MARKET SNAPSHOT: Stocks Extend 12-year Lows As Strategists Debate Significance

By Kate Gibson

As U.S. stocks tried and failed Tuesday to bounce back from the prior session's stumble to 12-year lows, analysts, technicians and would-be historians debated the significance of the declines, which may or may not signal an important market milestone.

On Tuesday, utility shares led losses, as the S&P 500 Index slid to its first close under 700 since Oct. 28, 1996, with a passel of testimony from federal officials doing nothing to calm jitters about the recession and the ailing financial system.

"Certainly when that November low of 750 was breached, getting to 700 happened relatively quickly. It's the economy and the extent [to which] corporate earnings have deteriorated," said Dean Curnutt, president of Macro Risk Advisors. "Folks are walking down the street and seeing a lot of empty storefronts."

After trading in a 150-point range on either side of zero during the day, the Dow Jones Industrial Average fell 37.27 points, or 0.6%, to 6,726.02. The S&P 500 declined 4.49 points, or 0.6%, to 696.33, and the Nasdaq Composite (RIXF) declined 1.84 points, or 0.1%, to 1,321.01.

On Monday, the Dow had closed at 6,763, a level not seen since 1997. If nothing else, the breach of 12-year lows is unusual. Other than Monday's retesting of 1997 lows, such a crossing has occurred only twice before, on Dec. 6, 1974, and April 8, 1932.

BOND REPORT: Treasurys End Higher As Stocks Hit Fresh 12-year Lows

By Nick Godt

Treasurys rose on Tuesday, while yields fell, after stocks made fresh 12- year lows after weak housing and auto sales data, along with a bleak assessment of the economy from Federal Reserve Chairman Ben Bernanke.

Speaking on Capitol Hill, Bernanke said that the most recent economic data, including on the labor market, showed little sign of improvement in recent weeks.

Reversing morning gains, government bonds returned to positive ground, sending their yields lower. Yields on benchmark 10-year Treasury notes (UST10Y) fell fractionally to 2.879%. Yields on two-year notes (UST2YR) were flat at 0.883%, while those on 30-year bonds (UST30Y) fell 1 basis points to 3.603%.

Bond prices move inversely to their yields.

Treasurys rose sharply on Monday as stocks tumbled to 12-year lows amid fresh concerns over the health of financial firms such AIG (AIG).

After rising firmly in morning trade Tuesday, stocks turned negative. The Dow Jones Industrial Average finished down 37 points at 6,726. The S&P 500 index dipped 4 points to 696, marking its first close below 700 since Oct. 28, 1996. the Nasdaq Composite (RIXF) lost 1 point to 1,321.

General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLC said U.S. vehicle sales fell at least 44% in February.

Investors also failed to react positively to remarks from Treasury Secretary Timothy Geithner who spoke on the budget and didn't provide additional details on how the government intends to deal with the toxic assets that still plague banks' balance sheets.

MARKET SNAPSHOT: Dow Heads To Worst February Point Drop Ever; S P's Close Eyed

By Kate Gibson

As stocks on Friday meandered to another month of losses, investors were especially focused on the S&P 500 Index and whether the broad market gauge would close above or below its November lows, with a finish above 740 to 750 seen as a victory of sorts.

"Only on a two-day close below 740 will I run for the hills. A close over 740 today would be considered a successful test of the November 2008 low," said Elliot Spar, market strategist at Stifel Nicolaus.

The S&P closed at 752.44 on Nov. 20, though the benchmark on Monday undercut that prior bear-market low.

"Hopefully we can get back to 800 on the S&P, but first we have to get past resistance at 752. If we can close above that one resistance level I think it would be a mild positive," said Robert Pavlik, chief market strategist at Banyan Partners LLC.

On Friday, financials led the declines, with Citigroup Inc. (C) down 39% on news the U.S. government was hiking its stake in the battered bank. .

Energy shares led sector gains and helped some in offsetting the damage that had the S&P falling to a 12-year low before bouncing back.

At 3:30 p.m. Eastern, the S&P 500 (SPX) was down 13.48 points to 739.35, while the Dow Jones Industrial Average (DJI) was off 82.75 points to 7,099.33.

The technology laden Nasdaq Composite (RIXF) fell 3.94 points to 1,387.53.

UPDATE: Frozen Food Fight Helps Consumers, Threatens To Burn Producers

By Matt Andrejczak

SAN FRANCISCO (Dow Jones) -- A bruising battle for market share that has rattled frozen food aisles for months shows no sign of abating.

This is good news for cash-starved consumers eager to upgrade from Salisbury steak. But it could crimp earnings at H.J. Heinz, ConAgra Foods and Nestle S.A., top sellers of frozen entrees in the U.S., if it goes on much longer.

Heinz, best known for its ketchup, makes Smart Ones, Boston Market and TGI Friday frozen meals. ConAgra sells Healthy Choice, Marie Callender and Banquet, while market leader Nestle owns Lean Cuisine, Hot Pockets and Stouffer's.

Bill Johnson, chief executive at Heinz, said aggressive promotions will squeeze industry margins and devalue the frozen food category if they persist. So far, Heinz has resisted matching the deep discounts of competitors even though this decision has undercut sales.

While Heinz does not break out frozen food sales in its financial statements, the company is the second-largest provider of frozen prepared meals in the U.S. Smart Ones holds a 27% U.S. share, Ore-Ida, 50%, and TGI Friday's, 17%, according to data the company cites from researcher A.C. Nielsen.

"We expect to lose some share rather than chase volume to achieve an end result that could be best described as profitless prosperity," Johnson said at a recent analyst conference in Boca Raton, Fla.

UPDATE: Lessons Learned Keep Airlines Safe Despite Recent Headlines

By Christopher Hinton

NEW YORK (Dow Jones) -- After two years of a nearly flawless safety record, airlines are again under the microscope following a rash of accidents that have left 59 people dead.

But airline industry experts say the recent plane crashes in New York City, Buffalo, N.Y., London and Amsterdam aren't related, and that they're only attention grabbing now after years of improving safety standards and falling fatalities.

"It's one of those coincidental things," said Todd Curtis, an aviation expert and founder of AirSafe.com. "Clearly, because of the world we live in, when you have events like this it gets a lot of attention and the public perception of aviation safety is heightened, but the risk continues to decrease."

Indeed, the number of international accidents for this year is down sharply, with just 5 substantial accidents -- those where the aircraft's hull has been breached -- for all of January compared to 15 last year, said Martine Ohayon, a spokesperson with the International Air Transport Association, or IATA.

BOND REPORT: Treasurys Edge Up As Stocks Flounder

By Deborah Levine

Treasury prices posted slight gains Monday, erasing earlier losses, as stocks compounded their losses while investors fretted about how the government will support financial institutions.

Ten-year note yields (UST10Y) slid 1 basis point to 2.78%, after earlier reaching 2.88% earlier. A basis point is 0.01%.

Yields on 2-year notes (UST2YR), which move inversely to prices, inched down 1 basis point to 0.94%, after having briefly risen above the 1% mark for the first time since Feb. 10.

Bonds retraced losses as U.S equities surrendered early gains, indicating continued concerns about the banking sector after the government detailed plans to begin "stress tests" of financial institutions.

"There are a lot more questions than answers right now," said Mario De Rose, a fixed-income strategist at Edward Jones & Co.

Safe havens such as U.S. government debt typically draw money from investors are shying away from riskier assets, like equities.

"The market is probably going to stay in a relatively narrow range until we get more answers about the banks," De Rose said.

LATIN AMERICAN MARKETS: Cemex, U.S. Bank System Worries Pull Mexico To Four-month Low

By Carla Mozee

Mexican equities were knocked back to four-month lows Monday, with losses suffered by cement maker Cemex SAB after a ratings downgrade and pressure from Wall Street, where stocks crumbled to 12-year lows.

Mexico's IPC fell 2% to 17,956.40. It was the lowest close for the benchmark since Oct. 23, and its fifth decline in a row.

On Wall Street, investors remained on edge as the U.S. government prepared to release details this week about stress tests it plans to administer to financial institutions. The S&P 500 Index (SPX) dropped 3.5% to 743.33, and the Dow Jones Industrial Average (DJI) fell 3.4% to 7,114.78.

Among the measures, bank regulators will consider how much capital a bank has left if it were to register its losses immediately. Companies that fail tests could be forced to accept investment from or be nationalized by the government.

In Mexico City, shares of Cemex (CX) stumbled 4.9% after Fitch Ratings cut the company's credit ratings, saying the company is facing a heavy debt load while three of its key markets -- the U.S., Spain and the U.K. -- are in " unprecedented downturns." Cemex is the largest provider of ready-mix concrete and cement to the U.S.

Consumer prices show first gains in several months

Consumer prices increased in January for the first time in several months, according to new figures from the Department of Labor.

The department's latest Consumer Price Index summary found a 0.3 percent increase in the cost of consumer goods, largely due to rising energy prices. The index had actually declined for three consecutive months prior to January following two months of zero percent change.

"A bit of inflation is encouraging. It means businesses aren’t completely giving up and slashing prices. The fact that they can at least hold the line on their price cuts is a positive," Mark Zandi of Moody's Economy was quoted as saying in a New York Times report.

In the Labor Department's report, transportation costs were up 1.3 percent while energy was up 1.7 percent. Other categories such as housing and food posted much smaller changes of less than 0.5 percent.

The latest figures may help calm some lingering fears among analysts about the possibility of deflation further impacting the recession, although much of this will depend on whether the recession continues to deepen in the coming months.

UPDATE: Citi, Bank Of America Fall Further On Nationalization Concern

By Alistair Barr

SAN FRANCISCO (Dow Jones) -- Bank of America Corp. shares hit a record low and Citigroup Corp.'s stock slumped to an 18-year low Friday, as the two financial giants faced investors' concerns they may be nationalized.

Citigroup shares dropped 33% to $1.68, their lowest level since early 1991. Bank of America fell 29% to $2.81, and earlier changed hands at a lowest-ever $ 2.53, according to FactSet Research data.

A Citigroup (C) spokesman highlighted the bank's high Tier 1 capital ratio, a measure of financial strength, and said it continues to cut assets on its balance sheet, reduce expenses and streamline its businesses for future " profitable growth." He declined to comment further.

Citi isn't having conversations with the U.S. government about nationalization, Reuters reported, citing two unidentified people close to the New York-based bank. However, those people also said the U.S. Treasury has not disclosed much more to Citigroup than it has to the broader public about its plans for the banking sector.

"We see no reason to nationalize a bank that is profitable, well capitalized and actively lending," said Scott Silvestri, a spokesman at Bank of America ( BAC).

LATIN AMERICAN MARKETS: Mexico's Rate Cut Falls Short Of Expectations; Vale Shares Drop

By Carla Mozee

Investors drove Mexico's equity market and its currency down Friday after the central bank's interest-rate cut wasn't as deep as expected.

After the rate decision, data released showed the first contraction in the Mexican economy since 2003.

Mexico's IPC posted its fourth loss in a row, finishing 1.9% lower at 18, 324.23.

Shares of interest-rate sensitive banks finished mixed. Grupo Financiero Banorte slumped 1% and Banco Compartamos fell 1.6%. Grupo Financiero Inbursa reversed declines and rose 1.9%.

The Bank of Mexico on Friday lowered its benchmark interest rate by 25 basis points to 7.5%. The decision was below the market estimate for a half-percentage point cut.

"Manufacturing in Mexico is really collapsing and, for that reason, they need as much monetary help that they can get. A 25 basis-points cut was really somewhat meaningless," said Doug Smith, head of Latin American research at Standard Chartered Bank, in a telephone interview.