Nicholas M Ong

Well, I’m one of those folks who have to head into the office on Chinese New Year Eve. Travelling time today for me was cut down to 45 minutes instead of the usual 75 minutes. I’m sure many of my mates are probably just crawling out of bed after a long night out. The fact that getting to work today was a breeze kind of made up for it. My guess is though most organisations declare the Chinese Year New Eve as a non-working day in Singapore, 35% of organisations or so let their staff off in the afternoon half to head home to join their families for reunion dinner.

On the stock market front, Super Tuesday turns out to be not-so-super. With the next presidential elects heading into the primary elections and of course, there is the also college basketball that will be aired live on sports channels like ESPN. Wall Street on the other hand saw major indices like the Dow Jones plummeting by 370 points as investors scramble for a major sell-off of blue chips with fears that the U.S. is already in the early stages of a recession. The recession doesn’t quite yell out "I’m back…". Heck, I can’t recall when the Terminator said that too besides "I’ll be back…".

In any case, fret not. Enjoy your long weekend folks and be safe!

Matt Egan

FOXBusiness

Wall Street did not react well to new data showing the U.S. service sector unexpectedly and sharply contracted in January. The blue-chip index followed yesterday’s sell-off with a much-larger 370-point plunge — the worst loss on a percentage basis in nearly a year.
Today’s Market
The Dow Jones Industrial Average fell 370.03 points, or 2.93% to 12265.13, the Standard & Poor’s 500 index dropped 44.18 points, or 3.20% to 1336.64 and the Nasdaq Composite Index lost 73.28, or 3.08%, to 2309.57. The consumer-friendly Fox 50 dropped 29.84, or 3.06%, to 943.95.
Today’s decline was steady and began just before the opening bell. The market received little if any positive news to work with today, leaving traders to take money off the table.
Wall Street closed at the lowest levels of the day and has now erased nearly all of last week’s gains in just the past two trading days.

Today’s 2.9% loss on the Dow was the worst since February 27, 2007.
Just like in yesterday’s trading, the financial sector is leading the way south on Wall Street. Lehman Brothers (LEH: 59.82, -4.00, -6.26%), Citigroup (C: 27.05, -2.17, -7.42%) and JPMorgan Chase (JPM: 43.89, -2.33, -5.04%) all fell sharply today, with Citi plunging 7% to be the biggest decliner on the Dow.
Compared to yesterday’s 2 billion shares changing hands on the New York Stock Exchange, trading volume has been relatively light today.
Today’s focus was on the Institute of Supply Management’s services sector index, which gauges how quickly that area of the economy grew or contracted from one month to another.
During January the index fell by the sharpest amount since the ISM began keeping records. ISM said the service sector index came in at a reading of 41.9 — the lowest level since the aftermath of September, 11 2001 and the first contraction since March 2003. The report came in well below economists’ expectations of a reading of 53. Similar to its bigger cousin, the ISM Manufacturing Index, a reading of 50 or larger indicates expansion and under 50 is a contraction.
"This was certainly an unexpected piece of bad news. The magnitude of the miss below the estimates really got people’s attention," said Michael James, senior equity trader at Wedbush Morgan Securities in Los Angeles.
It’s important to note that the service sector makes up more than 80% of the U.S. economy. This report has increased the expectation from the market and economists that the economy is in a recession, which is defined as two straight quarters of negative growth.
“You could say [ISM] fell off a cliff. It’s given fuel for the bears to roam and continue to do what they do best: forecasting gloom and doom," said Peter Cardillo, chief market economist at Avalon Partners, who said he doesn’t believe the economy is in a recession.
“The economic indicators continue to send mixed signals. I still don’t see the recession," said Cardillo, pointing to positive manufacturing and durable goods reports in recent weeks.
Instead of releasing the ISM as scheduled at 10 a.m. EST, a possible breach of information forced the report to come out at 8:55 a.m. EST.
Typically, the ISM service index is not a market-mover. However, with earnings season winding down and no more economic reports on the horizon until Thursday’s jobless claims, the ISM report is all the market has to work with today.
Even though it’s more than a month away, the weak ISM figures had Wall Street increasing its expectation that the Federal Open Market Committee will cut interest rates again in March to encourage economic growth. Now the market is pricing in a 100% chance the FOMC will cut by another 0.50%.
Expectations have grown so much that Merill Lynch (MER: 54.50, -3.23, -5.59%) put out a note today to investors saying that there is even a chance the Fed will cut rates in an emergency action prior to its scheduled meeting next month. However, the Fed has already reduced interest rates by a full percentage point over the past two weeks.
Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, made comments today during a speech about the possibility of a recession.
"As I said, my sense is that the most likely path is sluggish growth in the near term. But I can also see the possibility of a mild recession, similar to the last two we have experienced - in other words, shallow and with a slow recovery. What I don’t expect is a more severe recession, like those we saw in 1982 or 1974," said Lacker.
He also expressed more worries about inflation, saying, "The longer we go experiencing only upside inflation misses, however, the more we risk losing the credibility we have fought so hard to maintain."
The financial sector is also reeling from more downgrades. After American Express (AXP: 45.70, -1.96, -4.11%), Wachovia (WB: 34.18, -1.35, -3.79%) and others were cut yesterday by analysts, it was Goldman Sachs’ (GS: 189.86, -10.94, -5.44%) turn today. The investment banking giant was lowered to perform from outperform "based solely on valuation" by Oppenheimer late yesterday, Dow Jones Newswires reported. Goldman has fallen more than 3% on the news.
Meanwhile, billionaire investor Warren Buffet squashed rumors today that he was preparing his own rescue plan for struggling bond insurers MBIA (MBI: 14.90, -0.49, -3.18%) and Ambac (ABK: 11.39, +0.03, +0.26%). He told Liz Claman of FOXBusiness: "We could have some kind of insurance transaction with them but we will not investing in them or any other bond insurer."
Homebuilders have been one of the onl

y bright spots, after an analyst from Bank of America (BAC: 42.37, -1.66, -3.77%) upgraded KB Home (KBH: 24.65, -1.51, -5.77%), MDC Holdings (MDC: 44.80, -0.60, -1.32%) and Pulte Homes (PHM: 14.75, -0.49, -3.21%) to a buy rating. Also, Toll Brothers (TOL: 21.87, -0.48, -2.14%) saw its rating change to neutral from sell.
Treasuries surged on the release of the ISM numbers, as traders fled to relative safety.
Crude oil futures slid to the lowest levels since Jan. 23 on fears of a recession lowering demand. Oil dropped $1.61 to end at  $88.41 a barrel in New York.
Corporate Movers
Disney (DIS: 30.07, -0.83, -2.68%) easily beat the street after today’s closing bell, earning 63 cents a share in the first quarter on revenue of $10.45 billion. Analysts polled by Thomson Financial expected the Dow component to post earnings of 52 cents a share. 
Financial Guaranty Insurance Co. could soon be bailed out by a group of major financial companies, led by French bank Credit Aricole’s investment banking arm Calyon, The Wall Street Journal reported today. The plan to rescue FGIC, which is a bond insurer that recently lost its "AAA" credit rating, would be similar to efforts to help bond insurer Ambac (ABK: 11.39, +0.03, +0.26%), the Journal reported. The other banks reportedly in the group include Citigroup (C: 27.05, -2.17, -7.42%), UBS (UBS: 38.19, -1.93, -4.81%), Societe Generale, HSBC (HBC: 74.04, -2.34, -3.06%) and Barclays,
Coca-Cola (KO: 57.40, -1.23, -2.09%) has agreed to terms to acquire a 40% stake in premium and organic tea maker Honest Tea, The Wall Street Journal reported this morning. The article, which cited unnamed people familiar with the situation, said the Dow beverage giant will have the chance to buy the company outright after three years.
Apple (AAPL: 129.36, -2.29, -1.73%) has unveiled new iPhone and iPod models that double the devices’ storage space. The new-16 gigabyte iPhone and 32 gigabyte iPod will be sold for $499. Apple is implementing its Multi-Touch system on both devices.
NYSE Euronext (NYX: 71.03, -11.70, -14.14%), the parent company of the New York Stock Exchange, plunged 13% today despite tripling its fourth-quarter earnings. Aided by a jump in trading volume, NYSE Euronext said it earned 66 cents a share excluding certain charges, in line with analyst estimates.
Whirlpool (WHR: 90.00, +8.41, +10.30%), the appliance manufacturer, posted a fourth-quarter profit that solidly beat Wall Street’s expectations. The company said it earned $187 million, or $2.38 a share, up from $109 million, or $1.37 a share, from a year ago. Analysts expected Whirlpool to earn $2.15 a share, according to Thomson Financial.
Toyota (TM: 105.37, -3.82, -3.49%) closed 3% lower today despite reporting its quarterly profit rose 7.5%. The strength from Toyota’s quarter was found in strong sales in Asia and Eastern Europe, which helped the automaker overcome relatively flat or falling sales in the U.S. and Europe. Global sales and earnings outlooks were left unchanged but Toyota did lower its Japanese, American and European sales forecasts.
GMAC Financial Services (GMC), the financing arm of General Motors (GM: 26.47, -1.10, -3.98%), is dealing with more turmoil from its subsidiary Residential Capital. Today, GMAC posted a $724 million loss in the fourth quarter, largely tied to losses from ResCap. Then GMAC and ResCap had their credit ratings cut by Moody’s Investor Services on concerns about liquidity. The outlook for both companies is negative, Moody’s said.
BHP Billiton (BHP: 69.48, -3.00, -4.13%), the mining giant contemplating making a formal offer to acquire Rio Tinto (RTP: 421.50, -10.66, -2.46%), closed 4% lower ahead of its earnings statement.
CSX (CSX: 47.34, -1.70, -3.46%) lost more than 2% today after a UBS analyst lowered the railroad company to "neutral" from "buy." The analyst also cut another railroad, Norfolk Southern (NSC: 52.97, -1.68, -3.07%), to neutral today. CSX is up more than 20% over the past four weeks, while Norfolk Southern has jumped 13% over that span. 
Sirf Technology (SIRF: 7.36, -8.91, -54.76%) has lost half of its market cap during today’s trading. After yesterday’s closing bell the microchip manufacturer posted an 89% plunge in fourth-quarter profit. Sirf said it earned 28 cents a share, 4 cents below mean analyst estimates from Thomson Financial. While analysts expect Sirf to earn 26 cents a share in the current quarter, the company said yesterday it sees a loss of 4 cents a share for the period.
World Markets
European markets fell sharply today, mirroring the losses on Wall Street. The Dow Jones Euro Stoxx 50 Index, the benchmark index tracking the 50 biggest companies in Europe, fell 150.08 points, or 3.88%, to 3717.08. In London, the FTSE 100 Index lost 158.20 points, or 2.63%, to 5868.00.
On the continent, Paris’s CAC 40 Index fell 196.78 points, or 3.96%, to 4776.86 and Germany’s DAX dropped 235.24 points, or 3.36%, to 6765.25.
Japan’s Nikkei 225 fell 114.20 points, or 0.82%, to 13745.50. Hong Kong’s Hang Seng Index slipped 223.38 points, or 0.89%, to 24808.70.
Data Dump
Retail sales nudged higher by 0.2% last week compared to a year ago, according to the Johnson Redbook Retail Sales Index. For the month of January, retail sales rose 0.5% over a year ago.