Monday's Trading Summary...

U.S. Markets

Dow -153.54 (-1.29%)
Nasdaq -43.15 (-1.95%)
S&P 500 -20.00 (-1.55%)

News That Moved the Market

Financials Push Markets Down Further. Stocks finished sharply lower Monday, with more bad news coming out of the financial sector. Bear Stearns (BSC, -11.1%) fell the most in 10 years after rumors spread that the company has liquidity issues. "There's an insolvency rumor and concerns on liquidity, that they just have no cash," said Michael Mainwald, head of equity trading at Lek Securities Corp. A spokesman for Bear said that there is "no truth" to the rumors, but the trust in the banks has disappeared in the last couple months and investors were noticeably rattled. Citigroup (C, -5.8%) fell under $20, to its lowest levels since 1998.

Lehman Brothers (LEH, -7.3%) announced plans to cut another 5% of its work force, citing weak credit markets and a slowing economy. Markets finished near their lows, with the financial sector ending down 2.0%.

Blackstone's Profits Plunge. Blackstone (BX, +2.9%) reported an 89% decrease in profits this morning. The company was hurt by its holdings in FGIC, the troubled bond insurer. The company's stock hit an all-time low, before finding bidders late in the session, and said it sees difficult market conditions continuing in 2008.

FBI Targets Countrywide, Subprime Lenders. Countrywide (CFC, -14.0%) lost more ground after The Wall Street Journal reported the company, along with 15 other subprime lenders, is under an FBI investigation. The FBI is taking a broad look at the subprime industry as a whole for fraud and other unlawful practices. The investigation is still in its early stages.

Goldman Sees FOMC Cutting Rates By 1.0% In Two Meetings. Goldman Sachs (GS, -2.8%) sees the FOMC dropping interest rates a full point by late April. There were talks of an intermeeting cut before next week's official FOMC meeting, but few really believe the Fed would think the situation is so dire, that it could not wait one week.

Quick Tics:

McDonalds (MCD, +2.9%) reported strong same store sales growth

NY Governor Eliot Spitzer has been linked to a prostitution ring

Oil closed up nearly 3% to $107.90/barrel.

TomorrowNotable Earnings

Boston Beer Company (SAM) Time Not Supplied
J. Crew Group, Inc. (JCG) After Close
Take-Two Interactive Software (TTWO) After Close
The Kroger Co. (KR) Before Open

Economic Events:

8:30 AM: Trade Balance

FBI Probes Countrywide...

The FBI has opened a criminal inquiry to probe whether Countrywide Financial (CFC) intentionally misrepresented its financial condition in SEC filings. The FBI is investigating more than a dozen subprime lenders' origination and securitization processes, and probing possible conflicts of interest between lenders and investors.

If Countrywide is found guilty of fraud, it could scuttle a planned $4B acquisition of the company by Bank of America (BAC).

Earnings Due Today....

COMPANIES REPORTING EARNINGS

• Foot Locker Inc. (FL). Expected to report Q4 earnings of $0.44 a share, according to analysts polled by Thomson Financial. This is a decrease of 36.71% from the same quarter last year when the company earned $0.70.

• Inter Parfums Inc. (IPAR). Expected to post Q4 earnings of $0.34 a share, up 25.93% from the same quarter last year when the company earned $0.27.

• The Blackstone Group (BX). Expected to post Q4 earnings of $0.29 a share.

• Vail Resorts (MTN). Expected to report Q2 earnings of $1.35 a share.

This Morning's Top Stories...

• Morgan Stanley cuts 2008 earnings estimates on raft of large-cap banks

• Chevron to develop LNG facility in Australia

• Siemens eager to settle with SEC before presidential election - report

• Nationwide Financial Services gets buyout offer from parent

• Wyeth to invest $280 million in Chinese nutritional manufacturing plant