US Market ends mixed on auto bailout news

Better guidance from Oracle and RIMM help Nasdaq end in the green

The US Market ended mixed for the week that ended on Friday, 19 December, 2008. The indices practically finished in the territory where it was since the start of the month. There was once again a spate of bad news but market digested them comfortably. The only sliver lining in the week was perhaps the decision that was reached regarding the bailout of the automobile companies. Auto bailout news, extremely low crude price and earnings cautions dominated the week which was fully in search of direction.

The Dow Jones Industrial Average lost 50.57 points (0.6%) for the week to end at 8,579.11. Tech - heavy Nasdaq gained 23.6 points (1.5%) to end at 1,564.32. S&P 500 gained 8.15 points (0.9%) to end at 887.88.

The week marked a big decision after the Federal Open Market Committee (FOMC) cut the fed funds target rate from 1.00% to a range of 0.00% to 0.25%. In addition, the FOMC directive implied the Fed stands ready to do any, and all, things possible to stimulate the credit market and the economy, including possibly buying a lot of long-term Treasury securities.

Among major earning reports for the week, Goldman Sachs reported its first loss since its inception as a publicly-traded company. Best Buy beat earnings estimates for its third quarter but observed that there has been a dramatic and potentially long-lasting change in consumer behavior.

Among economic reports for the week, industrial production declined 0.6% in November. Housing starts declined 18.9%, marking the largest decline since March 1984, building permits hit a record low, and weekly initial jobless claims held near a 26-year high.

In the US stock market on Friday, 19 December, stocks ended the day on a mixed note. On Wall Street, the Dow Jones industrial average ended down by 25.8 points at 8,579.11, the Nasdaq closed higher by 11.95 points at 1,564.32 and the S&P 500 closed higher by 2.7 points at 886.7.

Automakers got something to cheer on Friday after the news hit the wires that the White House is providing $13.4 billion in TARP funds to automakers as part of an effort to shore up their finances. An additional $4 billion will be available for GM in February. The loans are being made on the contingency that the automakers have a viable plan by March 31 to become profitable.

GM ended as one of the main winners on Friday after climbing up by more than 22%. Twenty four of thirty Dow stocks ended in the green. Citigroup ended as one of the major laggards.

The technology sector managed to outperform on Friday after Oracle and Research In Motion posted in-line earnings results for the latest quarter. Their strength helped the Nasdaq outperform. In other earnings news, Accenture made its way to a new December high after posting better-than-expected results for its latest quarter.

On Friday, crude-oil futures for light sweet crude for January delivery closed at $33.87/barrel (lower by $2.35 or 6.5%) on the New York Mercantile Exchange. Earlier in the day, prices touched a low of $32.4. Prices reached a high of $147 on 11 July but have dropped almost 76% since then. For the week, prices ended lower by almost $12.41 or 27%. For this year in 2008, crude prices have dropped 65%.

Friday marked the last trading day for the January contract. Oil for February delivery, now the most active contract, rose 69 cents to end at $42.36 a barrel on the New York Mercantile Exchange on Friday. The contract lost 14% during the week.

After a meeting in Oran, Algeria, the Organization of the Petroleum Exporting Countries agreed to cut 4.2 million barrels a day from its actual September production level of 29.045 million barrels a day on 17 December, 2008. The production cut is effective on 1 January, 2009. Excluding previously announced cuts, OPEC will actually cut its daily production by 2.2 million barrels from current levels. That constitutes its biggest production cut ever.

At the currency market on Friday, the dollar was up against most major counterparts Thursday, jumping against the euro after the European Central Bank cut its deposit rate and lifted lending rates in the wake of the U.S. Federal Reserve's easing earlier this week. The dollar index gained 3% in the past two sessions.

For the year, Dow, Nasdaq and S&P 500 are down by 35.3%, 41% and 39.5% respectively.