Traders-Blog.com

Today the Dow fell 75.37 points to close at 10,766.23. Besides, both the Nasdaq and the S&P did bad today. The Nasdaq fell 13.68 points to close at 2,051.72, while the S&P closed at 1,203.60 after falling 7.77 points. Indexes ended lower today because of political upheaval in Lebanon, and investor’s fear of inflation.

Investors were concerned about the news that the government of Lebanese Prime Minister Omar Karami had decided to resign due to massive street protests. The murder of Hariri in Beirut set off popular protests against Karame’s government. The U.S. has also said that Syria is not securing its borders, nor stopping infiltration by Islamit fighters into neighboring Irak. Karame announced his resignation during a parliamentary debate over Hariri’s death.

Shares in Biogen Idec and its partner Elan plunged after they suspended sales of their multiple sclerosis drug Tysabri. Despite the revelation about a drug that Standard & Poor’s presented as “one of the top 10 drugs to watch this year”, Kelly Martin, CEO of Elan, said that the drug may return to the marketplace late summer or fall of 2005 assuming the Food and Drug Administration agrees. Tysabri is the first biotech drug to be withdrawn for the market. Biogen Idec fell $30 or 44.6 percent, to $37.29. However, Elan did worse because it fell $17.74 or 66 percent to $9.16.

U.S. spending is decreasing but inflation is going up. Nominal income fell 2.3 percent, marking the largest decline in 11 years in a reversal of December’s record 3.7 percent. This gain was tied to Microsoft payment of a special dividend to shareholders. Excluding effects of the one-time Microsoft payment, income rose 0.5 percent in January after a 0.6 percent gain in December. Since inflation is heating up and spending is faltering, then there is a possibility of stagflation in the U.S. economy.

Continental Airlines, the Houston-based airline, reaches agreement with its pilots, flight attendants, mechanics, and other unions that, when implemented, would bring $500 million in annual cost savings. The airline said that wage and benefit cuts agreed to with the unions would take effect at the end of March. Besides, the cost cuts are also crucial to refinancing $642 million in debt that will come due this year. Continental shares were up 4.6 percent in after-hours trading.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter