President Obama adopted an optimistic tone in his address to Congress last night, but investors today were feeling markedly less enthusiastic -- and for good reason. Uncertainty continued to plague the banking sector, as the Treasury Department officially started to administer "stress tests" to the nation's largest financial institutions. Depending upon the results, some banks could receive convertible injections of capital from the U.S. government, stoking fresh nationalization fears.
The day's bleak economic data only served to exacerbate traders' anxiety. The National Association of Realtors confessed that sales of previously owned homes fell 5.3% in January, marking the lowest sales pace in 12 years. Meanwhile, the median sales price tumbled to a 6-year nadir of $170,300. With economic woes still driving the market, stocks slumped into negative territory at the sound of the opening bell.
Despite an eleventh-hour rally attempt that propelled it briefly into positive territory, the Dow Jones Industrial Average (DJIA 7,270.89) couldn't eke out a gain. The Dow shed 80 points, or 1.1%, as 21 of its 30 components declined. Boeing (BA) and American Express (AXP) suffered the day's steepest drops, while General Motors (GM) led the way higher for the 9 advancing equities.
The S&P 500 Index (SPX 764.90) joined the Dow in a late-day surge, but also succumbed to selling pressure by the close. The SPX gave up 8 points, or 1.1%. Finally, the Nasdaq Composite (COMP 1,425.43) matched the performance of its peers by shedding 1.1%, or 16.4 points. The COMP's last-minute advance was rebuffed by short-term resistance at the 1,450 level.
Turning to equities in focus, First Solar (FSLR) swallowed a heavy loss today after offering a weak revenue forecast for 2009 ... The Allstate Corporation (ALL) said it will slash its dividend to preserve nearly $450 million per year ... Casino operator MGM Mirage (MGM) drew heavy put volume in the wake of sector peer Wynn Resorts' (WYNN) earnings report ... Ratings agency Moody's Corporation (MCO) attracted bearish speculation as the European Union is pushing for greater oversight ... Dollar Tree (DLTR) defied the day's downtrend after reporting solid fourth-quarter earnings ... and today's Quote of the Day comes from Howard Fineman, who observed that President Obama's plan to cut taxes and ramp up spending, while simultaneously slashing the national debt, is strongly reminiscent of former President Reagan's strategy of "inspiration over arithmetic." While Fineman says he believes Obama can succeed in achieving his lofty goals, he warned:
"I also believe that the Washington Nationals will win the pennant."
But these weren't the only headlines hitting the Street today. Click on the links below for our Daily Market Blog coverage of:
And, in case you missed it, Joseph Hargett assessed the prospects for Capital One Financial (COF) in this week's edition of The Casual Contrarian. Click here to watch.
For today's activity in crude oil, gold futures, options, and more, turn to page 2.
A bit of unexpectedly bullish supply data sparked a rally in oil futures today. The Energy Information Administration (EIA) reported that motor gasoline inventories fell by 3.4 million barrels last week, while U.S. gasoline consumption increased 1.7% during the last 4 weeks. This news effectively offset a slimmer-than-expected weekly build in crude inventories, and black gold galloped to a gain of 6.4% by the end of the session. Crude oil for April delivery settled at $42.50 per barrel, up $2.54 from Tuesday's close.
Gold futures endured a volatile trading day, as the malleable metal continues to take its cues from the equities market. Stocks fell hard in early trading, which propelled gold to early gains on the strength of its safe-haven allure. However, equities bottomed out within the first 2 hours of the day, and spent the remainder of the session attempting to claw higher. Gold futures pulled back as a result, with a bout of profit-taking eventually overpowering the earlier flight to safety. By the close, gold for April delivery dropped $3.30, or 0.3%, to $966.20 per ounce.
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