Dow -37.47 (-0.30%)
Nasdaq -9.06 (-0.38%)
S&P 500 -6.49 (-0.48%)
News That Moved the Market
Fed Eases 50 Basis Points. The markets finished a volatile session down, but do not blame the Fed. The FOMC lowered both the fed funds rate 50 basis points to 3.00% as well the discount rate 50 basis points to 3.50%. In the statement, the Fed said downside risks still remain and the Fed would be ready to deal with any risks to growth. This was taken as a hint that the Fed was prepared to cut further in the future. Off the announcement, the markets jumped, but the party ended abruptly when CNBC reported a ratings agency would lower the ratings of two bond insurers (see below). Markets then reversed and gave up all their gains.
FGIC Gets Downgraded. CNBC commentator Charles Gasparino stifled the rally Wednesday when he said that he believed two large bond insurers would lose their AAA rating. Gasparino failed to name a source, but as it so happens, FGIC, the world's fourth largest bond insurer, lost its AAA rating from Fitch Ratings after missing a deadline to raise capital. FGIC is owned a by group of investors including Blackstone (BX, -2.3%).
Ackman Sees Bigger Losses at MBIA and Ambac. Bond insurers were also pressured on news hedge fund manager Will Ackman sent a letter to the SEC saying both Ambac (ABK, -16.1%) and MBIA (MBI, -12.6%) would lose more money than they were predicting from their guarantees on mortgage-related securities. It should be noted that Ackman is a critic of the bond insurance industry and is betting against the two companies.
ADP Employment Report Beats Forecasts. The ADP Employment Report showed an increased of 130,000 jobs in private payroll growth. This was nearly twice the amount estimated by economists and gives hope Friday's monthly payrolls report will be better than expected.
Fourth-Quarter GDP Slumps. The GDP for the fourth quarter of 2007 slowed to an annual rate of 0.6%, far less than the third-quarter's 4.9% figure and the 1.2% that was expected. Housing was one of the main reasons for the slowdown. The report increased worries that we are possibly in a recession.
Profit Forecasts Push Amazon Lower. Amazon (AMZN, +0.4%; -10.9% A.H.) reported strong holiday sales after the close but issued a disappointing forecast. Profits were in-line with estimates for the past quarter, but the midpoint of the company's profit outlook for 2008 was well short of what forecasters expected.
Starbucks Continues Fall. New Starbucks (SBUX, -3.8% day; -2.7% A.H. ) CEO Howard Schultz said the company will lower the amount of store it planned on adding this year by 425 as the company plans to restrategize. Sales increased only 1% from last year.
Notable Earnings (Full List Here):
Bristol-Myers(NYSE:BMY) Before Open
Colgate-Palmolive (NYSE:CL) Before Open
Mastercard (NYSE:MA) Before Open
Google (NASDAQ:GOOG) After Close
8:30 AM: PCE Deflator
8:30 AM: PCE Core
8:30 AM: Initial Jobless Claims
8:30 AM: Employment Cost Index