MarketRant: USRant: Down 300... Youch...

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When the entire economy is synchronised - in a bad way - there';s absolutely no reason for a couple of things: (a) there is no reason whatsoever for government bonds to strengthen (since economic downturn means lower government tax receipts, which means more a tendency for the deficit to increase, which means more bond supply)... and (b) there is no reason for the currency to strengthen.

And yet that's what has happened recently - the Euro is well off its recent swing high, and Treasury bonds have spiked like blazes.

What it shows, is people who went to US graduate schools, who think there are only two assets in the entire world. Your average MBA crams the two-asset model into his head in order to get through the exam (which is usually aimed at your average second-year level)... and thinks nothing about the fact that maybe it's a two asset model to make the maths tractable.

it's like people who leave Uni thinking that the Black Scholes option pricing model is Holy Writ: they assume log-normality, continuity, liquidity and non-discreteness for their entire careers, and are astounded when things go horribly awry. Find me an asset whose returns do not EVER move in a discontinuous manner, and I will show you a commodity in a market that is always closed (i.e., returns are always zero). Every other asset on the planet violates every single assumption of Black Scholes (or more accurately, of the Black Scholes model with mesokurtic continuous returns and infinite liquidity).

Anyhow - this is not a second-year stats lecture... let's get on with it.

Crude Oil got hammered again, down under $90 at $89.99 a barrel (it got down to $89.57); Gold slumped further (to $877.50 an ounce on the front month futures contract); the US Dollar Index remains above 76 (at 76.30)

Economic News

The US housing market continues to provide an almost unending stream of enjoyment for those of us who believe that markets exist to take money off the little guy. The little guy is bleeding from every orifice, but it's when it comes to housing the collective sphincter has taken the most severe forced dilation.

Today it was December Housing Starts, which came in at 1.006 million units - a decline of nearly 15% from the prior report, and roughly 12% below the consensus estimate of 1.14m.

And for the homebuilders, the pain continued unabated - Building Permits (for December) fell to 1.068 million, a far cry from the prior months number (1.162 million) and well below the consensus guess of 1.14 million.

One bright spot was that Weekly Jobless Claims came in below the consensus guess: the actual was 301k versus the guess of 322k and last week's 322.0k.

The topper for the session was the Philadelphia Fed Business Survey, for January - the consensus guess was for a moderate decline from last month's -1.6 to a slightly-more-worser -1.6. Imagine the shock when the number was... wait for it... -20.9

Fed Open Market Operations

The Fed did two repurchases, but continued its recent trend of concentrating on bailing out the Agency market: the two repurchases had next to nuthin' for da Boyz:

an 11 billion overnight repurchase with just 0.2 billion in Treasury-backed collateral; and
a $6 billion 140day repurchase with 3.1 billion in T-backed.

Headline Indices

The Dow Jones Industrial Average lost 306.95 points (2.46%) to 12159.21 points. The index high for the day was 12517.61,set in the first half hour, while the low was 12128.00 - set n the final fifteen minutes. So, a nicely symmetrical session. Would you believe that within that carnage, one Dow stock managed a gain: the sole Dow gainer was Wal Mart (WMT) which added 6 cents (0.13%) to $47.55 with turnover of 25.5 million shares.

The other 29 Dow components dropped; the worst among the losers were -

AIG down -3.59 (6.20%) to 54.32 on volume of 25million units;
Alcoa down $1.88 (6.14%) to $28.75 on volume of 21.53million units;
Merck down $3.47 (5.95%) to $54.88 on volume of 27.4 million units;
Citigroup down $1.30 (4.95%) to $24.94 on volume of 194.4million units; and
United Tech down $3.18 (4.48%) to $67.86 on volume of 8million units.

The S&P500 Index lost 39.95 points (2.91%) to 1333.25 points. The index high for the day was 1377.72, while the low was 1331.24. Of the 500 index components, 452 fell and just 48 rose.

The Nasdaq Composite lost 47.69 points (1.99%) to 2346.90 points and the Nasdaq100 lost 30.19 points (1.61%) to 1842.10 points.

The CBOE Volatility Index advanced +3.87 points (15.87%) to 28.25 points, while the CBOE Nasdaq100 Volatility Index advanced +2.37 points (8.21%) to 31.24 points.

NYSE Total Volume totalled 5.48billion units. 503 NYSE listed stocks managed a gain, trading a total of 522 million shares; the decliners numbered 2819 and traded a total of 3.9 billion shares. Now that's what I call a tilt in favour of the decliners... 26 NYSE stocks made new 52-week highs, and 479 hit new one-year lows.

Nasdaq Total Volume totalled 2.78billion units. Among the Nasdaq listings, 2337 fell for the session while 701 eked out a gain. Volume in decliners totalled 2.2 billion shares - 89% of overall volume - and advancing volume was 566 million shares. 52 Nasdaq stocks posted new 1-year highs, and 369 hit new 52-week lows.

Major Market Statistics
Index	Close	Gain(Loss)	%
Dow Jones Industrial Average	12159.21	306.95	2.46%
S&P500 Index	1333.25	39.95	2.91%
Nasdaq Composite	2346.90	47.69	1.99%
Nasdaq100	1842.10	30.19	1.61%
CBOE Volatility Index	28.25	3.87	15.87%
CBOE Nasdaq100 Volatility Index	31.24	2.37	8.21%
NYSE Total Volume	5.48bn	-	-
Nasdaq Total Volume	2.78bn	-	-

Bellwethers

The nine-stock group that makes up the Rant bellwethers declined on average by 3.5%. The fallout occurred as follows:

General Electric (GE) down $1.34 (3.88%) to $33.22 on volume of 73.28 million units.
Citigroup (C) down $1.24 (4.73%) to $25.00 on volume of 200.09 million units.
Wal Mart (WMT) up $+0.06 (0.13%) to $47.50 on volume of 26.09 million units.
IBM (IBM) down $0.86 (0.85%) to $100.77 on volume of 9.54 million units.
Intel (INTC) down $0.55 (2.77%) to $19.33 on volume of 169.74 million units.
Cisco Systems (CSCO) down $0.82 (3.26%) to $24.33 on volume of 108.69 million units.
Google (GOOG) down $15.16 (2.46%) to $600.79 on volume of 8.17 million units.
Fannie Mae (FNM) down $2.26 (6.06%) to $35.04 on volume of 13.35 million units.
Freddie Mac (FRE) down $2.37 (7.56%) to $28.98 on volume of 15.17 million units.

Other Indices of Interest...

The Banks Index lost 3.85 (4.89%) to 78.79 points. Index volume totalled 520 million shares. Of the 24 index components, 1 advanced, with volume in advancers totalling 11.7 million units. Of the remaining 23 stocks in the index, every other stock fell, with total volume traded of 508.3 million shares.