An unsteady US Market ekes out gain for the week

Wal-Mart earning report and Technology sector fight hard to keep credit turmoil away

US Market ended the week with modest gains on Friday, 16 November, 2007. Indices registered substantial gains on Tuesday, 13 November and Friday, 16 November. Other days, market slipped. Ongoing concerns about the health of the financial sector and the overall economy continued. A profit warning from Fed-Ex dampened the outlook sentiment on the economy.

But amid that, couple of good earning reports, a dillydallying crude price and mainly the technology sector, helped market eke out some gains. The Dow Jones Industrial Average gained 134 points for the week. Tech - heavy Nasdaq gained 9 points. S&P 500 gained 5 points.

Market started off on a shaky note on Monday, 12 November mainly because of E*Trade Financial. There were reports in the market that company could face bankruptcy. E*Trade gave up almost 60% of its share price on that day. On the week, prior to that, the company announced it had observed continued declines in the fair value of its $3 billion asset-backed securities portfolio. The company stated that it expected the declines in fair value to result in further securities write-downs in the fourth quarter.

On Tuesday, 13 November, all ten economic sectors posted gains, headed by Financials and Technology sectors. Reassuring words from Goldman Sachs' chief executive that the investment bank won't be announcing a write-down like many of its peers, also added further fuel to the rally. Dow gained 320 points on that day.

On that day, Apple shares were up more than 10% on news that the company has almost finalized a deal to sell iPhon in China.

On Wednesday, a late hour sell-off triggered by some bad news in the financial sector sent stocks down and Dow closed 92 points lower for the day. Bear Stearns said it will write-down $1.2 billion of subprime-related assets in the fourth quarter and report a loss for the period. The write-down amount, though, was less than the market expected.

On Thursday, 15 November, above-expectation economic reports were overshadowed by the credit concerns in the market and market ended once again lower for the day. The financial sector came under pressure today after London - based Barclays disclosed net charges and write-downs of $2.67 billion. But the amount was far less than what was expected.

But on Friday, 16 November, it was all Cisco Systems. The company announced that its board had authorized an additional $10 billion for stock repurchases, bringing the total authorization for the buyback plan to a whopping $62 billion. This news provided a boost to Cisco's stock that contributed to the relative outperformance of the Nasdaq, as well as the technology sector.

Among major news in the merger and acquisitions sector, IBM announced a $5 billion all-cash offer to acquire Canadian software company Cognos. It was also reported that the nation's second and third largest airlines, United Airlines and Delta Airlines are in talks regarding a possible merger.

On the earnings front, Wal-Mart reported third quarter results ahead of analysts' expectations on improved performance in the U.S. The company also raised its projected earnings for the year as it heads into the important holiday selling season. On the other hand, Dow component Home Depot reported disappointing earnings.

Among major economic news hitting the market during the week, the government reported a 0.3% increase in the consumer-price index in October, with a 1.4% gain in energy prices fueling the rise. The core CPI, which excludes food and energy costs, gained 0.2% in October. The data were in line with economists' expectations. Data showed no sign of significant inflationary pressure.

New claims for unemployment for the week ended 10 November which rose to 339,000 from 319,000 the week before remained at levels well below recessionary trends. Economists were expecting a reading of 325,000.

Other than the above, two regional manufacturing surveys were released, the Empire State Index and the Philadelphia Fed, both topping economists expectations.

Federal Reserve reported on Friday, 16 November, that industrial production fell 0.5% last month, due in part to continued problems in automotive and housing-related industries. That was much weaker than the 0.1% gain that had been expected.

Executive Summary

For the week, indices registered gains. DJIx closed up by 1.02% and S&P 500 closed up by 0.3%. Nasdaq too gained a paltry 0.4%. A profit warning from Fed-Ex dampened the outlook sentiment on the economy. Worrying news from Financial sector continued.

Good news from Wal-Mart regarding its earnings report and a strong news from Cisco Systems at the end of the week, helped market register the gains for the week.

For the year, Dow is up by 5.7%, Nasdaq is up by 9.2% and S&P 500 is up by 2.9%.