Market Week in Review

S&P 500 683.38 -7.03%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 683.38 -7.03%
DJIA 6,626.94 -6.2%
NASDAQ 1,293.85 -6.10%
Russell 2000 351.05 -9.76%
Wilshire 5000 6,873.54 -7.31%
Russell 1000 Growth 308.51 -5.30%
Russell 1000 Value 336.67 -9.19%
Morgan Stanley Consumer 432.22 -5.04%
Morgan Stanley Cyclical 285.98 -13.73%
Morgan Stanley Technology 307.54 -3.65%
Transports 2,194.99 -12.17%
Utilities 296.89 -8.36%
MSCI Emerging Markets 21.10 -1.31%

Sentiment/Internals
NYSE Cumulative A/D Line 6,397 -47.25%
Bloomberg New Highs-Lows Index -1,972 -175.42%
Bloomberg Crude Oil % Bulls 50.0 +4.2%
CFTC Oil Large Speculative Longs 214,302 -8.46%
Total Put/Call .88 -9.28%
OEX Put/Call 1.14 +26.67%
ISE Sentiment 108.0 -20.0%
NYSE Arms .67 -60.35%
Volatility(VIX) 49.33 +6.43%
G7 Currency Volatility (VXY) 16.80 -4.82%
Smart Money Flow Index 6,903.50 -5.26%
AAII % Bulls 18.92 -22.14%
AAII % Bears 70.27 27.44%

Futures Spot Prices
Crude Oil 45.60 +3.54%
Reformulated Gasoline 133.25 -1.75%
Natural Gas 3.94 -6.20%
Heating Oil 122.94 -3.32%
Gold 942.70 -.07%
Base Metals 112.14 +6.15%
Copper 168.90 +9.50%
Agriculture 277.44 -.94%

Economy
10-year US Treasury Yield 2.87% -15 basis points
10-year TIPS Spread .85% -14 basis points
TED Spread 1.10 +8 basis points
N. Amer. Investment Grade Credit Default Swap Index 247.93 +12.40%
Emerging Markets Credit Default Swap Index 858.99 +3.97%
Citi US Economic Surprise Index -47.90 +11.30%
Fed Fund Futures imply 98.0% chance of no change, 2.0% chance of 25 basis point cut on 3/18
Iraqi 2028 Govt Bonds 45.35 +1.34%
4-Wk MA of Jobless Claims 641,800 +.3%
Average 30-year Mortgage Rate 5.15% +8 basis points
Weekly Mortgage Applications 649,700 -12.62%
Weekly Retail Sales -1.60%
Nationwide Gas $1.94/gallon +.06/gallon
US Heating Demand Next 7 Days 20.0% below normal
ECRI Weekly Leading Economic Index 105.20 -.28%
US Dollar Index 88.51 +.57%
Baltic Dry Index 2,167 +9.11%
CRB Index 209.59 -.94%

Best Performing Style
Large-cap Growth -5.30%

Worst Performing Style
Small-cap Value -11.1%

Leading Sectors
Gold +.84%
Semis -2.31%
Drugs -2.33%
Foods -2.92%
Restaurants -3.28%

Lagging Sectors
HMOs -14.17%
Airlines -15.44%
Gaming -18.89%
Oil Tankers -21.29%
Banks -22.93%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish Mixed as Gains in HMO, Airline, Paper and Construction Shares Offset Losses in Coal, Gaming, Financial and Technology Stocks

Evening Review
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Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Futures
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Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
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After-hours Stock Chart
In Play

Stocks Lower into Final Hour on Rising Economic Pessimism, Forced Selling, Greater Financial Sector Concerns, More Shorting

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Technology longs and Retail longs. I added to my (IWM)/(QQQQ) hedges and added to my (EEM) short this morning, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is lower, almost every sector is declining and volume is above average. Investor anxiety is above average. Today’s overall market action is very bearish. The VIX is rising 2.67% and is elevated at 51.45. The ISE Sentiment Index is low at 89.0 and the total put/call is about average at .89. Finally, the NYSE Arms has been running low most of the day, hitting .35 at its intraday trough, and is currently .99. The Euro Financial Sector Credit Default Swap Index is soaring 16.81% today to 194.33 basis points. This index is making another new record high. The North American Investment Grade Credit Default Swap Index is falling 1.36% to 247.93 basis points. This index is still below its Dec. 5^th record high of 285.99. The TED spread is rising .24% to 110 basis points. The TED spread is now down 353 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 3.97% to 78.50 basis points. The Libor-OIS spread is rising .41% to 104.0 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is dropping 4 basis points to .84%, which is down 180 basis points since July 7th. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .19%, which is down 1 basis point today. Market-leading stocks are under significant pressure today, sharply underperforming the broad market. This is likely the result of forced selling. As well, financials are continuing their freefall. Some gauges of investor angst still remain stubbornly low given the carnage that is taking place. Nikkei futures indicate a -173 open in Japan and DAX futures indicate a -34 open in Germany on Monday. I expect US stocks to trade mixed-to-lower into the close from current levels on more economic pessimism, more shorting, higher energy prices, rising financial sector pessimism and tax hike worries.

Today's Headlines

Bloomberg:

- U.S. regulators should intervene quickly with large financial institutions under stress by requiring more capital and taking ownership stakes with debt convertible to common shares, Federal Reserve Bank of Philadelphia President Charles Plosser said.“ Convertible debt could play an important role in financial firm resolutions by providing a quick, transparent method for recapitalization,” Plosser said in a speech in New York. “The potential for conversion, which would dilute shareholder and creditor claims, should improve market discipline.”

- Myron Scholes, the Nobel prize-winning economist who helped invent a model for pricing options, said regulators need to “blow up or burn” over-the-counter derivative trading markets to help solve the financial crisis. The markets have stopped functioning and are failing to provide pricing signals, Scholes, 67, said today. Participants need a way to exit transactions and get a “fresh start,” he said. The “solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, and let us start over,” he said, referring to credit-default swaps and other complex securities that are traded off exchanges. “One way to do that, through the auspices of regulators or the banking commissioners, is to try to close all contracts at mid-market prices.” Scholes also recommended moving the trading of credit-default swaps, asset-backed securities and mortgage-backed securities to exchanges to allow for “a correct re-pricing” of the assets. A total of $531 trillion in outstanding derivatives contracts traded over-the-counter as of June, according to the Intl. Swaps and Derivatives Assoc.

- Emerging-market borrowing costs rose, heading for the biggest weekly increase in three months, as a jump in the U.S. unemployment rate to the highest in more than a quarter century signaled a deepening recession. The extra yield investors demand to own developing nations’ bonds instead of U.S. Treasuries widened 3 basis points, or 0.03 percentage point, to 6.96 percentage points at 10:57 a.m. New York time, according to JPMorgan Chase & Co.’s EMBI+ Index. That brings the weekly increase to 47 basis points, the most since December. Argentina paced losses, with the country’s spread swelling 47 basis points to 18.74 percentage points.

- Warren Buffett and Jeffrey Immelt are among a handful of chief executive officers whose companies are rated AAA. Yet Buffett’s Berkshire Hathaway Inc. and Immelt’s General Electric Co. are being treated like junk in the market for credit-default swaps. Contracts that protect investors against a default on bonds of Omaha, Nebraska-based Berkshire, which has $25.5 billion in cash, cost as much as those of KB Home, the homebuilder that lost money for seven consecutive quarters. Credit-default swaps on the finance arm of GE, which holds $45 billion of cash, are about as expensive as those for building materials-maker Louisiana-Pacific Corp., which posted nine straight quarterly losses.

- The benchmark Markit iTraxx Financial index of credit- default swaps linked to the senior debt of 25 banks and insurers jumped 7 basis points to a record 202, according to JPMorgan Chase & Co. prices. The subordinated index surged 20 basis points to an all-time high 385.

- Ireland may lose its AAA debt rating because of a slump in government tax revenue, Fitch Ratings said. The country’s top credit classification was put on “watch negative,” Fitch said in a statement from London today. Ireland received the top rating from Fitch in 1998.

- Baosteel Group Corp., China’s largest steelmaker, said prices are close to its production costs, indicating that the country hasn’t had a “real” demand recovery. Baosteel is “cautious” about the demand outlook, Wang Jing, the company’s general manager for international trading, said in an interview in Beijing, while attending the National People’s Congress. “Demand hasn’t had a substantial recovery, but output rose faster because of higher prices,” Wang said. “Our prices are on the verge of production costs.” Chinese steelmakers may have to cut output by 20 percent, Shougang Corp., the eighth-largest mill, said yesterday. More than 60 percent of the mills in China are making losses, the China Iron and Steel Association said last month. “If we gave our prices a one-time cut to match the market levels, we’re afraid that would hurt the market confidence,” Wang said.

- China’s stock rally may falter as earnings miss expectations and the nation’s growth is held back by the weakening global economy, DBS Asset Management Ltd. said. Investors should lower forecasts for China’s expansion as stimulus spending will take time to work, Teo Chon Kiat, manager of the Greater China fund at DBS Asset Management, said today. “Earnings estimates are still too high, so there’s a risk the market will come off as earnings disappoint,” Teo said by phone. “Weakness in the external economy continues to be a major risk for China.”

- General Electric Co.(GE) and Siemens AG, the biggest makers of medical imaging machines, say President Barack Obama’s plan to slash spending on the use of MRIs and X- rays threatens patients, and they’ll lobby Congress to block it. As employers, Fairfield, Connecticut-based GE and Siemens, of Munich, say they back Obama’s efforts to cut health costs. Still, in separate interviews, the companies pledged to fight a plan, proposed in the president’s budget last week, to require approvals from a private “benefit manager” before Medicare will pay for imaging.

- The U.S. Treasury has failed to take “decisive” action to address the bank crisis, pursuing an ad- hoc approach that leaves management in place and avoids necessary asset writedowns, a veteran Federal Reserve official said. “We have been slow to face up to the fundamental problems in our financial system and reluctant to take decisive action with respect to failing institutions,” Kansas City Fed President Thomas Hoenig said in prepared remarks in Omaha, Nebraska. He called for a resolution process for firms deemed too big to fail, allowing their break-up if their complexity makes them unmanageable. Hoenig’s comments are the most detailed criticism of the Treasury’s actions by a Fed official since the financial crisis began.

- The U.S. Senate put off a final vote on a $410 billion spending package until next week after Republicans demanded time to offer more amendments. Senate Majority Leader Harry Reid, a Nevada Democrat, said he was “probably a vote short” of the 60 needed to cut off debate late yesterday and bring the bill to a final vote. “We’re going to have to continue work on this bill,” he said.

Wall Street Journal:

- A large participant has emerged in the oil market in recent months, controlling nearly a fifth of the most-active oil-futures contracts, and roiling trading in the market. The exchange-traded fund U.S. Oil Fund LP has expanded from a $7 million ETF just three years ago to $3.8 billion, drawing the attention of regulators and making it harder for the fund to keep up with oil prices. U.S. Oil's size has prevented it from tracking the price of oil. While crude has lost 2.2% in 2009, the fund has declined 20%.

- Citadel Investment Group, smarting from losses in its flagship hedge funds, plans to roll out several new funds, including one it is marketing now with lower fees that will aim to make money on currencies, interest rates and other trades based on broad economic trends. The Chicago firm hopes to raise $2 billion in coming months and is saying it ultimately could raise $5 billion for its new Citadel Global Macro Fund Ltd., overseen by former Moore Capital Management trader Kaveh Alamouti, according to marketing documents reviewed by The Wall Street Journal.

- What is most astounding about President Barack Obama's radical economic recovery program isn't its breadth, but its continuation of the most destructive policies of the Bush administration. These Bush policies were in themselves repudiations of Franklin Delano Roosevelt, Mr. Obama's hero. The most disastrous Bush policy that Mr. Obama is perpetuating is mark-to-market or "fair value" accounting for banks, insurance companies and other financial institutions.

- Barnes & Noble(BKS) Inc. acquired Fictionwise, a leading retailer of electronic books, and said it will launch a new e-bookstore this year, as the e-book market heats up. The purchase, for $15.7 million, comes only a few days after Amazon.com Inc., the country's largest online bookseller, said it is making its Kindle e-books available for reading on Apple Inc.'s iPhone and iPod Touch devices.

- Hedge Fund Gandhara Capital will shut down and return about $2.3 billion to investors.

LA Times:

- The Obama administration's plan to stave off foreclosures could fall flat in California, where nearly one-third of mortgage holders are underwater on their loans -- many of them by amounts that would disqualify them for government-sponsored refinancing.
The problem is likely to be especially acute in areas like the Inland Empire, where homes have lost more than 40% of their value in the last year and nearly half the homeowners owe more on their loans than the properties are worth.

Boersen-Zeitung:

- Hans-Werner Sinn, president of the German Ifo Institute, said Japanese-style deflation with surging government debt is the “true danger” the world is facing and inflation fears due to central banks’ liquidity provisions are unfounded.

Bear Radar

Style Underperformer:
Mid-cap Value (-1.31%)

Sector Underperformers:
Banks (-5.48%), I-Banks (-4.70%) and REITs (-4.70%)

Stocks Falling on Unusual Volume:
ICLR, E, BK, RJF, LM, BT, JPM, JNPR, AAPL, IBM, FSYS, MATK, NETL, PPDI, ZBRA, STAR, PLCE, PCAR, DTV, QCOM, XLNX, AMZN, IDCC, PSYS, COO, GNI and TDK

Stocks With Unusual Put Option Activity:
1) CCL 2) STX 3) FRP 4) S 5) BBY