US Market ends flat for the week

Economic data and earning reports help market remain steady

US Market ended the week on Friday, 01 August almost flat with little losses for the Dow Jones Industrial Average. Mixed economic data, mostly better-than-expected earnings reports, and volatile crude prices prompted the market's ups and downs during the week. Financial sector had some positives and also had some negatives during the week. The negatives came during the start of the week. But it was then taken over by spate of economic data during the course of the week.

The Dow Jones Industrial Average lost 44 points for the week to end at 11,326.6. Tech - heavy Nasdaq gained 0.43 points at 2,310.96. S&P 500 gained 2.55 points to end at 1,260.31.

The financial sector came under severe pressure during the start of the week. On Monday, 28 July, there was news that the FDIC seized two regional banks - First National Bank of Nevada and First Heritage Bank, marking the sixth and seventh failures this year. The banks' deposits were taken over by Mutual of Omaha.

Then, on Tuesday, 29 July, main news came from Merrill Lynch who tried to reduce its risk exposure and shore up its balance sheet. Merrill Lynch announced selling $30.6 billion worth of U.S. CDOs for only $0.22 on the dollar, or $6.7 billion. The assets were valued at $11.1 billion at the end of the second quarter implying that the sale will result in a $4.4 billion pretax write-down. Merrill has taken $51.8 billion in write-downs and credit losses since the credit market turmoil began last year and is only second to Citigroup in terms of writedowns.

But then, the financial sector enjoyed several other positive developments, including the Fed extending the length of its Term Securities Lending Facility program through 30 January and is introducing longer terms to maturity for its Term Auction Facility. The facilities were implemented to improve liquidity during the recent credit market turmoil.

But outside the financial sector, it was economic reports which dominated the week. Second quarter GDP rose 1.9%, aided by the fiscal stimulus, although the result was lower than the expected 2.3% gain.

The government's jobs report for July was mixed, as payrolls slipped by a smaller-than-expected amount, while the unemployment rate rose by a larger-than-expected amount. Specifically, nonfarm payrolls fell by 51,000, which was better than the expected decline of 75,000. Meanwhile, the unemployment rate rose to 5.7% from 5.5%.

The ISM Index, a national manufacturing survey, posted a decent reading in July given the current economic conditions. The index was roughly unchanged at 50.0, which represents flat manufacturing growth.

On the earnings front, Exxon Mobil posted a 14% increase in net income to $11.68 billion, marking the largest quarterly profit in U.S. history. But the results were still below expectation. Among others, while Corning, Garmin and MetLife disappointed traders, ArcelorMittal and Comcast met expectations. Other than that, Altria, Disney, MasterCard, Visa and Tyco - all reported upside earnings results.

Auto manufacturers were affected during the week after General Motors swung to a massive $15.5 billion second quarter net loss, as consumer preferences shift away from large trucks and SUVs in the face of record gasoline prices.

Crude prices ended higher on Friday, 01 August, 2008 as the dollar fluctuated and as Middle East tensions cropped up due to a possible Israeli strike on Iran. For the week also, it managed to end higher for this rise on the last day. Crude-oil futures for light sweet crude for September delivery closed at $125.1/barrel (higher by 1.02 or 0.8%) on the New York Mercantile Exchange. Futures earlier fell to an intraday low of $123.5 a barrel. But it also rose to a high of $128.6 during intra day trading and cut most of their gains by afternoon. For the week, crude prices ended higher by 1.5%.