It was a historic day in Washington as the country welcomed a new first family. However by the time the day was over, Wall Street was back to its sell off mode on a fresh set of financial worries. We had not seen such a sharp move in the market this year. The Dow Jones industrial average fell 332.13, or 4.01%, to 7,949.09, its lowest close since Nov. 20, when the blue chips ended at 7,552.29 which had been their lowest level in more than five years. It was also the index’s biggest drop since Dec. 1. The Standard & Poor’s 500 index fell 44.90, or 5.28%, to 805.22, and the Nasdaq composite index fell 88.47, or 5.78%, to 1,440.86. The Russell 2000 index of smaller companies got hammered, falling 32.80, or 7.03%, to 433.65.

Morning Outlook

Markets dropped sharply overnight on the same fears in the banking sector that were felt on Wall Street a day earlier. In Europe, Britain’s benchmark FTSE 100 index was down 2.0% at 4,008.83. Germany’s DAX also fell 2.0%, to 4,154.80, while France’s CAC 40 dropped 2.6% to 2,849.77.

Is Asia Japan’s Nikkei 225 closed down 2% at 7,901.64, while Hong Kong’s Hang Seng Index lost 2.9% to 12,578.58.

Futures are looking for a Wall Street rebound, as Dow Jones industrial average futures rose 91, or 1.15%, to 8,036. Standard & Poor’s 500 index futures gained 9, or 1.12%, to 815, while Nasdaq 100 index futures rose 7.25, or 0.63%, to 1,154.75.

On the Corporate Front

Warner Bros. Entertainment, a division of Time Warner, said it plans to lay off approximately 800 workers, comprising 10% of their staff worldwide due to the current economic climate.

IBM Corp. forecast significantly higher profits for 2009 than Wall Street expected, predicting at least $9.20 per share in profit in 2009 compared to analyst’s expectations of $8.75 a share. The company reported net income in the fourth quarter of 2008 was $4.4 billion, or $3.28 per share, a 12 percent profit increase from $3.95 billion, or $2.80 per share, in the same period a year earlier despite the economic turmoil.

Economic Calendar

7:45 AM
ICSC-Goldman Store Sales: Weekly measure of comparable store sales at major retail chains, published by the International Council of Shopping Centers. The figure accounts for roughly 10% of total retail sales.

10:35 AM
EIA Petroleum Status Report: The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S. With the sharp fall in crude, it will be interesting to see if demand has continued to taper off as well. Any unexpected drop in inventories could signal strength in the economy, however a move up in crude oil prices could spark further inflationary fears and we could see a rebound in commodity prices.

1:00 PM
Housing Market Index: Based on a survey in which respondents from The National Association of Home Builders are asked to rate the general economy and housing market conditions.