Bears Spoil Wall Street Party; Bernanke Rebuffed

It didn't matter that 4th quarter GDP checked in at an anemic 0.6% growth.

It didn't matter that a couple trillion dollars have simply evaporated between housing foreclosures and the blowup of mortgage-backed securities and even more was eviscerated in the recent market downturn.

It didn't matter that the house and senate plan to give away another $150 billion from an already unbalanced budget.

All that mattered was that the Fed made money easier to borrow and spend, borrow and spend, borrow and spend.

But in the end, after a spectacular run, the market regained its senses, turned the tables on the perma-bull cult and sent Fed Chairman a chilling rebuke.

With the second major federal funds rate cut in 8 days - this one 50 basis points, in addition to the 75 basis points last Tuesday - Wall Street partied like it was... well, like it was 1999, all over again.

Dow 12,442.83 -37.47; NASDAQ 2,349.00 -9.06; S&P 500 1,355.81 -6.49; NYSE Composite 8,994.46 -51.56

The major indices spent all of the day - up until precisely 2:15 pm - in the red, but tacked on an immediate 150 points once the Fed announcement was official. Like so many Polaris rockets at launch, the indices went straight up, leaving behind a cloud of volume.

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Trading, which was sluggish before the rate cut, literally exploded. Shares began changing hands at a rate of 10 million per minute, a level of activity that persisted into the close.

By 3:15 the Dow was up 200 points. It was then that the bears took their revenge for the 1170 point intraday move between Jan. 22 and today (11,508.74-12,681.41), blowing off more than 240 Dow points of froth and setting the market up for a resumption of the equity carnage that has been January's signature.

The reversal was a stunning repudiation of Fed policy and Bernanke personally. The market, left to its own devices, is seldom wrong, and today it indicated that nothing would save the economy from the perils of a downturn.

The bear's trap worked to perfection and the message of the market is now crystal clear: we are deep into the wilderness and the bear is hungry, angry and large.

As expected, advancing and declining issues battled to nearly a stand-off, with decliners winning the day, 3559-2802. New lows checked in at 194. There were only 69 new highs.

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In earnings news among Dow components, Altria Group (MO 76.57 +0.45) saw 4th quarter profit fall 26 percent and announced a spin-off of tobacco company Phillip Morris; drug-maker Merck (MRK 46.47 -1.54) earned 80 cents a share in the fourth quarter, on sales of $6.2 billion, a 3% year-over-year increase; Boeing (BA 82.87 +1.91) posted net earnings of $1.03 billion, or $1.36 a share, up from $989 million or $1.29 a share, in the year-earlier quarter.

Tomorrow, all eyes will turn to Google (GOOG), as the search and advertising company reports 4th quarter results after the close. On Friday, prior to the open, the December labor report will be the main mover. Employment is in the market cross-hairs now that the flames of recession are being fanned.

Oil was up 11 cents to $91.75; gold traded $4.50 lower to $926.30; silver lost 4 cents at $16.76.

NYSE Volume 4,404,828,500
NASDAQ Volume 2,565,181,250

Stocks Trade in Narrow Ranges

The Dow Jones Industrials traded in a narrow, 50-point range for most of the day - between +30 and +80 points - while the NASDAQ carried on a day-long flirtation with the unchanged line.

Despite more disheartening news from the housing sector, investors were content to play wait-and-see on the Fed, whose Federal Open Market Committee (FOMC) began a two-day meeting. On Wednesday at 2:15 the committee will deliver their policy recommendation. Most analysts are calling for a 50 basis point reduction in the federal funds rate, though of late more see a 25% cut a distinct possibility.

The argument is that the Fed may send more of a message with a smaller rate cut, that the economy is not as bad as many fear, and that the Fed has matters under control.

While that may be provide some short-term, superficial salve to open wounds in the markets, the consensus that the economy will fall into recession (or already is in one) is gaining traction, along with the belief that such a recession will be long and deep, extending for as long as 18-24 months.

Dow 12,480.30 +96.41; NASDAQ 2,358.06 +8.15; S&P 500 1,362.30 +8.33; NYSE Composite 9,046.02 Up 67.61

Much of the angst centers around the housing crisis, which continues to dole out pain on a near-daily basis.

In a report issued by RealtyTrac Inc., the number of foreclosure filings in 2007 reached 2,203,295, up 75% from 2006. While the 2007 figures are serious, more troubling is that the trend appears to be accelerating.

A total of 215,749 foreclosure filings were reported in December, up 97 percent from December 2006 and bringing the fourth-quarter total to 642,150 filings on 527,740 properties — up 1 percent from the previous quarter and up 86 percent from the fourth quarter of 2006.

In earnings news, US Steel (X) saw profits trimmed significantly in the 4th quarter due to acquisitions and layoffs. Investors punished the world's 5th largest steel producer with a 7% haircut, pushing shares lower by 7.49 to 102.58.

Naturally, no bad news could derail the PPT-manipulated market from tacking on gains in advance of more money created out of thin air by the Fed. At 3:00, the Dow surged an additional 50 points, briefly piercing the 12,500 resistance ceiling. The other indices followed along dutifully.

Volume, for the second straight day, was laughably light, as prudent bears sat back and watched the unsustainable rally unfurl.

Advancers bettered decliners once more, 3914-2379, and the gap between new lows and new highs tightened considerably, with new lows still on top, 152-71.

Crude oil gained 65 cents to $91.64. Gold lost $2.00 to close at $930.80. Silver gained five cents to $16.80.

NYSE Volume 4,001,153,250
NASDAQ Volume 2,150,718,000

Stocks Rise on Pathetic Volume

To say that the volume of trade on Monday was low would be a serious understatement. Following a week of extreme volatility, investors apparently were willing to sit out today's session - and maybe tomorrow's and most of Wednesday's - in anticipation of the next move by the Fed.

Monday's volume was roughly 3/5ths of the average day last week. This is the exact gut response to extreme volatility and unexplained "bounces." Continued meddling by the Plunge Protection Team (aka President's Working Group on Financial markets) will eventually lead to something resembling a gran mal seizure in the markets. The Fed will be trading with itself and itself only.

Dow 12,383.89 +176.72; NASDAQ 2,349.91 +23.71; S&P 500 1,353.97 +23.36; NYSE Composite 8,978.41 +150.91

On Tuesday of last week, Fed Chairman Ben Bernanke proclaimed a 75 basis point reduction in the federal funds rate in an "emergency" move designed to stabilize markets. The previous day, which was a holiday in the US, markets tumbled worldwide in apparent response to rampant recessionary fears in the US.

Bernanke and his henchmen managed to keep the Dow Jones and other indices from melting down, but at a significant credibility expense. With the Fed's knee-jerk response to global markets, the onus is clearly on the Chairman to make a policy statement of import on Wednesday, as the FOMC concludes two days of meetings.

With the Fed poised to act in some manner - most expect another 50 basis point cut - a report that may have even more impact will be released before the markets open on Wednesday. That would be the Commerce Department's Bureau of Economic Analysis release of preliminary GDP for the 4th quarter.

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Best expert guesses are that the US economy grew by anywhere from 1.2 to 2%, and while those figures are a far cry from the robust 4.9% reported for the 3rd quarter, anything above zero will be welcome news on Wall Street. The fear is that the economy has already fallen into recession and any indication reinforcing that belief will have a significant cooling effect.

Also this week, a huge number of S&P 500 companies will be reporting earnings, as well as 9 Dow components, including American Express, (AXP) which after the close today reported a 6% decline in earnings from a year ago, 71 cents versus 75 cents in the 2006 4th quarter.

McDonald's (MCD), the world's largest restaurant chain, reported profits for the full year fell 32% to $2.4 billion, or $1.98 per share, from $3.5 billion, or $2.83 per share in 2006. 4th quarter profits were marginally higher, but the company advised that same-store sales in the US were flat for the October-December period.

Also reporting after the close was another Dow component, Verizon (VZ), which earned $1.07 billion, or 37 cents per share, in the 4th quarter, compared to $1.03 billion, or 35 cents per share, a year earlier.

Other Dow components reporting this week are 3M Company (MMM) on Tuesday, Altria Group (MO), Merck (MRK) and Boeing (BA) on Wednesday, Procter Gamble (PG) on Thursday and ExxonMobil (XOM) on Friday.

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Tech bellwethers, Yahoo (YHOO) and Google (GOOG), report on Tuesday and Thursday, respectively.

Advancing issues slaughtered declining ones on the day, 4593-1775. New lows surpassed new highs, 200-67.

Crude oil gained 28 cents to $90.99. Gold soared $16.40 to $927.10. Silver was up another 26 cents to $16.75.

If you're getting the feeling that something just isn't right about soaring gold, beaten down foreign markets and a 176-point rise on the Dow, you may just be on to something.

Tonight, the world will cheer President Bush's State of the Union address... because it will be his last. The US is in for a world of hurt, though the media and markets aren't giving us full disclosure as of yet. As usual, the American public will be the last to know when the curtain falls.

NYSE Volume 3,763,495,750
NASDAQ Volume 2,020,705,750

Sellers Resume Bearish Ways

It didn't take long for investors to continue their selling once the Fed and their internal, clandestine agents were through pumping the markets on the buy side.

Naturally, with news of the federal government handing out money to citizens percolating all over mainstream media, the index pre-market futures were goosed and the morning shows all headlined the "stimulus package."

On Good Morning America this morning, Diane Sawyer asked a real estate expert, "are we nearing the end of this recession?" This and similar false hope nonsense was being spouted all over the airwaves. Obviously, Ms. Sawyer, like most of her viewing public hasn't a clue as to the depth and seriousness of the economic crisis underway.

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Fortunately, the expert was clear, explaining that home prices probably wouldn't settle out until late 2008.

Over the past three sessions, the Dow, after bottoming out at 11,508.74 on Tuesday morning, rose an incredible 1014 points (8%) to 12, 522 on Thursday afternoon before pulling back somewhat to close at 12, 378.61.

Dow 12,207.17 -171.44; NASDAQ 2,326.20 -34.72; S&P 500 1,330.61 -21.46; NYSE Composite 8,827.48 -114.77

On Friday, the Dow gapped higher by another 108 points, reaching the high of the day (12,486.89) just 5 minutes into the session. From there, however, it was all downhill.

At 10:30 am, the 12,400 mark was breached, and as it turned out, for the day. Between 1:00 and 1:30 pm, the index sputtered around the 12,300 level, broke through that and headed still lower. Approaching 2:00 pm, the Dow had hit 12,200, down 178 points.

That 12,200 level would prove to be the battleground between the bulls and bears. Absent active participation by the PPT, the market was allowed to drift lower without the overt influence demonstrated over the past three sessions. At least until 3:00 pm, that is.

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Considering that the Fed is almost certainly going to cut rates by another 50 basis points next Wednesday, they need some kind of negative influence to make their move plausible, thus negating the immediate need for Plunge Protection. Still,with the markets down considerably for the day, the manipulators felt a need to pare back some of the losses. In a 10-minute span from 3:10 to 3:20, the Dow cut its losses in half. The other indices experienced similar moves.

Finally, in the closing 15 minutes, the PPT apparently stood down and the selling continued in a fierce manner, lopping off 100 points in a matter of minutes. When it was all said and done, the bears won again, though, for the week, the Dow gained a negligible 108 points. The S&P and NASDAQ closed the week with minor losses.

Internals were more pronounced. Declining issues took the lead over advancers, 3565-2812, and new lows continued to dominate new highs, 194-62.

Oil gained another $1.30 to $90.71. Gold and silver continued to forge ahead, with gold up $4.90 ($910.70) and silver ahead 16 cents ($16.49).

The protracted interference from the PPT continues to make trading difficult, especially for those playing the market short. The direction is clearly to the downside, but the PPT insists on preventing the markets from busting, which they eventually will. The distortions are evident to anyone trading and until the funds of the Fed and Treasury are exhausted, we are forced to live with this blatantly unethical condition.

Of course, market forces are more powerful than the machinations of a few madmen masquerading as government officials. The fear is that the influence of underhanded trades (and associated derivatives in the options market) is making conditions worse rather than better.

NYSE Volume 4,528,555,500
NASDAQ Volume 2,598,300,250

Bottom's Up!

From the stunningly stupid to the overtly optimistic and moronic misguided pundits and plagiarists who make up the financial news media comes word today that the bottom is in.

These calls began with the close of trading on Wednesday and continued here and there through the day on Thursday. Stocks could continue on an unlikely rise for another three weeks and these calls will all be proven wrong in the long run.

Let me be among the first to tell you: the bottom is definitely not in.

Markets have been roiled by a combination of bad news, poor economic reports, weaker corporate earnings, writedowns, bad loans, fear, panic and finally, desperate moves by the Federal Reserve and more sweeping stupidity in the form of free money soon to come from the political class.

All of this points to a world economy splitting apart not only at the seams, but also uncoupling from the moorings of a badly damaged banking and credit system. Fear is rampant, mistrust overflowing, especially among the well-heeled like those gathering in Davos, Switzerland, where the doubtable US Secretary of State, Condoleezza Rice, one of the more serpentine figures in world politics, declared glowingly, "the US economy is resilient, its structure sound, and its long-term economic fundamentals are healthy." Link.

Ms. Rice must think that those in attendance at the World Economic Forum are idiots. Just about everybody outside the United States knows that the US, thanks largely to the policies of her president's (Bush) administration, is a financial house of cards being sold off in parts precipitously to various Arabs, Orientals and other, more stable, companies, countries and individuals. Somebody forgot to give her the memo, apparently.

One has to love comments like this, from an article on a business web site: "This just doesn't feel like a real, full-blown recession to me."

It makes one wonder just what a recession is supposed to feel like. Is there real, physical pain involved in having your assets depreciated right before your eyes?

Take a look at just two serious articles today:
Housing prices to free fall in 2008 - Merrill - This report suggests a 15 percent drop in housing prices in 2008 another 10 percent drop in 2009, with even more depreciation likely in 2010.

Why the Fed can't save us - Here, Senior Editor Allan Sloan correctly points out that the Fed, which has cut rates four times already since September 2007 - from 5.25% to 3.5% - and is expected to cut another 0.5% next week, is running low on rate cut ammo.

That's more like it.

The big news today was another bombshell from the imploding housing sector. In a report released by the National Association of Realtors, the median price of existing homes fell for the entire year of 2007. Since records prior to 1968 do not exist, it is assumed that it was the first time the median price had registered a full-year decline since the Great Depression of the 1930s.

It's notable that reference is being made to the Great Depression, as more and more stories these days are carrying a similar connotation. While some economists are still arguing over whether or not we are in a recession, more adroit minds are pondering the potential of a global depression.

Most of the pieces are in place. The global financial system is about one or two serious events removed from complete failure. As it stands, Citigroup and Merrill Lynch are only still standing due to major cash infusions from sovereign funds from Singapore, China and Kuwait. An actual bank failure could occur at any time, triggering the ultimate catastrophe - the seizing up of the entire world financial system.

On Wall Street, however, where fantasy thumbs its nose at reality, stocks gained for the second straight day, today without as much overt assistance from the PPT, the Fed or any other nefarious agents who might prime the equity pump. No doubt, they were there, keeping the indices above break-even. The job is to restore calm and civility and keep the dastardly sellers and short-players in check... for a time.

Dow 12,378.61 +108.44; NASDAQ 2,360.92 +44.51; S&P 500 1,352.07 +13.47; NYSE Composite 8,942.25 +136.57

That the market will retest the intraday lows of Tuesday and Wednesday is not in question. It's only a matter of time before a bit of news or earnings reports or a piece of economic data once again sets the seller's sails for distant shores.

Today's internals were benign, if not wholly fatuous. Advancing issues raced ahead of decliners, 3861-2541. New lows moderated over new highs, 208-59. Trading was range-bound and, relative to the past few sessions, lighter.

Oil traders got the "all clear" signal and priced higher by $2.42, to close at $89.41. Gold rocketed $23.00 to the upside, to 907.00. Silver improved by 36 cents, ending the day at $16.33 the ounce.

With two consecutive days of gains, a Fed meeting less than a week off and the Super Bowl looming, we are in a significantly soft "bounce" period. The Fed and the PPT will do what they do best, manage the market, and everything should go along swimmingly for a time. Congress and the president are even playing nice, agreeing on a sweeping cash give-away program to boost the economy.

In typical fashion, however, the politicians will not actually deliver checks - ranging from $300 to $1200 - to "the people" until sometime in June, according to most estimates. As Washington goes, that qualifies as "fast.", one supposes. This $100 billion and another $50 billion in business incentives ought to stimulate somebody. By then, surely, we'll need more.

Ah, I almost forgot. The bottom is in. NOT.

NYSE Volume 5,790,062,500
NASDAQ Volume 3,019,970,750