The last two days of the week play the spoilsport for the market
Friday, 29 February, 2008 spoilt the overall sentiment of the US Market for the last week that ended on that same very day. Barring that day, indices would have registered good gains for the week. Economic reports and Federal Chairman Ben Bernanke’s testimonies at Capitol Hill for two straight days made the main headlines for the week.
At Chairman Bernanke's testimony at Capitol Hill, Bernanke continued to emphasize downside risk to growth more than inflation. However, he said upside risks to inflation are greater than a month ago, noting commodity price gains. He said that this might cause an increase in the Fed's outlook on inflation.
The Dow Jones Industrial Average lost 115 points for the week. Tech - heavy Nasdaq lost 32 points. S&P 500 lost 22 points.
On Monday, 25 February, a rally was spurred by news that Standard & Poor's has reaffirmed the credit ratings of two key bond insurers whose financial outlook has been at the center of investor anxiety in recent months. Standard & Poor's took MBIA off CreditWatch and assigned a negative outlook. Additionally, the ratings agency affirmed the 'AAA' financial strength rating of Ambac Financial. Shares of MBIA and Ambac rose 20% and 16% respectively on that very day.
On Tuesday, 26 February, IBM spurred a good rally in the market and the stock was up nearly 4% after the tech giant raised its 2008 earnings forecast due to the positive impact of a $15 billion stock buyback plan. The Dow Jones industrial Average ended the day with a gain of 115 points.
On Wednesday, 27 February, US Market witnessed sea saw trading for the entire day but ultimately ended higher for the day. Federal Reserve Chairman, Ben Bernanke today hinted that Fed in all possibility will go for another soft landing in its next meeting thereby reducing interest rates by another 50 bps.
Unlike Wednesday, the stock market suffered a noticeable setback on Thursday, 28 February. The sell off was attributed in part to concerns about the banking industry that were sparked by Fed Chairman Bernanke's observation before the Senate Banking Committee that there will probably be some bank failures as a result of the financial market turmoil.
Thursday's weakness spilled over to Friday where the trading action reflected the release of pent-up angst about the financial sector's problems specifically and the economy in general. The Dow gave up more than 300 points on that day.