Stocks End Rough Week With Modest Drop Friday January 18, 6:22 pm ET

Wall Street ended a painful week with another decline Friday as skittish investors unable to hold on to much optimism about the economy drew little comfort from President Bush's stimulus plan.

The day's trading reflected how fractious Wall Street has been in the new year. Investors pulled back from a big early advance, with the major indexes trading mixed as Bush began to speak. By the time the president finished announcing a plan for about $145 billion worth of tax relief, the indexes were well into negative territory.

It's disappointed in the size of the economic growth package. Wall Street's showing its displeasure," said Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh. "Honestly, I think the institutional investors understand the limits to the government's ability to enact economic

Coming after Bush's announcement, Friday's pullback made it clear that the stock market is in for a protracted period of uncertainty and continued declines. Investors have shrugged off all the positive signs they've received in recent days, including assurances last week from Federal Reserve Chairman Ben Bernanke that the Fed is ready to act aggressively -- which means a likely big interest rate cut later this month -- to help support an economy pummeled by devastation in the housing and credit markets

7 Trading Ideas for Today Friday January 18, 7:38 am ET By TradingMarkets Research

Bullish

*Pepsico (NYSE:PEP - News) & China Fund (NYSE:CHN - News). PEP's PowerRating(for Traders) is 6, and CHN's PowerRating (for Traders) is 7.
*Dril-Quip (NYSE:DRQ - News). DRQ's PowerRating (for Traders) is 7
*Lockheed Martin (NYSE:LMT - News). LMT's PowerRating (for Traders) is 6
*Baidu.com (NasdaqGS:BIDU - News). BIDU's PowerRating (for Traders) is 9

Bearish

*Intermune (NasdaqGS:ITMN - News). ITMN's PowerRatings (for Traders) is 1.
*Warner Music Group (NYSE:WMG - News). WMG's PowerRating (for Traders) is 1.

Stocks Extend Plunge; Dow Falls 306 Thursday January 17, 6:14 pm ET

Wall Street extended its 2008 plunge Thursday, sending the Dow Jones industrials down 306 points and to their lowest level since last March after a regional Federal Reserve report showed a sharp and unexpected decline in manufacturing activity. Downgrades of key bond insurance companies added to the market's black mood, with investors fearing an escalation of months of credit market problems.

The Dow lost nearly 2.5 percent, giving the index its worst three-day percentage decline since October 2002. The Standard & Poor's 500, the index closely watched by market professionals, fell nearly 3 percent Thursday. The Dow, S&P 500 and the Nasdaq composite index have now given back all of the gains they achieved in 2007.

Stocks opened higher but quickly gave up their gains after the Philadelphia Federal Reserve said its survey of regional manufacturing activity registered a negative 20.9 from a revised reading of negative 1.6 in December. The latest number came in well short of what Wall Street had been expecting and underscored the seriousness of the economic worries that have gripped both Wall Street and Washington in recent weeks.

Credit concerns also dogged Wall Street after rating agency Moody's Investors Service placed bond insurer Ambac Assurance Corp. on review for a possible downgrade. That possibility alarmed investors because it would place all bonds insured by Ambac on review as well. Wall Street are concerned that bond insurers would be unable to absorb a spike in claims.

Investors' fears of a slowing economy, the consequence of a months-long housing and credit market crisis, dominated trading, as they have since the start of the year.

The Dow, which had been up more than 50 points early in the session, closed down 306.95, or 2.46 percent, at 12,159.21.
The Dow is now off 8.33 percent for the year; there have been just 12 trading days so far in 2008, but the index's frequent triple-digit losses have now forced it to give back its 2007 gains. The Dow had its lowest close since it ended the March 16, 2007, session at 12,110.41.
The Dow's decline also left it about 150 points above 12,000, a level it hasn't closed below since November 2006.
The broader market indicators also plummeted. The S&P 500 index lost 39.95, or 2.91 percent, closing at 1,333.25, and leaving it was a year-to-date loss of 9.2 percent, while the Nasdaq dropped 47.69, or 1.99 percent, to 2,346.90, giving it a 2008 deficit of 11.51 percent.
Thursday brought the lowest close for the S&P 500 since October 2006 and the worst for the Nasdaq since March of last year.
Declining issues outnumbered advancers by more than 5 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 5.41 billion shares compared with 5.25 billion traded Wednesday.
Bond prices rose as stocks fell and anxious investors sought the safety of government-issued securities. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.63 percent from 3.68 percent late Wednesday. The dollar was mixed against other major currencies.
The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped nearly 17 percent Thursday.
Light, sweet crude fell 71 cents to settle at $90.13 a barrel on the New York Mercantile Exchange after Bernanke's prediction of slower economic growth this year. Slowing growth could dampen demand for oil.
The Philadelphia manufacturing reading caught Wall Street by surprise -- igniting fears that the economy is slowing precipitously and that policymakers might be too late in contemplating aid.
Economists had expected the Philadelphia index would come in at a negative 1.5, according to Dow Jones Newswires. Instead, the negative 20.9 figure was the weakest since October 2001 when the economy was reeling from the shock of the Sept. 11 terror attacks.
Jim Herrick, manager of equity trading at Baird & Co., contends that the Philadelphia Fed reading and other recent negative economic reports indicate the economy is likely in a downturn.
Other economic reports added to investors' glum mood. The Commerce Department said housing starts plunged 14 percent to 1.01 million in December, marking the weakest pace of home building in more than 16 years. In addition, permits to build new homes dropped 8 percent last month to 1.07 million, the lowest level since 1993.
The week's steady flow of news, much of which has dented investor sentiment, has led to a growing chorus of calls for the Fed to cut rates. The Fed's monetary policy committee will meet Jan. 29-30 and is widely expected to lower its Fed funds target from the current 4.25 percent level. Bernanke on Thursday reiterated recent signals that the central bank will reduce rates for a fourth straight time.
Some on Wall Street have called for the Fed to intervene sooner with steep rate cuts.
The economic concerns come in a week in which some of Wall Street's biggest names have posted huge losses following bad bets on mortgage investments. Financial shares fell sharply Thursday after the reports have made clear that there is also increasing weakness in home equity and other consumer banking operations.
Merrill Lynch & Co. on Thursday posted a massive loss that underscored the depth of the economy's credit problems. The world's largest brokerage said it lost $9.91 billion in the fourth quarter, hurt by big write-downs from investments and trades battered by tight credit conditions.
John Thain, the new chief executive at Merrill, said he believes the red ink will constitute the bulk of the company's write-downs from its subprime mortgage exposure. But he would not speculate about what 2008 might hold in store in other areas. Earlier this week, Merrill secured a new round of capital infusions from foreign funds.
Merrill fell $5.64, or 10 percent, to $49.45.
Moody's announcement that it will review Ambac came after the insurer booked a $5.4 billion write-down on its credit derivative portfolio during the fourth quarter.
Ambac plunged $6.73, or 52 percent, to $6.24, while Ambac rival MBIA Inc. fell $4.18, or 31 percent, to $9.22. First Horizon National Corp. fell $2.43, or 13 percent, to $16.48 after Standard & Poor's Ratings Services lowered its rating on the bank's long-term credit.
The Russell 2000 index of smaller companies fell 19.34, or 2.76 percent, to 680.57.
Overseas, Japan's Nikkei stock average closed up 2.07 percent. Britain's FTSE 100 finished down 0.68 percent, Germany's DAX index fell 0.78 percent, and France's CAC-40 fell 1.31 percent.

Market Update Friday, January 18, 2008

4:20 pm : Stock market bulls did not have much to cheer about on Thursday. Stocks posted a large loss, finishing near their session lows. As has been the case for 2008, worries about further financial market turmoil and a slowing economy spurred the selling interest.
Stocks took a nose dive after the Philadelphia Fed Index hit the wires at 10:30 ET. The regional manufacturing survey came in at -20.9, its lowest number since October 2001. The consensus estimate predicted a reading of -1.5. Since the number is below zero, it reflects a contraction in manufacturing in that region.
The report has weighed on the broader market and especially the materials sector (-5.4%), as the poor reading raised concerns about growth. Conversely, the Treasury market rallied in a flight-to-quality trade.
The financial sector (-4.7%) also played a large role in Thursday's weakness.
Merrill Lynch (MER 49.53, -5.56) reported a much larger than expected loss. Merrill posted a loss of $10.3 billion in the fourth quarter, or $12.57 per share, which fell well short of the expected loss of $4.93. The dismal results were largely due to an $11.5 billion write-down for subprime and CDO exposure and a $2.6 billion credit valuation adjustment related to its hedges with financial guarantors.
In regard to financial guarantors, bond insurer Ambac (ABK 6.24, -6.73) was clipped 52% after Moody's announced this morning it is putting Ambac's Aaa credit rating under review for a downgrade. Ambac stock also got pummeled on Wednesday, after the company announced it is cutting its dividend and is planning to raise $1 billion to shore up its capital position in the face of a $5.4 billion pretax write-down. Other bond