From Briefing.com: 4:39 pm Weekly Wrap
What a remarkable week it was on Wall Street. Consider some of these finer points:
(1) Fannie Mae and Freddie Mac got taken over by the government (2) Lehman Bros. (LEH) plummeted 77% and was thought by many to be doomed to fail if it wasn't acquired by another company (3) Dow component AIG (AIG) dropped 46% on concern it needs to raise capital (4) the EU downgraded its economic growth forecast (5) retail sales were soft (6) auto companies were seeking billions in government loans to help meet new fuel efficiency standards and (7) a major hurricane barreled through the Gulf of Mexico, shutting in production and posing a serious threat to a large number of refineries.
There were plenty of other headlines, yet this particular grouping underscores why the market might have been expected to trade sharply lower. There were several angst-ridden trading moments, but at the end of the week it wasn't a case of recounting how much the market dropped. Rather, it was a case of recounting how much the market gained.
That's right. In spite of the all the worrisome headlines and the uncertainty surrounding the financial sector, the market ended the week higher, posting a gain of 0.8% to be exact.
It is the most intriguing gain seen in some time, yet it certainly fits with our assertion at the end of last week that we were likely to see a continuation of the roller coaster trading action.
There is little reason to think any differently going into next week, which will bring earnings reports from Goldman Sachs (GS), Morgan Stanley (MS) and Best Buy (BBY), an FOMC meeting, and several economic releases, including the CPI and Housing Starts reports.
Hopefully, what it won't bring is another cascade of dubious reports on the fate of major financial institutions.
Come Monday, though, there should be plenty to talk about, from the damage done by Hurricane Ike to the developments in the financial sector. Many participants expect discussions regarding the fate of Lehman Bros. to continue over the weekend and are braced for more news on that situation and others before trading begins Monday.
You may be wondering, then, how it was exactly that the market managed to hold up in the face of the alarming reports about Hurricane Ike and the financial sector. Well, it garnered support from General Motors (GM), which gained 21% this week, and other consumer discretionary issues, which continued to draw buying interest as oil prices continued to decline.
Oil settled the week at $101.18, down 4.8% from the prior week's close. That move was remarkable in itself given Ike's menacing manner and word from OPEC that it would get back to producing in accordance with agreed-upon production quotas, meaning supplies would be cut by roughly 500K barrels per day.
In Friday's trade, oil prices dinged $99.99 per barrel, which was the first reading below $100 in five months. The behavior of oil prices was viewed as a reflection of underlying concerns about a slowdown in global economic growth.
Recent trading in the energy and materials sectors has also captured those concerns; however, both areas caught a healthy bargain hunting bid late in the week that erased early week losses. From their lows on Thursday to the close on Friday, the energy and materials sectors rallied 6.9% and 7.9%, respectively.
Relative strength in the defensive-oriented health care, consumer staples and utilities sectors also played an influential part in propping up the broader market this week.
There is no telling whether the market will be on the defensive or on the offensive in the coming week. Things should remain volatile, which isn't a good thing, yet that shouldn't deter investors from dollar-cost averaging into their 401k and mutual funds. That said, this isn't the right environment for investors to be making big bets on individual stocks.
--Patrick J. O'Hare, Briefing.com
**For interested readers, the S&P 400 Midcap Index, which isn't included in the table below, gained 0.4% for the week and is down 8.1% year-to-date.
Index Started Week Ended Week Change % Change YTD
DJIA 11220.96 11421.99 201.03 1.8 % -13.9 %
Nasdaq 2255.88 2261.27 5.39 0.2 % -14.7 %
S&P 500 1242.31 1251.7 9.39 0.8 % -14.8 %
Russell 2000 718.85 720.26 1.41 0.2 % -6.0 %
10:03 am Intel: Q3 PC checks modestly weaker, cutting 2009 ests and tgt to $26 - FBR: . Friedman Billings says recent checks into Q3 PC builds with the top five notebook ODMs and top four desktop motherboard makers are modestly weaker than firm's month-ago checks and reflect slightly muted seasonal shipments now vs. in-line seasonal shipments one month ago... For Intel, with 3Q industry PC units still tracking to grow in the mid-teens sequentially, and with Montevina and Atom shipments ramping, they believe INTC is tracking towards the midpoint of its 3Q revenue guidance range. Intel's 4Q ests could be at risk, however, as the Street forecasts 7% sequential growth off of a strong base of 3Q shipments, and given that some of the new product 'goodness' seen in 3Q may not repeat in 4Q. Firm is lowering their tgt from $27 to $26, a steady 18x forward P/E multiple (2009). Firm cuts 2009 EPS ests from $1.45 to $1.40 (consensus $1.50).
8:00AM Trina Solar signs sales agreement with the Belgian Company Invictus; will supply Invictus with 20MW and 30MW for 2009 and 2010, respectively (TSL) 25.64 : Co announces that its subsidiary, Changzhou Trina Solar Energy has entered into a sales agreement with Invictus NV, a Belgium company. Under this two year agreement starting in 2009 with predetermined prices, co will supply Invictus with 20MW and 30MW for 2009 and 2010, respectively, with an option to purchase additional 10MW for each year. |
