Jim Cramer Blog

Last week, investors interpreted statements from the Federal Reserve Board's announcement that it would keep its primary interest rate at 5.25% as indicating the central bank might be moving towards a rate cut later in the year. Today, Fed Chairman Ben Bernanke suggested that investors may have jumped to that conclusion too quickly. Predictably, stocks sank today on renewed fears of inflation. The 10-year Treasury note also declined, while crude oil futures pushed above $64 a barrel.

Bernanke, in testimony before a joint congressional committee, said the decision to drop the long-standing phrase "additional firming" -- which was always interpretted to be code for "rate hike" -- was simply intended to give the bank "a bit more flexibility given the uncertainties that [the Fed is] facing and the risks that are occurring on both sides of [the Fed's] outlook." Inflation, Bernanke noted, remains a concern, but the economy is still growing, albeit more slowly than in previous years. He added that he does not expect the economy to slip into recession and that he sees no evidence that the problems occurring in the subprime sector are impacting the broader economy, which many investors have feared will happen.
Also weighing on stocks today was a weaker-than-expected rebound in durable goods orders in February. After a sharp -9.3% drop in January in orders for products expected to last at least three years, economists were looking for growth of 3.5% in February. According to the Commerce Department, durable goods orders rose by only 2.5% to a seasonally adjusted $207 billion.
Builders remained a focus of investors today. Beazer Homes USA (NYSE: BZH - News) sank -8.4% after the company confirmed that it is cooperating with a probe by several federal government agencies into its mortgage business. The company has not been accused of any wrongdoing at this point. Sinking for a second-consecutive day were shares of Lennar (NYSE: LEN - News), the Florida homebuilder that released sharply lower fiscal Q1 earnings yesterday. Following Lennar lower were Toll Brothers (NYSE: TOL - News), KB Home (NYSE: KBH - News), Pulte Homes (NYSE: PHM - News), and Hovnanian (NYSE: HOV - News).
Shares of Circuit City (NYSE: CC - News), the nation's No. 2 electronics retailer, moved higher after the company said it planned to cut about 8.5% of its in-store staff. The company said it would cut highly paid workers that earn "well above the market-based salary range for their role" and replace them with less costly workers. The company also plans to cut 130 corporate information technology jobs and outsource their functions to International Business Machines (NYSE: IBM - News). The nation's top electronics retailer, Best Buy (NYSE: BBY - News), closed lower.
Agriculture products giant and ethanol producer Archer Daniels Midland (NYSE: ADM - News) added 2.5% after Citigroup suggested the company will benefit from an expected drop in corn prices, which is a key ingredient in domestically produced ethanol. Fellow ethanol producer Verasun Energy (NYSE: VSE - News) also added 3.8%.

Labels: ADM, BBY, BZH, CC, HOV, IBM, KBH, LEN, PHM, TOL, VSE