According to the Commerce Department, the economy grew at 3.1% during the fourth quarter, which is higher than analysts had been expecting to see. Going into today’s report analysts had been expecting to see revised GDP output of 3.0%.

Last month the Commerce Department made a preliminary forecast of 2.8% GDP growth during the fourth quarter.

Most analysts agree that GDP has continued to grow in the first quarter, but rising oil prices over the past month will probably prevent us from seeing the same sort of growth that the economy enjoyed during the fourth quarter.

A key ingredient to the current economic recovery is consumer spending. During the final 3 months of 2010 consumer spending rose 4.0%, which is the most it has risen during a 3 month period since the fourth quarter 2006.

In reaction to the news the DOW is currently up 0.3%, the NASDAQ has gained 0.3%, and the S&P is up 0.2%.

Shares of Caterpillar are up 4.5% on the day to $71.91, up $3.13 following better than expected results this morning before the market opened.

Analysts were forecasting $0.39 per share, and the company easily outpaced those estimates with a reported $0.50 per share.

Revenues were a bit shy of analyst estimates, but the stock is surging after it raised its forecast for full year 2010 to $2.50 to $3.25 a share, up from its previous forecast of $2.50 per share.

S&P boosted its price target on the stock to $80 a share, and maintained its Buy rating on the company.

The company noted that the global economy is definitely improving, and as a result construction has been rebounding. This helped pushed the overall market higher today, with the DOW up over 25 points in afternoon trading.

The DOW closed the session down 0.67%, the NASDAQ ended the day down 0.76%, while the S&P slipped by 0.8%.

General Electric started off the day off on a bad note when the company reported revenues that came up short of analyst estimates. GE was able to outpace analyst estimates for its earnings in the third quarter by posting 23 cents per share verse analyst estimates of 20 cents per share, but that was not enough to outweigh its missed revenues. The company reported $37.8 billion in revenues verse analyst estimates for $40.3 billion. Shares of GE closed the day down 4.2% to $16.08, down $0.71 on the day and wiping out $7.5 billion in market capitalization.

Bank of America was expected to show a loss for its third quarter of 21 cents per share, but the actual numbers came in worse than expected with a 26 cent loss in the quarter. The stock was hit hard today following the report, with shares falling 4.6% to $17.26, down $0.84 on the day.

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New 52 Week Highs:

There were several big name stocks that were able to set new 52 week highs today, despite the down market and include the following; Pfizer (NYSE: PFE), Halliburton (NYSE: HAL), Hewlett-Packard (NYSE: HPQ), and Mattel (NYSE: MAT).

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Analyst upgrades and downgrades:

Stocks upgraded today include:

• Gap Inc. (NYSE: GPS) upgraded by Caris to Buy from Above Average with $27 price target
• Safeway (NYSE: SWY) upgraded by Kevin Dann to Buy from Neutral and boosted its price target on the stock to $27 from $19 per share.
• Google (NASDAQ: GOOG) received an upgrade today by Benchmark Co. to a Buy from Hold, while lifting its price target on the stock to $625 from $500.

Stocks downgraded today include:

• Netflix (NASDAQ: NFLX) downgraded by Caris to Above Average from Buy with a $56 price target on the stock.
• Nokia (NYSE: NOK) downgraded by Gabelli to Hold from Buy.

For the week, the DOW was up 4%, with the Nasdaq and S&P both up an impressive 4.5%.

We got a couple pieces of good news today. The Commerce Department noted that the trade deficit fell by 3.6%, and we also got news that first time jobless claims fell last week to their lowest levels since January.

Major stocks hitting new 52 week highs were: Cisco Systems (CSCO), International Business Machines (IBM), Brocade (BRCD), Target (TGT), Schering Plough (SGP) and Pier One (PIR).

Today also marks the two year anniversary of the DOW’s all-time closing high of 14,165 on Oct. 9, 2007.

When the smoke finally settled this afternoon, the DOW showed a hefty 4.2% loss, closing all the way down at 6,763.29.  The NASDAQ also took a big hit today, giving back 3.99% in today’s trading to close down at 1.322.85.

We are now looking at a greater than 50% retraction in the major indexes since their historic highs set back in the summer of 2007.

Some analysts think that we are going to see the markets head down towards their 1995 levels. If that is the case, then you could expect to see the DOW drop down close to, if not under the 5,000 mark. Pretty scary thought.

The credit crunc, foreclosures, rising unemployment are the main culprits, and until we can see a stabilization in at least one of these areas, expect more downside. How much more downside remains to be seen, but for now the picture is definitely not looking too pretty.

The DOW was down 1.04% today, the NASDAQ traded 0.5% lower, and the S&P dropped another 1.0% in today’s trading.

For the week, the DOW dropped a total of 5.2%, and is sitting at lows that we have not seen since back in November when fear was running rapid among traders regarding the future of the economy.

One thing that is keeping traders in a selling mode is the waiting game to see what version of the current stimulus package actually gets approved. In today’s news, the House of Representatives passed their version on the stimulus package, a $787 billion plan to boost the economy. The next step is to get the bill pass the Senate, which is expected to cast its vote later today.

President Obama was optimistic that the bill had made it through the House, and now awaits to see if the Senate will send him the bill for his approval next week.

In other news today, two of the big banks, JPMorgan Chase, and Citigroup announced that they were enacting a moratorium on new foreclosures until they see what sort of plan Obama announces to help ease the huge increases in foreclosures that are hitting the market. Both banks have suspended new foreclosures until the first part of March in hopes of easing the pain that many homeowners are currently dealing with.

The markets will be closed on Monday, so we will have to wait until Tuesday to see if the market can make up some of its recent losses.

Enjoy your Valentines Day, and your long 3 day weekend.

Investors continue to express concern that the stimulus package that was recently passed in the House is not going to get passed when the Senate gets its chance to vote on the new plan. There is still a good deal of concern over what the new package is going to do to address the ailing bank industry.

Consumer spending fell again in December, as the Commerce Department announces that personal spending in December fell by another 1%, as incomes dropped by 0.2% in the month as layoffs continue to mount. Analysts had been expecting to see consumer spending off by 0.9% in the month.

• Chico’s FAS (CHS) : Thomas Weisel lifted its rating on the stock to a market weight.
• Estee Lauder (EL) : Piper Jaffray lifted its rating on the stock from a sell rating to a neutral.
• Jetblue (JBLU) : JPMorgan lifts its rating on the stock to a overweight.
• Trimble Navigation (TRMB) : Oppenheimer lifts this stock to an outperform

Look for another sell off on Wall Street, as futures are indicating a very sharp drop at the open. After the volatile week last week, many of us had some hopes that the Bush approved $700 billion bailout plan that was passed late on Friday would help spark a slight bounce, but that is not to be the case, and stocks are set for a much lower open to get the week started.

There is going to be a lot of pain out there today.

Futures are trading higher today, but it is going to take a lot more than one day of upside to make up what we lost yesterday.

Yesterday started off slowly as investors were skeptical that the proposed Bush bailout plan was going to be enough to save the troubled economy, but that fear turned to panic once the market realized that the plan was not going to go through all at yesterday afternoon.

Lawmakers are going to be on holiday until Thursday to observe the Jewish holidays, but there should still be some action taking place behind closed doors aimed at ironing out a new deal that will satisfy both Congress and Wall Street. We will see if / when that is able to take place.