Market Close

A bizarre trading day. Bull or bear market? That is the question we will address this weekend by going over the monthly and weekly charts and the resistance levels which are still ahead.

More tonight…

Stock Market Update

January ISM data released and came in at 50.7, which is just a hair above contraction. (numbers below 50 indicate contraction in the manufacturing sector). Last month the number was 47.3. While today’s number is a few points higher the trend remains to the downside.

The markets started out not knowing which way to go. After the ISM data the bulls gained some momentum but were still watching as the move up seems to be catching some selling on the way up which is pulling the reins on the bull.

Another factor now being bantered about is that the weak employment report this morning now has the chances of yet another Fed Funds rate cut on the table. Futures are showing the chances of another 50 basis point rate cut is rising. Good heavens, another rate cut… the poor dollar. We might as well wall paper our homes with dollar bills as they will be worthless if they keep cutting rates. Inflation will get out of control.

Construction spending for December came in very poor. The value of -1.1% is twice as bad as was expected.

And just now crossing the wires:

MOODY’S: SOME BOND INSURERS WILL LIKELY BE DOWNGRADED

Oh how I wish for a normal market again, this is getting crazy!

We’re watching the events closely here.

Pre market - February 1st 2008

Just once I would like to come to my office and be able to enjoy my morning coffee without something significant happening in the pre market hours

Last night, following the news that MBIA was placed on the watch list for ratings cut sent back room maneuverings into high gear. Early this morning we are hearing that a consortium of 8 banks are standing ready to bail out the bond insurers. The banks include Barclays, BNP Paribas, Citigroup, Dresdner, Royal Bank of Scotland, Sociente General, UBS, and Wachovia. It would appear that the Standard and Poors negative watch deceleration last night was a call to do something very fast. This news is not official yet, it is a story being broken by the media. No confirmation from any parties involved yet. Stay tuned for another installment of the soap opera "as the bond insurers turn".

Microsoft has announced their intention to purchase Yahoo. A deal worth $44 Billion if it goes through. This gave stocks a lift this morning as this is a substantial buyout price tag. But Microsoft has plenty of cash so they do not need to finance the deal.

Then unemployment data came in and it was a big hit in the minus column for the economy. Numbers came in negative 17,000. Expectations were for a positive 70,000. With some revisions to prior months data the official unemployment rate dropped one tick to 4.9%. But even with all of the revisions the new data shows an acceleration of unemployment to the downside. We will analyze the data further as the day goes on but my first interpretation of the data is bad for the economy. When we add in the slight drop in hourly earnings (which were already trending down) we are seeing the picture of recession becoming quite clear. This is the kind of data that could take the GDP down into the negative column now.

Pre market futures have gone nuts, hard to say at this point how we will trade today. My guess is for a sell off today but there seems to be a real effort to keep the market up today.

Going to get a fresh cup of coffee and we will see how this all plays out today. Should be interesting.