Oil Futures Jump Back Above $90 a Barrel

Oil futures jumped back above $90 a barrel Friday, adding to the previous session's sharp gains on a view that the recession worries that pulled prices lower in recent weeks may have been overblown.


At the pump, meanwhile, gas prices fell below $3 a gallon for the first time in weeks.
Energy investors were heartened by recent moves by the Federal Reserve and Congress to shore up the economy, which could prevent oil demand from slowing as much as many had feared.

"This week's emergency interest rate cut by the Fed and the economic stimulus plan proffered by Congress appear to have, for now, stemmed fears of a looming recession in the U.S.," said Addison Armstrong, director of exchange traded markets at TFS Energy Futures LLC, of Stamford, Conn., in a research .

Word that Chinese oil demand grew by 6.4 percent in December, the highest rate in months, contributed to oil's advance.

Concerns that demand from the booming Chinese and Indian economies is outstripping global oil supplies helped push oil to records above $100 earlier this month.

Light, sweet crude for March delivery rose $1.30 to settle at $90.71 on the New York Mercantile Exchange after rising as high as $91.38. Oil futures last closed above $90 last Friday.

While investors believe the government's $150 billion stimulus plan and the Fed's rate cuts will stave off a serious economic slowdown, rate cuts also tend to weaken the dollar, giving investors another reason to buy oil futures. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

"When (investors in foreign) countries go to buy oil, they're buying it on sale," said James Cordier, president of Liberty Trading Corp., in Tampa, Fla.

Many analysts believe the weakening dollar helped draw speculative investors into oil markets this fall and winter, driving oil prices above the $100 mark.

While oil prices are on the rebound, gas prices slid 0.8 cent Friday to a national average of $2.998 a gallon, their first dip below $3 in weeks. Retail prices tend to lag the futures market, meaning that if oil prices continue to rise, gas prices may halt their decline and move back above $3.

Other energy futures also rose Friday. February heating oil futures jumped 4.28 cents to settle at $2.5191 a gallon on the Nymex while February gasoline futures added 3.54 cents to settle at $2.3182 a gallon. Heating oil and gasoline prices were supported by news that Valero Energy Corp.'s 255,000 barrel a day refinery in Aruba was shut down due to a fire.

February natural gas futures rose 18.1 cents to settle at $7.983 per 1,000 cubic feet.
In London, March Brent crude rose $1.83 to settle at $90.90 a barrel Friday on the ICE Futures exchange.

Associated Press writers Pablo Gorondi in Budapest and Thomas Hogue in Bangkok, Thailand, contributed to this report.

Latest Updates

4:25 pm : Microsoft (MSFT 32.94, -0.31) gave the market everything it was looking for when it reported its fiscal second quarter results after Thursday's close. The software giant topped expectations and raised its revenue and earnings per share guidance for the fiscal year, which ends in June, noting broad-based strength in its business.

The market chewed up the report, liking the taste of it in early trading, and then promptly spit it back out, hitting both Microsoft and the broader averages with losses to close a remarkable week of trading.

The inability of Microsoft's stock to hold its opening gains, which were as much as 5.3%, spurred a disappointment trade that then took most stocks lower on the day. Dow components Caterpillar (CAT 65.93, +0.68) and Honeywell (HON 58.25, +2.05) managed to buck the trend after sharing reassuring earnings news.

Selling efforts were compounded by renewed concerns surrounding the likelihood of further credit losses for the financial sector, worries that a rescue plan of some sort for the bond insurers was no sure thing, and rumors that a hedge fund was in trouble.

On top of that, Merck (MRK 47.79, -1.77) and fellow drug company Schering-Plough (SGP 19.02, -1.15) got hit on a seemingly benign announcement from the FDA that it is still awaiting more results on the study of the efficacy of their joint cholesterol drug, Vytorin, and that an eventual review could take up to six months. Both stocks made up some lost ground, but still finished lower and acted as a weight on the market.

Strikingly, the financial (-2.5%) and consumer discretionary (-2.0%) sectors, which were the leaders in the rebound off Wednesday's low, were the hardest hit areas Friday. Although both areas were prime for some profit-taking, their weakness Friday is apt to stir concerns for some participants that the rally try this week will be short-lived.

A late-day report that New York officials sued Countrywide's (CFC 6.02, -0.09) underwriters for fraud triggered a final wave of selling interest that left the major indices near their lows of the session when the closing bell rang.

Every sector ended the day with a loss, although the materials sector (-0.2%) held up the best, aided in part by strength in certain gold stocks like Newmont Mining (NEM 53.26, +0.29) which followed reports of a shutdown of some South African mines due to a power shortage. Gold futures closed the week up 0.9% at a new high of $919.10 per troy ounce.

Weakness in the stock market once again benefited the Treasury market. The 10-year note jumped more than a point and its yield fell back to 3.56%.DJ30 -171.44 NASDAQ -34.72 NQ100 -2.1% R2K -0.6% SP400 -0.9% SP500 -21.46 NASDAQ Dec/Adv/Vol 1611/1394/2.64 bln NYSE Dec/Adv/Vol 1807/1365/1.88 bln

3:30 pm : The major indices pare a portion of their losses in a broad-based move. The stock market is now trading at its best level since 1:00 ET. It has been a volatile week of trading, although the S&P is set end the week near the unchanged mark.

The following is the best and worst performing industry groups of the week as we head into a final half hour of trading. Best: 1. Homebuilding (+30.9%) 2. Coal & Consumable Fuels (+17.1%) 3. Apparel & Accessories (+16.8%). Worst: 1. Wireless services (-14.3%) 2. Health Care Services (-9.7%) 3. Managed Healthcare (-8.6%)DJ30 -114.08 NASDAQ -21.79 SP500 -15.01 NASDAQ Dec/Adv/Vol 1716/1279/2.13 bln NYSE Dec/Adv/Vol 1870/1270/1.40 bln

3:00 pm : The major indices are trading near their session lows. Buyers remain on the sidelines after being disappointed that the stock market was unable to hold onto its opening gains. At current levels, the S&P and Nasdaq are set to end the week with a modest loss, while the Dow is set to end slightly higher.

There have been quite a few headlines crossing the wires regarding bond insurers. Standard & Poor's analysts said bond insurers must resolve business viability and other issues in order to retain their "AAA" ratings, according to Reuters. Reuters also reports that a bond insurers group said the industry is "financially strong" and is intent on defending its top credit ratings.DJ30 -159.16 NASDAQ -29.13 SP500 -20.01 NASDAQ Dec/Adv/Vol 1583/1388/1.99 bln NYSE Dec/Adv/Vol 1818/1318/1.27 bln

2:35 pm : The stock market is off its worst level, but continues to trade with a substantial loss.
Barclays Capital said banks may need to raise another $143 billion in capital if bond insurers get their credit ratings cut, according to Bloomberg.com. The article states banks have already raised $72 billion. If bond insurers get their ratings cut, it will lower the value of the $2.4 trillion in bonds they insure. Bond insurer Ambac (ABK 11.61, +0.28) is posting a slight gain on reports that it may be bought by vulture fund investor Wilbur Ross.

Merck (MRK 47.41, -2.15) and Schering-Plough (SGP 18.53, -1.64) just came under selling pressure after the FDA said the Vytorin study will take six months to review.DJ30 -133.80 NASDAQ -21.43 SP500 -17.56 NASDAQ Dec/Adv/Vol 1501/1426/1.85 bln NYSE Dec/Adv/Vol 1808/1328/1.18 bln

2:00 pm : The stock market comes under a fresh wave of selling pressure, sending it to new intraday lows. Meanwhile, Treasuries contine to rally as stocks weaken. The 10-year note is up 32 ticks, pushing its yield down to 3.58%.

All sectors are trading in the red. The financial sector (-2.7%) has extended its losses. Consumer discretionary (-1.9%) is the second worst perform sector.

Tech (-1.5%) is also posting a large loss as Apple (AAPL 131.40, -4.20) again comes under selling pressure. The stock is down 34% in 2008 compared to the tech sector's 14% decline.DJ30 -145.99 NASDAQ -26.67 SP500 -19.48 NASDAQ Dec/Adv/Vol 1509/1417/1.67 bln NYSE Dec/Adv/Vol 1619/1489/1.04 bln

1:30 pm : Stocks are trading near their recently reached session lows. The materials sector (+0.1%) has recovered into the green, although it remains well off its session high.

Financials have been hit the hardest, now down 1.9%. 18 of its 19 industry groups are lower. Thrifts & mortgages is the main laggard with a 4.2% loss. Investment banks & brokerages comes in as the second worst-performing group with a 3% loss. Residential REITs are managing to hold onto a 1.4% gain.DJ30 -107.11 NASDAQ -13.79 SP500 -13.70 NASDAQ Dec/Adv/Vol 1251/1648/1.53 bln NYSE Dec/Adv/Vol 1548/1532/951

1:00 pm : The major indices fall to fresh lows. All ten of the sectors are now in negative territory. In the past half-hour, Standard and Poor's lowered its ratings on 93 classes of mortgage pass-through certificates from 25 different U.S. subprime residential mortgage-backed securities transactions from nine issuers.

Meanwhile, disappointment that Microsoft (MSFT 33.21, -0.04) has slipped into negative territory is adding to the selling pressure.DJ30 -92.75 NASDAQ -9.98 SP500 -11.92 NASDAQ Dec/Adv/Vol 1094/1790/1.38 bln NYSE Dec/Adv/Vol 1143/1923/843 mln

12:35 pm : Stocks are fluctuating around the unchanged mark. The materials sector (+1.1%) continues to provide leadership.

Despite the market's decline, market breadth remains positive due to the outperformance of small-cap and mid-cap stocks. The Russell 2000 Index is up 1.1% and the S&P 400 Mid-Cap Index is up 0.5%. Advancers outpace decliners by 9-to-5 on the NYSE and by 8-to-5 on the Nasdaq.DJ30 -22.60 NASDAQ +6.05 SP500 -3.29 NASDAQ Dec/Adv/Vol 1053/1761/1.21 bln NYSE Dec/Adv/Vol 1174/1884/738 mln

12:00 pm : Stocks opened with significant gains, lifted by strong earnings and outlook from a tech giant and a report that a struggling bond insurer may be acquired. The stock market then drifted lower as investors remain uneasy and traders take some profits. At midday, stocks are off their lows as they trade at the unchanged mark.

Microsoft (MSFT +33.51, +0.26) fell off its highs and is now only posting a small gain despite the company's strong earnings report. Microsoft reported a second quarter net income of $0.50 per share, 92% higher than its $0.26 per share earnings in the year ago period. The company's results also topped the consensus estimate that called for a profit of $0.46 per share. Microsoft raised its outlook for the full year, estimating earnings of $1.85 to $1.88 per share, beating analysts' forecast of $1.81 per share.

There were a large number of companies that reported earnings, and most were better than expected. Dow components Honeywell (HON 59.55, +3.35) and Caterpillar (CAT 66.44, +1.20) are standouts after investors were pleased with their in-line earnings reports.

The Evening Standard reported that billionaire vulture fund investor Wilbur Ross is in talks to take over bond insurer Ambac (ABK 12.00, +0.67). Its stock is off its highs, but is managing to post a gain while other financials (-0.8%) struggle this session.

There was not a specific catalyst to account for the stock market's decline. Profit taking is certainly playing a role, as traders trim positions after the market's 7.8% surge from Wednesday's low to this session's high.

The market turned south as CNBC reported that Goldman Sachs (GS 196.47, -2.38) is cutting 5% of its workforce. Goldman Sachs quickly refuted the report, saying it is cutting the bottom 5% of performers, as it always does during its annual review. There are also rumors that European banks may be facing further write-downs and that a hedge fund is liquidating its assets.

Six of the ten sectors are higher, led by a 1.2% gain in materials. Financials are the main laggard with a 0.8% decline. DJ30 +6.10 NASDAQ +8.89 SP500 +0.19 NASDAQ Dec/Adv/Vol 1061/1736/1.14 bln NYSE Dec/Adv/Vol 1140/1892/693 mln

11:30 am : Stocks remain in negative territory. The Dow has dropped to fresh session lows. The market has had wild swings of late, as investors remain nervous. Treasury bonds have rallied as stocks decline in a flight-to-quality bid.

There does not appear to a specific catalyst for the stock market's recent downturn, but several factors may be contributing. 1) The reports of Goldman Sachs (GS 195.07, -3.78) job cuts may have unnerved the market even though the company said it was a "misrepresentation." 2) There is talk that another big European bank may face another write-down 3) There is talk that a hedge fund is liquating. 4) Traders are participating in some profit taking after the S&P's impressive 7.8% surge from Wednesday's low to this session's opening high.DJ30 -46.33 NASDAQ -1.64 SP500 -5.60 NASDAQ Dec/Adv/Vol 1096/1626/940 mln NYSE Dec/Adv/Vol 1205/1803/556 mln

11:00 am : Stocks fall into the red, led by financials, as CNBC reports that Goldman Sachs (GS 195.23, -3.62) is laying off 5% of its workforce. Stocks then recovery some after Goldman Sachs told CNBC the story is a "misrepresentation." They are laying off the bottom 5% of performers as part of their regular annual review process. Stocks have since crossed back into negative territory led by a 1.1% drop in financials.

Goldman Sachs has been able to navigate through the subprime turmoil relatively unscathed. The market's negative response showed investor fear that if Goldman needed to cut jobs much worse was to come from firms that have been hit hard such as Citigroup (C 29.96, -0.37) and Merrill Lynch (MER 56.66, -0.79).

Meanwhile, Fannie Mae (FNM 32.75, -1.44) and Freddie Mac (FRE 31.02, -0.98) fall to session lows as Reuters reports that Fannie's mortgage delinquencies rose to 0.90% in November from 0.83% in October.DJ30 -27.88 NASDAQ +2.16 SP500 -3.17 NASDAQ Dec/Adv/Vol 1056/1629/733 mln NYSE Dec/Adv/Vol 1029/1954/428 mln

10:30 am : The stock market drops to its lowest levels of the session, but continues to post a modest gain. There has been notable selling interest within the tech sector (+0.5%), which was up as high as 1.9%. There has been a drop in shares of Apple (AAPL 135.82) and Intel (INTC 20.67, -0.02) after providing leadership at the open.

Microsoft (MSFT 33.98, +0.73) is off its opening high, but continues to post a solid gain in the wake of its earnings report. Microsoft reported a second quarter net income of $0.50 per share, 92% higher than its $0.26 per share earnings in the year ago period. The company's results also topped the consensus estimate that called for a profit of $0.46 per share. Microsoft raised its outlook for the full year, estimating earnings of $1.85 to $1.88 per share, beating analysts' forecast of $1.81 per share.DJ30 +44.14 NASDAQ +20.04 SP500 +7.24 NASDAQ Dec/Adv/Vol 849/1731/480 mln NYSE Dec/Adv/Vol 668/2162/206 mln

10:00 am : Stocks give up a portion of their opening gains as the financial sector (+0.4%) slips off its highs. The sector managed to advance yesterday, but underperformed the stock market.
Nine sectors are trading higher, led by the materials (+2.1%) and energy (+1.4%) sectors. Consumer staples (-0.03%) is in the red, but is basically flat.DJ30 +63.57 NASDAQ +27.28 SP500 +9.84 NASDAQ Dec/Adv/Vol 488/1862/177 mln

09:40 am : Stocks start on a high note, with the Nasdaq set to outperform for the second straight day. The buying interest is being fueled by a strong earnings report and outlook from Microsoft (MSFT) and an Evening Standard report that billionaire vulture fund investor Wilbur Ross is in talks to take over bond insurer Ambac (ABK). Since yesterday's close the majority of earnings reports have been better than expected.

There are no economic reports or scheduled Fed speakers this session.

DJ30 +86.00 NASDAQ +40.56 SP500 +14.78

09:16 am : S&P futures vs fair value: +11.5. Nasdaq futures vs fair value: +33.5.

09:00 am : S&P futures vs fair value: +11.0. Nasdaq futures vs fair value: +34.0. Futures gain
some ground and point to a strong start. In commodity trading, gold hit an all-time high of $924.30 per ounce in overnight trade on news that companies stopped mining in South Africa due to power outage concerns. Crude oil is up 1.2% to $90.50 per barrel.

08:31 am : S&P futures vs fair value: +7.6. Nasdaq futures vs fair value: +26.8. Stock futures continue to point to a higher start. The majority of earnings reports from last night and this morning have been better than or inline with expectations. There are no economic releases or Federal Reserve speakers today.

08:00 am : S&P futures vs fair value: +8.1. Nasdaq futures vs fair value: +24.0. Futures point to a higher start, with the Nasdaq set to outperform. A strong earnings report and outlook from Microsoft (MSFT) is the main catalyst for the buying interest. Also lending support is a report that billionaire investor Wilbur Ross is in talks to take over struggling bond insurer Ambac (ABK). In overseas markets, Hong Kong’s Hang Seng closed up 6.7% and France’s CAC 40 and Germany’s DAX are currently up more than 1%.
06:23 am : S&P futures vs fair value: +6.0. Nasdaq futures vs fair value: +23.0.

06:23 am : FTSE...5927.00...+51.20...+0.9%. DAX...6915.09...+94.02...+1.4%.

06:23 am : Nikkei...13629.16...+536.38...+4.1%. Hang Seng...25122.37...+1583.10...+6.7%.

Stocks Fall, Giving Up Early Gains

Wall Street ended a tumultuous week with a sharp decline Friday, backtracking following two days of stunning gains as investors turned cautious and cashed in some of their winnings. The Dow Jones industrial average still managed to record its first weekly advance of 2008, even as it fell more than 170 points on the day.

The week, which started with a 465-point drop in the Dow soon after the market opened Tuesday, showed that the stock market is still fractious but may be going through healthy process of trying to establish a bottom following weeks of sharp declines.

Investors had an initial burst of enthusiasm Friday, sending each of the major indexes up more than 1 percent, after upbeat profit reports from big names like Microsoft Corp. and word of a possible buyout of a trouble bond insurer. But the advance proved short-lived and the eventual decline wasn't surprising given that investors putting down bets ahead of the weekend were coming off two days of big gains -- including 400 points in the Dow.

"People may be looking to take some profits off the table in this volatile market. And there's a lot of activity that's coming up next week," Scott Fullman, director of investment strategy for I. A. Englander & Co., said during the day's back-and-forth trading.

President Bush is scheduled to deliver his State of the Union address Monday. Meanwhile, the Federal Reserve is expected to hold its first regularly scheduled meeting of the year on Tuesday and Wednesday, and then the Labor Department will weigh in on the state of the job market on Friday.

Despite the pullback, Wall Street's tone Friday stood in sharp contrast to the intensely dour mood that hung over the market when the week began. While U.S. markets were closed Monday for Martin Luther King Jr. Day, stocks in Asia and Europe plunged amid fears of a precipitous slowdown in the U.S. economy. To stave off a similar sell-off in the U.S. over recession fears, the Fed stepped in before the opening bell Tuesday with an emergency interest rate cut.

The central bank's move to lower rates by a big 0.75 percentage point to 3.5 percent helped shore up investors' confidence and led stocks to end the day well off their lows, although they still closed down. A day later, on Tuesday, Wall Street had an astonishing about-face, with the Dow swinging more than 630 points and turning a sharp sell-off into huge gains. Stocks then extended their advance Thursday.

The Fed is widely expected to cut rates again at next week's meeting; many analysts expect a half-point cut.

With Friday's decline, the market might well be following the pattern of past corrections, when huge gains were often followed by some retrenchment. Many market watchers consider such backing and filling a sign of health. However, with much economic uncertainty ahead, investors may need months before they can decide whether to take the market solidly higher.
The Dow fell 171.44, or 1.38 percent, to 12,207.17. The Dow had been up more than 100 points in the early going.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 21.46, or 1.59 percent, to 1,330.61. The technology-heavy Nasdaq composite index fell 34.72, or 1.47 percent, to 2,326.20.
Despite the huge moves seen during the week, stocks finished not far beyond where they began, with the Dow adding 108 points, or 0.89 percent. The S&P 500 ended the week up 0.41 percent and the Nasdaq lost 0.59 percent.
Declining issues outpaced advancers by about 3 to 2 Friday on the New York Stock Exchange. Consolidated volume came to 4.78 billion shares, down from 5.48 billion shares traded Thursday.
Government bond prices jumped as stocks declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.56 percent from 3.71 percent late Thursday.

The dollar was mixed against other major currencies, while gold prices rose. Light, sweet crude oil advanced $1.30 to settle at $90.71 a barrel on the New York Mercantile Exchange.
Investors are looking for clues about whether the market is due to add to its gains after a brief hiatus or whether another pullback is in the offing. Despite the increases logged this week, stocks are still down sharply in the new year.

"The market is extremely sensitive to any news that's out there. A year ago, it brushed off a lot of stuff. Now, it's just the opposite, and we're seeing reactions nearly immediately when things come out," Fullman said.

Despite giving up the early gains, Wall Street still appeared pleased by reports from U.K. newspapers that billionaire Wilbur Ross was in talks to acquire bond insurer Ambac Financial Group Inc. Financial woes at many U.S. bond insurers have caused headaches in recent weeks for investors worldwide who have worried that tightness in the credit markets could worsen should one of the companies buckle under an inability to draw new business.
Ambac rose 21 cents to $11.54.

Word of Ross' interest follows comments this week by New York State regulators that indicated they would consider lending support to shore up the struggling bond insurance industry. While uncertainty remains over what role regulators might play, the comments initially helped reassure Wall Street and made room for stocks to rally.

Other corporate news appeared to offer investors mixed readings on the economy.
Microsoft finished down 31 cents at $32.94 after spending much of the session higher. The company raised its forecast for the rest of its fiscal year, which ends in June, and said its quarterly earnings jumped 79 percent. Microsoft cited the growing importance of its sales outside the U.S.

The Russell 2000 index of smaller companies fell 4.12, or 0.59 percent, to 688.60.
Overseas, Britain's FTSE 100 closed down 0.12 percent, Germany's DAX index finished off 0.06 percent, and France's CAC-40 fell 0.76 percent. Japan's Nikkei stock average jumped 4.10 percent after falling sharply earlier in the week. Hong Kong's Hang Seng index likewise surged 6.73 percent by the close.

The Dow Jones industrial average ended the week up 107.87, or 0.89 percent, at 12,207.17. The Standard & Poor's 500 index finished up 5.42, or 0.41 percent, at 1,330.61. The Nasdaq composite index ended down 13.82, or 0.59 percent, at 2,326.20.

The Russell 2000 index finished the week up 15.42, or 2.29 percent, at 688.60.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 13,423.62, up 115.17 points, or 0.87 percent, for the week. A year ago, the index was at 14,358.67.

7 Stocks You Need to Know for Friday

Microsoft (NasdaqGS:MSFT - News) beat earnings estimates on Thursday afternoon, announcing $0.50 EPS over a consensus of $0.46 EPS. MSFT's PowerRating (for Traders) is 6

Tempur-Pedic (NYSE:TPX - News) missed earnings, reporting $0.52 EPS versus expectations of $0.53 EPS. TPX's PowerRating (for Traders) is 2.

Cash America (NYSE:CSH - News) also missed earnings, with $0.88 EPS versus a consensus of $0.90 EPS. CSH's PowerRating (for Traders) is 3.

Caterpillar (NYSE:CAT - News) reports earnings on Friday morning, with traders expecting $1.50 EPS. CAT's PowerRating (for Traders) is 3.

When Commerce Bancorp (NYSE:CBH - News) announces quarterly results tomorrow morning, analysts will be looking for $0.30 EPS. CBH's PowerRating (for Traders) is 5.

Harley-Davidson (NYSE:HOG - News) is set to report $0.82 EPS on Friday before the bell. HOG's PowerRating (for Traders) is 4.

WW Grainger (NYSE:GWW - News) is expected to announce $1.27 EPS tomorrow morning. GWW's PowerRating (for Traders) is 3.

Stocks Extend Their Gains Following Employment Report, Hopes for Stimulus Plan

Wall Street scored its second straight big advance Thursday after economic figures suggested the job market is holding up and as lawmakers agreed on measures that could ease concerns about consumer spending. The Dow Jones industrials rose more than 100 points, bringing its two-day gain to more than 400.

While stocks fluctuated throughout the session, trading was decidedly more calm than on Wednesday, when Wall Street executed a stunning turnaround that transformed a sharp sell-off into big gains for stocks. Thursday's rise was notable, however, as investors will often move in a day after a rally or plunge to take profits or scoop up bargains. That the buying largely continued was a positive sign, observers said.

Investors were clearly interested in buying, but despite the size of the advance, there didn't appear to be much conviction to it -- the market is still searching for clues about the economy in hopes of determining whether it will soon pick up or will continue to slow and tip into recession.

In addition, the market wobbled during the session after Fitch Ratings lowered its rating on bond insurer Security Capital Assurance Ltd. Bond insurers have been hurt in the fallout from the mortgage and credit crises, and news of their problems has shaken the market.
But those seeking good news found some in a Labor Department report that said the number of people seeking unemployment benefits last week fell for a fourth straight week. Applications for benefits dropped 1,000 to 301,000, pushing claims down to the lowest level in four months.

Investors also appeared pleased by a widely anticipated agreement between congressional leaders and the White House on an economic stimulus package. The agreement calls for most tax filers to be given refunds of $600 to $1,200, and more if they have children.

Bill Dwyer, chief investment officer at MTB Investment Advisors in Baltimore, said Wall Street found some relief from word of the economic stimulus plan as well as the efforts of regulators to help bond insurers. He said the Federal Reserve's decision to lower interest rate this week could also help some struggling homeowners hold on to their properties. The efforts, he said, could ultimately help stave off recession.

"People have that 'R' word stuck on the front of their forehead. It's really just a dramatic slowing of growth. We may not have a recession," Dwyer said.
The Dow Jones industrial average rose 108.44, or 0.88 percent, to 12,378.61, following a nearly 300 point surge on Wednesday. The Dow has not finished higher for two straight sessions since Jan. 9-10.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 13.47, or 1.01 percent, to 1,352.07, and the Nasdaq composite index advanced 44.51, or 1.92 percent, to 2,360.92.
Advancing issues outnumbered decliners by 4 to 3 on the New York Stock Exchange. Consolidated volume came to 5.48 billion shares, down from 7.3 billion Wednesday.

The Dow on Wednesday swung 631.86 points from its low point to its high -- its largest single-day reversal in more than five years.

Stephen Carl, principal and head of equity trading at The Williams Capital Group, said Thursday's overall trading reflected a continuation of the bounce that first began on Tuesday, when the Fed lowered its federal funds rate by a steep 0.75 percentage point, or 75 basis points, to 3.5 percent.

He said investors were also encouraged that the government's rebate plan, while not perfect, appeared to be progressing. Still, despite some investors' mostly upbeat mood, uncertainty remained. The market's about-face Wednesday, while certainly a relief for many investors, illustrated the fractiousness that has settled into Wall Street in recent months.

"We still have a long way to go in getting the economy on track," Carl said. "Whether we dip into a recession or not, a lot of things need to be fleshed out in the markets."

Bond prices fell as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 percent from 3.55 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose
.
Light, sweet crude oil for March delivery rose $2.42 to settle at $89.30 a barrel on the New York Mercantile Exchange after the agreement on the economic stimulus plan. Traders wagered the plan to put money in consumers' pockets could increase demand for oil.

Some of Wall Street's most recent concerns relate to the downgrade from Security Capital and broader unease about the stability of bonds. However, investors also looked to New York state regulators in hopes they can hatch a plan to shore up the bond insurance industry. New York Insurance Superintendent Eric Dinallo said in a statement Thursday it likely will take time to draw up measures to help the industry.


After the Fitch downgrade, Security Capital fell $1.16, or 30.6 percent, to $2.63.

Beyond bond insurers, investors have been concerned about the health of corporate profits.

Microsoft Corp. rose more than 4 percent in after-market trading from its Thursday close of $33.25 following the release of its fiscal second-quarter earnings. The company posted a 79 percent jump in profit, surpassing Street expectations, thanks to strong sales of Windows-based personal computers.


The Russell 2000 index of smaller companies dipped 0.71, or 0.10 percent, to 692.72.
Overseas, Japan's Nikkei stock average closed up 2.06 percent and Hong Kong's Hang Seng index fell 2.29 percent. Britain's FTSE 100 finished ahead by 4.75 percent, Germany's DAX index surged 5.93 percent, and France's CAC-40 jumped 6.01 percent.

Best and Worst Places to Buy a House Thursday, January 24, 2008

Whether you're looking for an investment property or a place to live, here's a look at the cities you should seek out and avoid in 2008.

The housing crunch and the excessive inventory -- exceeding 10 months on resale homes -- continues to take its toll on housing prices. But over the long term, housing is still a good investment. In fact, it's more than an investment; it's a home. Plus, you're not really saving anything by renting, as the costs of renting and owning are about equal (well, owning may be a little more). The tax benefits of home ownership far outweigh renting, too. With good housing prices in many great areas, this may indeed be the time to buy.

So now that I've convinced you this is a good time to buy a home, the next question is, Where do you buy one? No matter where you look, you should check out some basic economic fundamentals before buying. Is job growth stable in the area? Is income keeping up with inflation? Is crime above the national average? Is there a higher-than-average rate of foreclosures? These issues and others play a factor when deciding where to buy a house.

As a real estate investor and analyst, it's my job to provide buyers with qualified information on where to buy -- and where to stay away from. Here are my thoughts for 2008 based on the indicators noted above.

The Top Places to Buy

Whether you're an investor like me or you're looking to purchase that next move up, here are my picks for the best areas to buy a home:


Killeen, Round Rock, Austin, Texas: Killeen has the lowest average home price in any market in the nation while still maintaining quality. Round Rock and Austin have seen incredible job growth and very stable home prices despite the downturn nationwide. Jobs continue to grow here -- a factor for keeping inventory low and prices stable.

Mission Viejo, California: Mission Viejo has the lowest crime statistics in the nation. With no murders in 2007 and a low rate of violent crime, this is a good place to raise a family. Prices are relatively stable, and the job market in the nearby cities of Irvine and San Diego means there is consistent demand from job seekers.

Palm Beach, Florida: I'm taking a risk here because this area has been pummeled by foreclosures in 2007. But there are also a lot of boomers retiring, and Palm Beach is looking mighty attractive. If you don't like this high of a risk (which translates to great prices), check out Tampa or Clearwater in the same state

Las Vegas, Nevada: Yes, Las Vegas has been hit hard by incoming investors, who watched their home values disappear and then left those homes empty. Las Vegas comes in quite high on the national foreclosure list, almost always within the top three metro areas. But there's an upside -- a very strong job market. In 2007, Las Vegas experienced a 12 percent increase in population, partly driven by retirees looking for Sunbelt states to move to. Coupled with low prices, we could see inventories reduced here, which would also stabilize prices. Be careful what you buy, but I like it.

Places to Avoid

And now for the places you definitely want avoid


Detroit, Michigan: The job market is in chaos. People are getting laid off left and right. National statistics seem to point to a significant problem with job loss and job income not keeping up with inflation. As a result, many nice neighborhoods are now abandoned due to people leaving their homes. Inventories exceed one year (under six months is what we want to see), and the foreclosure problem hit Detroit hard. With fewer jobs to support home purchases, I don't see Detroit turning around anytime soon.

Miami, Florida: Palm Beach is different than Miami, which sits in its gorgeous aqua water with half-built and abandoned condos, a shrinking job market, a tough time getting insurance against hurricanes and a job problem. Yes, you can get a good deal, but do this only if you don't need the appreciation from the home in the next decade.

Riverside/San Bernardino, California: Even those lucky homeowners that bought before the boom are feeling it now. Riverside and San Bernardino counties in Southern California consistently lead California in foreclosures and rank in the top three metro areas nationally. The prices have plummeted, and jobs in the area are scarce. People moved there due to lack of affordability in Orange and Los Angeles counties (where their jobs were), so it's a commuter's area. Now that prices in the two counties have dropped, people can live close to their jobs. Although I grew up in Riverside County, I could never recommend it to anyone looking to buy a home.

Toyota Falls Short of GM in Global Sales Thursday January 24, 1:26 am ET

Toyota Still No. 2 After Falling About 3,000 Vehicles Short of GM in Global Vehicle Sales

TOKYO -- General Motors, a symbol of American industrial might and the world's top seller of motor vehicles since Herbert Hoover was president, has been all-but-overtaken by a foreign rival.

Toyota said Thursday it sold 9.366 million vehicles last year globally, about 3,000 vehicles fewer than the tally from General Motors Corp., just barely allowing the U.S. automaker to retain its crown as the world's No. 1 automaker.

All year long, the two automakers raced neck-and-neck in global sales, highlighting Toyota's phenomenal growth and the struggles facing GM and other American automakers.

Toyota had said as late as Wednesday that its annual total was 9.37 million vehicles, up 6 percent from 2006. GM said Wednesday in Detroit its global sales had risen 3 percent to 9,369,524 vehicles, making for a race that appeared too close to call.

But Toyota Motor Corp. spokesman Paul Nolasco in Tokyo confirmed the extra digit in Toyota's sales Thursday, showing that GM's total was narrowly higher. GM has been the world's top seller for 77 years.

Toyota executives have repeatedly expressed worries about a possible backlash if they dethrone GM, an American icon. The Japanese automaker has been setting up more plants in North America and has tried to show it's a good U.S. corporate citizen.

Nolasco refused to comment on GM's retention of the No. 1 title. But he said Toyota sees sales growth as a reflection of how people recognize its products "We would like to become No. 1 in quality in product offerings and services, carefully making good products, and give true happiness to our customers," he said.

In Detroit, GM wasn't gloating. The company's global strategy hasn't changed, said company spokesman John McDonald. "We're not as concerned about who's winning," he said. "We're just really focused on what we need to do to have a growing business, getting our business right in North America."

Overall, GM's worldwide sales in 2007 were the second-best in its 100-year history

It's biggest sales growth has come outside the U.S. It set a sales record in China by selling more than a million vehicles, set a record in Brazil with nearly 500,000 and doubled sales in Russia.
Still, GM has struggled in recent years with job cuts, earning losses and plant closures.

Toyota has seized the lead in ecological hybrids with its hit Prius, which runs on a gas engine and electric motor, selling more hybrids than any other automaker. And that edge came at a good time when consumers were looking for good mileage amid soaring gas prices.

Earlier this month, Toyota deposed Ford Motor Co. as the No. 2 auto seller in the U.S. for 2007. Toyota sold 2.6 million vehicles in the U.S. for a 16 percent share of the market -- and more than double from what it sold in 1990.

GM, third on the Fortune 500 list of U.S. corporations, remains the auto sales leader in the U.S. But its market share has dropped dramatically from about 35 percent in 1990 to about 24 percent in 2007. GM sold 3.8 million vehicles in the United States last year.

Aaron Bragman, an analyst with the consulting firm Global Insight, said GM and Toyota have expanded almost evenly in most emerging global markets, but GM has been hurt by sales declines in North America. "A lot of that volume reduction has come here," Bragman said. "They did very well in every other market except North America."

He said much of GM's U.S. sales decline comes as the company has intentionally cut incentives and reduced low-profit sales to rental car companies. GM's U.S. sales last year were down 6 percent from 2006, due largely to a reduction in fleet sales -- those to large, bulk buyers.
"If they had kept that fleet volume up, it wouldn't even be a competition," Bragman said.

Still, it was in new markets such as China that GM still led Toyota, managing to come out ahead for the time being. And the competition in such markets is likely to determine the winner in the long run.

While more mature auto markets, such as the U.S. and Japan, are stagnating, China and India are booming. Toyota, which is aggressively expanding overseas production, is forecasting robust growth for this year at selling 9.85 million vehicles, up 5 percent from this year.
GM does not give comparable sales forecasts.

In a typical comment for a Toyota executive, Shoichiro Toyoda, a member of the founding family and former president, told The Associated Press earlier this month that gaining the top spot in the auto industry could be fleeting. "We are not No. 1," he said. "We need to just keep working harder."

General Motors Corp.: http://www.gm.com

Toyota Motor Corp. http://www.toyota.com

7 Stocks You Need to Know for Thursday

Qualcomm (NasdaqGS:QCOM - News) missed earnings expectations on Wednesday, with $0.52 EPS versus expectations of $0.53 EPS. QCOM's PowerRating (for Traders) is 5

AT&T (NYSE:T - News) reports earnings on Thursday morning before the market opens, with traders looking for $0.71 EPS. T's PowerRating (for Traders) is 6.

Analysts are watching for Ford (NYSE:F - News) to announce -$0.20 EPS on Thursday before the bell. F's PowerRating (for Traders) is 3.

Lennar (NYSE:LEN - News) is expected to report -$1.65 EPS on Thursday morning. LEN's PowerRating (for Traders) is 4.

Lockheed Martin (NYSE:LMT - News) is looking to announce $1.70 EPS when the homebuilder reports tomorrow morning. LMT's PowerRating (for Traders) is 5.

Watch for Northrop Grunman (NYSE:NOC - News) to report $1.31 EPS tomorrow morning before the bell. NOC's PowerRating (for Traders) is 5.

Sunpower (NasdaqGS:SPWR - News) is expected to report $0.37 EPS on Thursday morning. SPWR's PowerRating (for Traders) is 6.

Market Update Wed, Jan 23, 2008, 4:25AM ET - U.S. Markets closed.

4:25 pm : There are volatile markets and then there are volatile markets. Wednesday's session was the latter variety, which is to say it was truly volatile. To wit, the swing in the S&P 500 between its low of the day, reached around 12:45 p.m. ET, and its high of the day, reached around 3:50 p.m. ET, was 69 points or 5.4%.

The bearish mood that predominated for the first half of today's session was driven by a relatively disappointing earnings report and outlook from Apple (AAPL 139.07, -16.57) and a remark from ECB President Jean-Claude Trichet that left participants inclined to believe the ECB won't be following the Fed's lead and cutting its key bank rate.

The latter precipitated a widespread sell-off in European bourses, most of which dropped between 3.0% and 5.0% for the day. Their poor showing carried over to the U.S., which was already on the defensive amid consumer spending concerns that flowed from Apple's conservative outlook.

Briefly, Apple forecast fiscal second quarter sales of $6.8 billion and earnings of $0.94 per share versus analysts' expectations of $6.98 billion and $1.09, respectively.

Correspondingly, the tech sector led the early retreat along with the energy, telecom, and materials sectors, which traded down sharply on growth concerns. Those concerns were reflected in falling oil prices, which hit $86.65 a barrel at their low before rebounding some to $87.59 at the end of the trading session.

The energy sector declined as much 6.3% at its low today. Remarkably, it closed with a gain of 0.6% after participating in the afternoon rally.

Stocks Drop, Then Rebound, After Rate Cut -- but Long-Term Recovery Could Be More Difficult Tuesday January 22, 6:23 pm ET

The opening bell hadn't even sounded on Wall Street when the Federal Reserve announced an emergency interest-rate cut. The Dow Jones industrial average fell 465 points -- including 300 in the first minute -- then rebounded to finish down a more bearable 128

The recovery Tuesday was a victory of sorts for a battered market. But a long-term comeback may depend on factors much more difficult to achieve -- a turnaround in the housing market and renewed confidence among U.S. consumers, who hold up most of the economy.

The alarming early drop in U.S. stocks followed the lead of markets abroad, where investors fled stocks and sent indexes plummeting on fears of a U.S. recession that could spread to other global economies.

By the close, the Dow had recovered to a loss of 128.11, or just over 1 percent, at 11,971.19.
Before trading began, the Federal Reserve moved to slash its benchmark federal funds rate by 0.75 percentage points, to 3.5 percent. It was the widest cut since 1990, the beginning of what the Fed says is a comparable period in the way it handled the rate.

The Fed cut the discount rate, the interest rate the Fed charges banks directly, to 4 percent, also a three-quarter-point cut.

Many traders had anticipated a rate cut, but it was unusual for the Fed to make the call between regularly scheduled meetings of its policy-making Open Markets Committee.

How to Sell a Stock Short Monday January 21, 11:29 am ET

The most basic way to trade the short side of the market is to sell stocks short. While selling stocks short is in some ways just the opposite of buying stocks, there are some important differences. In order to sell a stock short, there must be shares of the stock available to your broker for you to borrow. When traders sell stock short, they essentially borrow stock from their broker and sell the stock in the market. Because the trader has sold something he or she does not own, eventually the trader will need to buy back the stock he or she sold.

The short seller believes that when the time comes to buy back the stock, that stock will be at a much lower price than it was originally sold for. This enables the short seller to buy back the stock at a cheaper price, return it to his or her broker, and pocket the difference as a profit.

For example, a trader wants to short stock Research in Motion (NasdaqGS:RIMM - News).
The trader borrows 100 shares of the stock from his broker and then sells it for the going price of $120 a share. RIMM does move lower as the trader expected, say to $90 a share. The trader would then buy the same amount of RIMM that he or she originally borrowed--100 shares--on the open market, and then returns the stock to his or her broker.

The trader sold 100 shares for $120, gaining $12,000. The trader then bought back or "covered the short" by buying 100 shares at $90 ($9,000). The difference between the amount earned by selling the shares and the amount it cost the trader to buy the shares back after they moved lower is the profit of the short trade, in this case $3,000

If the stock does not move lower and, instead, moves higher, then the trader selling the stock short will still have to "cover" or buy back the stock he or she borrowed. But the trader will be doing so at a loss.

For example, if RIMM advanced by 10 points instead of falling by 30 in the example above, the trader would have had to buy or cover his or her short position at $130. Having made $12,000 from the initial sale and then spent $13,000 buying the stock back when ABC went the wrong way, the trader would realize a loss of $1,000.

In order to sell a stock short, the trader typically must have a margin account set up with his or her broker. Because of the risks involved in selling an asset that the trader does not own--and the possibility that the stock will be at a significantly higher price when the time comes to cover or buy the stock back--a margin account is required to ensure that the trader has sufficient capital in order to buyback a position went against him or her.

The margin amount, which is set by the broker, serves as a sort of collateral in the event that the trade goes badly. This collateral may be in the form of cash or securities such as stocks. If the losses from the short sale trade grow larger than the amount held in margin, then the trader will get a "margin call" from his or her broker, requiring the trader to either liquidate the position immediately or provide additional capital. Additionally, the trader will have to pay interest on the margin--at least, to the degree it is used. The margin is essentially money borrowed from the broker, the interest paid in this sense is no different that the interest a trader might pay on a loan from a bank.

For many years, selling stock short was complicated by what was called the "uptick rule". This rule meant that traders could only sell a stock short if and when it's last trade was higher than the previous trade price (creating an "uptick"). This rule had been in force for decades, but was recently eliminated by the Securities and Exchange Commission effective July 2007. This has made it much easier for traders to sell stocks short.

Another phenomenon that traders looking to sell stocks short should be aware of is called the "short squeeze." A "short squeeze" occurs when a large number of traders who are short a stock begin covering or buying back the stock at the same time. This rush to cover can have a dramatically bullish impact on a stock, particularly one that has been heavily sold short. Being caught with a short position in a stock when a "short squeeze" occurs is one of the risks in selling stocks short that trader need to be aware of.