Daily Summary....

U.S. Markets

Dow -370.03 (-2.93%)
Nasdaq -73.28 (-3.08%)
S&P 500 -44.18 (-3.20%)

News That Moved the Market

Market Plunges On ISM Service Data. Stocks fell the most in nearly a year after a disappointing ISM service figure. The Institute for Supply Management announced its non-manufacturing index dropped to 41.9% last month, well below the 53.0% economists had estimated. Looking at today's report combined with the disheartening monthly jobs report announced on Friday, the risk of recession has grown very strong in the last week.

BHP Ups Bid for Rio Tinto. BHP Billiton (BHP, -4.1%) offered 3.4 shares for each share of Rio Tinto (RTP, -2.5% day, + 4.4% A.H) after Rio refused to begin merger talks. The bid is worth $147.4 billion.

MBIA Back Under Review For Downgrade. MBIA's (MBI, -3.2% day, -5.4% A.H.) AAA rating will come under further pressure after Fitch placed the bond insurer back under review for a downgrade. The ratings firm will probably increase the capital needed for the company to maintain its AAA rating. Fitch already has cut its AAA rating for Ambac Financial (ABK, -0.0%).

Disney Beats Estimates. Disney (DIS, -2.7% day, +5.9% A.H.) reported a 27% decrease in profits after the bell, but traded higher after topping analysts' estimates. Revenue jumped 9%.

Tomorrow Notable Earnings

Time Warner (TWX) Before Open
Prudential (PRU) After
CloseCisco (CSCO) After Close

Economic Events:

8:30 AM: Productivity and Costs
10:30 AM: Crude Inventories

Dow loses 368 points...

Dow -368 to 12,265
S&P -44 to 1336
Nasdaq -73 to 2309
Volatility Index (VIX) +2.39 to 28.38

NYSE Breadth - 15-1 Downside Volume to Upside Volume (That's Bad!!)

Almost on cue the Market is heading back down to retest lows of January 22. A retest is a retracement back to previous lows, but not getting all the way there. This is a typical pattern after we see large, sharp selloffs similar to the one we saw in January. Experienced traders typically will not reenter the market until a retest happens. Look for a large round of buying if the Dow hits the 12,000 level. That is 265 points lower from here.

One troubling thing about today's selloff was that it was not accompanied by a sharp move higher in the VIX. This shows that today's selloff was not due to fear. Meaning we have more selling to come. The selloff won't be over until we get a sharp rise in the VIX, typically above the 35-37 level.

That 15-1 negative breadth is one of the worst readings I've seen in 15 years...yet no fear seen in the VIX???

Keep an Eye on the VIX....

The Volatility Index (VIX) is spiking higher as the market is selling off further.

The VIX measures that amount of fear in the market. Typically it acts as a contrary indicator for the market. When it spikes up over 35, that typically has marked bottoms in the market. On January 22, it hit 37.

Today it is up 2.05 to 28.04

Stocks that are bucking the trend....

Market selling off hard so far today (Dow -250). As we have been saying, it looks like traders are trying to bring stocks down to retest the lows made on January 22.

Bucking the trend:

Google (GOOG) up 9 to $504.50

Las Vegas Sands (LVS) up 11.50 to $93.00

Wynn Resorts (WYNN) up 9 to $120.50

Thornburg Mortgage (TMA) up .75 to $12.00

Intuitive Surgical (ISRG) up 4 to $311.00

Dolby Labs (DLB) up 1.67 to $49.05

KB Homes up 1.07 to $27.25

Continental Airlines up 1.06 to $29.00

11:30 am Update....

Dow -231
S&P - 27
Nasdaq -38

The major indices continue to be under selling pressure. All ten S&P sectors are posting a loss in excess of 1%, five of those sectors are posting a loss larger than 2%.

A poor ISM Services reading helped give Treasuries a boost as traders up their bets on the size of the next Fed rate cut. The 10-year is up 27 ticks, pushing its yield down to 3.54%.

Yahoo / Microsoft Square Off...

Yahoo (YHOO) may play 'hard to get' in an effort to entice Microsoft's (MSFT) to sweeten its $46.1B bid. Yahoo has received a number of tentative approaches from media, telecom and private equity groups that could potentially lead to a rival bid. Microsoft revealed Monday it would have to borrow money for the first time in order to foot the bill.

Yum Brands Reports In-line Earnings....

After Monday's closing bell, fast-food giant Yum Brands Inc. (YUM, $35.81, $0.57, 1.62%) reported fourth-quarter net income of $231 million, or 44 cents a share, nearly unchanged from $232 million, or 42 cents, a year ago. Total sales at the company came in at $3.01 billion, up 8%. Same-store sales, or those at outlets open at least a year, climbed 8% worldwide. The average estimate had been for the company to earn 42 cents a share on revenue of $3.21 billion. Looking to the current year, Yum raised its 2008 profit target from $1.82 to $1.85 per share, excluding one-time gains.

Yum Brands is the owner of KFC, Pizza Hut and Taco Bell chains...

Las Vegas Sands Disappoints...

Las Vegas Sands Corp. (LVS). The Las Vegas-based developer and operator of hotel, gambling, and resort businesses late Monday reported fourth-quarter adjusted earnings of $71.1 million, or 20 cents a share, compared with $132.9 million, or 37 cents a share, during the year earlier. The company posted net income of $39.9 million, or 11 cents, a share, down from $113.6 million, or 32 cents a share, last year. Revenue for the three months ended Dec. 31 came in at $1.05 billion versus $636.3 million a year ago.

The company said its latest results were impacted, in part, by increases in operating costs related to its global expansion, as well as higher depreciation and amortization expense.

The stock is trading up 3 points pre-market.

Companies Reporting Earnings Today...

• Ace Ltd. (ACE). Expected to post Q4 earnings of $1.90 a share, according to analysts polled by Thomson Financial.

• Avon Products Inc. (AVP). Expected to report Q4 earnings of $0.28 per share.

• CME Group Inc. (CME). Expected to report Q4 earnings of $3.62 a share.

• CNET Networks (CNET). Expected to report Q4 earnings of $1.29 a share.

• Duke Energy Corp. (DUK). Expected to post Q4 earnings of $0.24 per share.

• Martin Marietta Materials (MLM). Expected to post Q4 earnings of $1.55 per a share.

• Nabors Industries (NBR). Expected to post Q4 earnings of $0.73 a share.

• THQ Inc. (THQI). Expected to post Q3 earnings of $0.33 per share.

• Walt Disney Co. (DIS). Expected to report Q1 earnings of $0.52 per share.

• XL Capital (XL). Expected to report Q4 earnings of $1.76 a share.

Apple Adds New iPhone & iPod Models...

Apple Inc. (AAPL) $131.65 : Co announces it has added new models of the iPhone and iPod touch which have double the memory, doubling the amount of music, photos and videos. The iPhone now comes in a new 16GB model for $499, joining the 8GB model for $399. iPod touch now comes in a 32GB model for $499, joining the 16GB model for $399 and the 8GB model for $299.

Boston Scientific Beats by $0.15

Boston Scientific beats by $0.15, beats on revs; guides Q1 EPS above consensus, revs in-line (BSX) 12.85 +0.48 : Reports Q4 (Dec) earnings of $0.24 per share, excluding charges and amortization expense, $0.15 better than the First Call consensus of $0.09; revenues rose 4.2% year/year to $2.15 bln vs the $2.13 bln consensus.

Co issues mixed guidance for Q1, sees EPS of 0.15-0.20, excluding charges and amortization expense, vs. $0.12 consensus; sees Q1 revs of 1.96-2.08 bln vs. $2.09 bln consensus.

SOHU Beats Earnings Estimates...

Sohu.com beats by $0.08, beats on revs; guides Q1 EPS above consensus, revs above consensus (SOHU) 48.95 -1.54 : Reports Q4 (Dec) earnings of $0.39 per share, including stock based comp, $0.08 better than the First Call consensus of $0.31; revenues rose 90.1% year/year to $65.3 mln vs the $55.4 mln consensus. Co issues upside guidance for Q1, sees EPS of $0.34-$0.37, including stock based comp, vs. $0.32 consensus; sees Q1 revs of $66.5-$68.5 mln vs. $59.00 mln consensus.

Co states, "...With the Beijing 2008 Olympic Games kicking off in 185 days, the Sohu brand resonates across China as we broaden our media reach to penetrate the Olympic audience. We expect the continued expansion of the total Chinese internet population, combined with our advancements in technology and our Olympic sponsorship, to help us to increase our market share of internet users. We believe that we will continue to reap the rewards of our success and strong branding for 2008 and beyond."

Daily Summary....

U.S. Markets

Dow -108.03 (-0.85%)
Nasdaq -30.51 (-1.26%)
S&P 500 -14.60 (-1.05%)

News That Moved the Market

Markets Fall; Factory Orders Disappoints. Markets drifted lower Monday after posting a strong gain last week. After opening down, major indices fell even lower after factory orders came in weaker than expected. The figure increased by 2.3%, but fell short of the 2.6% jump economists were anticipating.

With little news during the day, buyers seemed to sit the session out and let seller regain control.

Google Reacts To Microsoft's Bid. Microsoft's (MSFT, -0.1%) bid for Yahoo (YHOO, +3.3%) remained in focus Monday, as major players began reacting to the move. Google (GOOG, -4.0%) CEO Eric Schmidt reportedly called Yahoo CEO Jerry Yang to explore partnerships between the companies to fend off the unsolicited bid. Meanwhile, an executive at Google said on a blog during the weekend that the combination of Microsoft and Yahoo could create antitrust issues, despite Google owning a greater market share of the Internet search market than its two rivals combined. Yahoo said that it still has made "absolutely no decisions" about the proposed deal, but I do not know many Yahoo share holders opposed to it.


After Hours Earnings Reports.

News Corp. (NWS, -0.3% day; -0.0% A.H. ) reported a slight increase in profit, but missed estimates by a penny. The company closed its deal to buy Wall Street Journal publisher Dow Jones in December.

Yum Brands (YUM, +1.6% day, -1.3% A.H.) top and bottom-line fourth quarter figures beat estimates, but its 2008 EPS guidance fell short of expectations.

Tomorrow Notable Earnings

Toyota (TM) Before Open
Disney (DIS) After Close
NYSE Euronext (NYE) Before Open
CME (CME) Before Open

Economic Events:

10:00 AM: ISM Services

What a Boring Day...

I guess I'm getting spoiled by all the volatility we've seen over the past month, but today was very slow.

Closing performance:

Dow -108
S&P -14
Nasdaq -30

Retail and Gold stocks sold off, leaders were Pharmaceutical, Oil, and Fertilizer stocks.

More complete summary to follow.

Motorola Downgraded to Sell....

MOT down .38 to $12.31

AmTech Research downgrades Motorola from Neutral to Sell . Amtech downgrades MOT to Sell from Neutral saying in the $13 range, MOT stock is discounting a successful sale of the handset division for $10-$11 bln.

The firm says they would sell the stock here on strength given the risk and uncertainty of timing and/or amount of transaction. They argue that 1) $8 bln for handsets would be generous based on 0.5x their CY08 sales estimate of $16 bln, and 2) a successful deal appears factored into today's stock valuation.

Wells Fargo Downgraded to Sell....

WFC down 1.75 to $31.90

Stifel Nicolaus downgrades Wells Fargo from Hold to Sell . Stifel downgrades WFC to Sell from Hold based on valuation. The firm says this move is one of the toughest decisions they have made in recent years.

They still believe the co has one of the better management teams in the industry and has a strong capital position relative to other large-cap banks. However, the shares currently trade at 14.0x their 2008 EPS of $2.40, which is in line with the broader market multiple. This premium multiple comes despite the fact that the firm has lowered their 2008 EPS estimate by 20% since 2Q07, which shows that while the company has avoided the large CDO and market valuation writedowns, it is not immune to the overall economic environment.

A Lull in the Action....

Very sluggish market this morning. The averages are lower following a great Superbowl last night. Probably a hangover similar to the one I'm experiencing right now.

Dow - 69
S&P - 8
Nasdaq -16

I think Traders want to bring this market back down to retest the bottom made on January 22nd. However, with all the positive stimulus going on out there, they may not be able to.

The old adage is "Don't fight the Fed" and the Fed right now is cutting rates....that should help the market head higher over the next few months.

Earnings Today...

COMPANIES REPORTING EARNINGS

Anadarko Petroleum Corp. (APC). Expected to post Q4 earnings of $0.76 a share, a decrease of 40.86% from $1.28 earned same time last year, according to analysts polled by Thomson Financial.

Clorox Co. (CLX). Expected to report Q2 earnings of $0.55 a share.

Computer Sciences Corp. (CSC). Expected to report Q3 earnings of $1 a share.

Equifax Inc. (EFX). Expected to post Q4 earnings of $0.57 a share.

Lincoln National Corp. (LNC). Expected to post Q4 earnings of $1.36 a share.

Manitowoc Co. (MTW). Expected to post Q4 profit of $0.68 a share.

News Corp. (NWS). Expected to post Q2 earnings of $0.27 a share.

PartnerRe Ltd. (PRE). Expected to post Q4 earnings of $3.19 a share.

Post Properties Inc. (PPS). Expected to post Q4 earnings of $0.09 a share.

Principal Financial Group (PFG). Expected to report Q4 earnings of $1.01 a share.

Savvis Inc. (SVVS). Expected to post Q4 earnings of $0.02 a share.

Yum Brands Inc. (YUM). Expected to report Q4 earnings of $0.42 a share.

Google will try to thwart MSFT/YHOO deal...

Google mobilized over the weekend to thwart Microsoft's $44.6 billion hostile bid for Yahoo. A Google statement said the deal would threaten competition and needed examination by policymakers around the world. Google CEO Eric E. Schmidt reportedly called Yahoo chief Jerry Yang to offer help in fending off Microsoft, possibly in the form of a partnership between the companies.

Google's lobbyists in Washington began shaping arguments against the transaction, hoping to prolong a regulatory review at least until after the next president takes office.

This, of course, is positibve news for Yahoo, as it means Google may ultimately get in a bidding war with Microsoft. Yahoo is just responding that it is "exploring its options."

Daily Deep Thought....

"Winning isn't everything, but wanting to win is."

-Vince Lombardi

Wow...I guess I had that quote wrong all these years...I've been telling my kids:

Winning isn't everything...it's the only thing.