Sam Collins

Traders Booking Year-end Profits

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A weak financial sector, plus a threat of inflation coupled with low or no growth (stagflation), hit the markets yesterday, and investors didn't like it. The banks were the hardest hit as they struggled with credit card write-downs and shareholder dilution.

Bank of America (BAC), the Dow 30's weakest component, fell 2.8% after a write-off of 13% of its credit card debt in November. And JPMorgan Chase (JPM) followed, writing off 8.8% of November loans up from 8.02% in October, according to the Wall Street Journal. Citigroup (C) fell 3.8% to close at $3.56 a share, and the company is expected to place a $17 billion public offering today.

The U.S. dollar rose again, driving the Dollar Index to a two-month high, and that put additional pressure on stocks. 

With the November producer price index (PPI) up 1.8%, versus a prediction of 0.8%, and the Empire State Manufacturing Index for December at 2.55, far below the 24 that had been forecast, the problem of inflation with no growth was on everyone's mind. 

Thus, today's focus will be on the Federal Open Market Committee's report due at 2:15 p.m. today, and close attention will be paid to the comments in the report for any hints of when the Fed might ease off of their current easy money strategy. 

At the close, the Dow Jones Industrial Average (DJI) was down 49 points to 10,452, the S&P 500 (SPX) fell 6 points to 1,108, and the Nasdaq (NASD) lost 11 points to 2,201.

The NYSE traded 1.2 billion shares with decliners ahead of advancers by 3-to-2. On the Nasdaq, declining stocks led by 2-to-1 on volume of 575 million shares.

Despite a rising dollar, January crude oil rose $1.18 to $70.69 a barrel for the first increase in price since Dec. 1. The Energy Select Sector SPDR (XLE) gained 18 cents to close at $56.28. 

February gold fell 80 cents to settle at $1,123 an ounce, and the PHLX Gold/Silver Sector Index (XAU) fell $3.22 to close at $171.16.