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One of my mother's favorite lines is the one about not saying anything if you can't think of something nice to say. Well that was the story of the markets Monday. What a day of angst. Look at this headline from a note sent by MF Global's Andy Brenner Monday afternoon: "The market has traded like a crazed man with no liquidity." Yikes.
Another flight-to-safety trade in Treasuries pulled yields dramatically lower. In the afternoon, the yield on the two-year was 3.20% and the 10-year yield was trading at 4.06%. "Their yields moved over a dozen basis points in two-years and halft that in 10s," said CNBC's Rick Santelli. "Two-year notes used to be like watching paint dry and I'm talking oil based on a humid day."
The Dow finished down 218, or 1.66%, at 12,958 after a volatile day of trading. The Nasdaq fell 43.86 or 1.66%, and the S&P was off 25.47, or 1.75%. Stocks took their cue in part from a negative note put out by Goldman Sachs Monday morning on the banking group. Goldman made a broad call and also cut Citigroup [C
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] to sell, saying it could writedown a total $15 billion from the subprime debacle in the next two quarters.
Some good news though: Computing technology giant Hewlett-Packard [HPQ
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] reported a profit that rose 21%, edging analysts' forecasts. Shares of the company rose more than 1 percent in electronic late trading.
The big event for the markets this week is the Fed's release Tuesday afternoon of the minutes of the last FOMC meeting. Along with those minutes will be released a new quarterly outlook from the Fed which is expected to show a compilation of projections from the meeting participants.
The Fed will include data on headline inflation forecasts, in addition to core inflation. The Fed is now doubling its outlooks to four times a year, and deepening the data content. Fed Chairman Ben Bernanke last week said the Fed's intention is to help the public understand more about how its decisions are made.
The anxiety of Monday's market may continue into Tuesday ahead of this release. Other important data includes housing starts and building permits for October, reported at 8:30 a.m. Economists expect a consensus of 1.174 million for starts, down from 1.191 million in September.
Minneapolis Fed President Gary Sterm speaks at a global credit and operational risk forum in Singapore. Former Fed Chairman Alan Greenspan speaks at a Microsoft event in Canada.
More earnings from retailers are due Tuesday with Target, B.J.'s, Barnes and Noble and Gamestop reporting in the morning, and Saks, Limited, Pacific Sun and Whole Foods reporting after the bell. Other companies reporting in the morning include builder D.R. Horton and Hormel Foods. Also reporting is Freddie Mac which saw its stock take a dive Monday after Credit Suisse analyst Moshe Orenbuch projected Freddie could announce up to $5 billion in losses from mortgage securities.
"The only forecast people want to see is when the credit crunch will be over," said Santelli. He used the analogy of a car crash to describe the crunch. "The credit crunch is like a car wreck in slow motion. The Fed is like the ambulance caring for the wounded but won't be able to stop the accident before it occurs."
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