US Market tries best to limit its own losses

Nasdaq manages to eke out some gains for the week while Dow and S&P 500 end in the red

US Market ended the week on Friday, 25 July on a mixed note. Nasdaq was the only index that managed to carve out some gains for the week. But the other two major indices, S&P 500 and the Dow registered modest losses. Drop in oil prices, ups and downs in the financial stocks and better-than-feared earnings news once again dominated the week.

The Dow Jones Industrial Average lost 126 points for the week to end at 11,370.69. Tech - heavy Nasdaq gained 30.4 points at 2,310.5. S&P 500 lost 2.9 points to end at 1,257.76. In percentage terms, Nasdaq gained 1.2%. Dow and S&P 500 lost 1.1% and 0.2% respectively.

Bank of America kicked off the reporting for the financial sector this week. The company announced a substantial drop in its profits. Bank of America reported a 43% drop in earnings per share to $0.72. However, the result easily topped Wall Street's forecast due to a lower-than-expected write-down of $1.2 billion. In contrast, Wachovia declared a larger-than-expected loss of $8.9 billion.

After rallying in the first two days of the week, the pullback in the financials was a major drag on the broader market during the rest of the period. A pickup in concerns about a global economic slowdown, which were fed by weak data out of Europe, the hangover of major earnings disappointments from American Express and Texas Instruments, cautious guidance from Apple, and a horrendous earnings report from Ford kept buying efforts in check.

Also in the earnings arena, strong emerging market demand helped Caterpillar increase earnings per share 40% year-over-year, topping estimates. UPS reported in-line earnings, relieving investors. The company called the economy "bleak," but kept its full year earnings forecast in-line with expectations.

In the healthcare sector, Merck reported better-than-expected results for its latest quarter, but continued concerns over its cholesterol drug Vytorin sent shares tumbling. United Health reported a 23% drop in earnings per share, but the results topped expectations.

AT&T shares rallied after reporting an 8.6% rise in earnings per share, which met Wall Street's forecast. There were some earnings misses as well. Boeing, E*Trade, Washington Mutual and Yahoo! fell short of estimates. Washington Mutual reported a larger-than-expected loss of $3.3 billion. 3M announced earnings that exceeded analysts' expectations. Amazon.com announced that its second quarter revenue surged 40% year-over-year to $4.1 billion which was better than analysts forecast.

Weak housing data added further salt to injury that the market had been bleeding with since the middle. On Thursday, 24 July, the National Association of Realtors reported existing home sales in June slipped to a 10-year low. A day later, Commerce Department reported that new home sales, were reported to be down 0.6% in June from an upwardly revised May number. Strikingly, June new home sales at an annual rate of 530,000 units were right in line with the 3-month average for the March to May period. Market was expecting new home sales of 503,000 for June. Importantly, the data suggested some signs of stabilization, though at depressed levels.

During the last day of the week, Friday, 25 July, traders lifted stocks in early action after it was reported durable goods orders made a surprising increase for June. The increase totaled 0.8%, which is better than the prior increase of 0.1% and the 0.3% downturn that economists forecast. Excluding transportation, orders increased 2.0%, up from the 0.5% downturn in the prior month and above the 0.2% downturn that was expected.

In other economic news, initial jobless claims for the week ending 19 July was reported to have totaled 406,000, which is an increase of 34,000 from the prior week and 26,000 more than market expectations. That was the second time in four weeks the claims number were reported above 400,000. This report also made sentiment negative in the market.

Crude prices once again fell on Friday, as investors continued to be worried about oil demand from US in the long run. The rebounding dollar also added further impact to the fall. With this, crude ended lower in the seven out of last nine sessions. Crude-oil futures for light sweet crude for September delivery closed at $123.26/barrel (lower by 2.23/barrel or 1.8%) on the New York Mercantile Exchange. For the week, prices coughed up $6.5 (4.8%). It's now 16.3% lower than the $147.27 record high hit last on Thursday, 10 July, 2008.

The coming week will bring another heavy slate of earnings reports and a key batch of economic data, including the advanced Q2 GDP report and the July employment report.