U.S. stocks brace for more volatility next week

U.S. stocks are poised for more volatility and losses next week, with investors digesting the past week's turbulence, including further evidence suggesting that the U.S. economy is in recession and that the credit crisis shows no signs of abating.

The past week saw an acceleration of the troubles in credit markets, where investors find it increasingly hard to assign value to debt instruments as a result of the bad loans that have surfaced on the balance sheets of financial institutions worldwide.

"We can be sure that this won't go away anytime soon," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. "We'll see more news of banks having trouble raising capital and more news pointing to the fact that we're in a recession."

Stocks took another hit on Friday after news that the U.S. economy lost 63,000 jobs in February, the largest drop since March 2003 and marking the second drop in a row in monthly employment.

The Dow Jones Industrial Average (DJI:^DJI) lost 146 points, or 1.2%, to end at (DJI:^DJI) 11,893, capping a 2.8% weekly decline.

The S&P 500 Index fell 10.97 points to 1,293.37, down 2.8% on the week, while the Nasdaq Composite Index (COMP) shed 8.01 points to 2,212.49, off 2.6% on the week.

The Federal Reserve also intervened to boost liquidity ahead of the jobs report, somewhat cushioning its impact. Credit markets also had become increasingly volatile since earlier in the week, after a default at mortgage lender Thornburg Mortgage Inc. (NYSE:TMA) and a litany of other problems at other financial institutions.

Financials stocks ended Friday's session mixed with Citigroup Inc. (NYSE:C) off 1.3%, while J.P. Morgan Chase (NYSE:JPM) was up 0.5%, and American Express Co. (NYSE:AXP) 0.6% higher.

"Friday's market action is not going to satisfy anybody," said Ken Tower, chief market strategist at Covered Bridge Tactical. "The bulls did not get the recovery they'd hoped, and the bears did not get the collapse they wanted to get. There will be a lot of uncertainty and disgruntlement over the weekend."

Following the jobs report, market odds that the Federal Reserve will cut interest rates by 75 basis points in March jumped to 96%. The move would bring the central bank's key rate to 2.25%.

Investors next week will sift through more data that could point to economic weakness, though the first three trading sessions of the week will be relatively light on indicators.

On Thursday, February retail sales, weekly jobless claims, January business inventories and import prices for last month will be released.

Friday will bring a consumer-sentiment survey and the key consumer-price index for February, which will be watched closely for signs of inflation.

Commodities continued their rally over the past week. Crude futures touched a record high of $106.54 Friday.

The dollar dropped to a new low against the euro Friday, with the European currency hitting $1.5463. A weaker dollar makes dollar-denominated commodities, such as oil, less expensive for buyers holding other currencies.

Among key reasons cited by traders for the continued surge are that investors fleeing dollar-denominated assets are increasingly turning to commodities to seek a safe haven.
Other beneficiaries of market turmoil have been Treasury bonds, which typically serve as a safe haven.

Some analysts believe that the current trends in U.S. markets will continue until the global economy also gets hit, which would force other central banks to also cut interest rates, putting pressure on their currencies.

But U.S. stocks could take an even turn for the worst once this happens, according to Joshua Rosner, analyst at Graham Fisher, as current dollar weakness has provided support in making dollar-denominated assets more attractive. "Once foreign central banks start to cut rates and the dollar strengthens relative to those foreign currencies, we are likely to see capital flight from our equity markets," he wrote in a note.

Among profit reports of interest next week, will be Texas Instruments Inc. (NYSE:TXN) , which reports on Monday along with Blackstone Group (NYSE:BX) , Foot Locker (NYSE:FL) and Hovnanian Enterprises Inc. (NYSE:HOV)

7 Stocks You Need to Know for Friday

Stocks plunged on Thursday as a fresh round of credit-related problems hit a number of financial institutions. The Dow lost -214.60, the Nasdaq Composite -52.31, and the S&P 500 -29.36.

7 stocks to watch

Washington Mutual (NYSE:WM) lost more than 8% after its debt was downgraded by S&P. WM's Short Term PowerRating is 6.

PETsMART (NasdaqGS:PETM) lost nearly 12% after missing earnings estimates by $0.07. PETM's Short Term PowerRating is 5.

Urban Outfitters (NYSE:URBN) beat earnings estimates but failed to escape today's widespread selling. URBN closed down nearly 3%. URBN's Short Term PowerRating is 6.

After the close, Cooper Cos. (NYSE:COO) reported earning in-line with estimates but issued mixed guidance. COO's Short Term PowerRating is 4.

Marvell Technology Group (NasdaqGS:MRVL) beat fourth quarter estimates by $0.09. MRVl's Short Term PowerRating is 5.

Ciena (NasdaqGS:CIEN) reports before the market open on Friday, with analysts expecting $0.40. CIEN's Short Term PowerRating is 5.

Do you think Fannie Mae (NYSE:FNM) will close up or down on Monday? FNM's Short Term PowerRating is 7. Play TradingMarkets Up or Down Daily Stock Contest for the chance to win $1000 every month by predicting the direction of a stock.

Oil Prices Spike to Record $105.10

Oil prices hit a record $105.10 a barrel Thursday, a day after a surprise drop in U.S. crude supplies and a decision by OPEC not to boost production

Prices gave up some ground by midday trading in Europe. Light, sweet crude for April delivery was still up 11 cents to $104.63 a barrel in electronic trading on the New York Mercantile Exchange.

On Wednesday, the April contract had jumped $5 to settle at a record $104.52 a barrel and later rose to $104.95 in post-settlement electronic trading.

Earlier this week, oil prices broke the previous inflation-adjusted price record of $103.76, set in 1980 during the Iran hostage crisis.

In London, Brent crude fell 21 cents to $101.43 a barrel on the ICE Futures exchange.
"The primary factor causing the surge in oil prices is the surprising drawdown in crude inventories, which caused traders to really react quite dramatically," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Most analysts had expected the U.S. Energy Department's Energy Information Administration to report oil stocks rose last week for the eighth straight time. Instead, the stocks fell 3.1 million barrels.

In Vienna, the Organization of Petroleum Exporting Countries said Wednesday it would hold production levels steady, at least for now. OPEC ministers cited falling demand in announcing their decision to hold production steady.

The EIA report and OPEC announcement fed a new frenzy of investing in oil futures, which have risen to new inflation-adjusted records this week as the falling dollar drew investors to the market.

"Five dollars is an incredible gain," Shum said. "The overall oil market fundamentals are supportive of strong oil prices but not at this level, above $100. I would expect some profit taking to put a temporary halt to this rather large surge in pricing."

The dollar, meanwhile, fell to a new low against the euro, with the EU's shared currency climbing to $1.5329 before dropping back slightly. The euro set its previous high mark of $1.5302 on Wednesday.

Analysts noted that U.S. oil inventories are at historical highs despite last week's decline in crude supplies. Meanwhile, demand for gasoline is falling, and several forecasters have cut their oil demand growth predictions for this year.

Traders also worried about the escalating of tensions between oil producing countries in Latin America. Colombia's weekend attack on leftist rebels hiding in Ecuadorean territory has sparked a growing crisis as Venezuela moved tanks and soldiers to the Colombian border Wednesday.

Ecuador said Monday it had sent 3,200 soldiers to its border with Colombia.

In other Nymex trading, heating oil futures fell 1.04 cents to $2.9327 a gallon (3.8 liters) while gasoline prices lost 0.63 cent to $2.6358 a gallon. Natural gas futures added 3.9 cents to $9.78 per 1,000 cubic feet.

7 Stocks You Need to Know for Monday

Stocks tumbled on Friday after American International Group reported its biggest loss ever, sending shock waves through the market and causing widespread selling of financial stocks.

The Dow lost -315.79, the Nasdaq Composite -60.09 and the S&P 500 lost -37.05.

American International Group's (NYSE:AIG) record $5.29 billion loss led to widespread selling on Friday. AIG's Short Term PowerRating is 4.

Meanwhile, a 6% decline in quarterly profit at Dell (NasdaqGS:DELL) weighed on the technology sector. DELL's Short Term PowerRating is 4.

After the market close, Berkshire Hathaway (NYSE:BRK-A) reported an 18% decline in fourth quarter profit and warned investors that "insurance-industry profit margins, including ours, will fall significantly in 2008". BRKA's Short Term PowerRating is 5.

Northrop Grumman (NYSE:NOC) won a $35 billion contract to build air refueling tankers. NOC's Short Term PowerRating is 6.

The news Northrop Grumman was a major blow to market leader Boeing (NYSE:BA). BA's Short Term PowerRating is 5.

Late on Friday, The Wall Street Journal reported that Countrywide Financial (NYSE:CFC) may be sanctioned for "alleged abuses of the bankruptcy system." CFC's Short Term PowerRating is 5.

And finally, do you think Merrill Lynch (NYSE:MER) will close up or down on Tuesday? Short Term PowerRating is 5. Play TradingMarkets Up or Down Daily Stock Contest for the chance to win $1000 every month by predicting the direction of a stock.

Weak Dollar Hurts Smaller European Firms

Hugh Quinn has seen the ever-weakening dollar shatter his ability to sell hand-cut Irish lead crystal to American customers.

Ingolf Haas says profit at his family-run cuckoo clock business in Germany has dropped at least 10 percent since the U.S. currency's latest decline began. Roberto Anselmi now sells more of his Italian white wine to Canada than to the United States.

Times are tough for small and artisanal businesses across Europe that traditionally target Americans as their No. 1 buyers, since the swooning dollar shrinks their revenues from U.S. sales but their costs remain in expensive euros.

The problem is compounded by economic worries that may make Americans think twice about buying the products they coveted and consumed in more prosperous days.

With the euro topping $1.52 this week -- up from $1.18 when it was introduced in 1999, and from 82 cents at its lowest in 2000 -- economists say all euro-denominated exporters have reason to be worried. But tourism-oriented producers of luxury goods are hurting the most.

These niche manufacturers are often too small to engage in the complex, risky hedging that protects larger companies from shifts in the value of different currencies.

"They can get into trouble if they have their eggs in one basket, particularly these days if it's an American basket," said Alan McQuaid, chief economist of Bloxham Stockbrokers in Dublin.

"They have to broaden their horizons."

Irish crystal offers a glittering example. Five years ago, both Quinn's employer, Galway Irish Crystal Ltd. in western Ireland, and its much bigger Irish competitor Waterford, relied on Americans for about half of their sales.

Both have now been hammered by the dollar's decline -- but Waterford has maintained its U.S. sales volumes by slashing Irish production and shifting output away from the euro zone to cheaper locations like Eastern Europe and Brazil.

That's no option for Galway Crystal, whose work force has nearly halved in the past five years to 80. Americans today account for just 20 percent of its sales, a figure that keeps falling with the dollar.

"It will probably continue to decline until the dollar resurrects itself," said Quinn, the company's sales and marketing director.

Galway Crystal began retreating from the U.S. market two years ago, he said, after the euro reached $1.40 and the company started taking a loss on each piece of crystal it sold in dollars. That forced Galway Crystal to raise prices -- which only hurt sales.

"We spent a good few years telling ourselves: This is not about profit, it's about defending our market share. So we kept our prices firm in U.S. dollars as best we could and just about broke even. We just kept hoping for a turnaround," Quinn said.

"But when you reach the stage where you're actually losing money, you have to take a fresh, hard look at it: When is it going to come back? How long can I sustain this?"

Galway Crystal has survived by shifting its designs in tune with European tastes, which favor simpler and lighter glassware. This also means less labor-intensive pattern cutting.

That's not an option for German makers of wooden cuckoo clocks, who count Americans among their best customers.

At Rombach & Haas Schwarzwalduhrenmanufaktur, or Black Forest Clock Manufacturers, they craft more than 100 different wooden clocks -- most of which have the traditional little bird peeking out of the door and chirping on the hour.

In general more than half of the company's customers are Americans -- either tourists or online shoppers -- who buy products that sell from about $120 for a small clock to $6,000 for a 5-foot-tall model.

"Making cuckoo clocks has never been a very lucrative business, but now this drama with the weak dollar is really giving us trouble," said Haas, 45, who runs the company along with his wife, father and three employees. "I think we've suffered at least a 10 percent drop in profit since the dollar's latest decline started a few months ago."

Lately, Haas has broadened his range of offerings, and customers who pay extra can design their own clocks over the Web.

"I hope the Americans will take advantage of this offer," he said. "Like it or not, they are our main customers and most of the cuckoo clocks end up on living room walls in the U.S."

He's also been looking into selling his products in new markets, particularly Asia and Russia. "However, that's not so easy either, since we don't have an additional few hundred thousand euros that we could invest in advertising," Haas said.

Anselmi is seeing sales go elsewhere than the United States. The maker of premium white wines said his U.S. sales have fallen by about 20 percent, or 50,000 bottles, over the past year. He also had to raise prices up to 20 percent on U.S. store shelves.

As a result, Canada has eclipsed the United States as Anselmi's largest export market.

"We can't recoup this market," said Anselmi, who is based in the northern Italian town of Monteforte near Verona. "In the United States there is a lot of competition from domestic wines, and consumers are also looking for wines that are more competitively priced from other regions of the world that have lower costs."

Five-Star Stocks

What stocks does a five-star fund manager think about on a less-than-stellar day?
It's a good question for Tom Ognar, manager of Wells Fargo's Advantage Growth Fund. The fund is up an average of 15.26 percent per year over the last five years.

These are troubling times, and so, let's take that into account and have a game plan," he told CNBC.

He urges investors to "stress-test" their portfolios, watching out for those companies that are lowering their guidance, and those companies that are able to offset challenges with unique initiatives.

One company that survives his stress test is medical device firm St. Jude Medical (NYSE:STJ).

"That really fits into our game plan, which is, find areas where you're not really dependent on the consumer, find areas where the U.S. economy's not going to drive the opportunity set for the company's fortunes, and St. Jude is a good example of that," he said.

He also likes Hewlett-Packard (NYSE:HPQ), where he sees corporate reforms going beyond simple cost-cutting.

"They've found areas where they've not really gone to the market correctly, and they've taken some of the savings from their cost-cutting and put that back into growing their market share," he said.

Ogan's third pick is Cisco Systems (NasdaqGS:CSCO).