Market Summary 12-11-07 "Economy Uncertain"

Index	Last	Change	% Chg
DJ Industrials	13432.77	-294.26	-2.14%
Nasdaq Comp	2652.35	-66.6	-2.45%
S&P 500	1477.65	-38.31	-2.53%
DJ Wilshire 5K	14923.55	-387.79	-2.53%
Russell 2000	766.27	-24.93	-3.15%
Nasdaq 100	2083.72	-51.16	-2.40%

Comment: The Fed statement's dour tone in its statement sent this market down today...or it could have been that overenthusiastic participants had already baked in a 50bp cut. In any case, today's Fed words are really about a looming STAGFLATION. No recession words yet....but with inflation still on their radar and growth slowing it sure looks like the stag is coming. And that would not be pretty for the financial markets. I expect we see further selling now as there are NO catalysts (barring a surprise Fed cut or such) happening before year end. Also, expect volatility to spike further into year end. More "shoes to drop" about the economy and financial sector are sure to weigh on the economy in the weeks and months ahead.

Issues	NYSE	Nasdaq	Amex
Advancing	534	650	393
Declining	2,759	2,390	864
Unchanged	66	102	103
Total	3,359	3,142	1,360
New 52 Wk High	104	59	43
New 52 Wk Low	64	104	39
Total	1,542,282,970	2,200,115,521	47,675,404
Advancing	101,082,220	350,642,634	11,792,600
Declining	1,436,816,750	1,828,508,916	33,347,104
Unchanged	4,384,000	20,963,971	2,535,700

Futures	Last	Change
Crude Oil	89.4	-0.62
Natural Gas	7.134	0.049
Gold, Feb	809.5	-7.6

From Briefing.com:

Moving the Market		Sector Watch
Fed cut the fed funds rate by 25 basis points to 4.25% and the discount rate by 25 basis points to 4.75% Washington Mutual announces $1.6 bln write-down, cuts dividend, plans to issue $2.5 bln in convertible stock AT&T raises dividend by 12.7%, authorizes share buyback plan of up to $15 bln		Strong: integrated telecom Weak: homebuilding; thrifts & mortgages; residential REITs; health care facilities; retail REITs; specialty REITs; regional banks; investment banks & brokerages; fertilizer & agriculture chemicals; office REITs

Stocks plummeted Tuesday following the FOMC announcement at 2:16 ET, even though the Fed cut rates by the expected 25 basis points. The Dow, Nasdaq and S&P plunged 344, 83 and 46 points, respectively, from their session highs to their closing levels. As stocks faltered, bonds rallied in a flight to safety. The reaction to the FOMC decision was decidedly negative. The 25 basis point cut on the fed funds rate was expected, but there was increased chatter that the Fed would be inclined to cut the discount rate by 50 basis points to 4.50% to address some of the liquidity strains weighing on the financial markets. The aggressive discount rate cut didn't happen, which provided the first source of disappointment. Strikingly, the Fed's directive no longer references the thinking that the upside risks to inflation roughly balance the downside risks to growth. On the contrary, while the statement did note elevated energy and commodity prices may put upward pressure on inflation, the bulk of the statement seemed to revolve around slower economic growth. The Fed acknowledged an intensification of the housing correction, some softening in business and consumer spending, and strains in financial markets. It also said recent developments have increased the uncertainty surrounding the outlook for economic growth and inflation. In light of the emphasis on growth factors, the initial response from the stock market is likely rooted in a sense of disappointment the FOMC didn't take a more aggressive stance at this meeting. The Fed policy statement did, however, leave open the prospect of further rate cuts. If credit market conditions do not improve, the Fed will presumably cut rates further. Although the FOMC statement stole the limelight, there were several corporate news items of note on Tuesday. After the FOMC meeting, General Electric (GE 37.03, -0.38) provided a 2008 earnings forecast that was below the market's expectation, which was another negative focal point that prevented stocks from staging a late-day comeback. Specifically, GE said it expects 2008 earnings to be $2.42 per share, which is below the First Call consensus estimate that now stands at $2.49. GE's forecast still equates to 10% growth. Washington Mutual (WM 17.59, -2.29) announced it is cutting its quarterly dividend to $0.15 from $0.56, will write-down $1.6 billion worth of its home lending portfolio, and will likely incur a fourth quarter earnings loss. The company plans to make an offering of convertible preferred stock in a bid to raise approximately $2.5 billion. Shares of WaMu closed down 11.5% as the capital raise was being criticized by some analysts as not being enough, and the stock was downgraded by several brokerages. On a positive note, AT&T (T 34.91, +1.51 ) shares traded higher after the San Antonio-based telecommunications company said it will raise its dividend 12.7% to 40 cents per share and repurchase up to 400 million shares under a new buyback authorization. Meanwhile, in its mid-quarter update, Texas Instruments (TXN 32.93, +0.26) raised the low end of its revenue and earnings per share guidance provided in October. Nine sectors finished lower, all posting a loss in excess of 1%. The financial sector (-4.9%) was the main laggard, with the thrifts & mortgages group (-9.1%) posting the largest loss in response to the WaMu news. The materials sector was also a laggard. Only the telecom sector (+1.0%) posted a gain, thanks to the strength in AT&T, which accounts for over 50% of the sector.