Stimulate Me!

The markets look for excuses to do what they were going to do anyway. And apparently Ben Bernanke provided ample opportunity this week during his testimony to Congress. As usual, the Fed chairman was peppered with the standard politically-loaded questions from Democrats and Republicans alike. What was unusual—and for many critics, maddening—was Chairman Bernanke's willingness to engage in these issues of fiscal policy and potential economic stimulus as opposed to affirming what the Federal Reserve is supposed to do in times like these: lean on the banks to loan money.

Wayne Angell, former Federal Reserve governor appeared on CNBC's unabashedly bullish, Kudlow & Company program yesterday to say just that. For people like Angell, the Fed's next moves aren't rocket science: First, be in charge. The Fed needs to tell Congress that the Fed will take care of the problem. Second, make the markets an offer they can't refuse: move the Fed funds rate so low that even mortgage-backed securities don't sound as scary as they used to. As preposterous as it may sound in this week of more billion dollar write-downs due to subprime mortgage exposure, Angell's approach is textbook Greenspan from the earlier part of this new century.

"When are they going to get their checks?" might have been the most telling question asked by the media at the press conference held by Treasury secretary Paulson on Friday. The reporter was asking specifically about the rebate checks that are allegedly part of the White Houses economic stimulus plan. But it was also a great expression of the sort of impatience, the sense of frustration that more and more people are feeling as the correction continues to drive stock prices lower. You couldn't help but be reminded of how the administration sounded explaining its Katrina disaster relief efforts, or the various setbacks in Iraq or Afghanistan. The sense of impending defeat and the cry for Hail Mary efforts to save the day are all important ingredients in any capitulation that will lead eventually to a turn around in mood and potentially a significant market bottom.

Stimulation Nation

Speaking of desperate measures, you couldn't cross the street in Washington, D.C. these days without bumping into somebody's stimulus package. As the markets broke down severely this week, everyone from the presidential candidates to the Fed chairman himself went out of their way to suggest short-term solutions--or maybe just palliatives--for the market's pain. The current, $140 billion stimulus plan offered by President Bush on Friday is likely to involve tax rebates to the tune of $800 for individuals and $1600 for families. Answering questions from reporters on Friday, Treasury Secretary Paulson pointed to the success of tax stimulus in 2001 and 2003, and emphasized that the bulk of the relief should be targeted toward consumers and taxpayers.

Any final stimulus plan will eventually have to be worked out between the White House and Congress. And partisanship aside, it is in both parties' interests to put some sugar in the bowl within the next few months. The question for investors is whether or not any stimulus-related surge will provide broader economic cover for the financial economy to get its act together through whatever Mother of All Writedowns still remain.

Stocks in the News

Shares of IBM (IBM | Quote | Chart | News | PowerRating) rallied late in a week that began with the company announcing a 24% gain in fourth quarter EPS. Overseas sales growth was credited for company's strong outlook going forward.

Forest Labs (FRX | Quote | Chart | News | PowerRating) this week announced quarterly earnings gains of more than 20%. Key factors included strong sales of the company's drugs for the treatment of both Alzheimer's disease and diabetes.

The world's largest brokerage firm, Merrill Lynch (MER | Quote | Chart | News | PowerRating) reported record losses, announcing that it would have to write down more than $16 billion because of assets tied to subprime mortgages.

Sears (SHLD | Quote | Chart | News | PowerRating) was downgraded from "neutral" to "sell" by Goldman Sachs early in the week, as Sears reported weaker than expected December sales. Competition from other retailers, as well as credit crunch both blamed for the retailer's setbacks.

The long pursuit over, Oracle (ORCL | Quote | Chart | News | PowerRating) finally managed to acquire BEA Systems. The business software giant paid a premium of 24% for the smaller rival.

Profits surged at TD Ameritrade (AMTD | Quote | Chart | News | PowerRating) due to growth in customer assets as well as increased trading activity. Earnings were up 65% for the quarter for the online brokerage.

Citigroup (C | Quote | Chart | News | PowerRating) announced its "worst quarter ever" this week. Writedowns of as much as $18 billion, a 40% cut in its dividend and 20,000 workers about to lose their jobs represented Citigroup's contribution to the difficult times on Wall Street.

What to Look for Next Week

Monday: None. Markets Closed for Holiday
Tuesday: Treasury Auctions / Fed Manufacturing Index
Wedneday: Mortgage Refinancing Index / Chain Store, Retail Sales
Thursday: Jobless Claims / Existing Home Sales / Money Supply
Friday: None

Best Performing Stocks (PR 8-10) of the Last Five Days

Here are some of the best performing, high Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings of 8, 9, or 10.

PowerShares DB Agriculture Fund ETF (DBA@DBA | Quote | Chart | News | PowerRating). Long Term PowerRating 10
Stericycle (SRCL@SRCL | Quote | Chart | News | PowerRating). Long Term PowerRating 9
Pediatrix Medical Group (PDX@PDX | Quote | Chart | News | PowerRating). Long Term PowerRating 9
Becton Dickiinson & Company (BDX@BDX | Quote | Chart | News | PowerRating). Long Term PowerRating 9
Affiliated Computer Services (ACS@ACS | Quote | Chart | News | PowerRating). Long Term PowerRating 8

Worst Performing Stocks (PR 1-3) of the Last Five Days

Here are some of the worst performing, low Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings 2.

Countrywide Financial (CFC@CFC | Quote | Chart | News | PowerRating). Long Term PowerRating: 2
Ambac Financial Group (ABK@ABK | Quote | Chart | News | PowerRating). Long Term PowerRating: 2
Dryships (DRYS@DRYS | Quote | Chart | News | PowerRating). Long Term PowerRating: 2
Genco Shipping and Trading (GNK@GNK | Quote | Chart | News | PowerRating). Long Term PowerRating: 2
J Crew Group (JCG@JCG | Quote | Chart | News | PowerRating). Long Term PowerRating : 2

David Penn is Senior Editor at PowerRatings.net.