The End of February…. Stock Market volatility, All eyes on FED and Economic numbers.

It had been an interesting weeks of sorts with the S&P and DOW hitting highs of 1,380s and 12,700s respectively during the week. The week’s market gain was lost today with the S&P and DOW  back down to the 1,335 and 12,301 respectively.  So what happened here? To put it simply; consumer spending and the high price of oil. If you recall in my earlier post i outlined a simplistic model on the types of recessions and the two variables affecting the economy (Consumer spending and Housing). With the current Housing problems, many eyes may very well be on consumer spending on indicating the condition and possible short term direction of the economy. Yesterday’s news indicated that consumer spending has been flat  since January and as expected the market took a hit downwards to our current levels. The Market seems to be trading back to the 13,25-40s ranges for the S&P.

Fridays have traditionally tended to be difficult days to trade due to lack of liquidity and volume. Major moves were all taken up close to the open and not surprisingly in one direction. JP Morgan (JPM) was a great short today with the stock down $1.50 currently. Decent volume of around 22 million shares allowed some adequate size positions to be taken during the open. As expected Financials are taking a hit today with Citi Group (C) down almost 88 cents. The Big story today was ofcourse American International Group (AIG) which is down more than 7% ($3.70). AIG posted around $5.3 billion in losses mainly due to the credit crisis which have affected so many financials. They apparently also own $42 billion in bonds which are insured by bond insurers. I talked earlier about the recent problems in the Bond insurance sector and this may not bode to well for AIG or the market. The Pit today at the Chicago merchantile Exchange also appeared confused and the bears seemed to be back in significant strength. 

All eyes should be on the FED and econonomic data in the month of March. There are already rumours on the market that the FED might cut rates ahead of their upcoming meeting. Speculations on a .75 cut may also be in the play.

-Danial Jameel (www.daytraderlog.com)