Market Wrap-Up

January 17, 2007

DOW 12,159.21 -306.95 (-2.46%) S&P 500 1,333.25 -39.95 (-2.91%)
NASDQ -2,346.90 -47.69 (-1.99%) 10 yr Bond 3.64% -0.072

What can I say other than thank god my office is not on the top floor of a skyscraper. The market again was pummeled my fears of recession and the credit problems spiraling out of control.

Merrill Lynch (MER) $49.45 -5.64 (-10.24%) reported huge losses, even more than the street expected. Mother Merrill lost $10.3 billion in the fourth quarter, or $12.57 per share, well short of the streets expected loss of $4.93. The loss was largely due to a $11.5 billion write-down.

In economic news today, December housing starts dropped a larger than expected 14.2% and housing permits also fell, no big surprise there. Jobless claims for the week came in at a better than expected 301,000. Economist had expected 335,000 new claims.

Federal Reserve Chairman Ben Bernanke testified before the House Budget Committee today. While testifying he said that any fiscal stimulus plan should be implemented quickly and last for 12 months. He noted if the plan comes too late it might do more harm than good. Additionally, he said the economic outlook has worsened, and that downside risks to growth are now more pronounced. Is he saying recession? He also said subprime losses could amount to "several multiples" of $100 billion, but would not top $500 billion. This is the same guy who last year said that the subprime problem was contained and would not affect the capital markets. Funny thing is that once he opened his mouth the market started to sell off.

AMBAC (ABK) $6.24 -6.43 (-51.89%) continued to get hammered today after yesterdays announcement of a dividend cut and the need to raise $1 billion in capital.

Look for the market to continue its sell off tomorrow, since many traders will not want to hold on to positions going into the weekend.

Companies reporting earnings tomorrow are: General Electric (GE), Johnson Controls (JCI) and Schlumberger (SLB)