Economy Makes for Mixed Market

Major indexes came off earlier lows Friday February 20th after the Dow reached a six-year low in the previous session. Big banks remained in the spotlight amid nationalization fears. U.S. stocks were mixed in early trading Friday amid market volatility as February options contracts expire. Major indexes came up from earlier lows following Thursday’s skid in the Dow Jones industrial average through its Nov. 20 bear market low to a six-year low. The Dow is off 47% in the 16-month slide.

Today the 30-stock Dow Jones industrial average was lower by 44.21 points, or 0.59%, at 7,421.74. The broad S&P 500 index fell 5.66 points, or 0.73%, to 773.28. The tech-heavy Nasdaq composite index was up 1.81 points, or 0.13%, to 1,444.63.

On the NYSE, 21 stocks were lower in price for every six that advanced. Nasdaq breadth was 14-8 negative. Trading was relatively active.

The financial sector remained in the spotlight Friday amid concerns that big banks may be nationalized. Bank of America (BAC) Chairman and Chief Executive Kenneth Lewis told Bank of America executives at a senior leadership meeting on Thursday that Washington policy officials have assured him that the possibility of nationalizing the largest U.S. bank by assets is not on the table, the newspaper said, citing a person at the meeting.

Separately, Lewis was subpoenaed last week by New York Attorney General Andrew Cuomo, who is investigating whether the bank violated state law by withholding information from investors, the Wall Street Journal said. Investigators took testimony all day Thursday from former Merrill Chief Executive John Thain, the newspaper said. Thain was asked about $4 billion in bonuses paid to Merrill employees, and in particular why Bank of America’s merger agreement with Merrill contained a nonpublic attachment outlining the maximum Merrill could pay, the newspaper said.

The troubled newspaper industry remained in the headlines. The New York Times Co. (NYT) said its board voted to suspend the quarterly dividend on the company’s Class A and Class B common stock. In November, 2008, the company reduced the payout level of its fourth quarter to $0.06 per share from $0.23 per share in the 2008 third quarter. Let’s further look at the analysis of the US Economy here below:

Shares of Chiquita Brands International (CQB) tumbled Friday after the company posted a $0.74 fourth-quarter non-GAAP loss per share vs. $0.02 EPS on flat sales, higher costs including flood impacts, a weaker euro, and lower performance in salads. The company expects to deliver improved full-year results in 2009.

In recent economic stock news, U.S. CPI rose 0.3%, with the core rate up 0.2% in January. That follows a revised 0.8% decline in December headline index (was -0.7%), and a flat reading on the core. Gains were widespread following several months of declines and should help unwind deflation fears. Energy prices rose 1.7%, rebounding from a 9.3% December decline. Gas prices rose 6.0% after a 19.3% drop in December. Food prices edged up 0.1%. In the housing sector, the owners’ equivalent rent measure rose 0.3%. Apparel prices rose 0.3%. Medical care costs are up 0.4%, and tobacco prices are up 0.8%. The data are close to expectations and should have little effect on the markets.

The euro headed lower vs. the U.S. dollar Friday as worries about trouble in Eastern Europe encouraged investors to flee to safer assets. Traders were nervous about damage to the European banking industry from struggling economies on the euro zone’s periphery and in Eastern Europe, says S&P.