Reply #106: markets close near those psychologically soothing numbers (12600 1400)

[UpInArms]

Dow 12,606.30 246.79 (1.92%)
Nasdaq 2,439.94 48.58 (1.95%)
S&P 500 1,401.02 19.31 (1.36%)
10-Yr Bond 3.81% 0.077

NYSE Volume 4,465,633,000
Nasdaq Volume 2,396,167,500

4:10 pm : Friday was another disappointment for the bulls, marking the third straight weekly decline for the stock market. Stocks closed sharply lower on concerns that the credit crunch was affecting consumers.

American Express (AXP 43.91, -5.01) rang some warning bells after it increased its loan loss reserves due to an increase in defaults and slower card member spending. American Express will take a pre-tax charge of roughly $440 million, which dropped its earnings guidance well below expectations.

The announcement follows Capital One's (COF 12.64, -0.28) warning yesterday, when the company reduced its profit outlook due to increased loan delinquencies and additional legal reserves.

Many investors fear weakness in the consumer will push the U.S. economy into a recession. Philadelphia Fed President Plosser said today the Fed's biggest worry is potential weakness in consumer spending.

This fear was exacerbated by overall disappointing same-store retail sales, which weighed on the consumer discretionary sector (-2.5%), and the S&P 500 Retailing Index (-3.2%).

In financial news, Bank of America (BAC 38.48, -0.82) is buying struggling mortgage lender Countrywide (CFC 6.36, -1.39) for approximately $4 billion in stock. Yesterday, reports that the two companies were in "advanced" talks sent the stock market higher.

The financial sector (-0.2%) outperformed on a relative basis as traders speculated on further industry consolidation and capital infusions.

Citigroup (C 28.56, +0.45) traded higher on speculation it will receive a cash infusion. CNBC reported the company is seeking $15 billion in capital from various sources.

Washington Mutual (WM 14.69, +0.53) closed on a postive note after CNBC reported that the company is in very preliminary talks to merge with JPMorgan Chase (JPM 40.85, -0.48).

The New York Times reports Merrill Lynch (MER 54.69, +2.66) might write-down $15 billion in losses, which is almost double the company's original estimate. Merrill traded higher though, as the report also indicates the company is in discussions to raise about $4 billion.

Next week, financials will remain in focus. Several large banks will be reporting their earnings, including Wells Fargo (WFC 28.20, +0.29), JP Morgan and Merrill Lynch.

Nine of the ten sectors posted a loss, with only the defensive healthcare sector (+0.04%) eking out a slight gain. Telecom (-2.8%) was the main laggard. DJ30 -246.79 NASDAQ -48.58 NQ100 -2.1% R2K -2.2% SP400 -1.4% SP500 -19.30 NASDAQ Dec/Adv/Vol 2166/852/2.38 bln NYSE Dec/Adv/Vol 2028/1149/1.79 bln

3:30 pm : The major indices fall to fresh session lows as the market heads into the final half-hour of the trading week. Treasury Secretary Henry Paulson said "time is of the essence" in any stimulus package, according to Bloomberg.

This week has been volatile and disappointing to the bulls, with the S&P set to end down by about 1% and the Nasdaq down 2.9%. Telecom is the worst-performing sector with a 5.1% drop after AT&T's (T 38.00, -1.40) CEO warned of consumer weakness. Healthcare is set to finish up 4.8%, which makes it the leader. Financials are set to close with a small 0.1% gain after experiencing a number of large swings.DJ30 -274.02 NASDAQ -51.20 SP500 -20.98 NASDAQ Dec/Adv/Vol 2151/833/1.83 bln NYSE Dec/Adv/Vol 1966/1190/1.28 bln