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Here Comes The Profit Taking (Update)

You knew it was going to happen. I've noted that energy and material stocks have notably outperformed the rest of the market for the past several days.

Today, they took profits in these two sectors, with big names like AK Steel (down 7 percent), coal producer Massey (down 6.2 percent) and oil service giant Nabors (down 7 percent) all going from positive to negative right about 2 pm ET.

What happened? The simple answer is that we know that demand for commodities will remain weak until we work through the global recession, and the markets will not allow these groups to get too far ahead of everyone else.

Some would also like to blame the selloff on JP Morgan CEO Jamie Dimon, who noted in a 2 pm ET interview on CNBC that while November was bad, December was looking terrible as well, and that 2009 was looking "tough."

Financials were weak all day, but weakened again just before 3 pm ET. US Bancorp provided an update on the fourth quarter this morning, and the bottom line is that there is good likelihood of a jump in bad loans, and that the environment remains "difficult."

Nothing new here from Dimon or US Bancorp, but a reminder that the environment is not improving is always bracing for traders.

The REIT index has rallied 60 percent off its November lows at the close yesterday; today it gave back about half of those gains. Many of the big names were down 20 percent.

What happened? Again, nothing new. REITs face refinancing risks as large mortgages come due, and the market reminded traders not to take rallies too far, too fast.

UPDATE: Futures are a bit weaker on a report that hedge fund manager Bernie Madoff was arrested and charged with criminal securities fraud. Mr. Madoff ran a large hedge fund and was well known on the Street, and was very successful, though he refused to ever discuss how exactly he made his money.

- The Dow 30 at a Glance


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