Tuesday, July 15, 2008

Market Turmoil Abounds

With Fed Chairman Ben Bernanke pleading with Congress for unlimited powers to fund failing mortgage lenders/underwriters Fannie Mae and Freddie Mac, US equity markets are nearly in panic mode.

After early steep declines on Tuesday, markets advanced in unison until the final hour of trade, then sold off rapidly.

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Bernanke, testifying before the Senate Banking Committee along with Treasury Secretary Henry Paulson, disclosed and discussed a plan that would allow the United States Treasury to purchase an equity stake in both Fannie and Freddie and give the Fed wide-ranging ability to make loans to the troubled GSEs (Government Sponsored Enterprises).

Prior to the Senate dog-and-pony show, the market was treated to another in a series of troubling PPI reports, this one showing PPI up by a staggering 1.8% and core PPI (which excluded energy and food) up by 0.2% in June.

That sent the indices reeling into the red, as more and more bad news comes over the wires in a seemingly-unending stream. And second quarter earnings are just beginning to hit the Street.

Dow 10,962.54 -92.65; NASDAQ 2,215.71 +2.84; S&P 500 1,214.91 -13.39; NYSE Composite 8,157.80 -129.96

Market internals were severely tilted to the negative. Losers crunched gainers by 4330-2091. New lows hit an extreme high of 1720, to just 68 new lows. Once again, the persistence of a high level of new lows (now nearly 1 of every 4 stocks) is indicating the possibility of a cataclysmic event at any time and the news continues to confirm that the US economy is in its worst state since the Great Depression of the 1930s.

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Oil fell $6.31, to $137.39, while the metals were mixed. Gold gained $5.00 to $978.70, while silver fell 24 cents to $19.01. Sooner or later, these prices are all going to plummet. The US - and to a large extent the world - economy is in dire straits.

A massive one-day decline in now in the cards, probably within the next two weeks.

Warning! The US is a Falling Stock Zone.

NYSE Volume 1,747,139,000
NASDAQ Volume 2,774,362,000

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