that inflation will remain low, Fed Chairman Ben Bernanke told a lawmaker in a written statement Tuesday. "I continue to expect slack resources, together with the stability of inflation expectations, to contribute to the maintenance of low inflation in the period ahead." Most economists expect the Fed to keep rates unchanged which will be announced today at 2:15pm.

Geithner said banks are stronger. U.S. Treasury Secretary Geithner said Tuesday that confidence in the financial system is coming back and that private capital will start replacing the government's investment in banks. The government expects to get checks totalling more than $185B in repaid TARP, after Wells Fargo (WFC) said Monday it will repay $25B in bailout money.

Today’s Market

· Futures at 7:00: Dow +0.4% to 10438. S&P +0.5% to 1109.50. Nasdaq+0.6%.

Treasurys showing modest gains ahead of FOMC rate decision.
Crude +0.8% to $71.26. Gold +1% to $1,134.
Euro +0.2% vs. dollar. Yen flat. Pound +0.5%.

· Asia: Nikkei +0.9% to 10177. Hang Seng -0.9% to 21612. Shanghai -0.6% to 3255. BSE +0.2% to 16913.

· Europe at midday: FTSE +0.5% to 5312. CAC +0.8% to 3865. DAX+1.2% to 5881.

Market Wrap-Up

February 6, 2008

DOW 12200.10 -65.03 (-0.53%) S&P 500 1326.45 -10.19 (-0.77%)
NASDQ 2278.75 -30.82 (-1.35%) 10 Year Bond 3.614% +0.027

The Market opened higher this morning on news that Walt Disney (DIS) $31.50 +1.43 (4.76%) posted better than expected earnings. Time Warner (TWX) $15.71 +0.31 (+2.01%) also had a nice report today

Future exchange companies CME Group (CME) $485.25 -103.55 (-17.59%) and NYMex (NMX) $87.88 -18.78 (-17.61%) both got killed today after it was reported that U.S. Dept. of Justice is calling for an end for futures exchanges being able to own or control clearing functions.

BHP Billiton's (BHP) $66.10 -3.38 (-3.16%) offer to acquire Rio Tinto (RTP) $409.37 -12.13 (-2.88%) for $147.4 billion was rejected today. The company said that the offer did not reflect the value of the company and its prospects for expansion.

Today’s downturn in the market can be attributed to Philadelphia Fed President Plosser. Mr. Plosser expressed concerns about inflation and said that the Fed's credibility is weakening. The market had positive returns up until his comment.

The energy sector also got hit today (-1.58%) on the Department of Energy report showing that crude stockpiles rose 7.05 million barrels. Economist has been looking for only a 2.6 million barrel increase. This also caused the price of crude to drop today.

After hours today, Cisco Systems (CSCO) $23.08 -0.18 (-0.77%) reported earnings in line with estimates. The company reported earnings of $0.38 per share. Revenues rose 17.0% year-over-year to $9.8 billion, which also met estimates. The shares are under pressure in after hours trading.

I would expect more volatility in the market tomorrow.