Good weekly close for US Markets

Indices close mixed for the week as Nasdaq registers losses

US Market ended the week on Friday, 13 June on a mixed note. The Dow Jones industrial Average and the S&P 500 managed to eke out gains for the week. Nasdaq was the only major index to register loss. It was another volatile week of trading. But financial sector remained burdened with concerns about Lehman Brothers' financial position. On the other hand, Fed's inflation-fighting comments made market more nervous during the middle of the week. The only positives were the pleasing economic data and a welcome pickup in M&A news.

The Dow Jones Industrial Average gained 97.5 points for the week to end at 12,307.6. Tech - heavy Nasdaq lost 20 points at 2,454.5. S&P 500 ended practically unchanged at 1,360.03. In percentage terms, Dow and Nasdaq gained and lost 0.8% respectively.

Although the week began on an inauspicious note, it certainly ended on an auspicious one as the indices rallied into the close Friday, finishing at or near the session's highs.

On Friday, 13 June, crude prices closed down $1.90 on the New York Mercantile Exchange, settling at $134.84 per barrel and finishing the week roughly 2.7% lower. The sustained drop in oil prices helped provide airline and transportation stocks a healthy lift. Indices rallied and Dow ended higher by almost 165 points.

Also, on the economic front, consumer prices increased 0.6% month-over-month and 4.2% year-over-year, according to the May Consumer Price Index (CPI) data. Market was forecasting a monthly increase of 0.5% and an annualized increase of 3.9%. Core CPI data, which excludes food and energy, indicated prices increased 0.2% month-over-month and 2.3% year-over-year, which was in-line with the consensus. Nasdaq too ended higher by 50 points on that day.

Earlier during the week, in a speech late Monday, 9 June, Bernanke emphasized the central bank's determination to hold down inflation expectations. The Fed has hinted that it is most likely done cutting rates, and its next move is likely an increase in rates. Market viewed as a signal the Fed will move to tighten monetary policy later this year.

In the financial sector, Lehman Brothers weighed on the financial sector today after a second quarter earnings preannouncement from the company topped headlines. The struggling Wall Street firm reported that it expects a massive $2.8 billion second quarter loss and plans to raise $6.0 billion in new capital in common and preferred stock offerings. The stock slid by 20% during the week.

In economic news during the week, the Commerce Department reported that U.S. trade deficit widened to $60.9 billion in April on higher prices for crude oil and other commodities. Imports rose 4.5% to $216.4 billion, while exports increased 3.3% to $155.5 billion. Excluding the impact of inflation, the trade deficit slipped by 0.1% to the lowest level in nearly five years.

Also, retail sales increased May by 1.2%, excluding autos. The results were way ahead of the 0.7% increase that market had expected. April sales, less autos, were revised upward to an increase of 1.0%. The best part of the report was that, paired with the May same-store sales seen last week, the retail sales report for May, and the upward revision to April, the same will bode well for upward revisions to second quarter real GDP forecasts.

In other economic news, initial jobless claims for the week ending 7 June totaled 384,000, which is more than the 370,000 claims that were expected.

Among interesting corporate news, Yahoo! announced that it failed to reach an agreement with Microsoft but it has, instead, decided to team up with Google to increase its competitiveness in Internet search and display markets.

In the M&A arena, Belgian brewer InBev made an unsolicited $46 billion offer for Anheuser-Busch. The offer to BUD shareholders was 11% premium to last closing price.

Executive Summary

For the week, indices ended mixed. In percentage terms, Dow and Nasdaq gained and lost 0.8% respectively. S&P 500 ended practically unchanged. Although the week began on an inauspicious note, it certainly ended on an auspicious one as the indices rallied into the close Friday, finishing at or near the session's highs.

The week was mainly dominated by the crude oil and economic reports. Financial sector remained burdened due to news on the Lehman Brothers front. Crude prices closed down $1.90 on the New York Mercantile Exchange, settling at $134.84 per barrel and finishing the week roughly 2.7% lower. The sustained drop in oil prices helped provide airline and transportation stocks a healthy lift.

For the year, Dow, Nasdaq and S&P 500 are down by 7.2%, 7.5% and 7.4% respectively.