Markets Re-cap

The Bears are back in town. Monday’s strength in the US equity market was reversed as Citigroup plus a negative December US retail sales report hammered the Bulls on Tuesday.

The DJIA (-277.04 to 12501), S&P 500 (-35.30 to 1381), and Nasdaq Composite (-60.71 to 2417) all plunged.

Citigroup (C -7.3 pct) reported the worst performance in its 196-year history, a 4Q net loss of -$9.83 billion (-1.99/share) vs a net income of +$5.13 billion a year earlier. The losses came from -$17.4 billion in sub-prime-related write-downs and -$5.2 billion in provisions for bad debts in the credit card and auto loan business. The SIV write-down was the largest of any bank in history, exceeding the recent $14 billion loss taken by UBS.

Fearing more to come from Citi and from other Financials, traders also sold off the XLF (-4.12 pct) and the Banks ($BKX -4.2 pct) and Broker-Dealers ($XBD -4.4 pct).

Citi, whose 4Q revenue dropped -70 pct Y/Y while operating expenses jumped +18 pct, also announced plans to sell another $14.5 billion in preferred stock and will cut its dividend -41 pct to $0.32.

While Citi shares lost -7.3 pct yesterday, so too were the Cara 100 banks of India dumped. ICICI Bank (IBN) and HDFC Bank (HDB) lost -7.5 pct and -7.2 pct respectively.

Bank of America (BAC -3.4 pct) announced it will sell its prime brokerage unit and also cut 650 investment banking jobs.

The Energy sector (XLE –4.14 pct) was yesterday’s biggest loser, however. Oil Services (-4.9 pct) and Big Oil (-3.8 pct) were trounced. Exxon (XOM) fell -2.0 pct to $89.02.

On the economic front, price pressures moderated in December, but 2007 was the highest calendar-year increase in prices in over 25 years. The December PPI core rose +0.2 pct, but overall fell -0.1 pct. The biggest disappointment in yesterday’s data was in December Retail sales, which fell -0.4 pct, as the consumer is tapped out from rising fuel costs and bankers no longer interested in lending against home equity. November US business inventories grew +0.4 pct to $1.437 trillion.

Crude Oil ($WTIC) dropped -2.14 pct to $91.73/bbl on expectations that inventories climbed last week.

The $USD rallied only +0.08 pct to 75.66, but with the flight-to-safety, the 30-year US Bond jumped +0.85 pct to 118.81 and $GOLD dropped -0.09 pct to 902.60. By midnight, however, spot Gold had fallen to about 890, and at 7:06am ET this morning it is 884.35, after reaching a low of 878.00 at 5:30am. Spot Silver is now 15.82, after hitting 15.66 at 5:30am.

This morning the Euro is down -0.0061 (-0.42 pct) to US$1.4767, which is putting pressure on the precious metals.

March Crude has dropped -1.29/bbl this morning to 90.44, which is helping support the $USD.

Overnight, the losses in Asia-Pacific markets were quite substantial (Hong Kong down -5.4 pct with HSBC just smashed) and presently the European bourses are following suit (FTSE down -1.7 pct). Meanwhile, the US equity futures are also very negative, with the March DJIA contracts down -114 to 12450.

There appears to be no let up in the selling. The economic news today through Friday is projected to be quite negative.

Comments & Outlook

When 20 pct of the Cara 100 plunges in a single day by more than -5.0 pct, the Bulls know it was a bad day. It appears today will have more of the same.

As I opined a week or so ago, it appears the first real resistance in this Bear will come down around DJIA=12000. That’s another -500 Dow points. But that’s just a resting point, as I see it. The DJIA may be headed for 10000 and the Nasdaq (2417.59) may not stop until 2000.

Stimulus packages from governments that are intent on bailing out HB&B and much lower Crude Oil prices will ultimately cause a floor in market prices to develop, but for now traders are sellers. Next will be broker-dealers doing the margin calls. Then the economists will start whining about recession, something we saw in November.

It all feeds on itself.

Knobias Cara100 Tables

Portfolio GAINERS

SYMB	LAST	CHG	%C	VOL
TGP	31.410	+0.260	+0.8	31.5K
AMAT	16.950	+0.110	+0.7	38.4M
PAYX	33.060	+0.070	+0.2	3.6M

Portfolio LOSERS

SYMB	LAST	CHG	%C	VOL
CHA	77.310	-10.240	-11.7	741.2K
PTR	158.310	-14.690	-8.5	1.8M
PDA	47.100	-4.200	-8.2	115.4K
CEO	164.130	-14.120	-7.9	698.3K
VIP	37.910	-3.250	-7.9	3.9M
CHL	77.650	-6.560	-7.8	5.3M
IBN	66.030	-5.360	-7.5	3.9M
MICC	99.810	-8.020	-7.4	1.1M
HDB	130.290	-10.030	-7.1	664.6K
TS	38.650	-2.590	-6.3	2.9M
GRMN	65.620	-4.370	-6.2	6.9M
BHP	66.180	-4.310	-6.1	5.2M
NKE	57.060	-3.670	-6	7.1M
CTSH	26.670	-1.680	-5.9	6.5M
LEH	55.710	-3.490	-5.9	13.9M
ABB	25.030	-1.560	-5.9	9.7M
RIMM	90.930	-5.420	-5.6	27.9M
MBT	92.330	-5.300	-5.4	2.2M
GFI	16.620	-0.930	-5.3	11.9M
PBR	105.500	-5.760	-5.2	8.9M
BA	77.860	-3.810	-4.7	16.4M
SU	99.410	-4.860	-4.7	3.5M
SNDK	29.080	-1.400	-4.6	13.4M
GG	36.600	-1.760	-4.6	9.5M
TCK	33.150	-1.550	-4.5	991.8K

Portfolio 52-Wk HIGHS

SYMB	DAY HIGH	LAST	CHG	%CHG	VOL
NONE FOUND.

Portfolio 52-Wk LOWS

SYMB	DAY LOW	LAST	CHG	%CHG	VOL
TS	38.500	38.650	-2.590	-6.28	2.94M
CTSH	26.400	26.670	-1.680	-5.93	6.46M
BA	76.000	77.860	-3.810	-4.67	16.43M
HBC	75.800	75.900	-3.490	-4.40	3.12M
TM	100.250	100.450	-3.660	-3.52	861.46K
INFY	38.560	39.090	-1.260	-3.12	4.59M
BDK	63.410	63.900	-1.820	-2.77	1.37M
WHR	70.300	70.870	-1.880	-2.58	1.72M
CCL	38.370	38.990	-0.450	-1.14	5.49M
KSS	37.310	38.430	-0.370	-0.95	6.67M
WAG	32.800	33.010	-0.300	-0.90	8.78M

Portfolio VOLUME

SYMB	LAST	%C	VOL	%ADSV
BA	77.860	-4.7	16.4M	+184
ECA	65.720	-3.3	4.7M	+170
CHL	77.650	-7.8	5.3M	+146
DNA	69.620	-1.4	8.5M	+135
AMAT	16.950	+0.7	38.4M	+112
PTR	158.310	-8.5	1.8M	+105
NTES	19.190	-1.4	1.5M	+101
SU	99.410	-4.7	3.5M	+100
MBT	92.330	-5.4	2.2M	+99
HBC	75.900	-4.4	3.1M	+96
INTC	22.690	-1.7	125.8M	+95
AET	56.270	-2.7	5.2M	+95
NKE	57.060	-6	7.1M	+94
IBN	66.030	-7.5	3.9M	+94
DB	121.670	-4	994.5K	+93
ABB	25.030	-5.9	9.7M	+84
WBK	112.180	-3.1	38.6K	+80
TS	38.650	-6.3	2.9M	+80
TM	100.450	-3.5	861.5K	+77
LLTC	27.800	-1.7	7.6M	+75
CHA	77.310	-11.7	741.2K	+70
SNDK	29.080	-4.6	13.4M	+70
INFY	39.090	-3.1	4.6M	+69
CEO	164.130	-7.9	698.3K	+68
CTSH	26.670	-5.9	6.5M	+63

Analysts UPGRADES

SYMB	ANALYST	OLD		NEW	BEFORE		AFTER
CHL	Davenport	---		---	Neutral		Buy
STO	CSFB	---		---	Neutral		Outperform
• PREVIOUS SESSION
TOT	Societe General	---		---	Hold		Buy
STO	Societe General	---		---	Hold		Buy
BBBY	CSFB	---		---	Neutral		Outperform

Analysts DOWNGRADES

SYMB	ANALYST	OLD		NEW	BEFORE		AFTER
GRMN	Oppenheimer	---		---	Outperform		Sector Perform
ABB	Smith Barney	---		---	In-line		Sell
TOT	CSFB	---		---	Outperform		Neutral
• PREVIOUS SESSION
INFY	Goldman Sachs	---		---	Buy		Neutral
BC	JP Morgan	---		---	Overweight		Neutral
PAYX	UBS Securities	---		---	Buy		Neutral

Cara 100 Daily RSI-7 Charts

At least one RSI value <30:

Table: Dow 30 List