Market Summary 12-12-07 "Fed Says Ooops!"

Index	Last	Chg	% Chg
DJ Industrials	13473.9	41.13	0.31%
Nasdaq Comp	2671.14	18.79	0.71%
S&P 500	1486.59	8.94	0.61%
DJ Wilshire 5K	14993.96	70.41	0.47%
Russell 2000	771.71	5.44	0.71%
Nasdaq 100	2101.36	17.64	0.85%

Comments: Pretty much everyone at this point is painting the end of the year as being UGLY. Today's wild swings and a Fed that many lost faith in, is making for a unkind end for 2007. Many traders are throwing in the towel with today's action and closing up positions for the year. Many are positioning defensively or short the market. If key support levels get broken (like S&P breaking and holding under 1490), the door is wide open for further drops. With investment banks set to report earnings, starting tomorrow with LEH, there should be a plenty of market news and reaction (most likely negative). Previous stalwarts like Goldman Sachs (GS) could be set up for failure. Todays nice 3%+ gain in the Ultrashort Financial ETF SKF is an indication of fun to come.

Issues	NYSE	Nasdaq	Amex
Advancing	1,858	1,581	663
Declining	1,431	1,454	580
Unchanged	75	128	111
Total	3,364	3,163	1,354
New 52 Wk High	60	35	28
New 52 Wk Low	101	125	40
Share Volume
	1,721,530,460	2,245,147,880	48,138,239
Advancing	993,923,060	1,372,148,768	22,963,210
Declining	709,294,100	838,672,997	16,491,400
Unchanged	18,313,300	34,326,115	8,683,629

Futures	Last	Chg
Crude Oil	94.18	-0.21
Natural Gas	7.47	0.062
Gold, Feb	816.6	-2.2

Comment: Stubbornly high oil is not a good thing at this point in the season. $100 is back on the table and with backwardation back in play, its looking likely to be hit before the year is out.

From Briefing.com:

Moving the Market		Sector Watch
Fed partners with four central banks to address liquidity issue Financials trail broader market on more write-down warnings, brokerage downgrades Crude oil rallies		Strong: coal & consumable fuel; steel; agriculture products; integrated telecom; distillers & vintners; oil & gas exploration; education services; diversified metals & mining; homebuilding; industrial REITs Weak: thrifts & mortgages; photo products; regional banks; other diversified financial services; tires & rubber; consumer finance; specialty stores; residential REITs; airlines; auto retail

Stocks started the day sharply higher fueled by news that the Fed has a plan to address liquidity issues, but eventually lost steam as negative developments out of the financial sector weighed on the broader market. The swings were huge today. The Dow was up 272 points at its peak and was down 111 points at its trough. In the end, the Dow managed to finish with a modest gain (+41 points), as did the broader indices. In regard to the Federal Reserve news, the Fed announced before the open that it will be coordinating with the Bank of Canada, Bank of England, European Central Bank, and Swiss National bank to add liquidity through term funds auctions and foreign exchange swap lines. The news provided a boost to the equity markets. The auctions allow the Federal Reserve to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations. The plan is more ambitious than added easing in the funds or discount rates. The operations are open to thousands of banks rather than the 20 or so primary dealers involved with the daily Fed operations. In addition, there should be no stigma against these operations as, like it or not, discount borrowing from the Fed still carries the presumption of troubled borrowing, leaving hesitancy from the market. With regard to the financial sector (-0.9%), there were several headlines that attributed to their poor showing today despite the seemingly positive Fed news. Today's decline follows the sector's 4.9% plunge yesterday after investors were disappointed with the Fed's decision to only cut rates by 25 basis points. Bank of America (BAC 43.43, -1.22) said it expects quarterly results to be disappointing. The company expects write-downs will be larger than previously reported, and said final write-downs of collateralized debt obligations are "unknowable." The bank expects to have a fourth quarter profit, but said it may not be able to resume its planned stock buybacks until 2009. Wachovia (WB 40.53, -1.42) said it now expects fourth quarter 2007 provision expense to be $1 billion higher than charge-offs. There were reports that Morgan Stanley picked Citigroup (C 31.47, -1.76) as a stock to sell short. The reports indicate Morgan Stanley believes Citi's earnings are deteriorating, that it expects new management to deliver a dividend cut, and that it expects further hybrid issuance, diluting current shareholders. Student lender SLM Corp. (SLM 28.49, -3.45), better known as Sallie Mae, has guided fourth quarter and FY2008 earnings below the current consensus estimate. SLM also stated that the J.C. Flowers led buyout group has indicated it no longer wants to pursue opportunities to acquire the company. To top it off, JPMorgan Chase (JPM 46.15, +0.21 ), Bank of America and Wachovia were downgraded at Merrill Lynch based on credit risks. Eight sectors traded higher. Energy (+2.4) provided leadership as it rose in conjunction with crude oil prices, which rallied 4.3% to $93.86. The government's weekly report showed crude inventories declined in-line with expectations, but managed to make gains after Goldman Sachs raised its average 2008 forecast on oil to $95 from $85 per barrel. Telecom (+3.1%) was also a standout after AT&T (T 41.71, +2.25) extended its gains from yesterday as investors continue to embrace its dividend hike and buyback plan.