A dismal week for US Market

Tax relief and recession warding plans by the President fail to cheer market

Barring Monday, 14 January, 2008, US Market closed lower on all the days of the week that ended on Friday, 18 January, 2008. While IBM earnings tried to give the week a good start, market ran out of gas in the subsequent days following concerns about the global economy and business spending.

Disappointing earning reports from Citigroup and Intel also made sentiments extremely shaky during the week. Weak retail sales data for December 2007 from the Commerce Department raised concerns about the health of the economy and thus increased hopes for aggressive Fed action at its meeting later this month.

The Dow Jones Industrial Average lost 507 points for the week. Tech - heavy Nasdaq lost 100 points. S&P 500 lost 75.8 points. Percentage wise, S&P 500 suffered the maximum losses.

On Monday, 14 January, 2008, with the help of IBM, stocks ended higher but mixed. IBM announced revenues and earnings ahead of analysts' expectations. IBM also said that the results were driven by "strong operational performance in Asia, Europe and emerging countries."

On Tuesday, 15 January, dismal earnings report from Citigroup and a disappointing retail data from the Commerce Department sent stocks bleeding for the entire day and market erased all of Monday’s gains. The Dow Jones industrial Average finally ended the day with a loss of 278 points and Nasdaq Composite Index, finished lower by 60 points.

Citigroup reported a net loss of $9.83 billion on a 70% decline in revenues. The loss was led by a $18.1 billion write-down in subprime exposure and fixed income markets as well as a $4.1 billion increase in credit cost, primarily due to "higher current and estimated losses on consumer loans." The company also cut its dividend by 40%.

The negative sentiment continued through Wednesday, 16 January, 2008 and Thursday, 17 January, 2008 when the market digested disappointing results from technology bellwether Intel and Merrill Lynch. Intel reported lower than expected fourth quarter revenues and earnings, and tempered its guidance for the first quarter. Merrill Lynch posted a net loss from continuing operations of $10.3 billion during the quarter.

After opening higher Friday, 18 January, 2008 due to strong results from Dow component General Electric, the stock market turned lower during the day. Concerns about a possible recession and the troubled state of bond insurers Ambac Financial and MBIA continued to weigh on sentiment and canceled the rally effort.

Dow lost 60 points on Friday despite a plan presented by President Bush that called for roughly $145 billion worth of tax relief and other incentives to boost the slowing economy and help stave off a recession.

On the economic front during the week, Commerce Department reported that U.S. retail sales fell 0.4% (against expected figure of 0.1%) in December, the first decline in six months. The figure capped the weakest year since 2002. But a government report showed core inflation trends remained steady. The Philadelphia Fed report showed manufacturing activity in the mid-Atlantic region contracted more than expected in January.

Among other major news in the market during the week, Wall Street Journal reported that Boeing is going to announce more delays in the delivery of the 787 Dreamliner.

Executive Summary

For the week, indices registered substantial losses for the fourth consecutive week. DJIx and S&P 500 closed down by 4.2% and 5.4% respectively. Nasdaq shed 4.1%.

While IBM earnings tried to give the week a good start, disappointing reports from Intel and Merrill Lynch let waves of negative sentiment across the market for the rest of the week. Even tax relief plans and certain incentives announced by the President of US to stave of a recession failed to cheer market.

For the year, Dow, Nasdaq and S&P 500 are down by 8.8%, 11.8% and 9.8% respectively.