US Markets jump on the first trading day

Christmas comes a week late at Wall Street

Christmas perhaps came a week late for US Market this year. Investors were more than happy to end the dismal 2008 and start 2009 on a fresh note on Friday, 02 January, 2009, the first trading session in 2009. The week that ended on that day brought huge gains on Wall Street, quite after a long time. Trading volumes during the week remained quite low due to the ongoing holiday mood in the market.

There wasn't a lot of corporate news of note this week. The market ignored bad economic news, of which there was plenty in this shortened week.

The Dow Jones Industrial Average gained a whopping 519 points (6.1%) for the week to end at 9,034.69. Tech - heavy Nasdaq gained 101.97 points (6.7%) to end at 1,632.21. S&P 500 gained 59 points (6.8%) to end at 931.8.

Among the bad news in the market this week, Kuwaiti petrochemical company pulled out of a proposed $17 billion joint venture with Dow Chemical. In doing so, it raised concerns that Dow will be unable to complete its proposed acquisition of Rohm & Haas.

Among good news in the market this week that the financial arm of GM, (GMAC) got word that the U.S. Treasury would make a $5 billion investment in the troubled financing company and would loan General Motors another $1 billion to participate in a GMAC rights offering that supports GMAC's reorganization as a bank holding company.

Bolstering the Dow on the last day of the week, Friday was Citigroup after Chief Executive Vikram Pandit said that he and Chairman Win Bischoff would not take bonuses for 2008 and will trim pay and severance packages for executives.

Among major earning reports for the week, The S&P/CaseShiller Home Price Index declined 18% in October, which was the largest year-over-year decline on record. The report also conveyed the message that the housing market is still searching for a bottom. Separately, consumer confidence hit a record low in December. The ISM Index, which is computed from a survey of national manufacturing conditions, hit its weakest point since June 1980. The ISM added that new orders were at their lowest level since January 1948.

Among other reports for the week, weekly initial claims surprised in a good way, as they fell by 94,000 positions to 492,000. But there were continued job cut announcements and the claims for continuing benefits jumped to 4.506 million from 4.336 million.

In the US stock market on Friday, 02 January, 2008 stocks ended substantially higher. Stocks rallied despite lack of news and data.

On Wall Street, the Dow Jones industrial average ended higher by 258 points at 9,034, the Nasdaq closed higher by 55 points at 1,632 and the S&P 500 closed higher by 28 points at 931.

Energy sector provided to good leadership to the market on Friday as crude prices erased earlier losses and rallied to end higher.

Among major economic reports for the day, The Institute for Supply Management reported on Friday, 02 January, 2008 that U.S. manufacturing contracted for the fifth straight month in December. The overall ISM index fell to 32.4% in December, the weakest reading since 1980. It's down from 36.2% in November. Market was expecting the December ISM index to rise slightly from November's reading, to 36.3%.

ISM readings above 50% indicate an expansion of the manufacturing economy, while readings below indicate a contraction. The report detailed that that new orders now have contracted for 13 consecutive months, and are at the lowest level on record going back to January 1948. Manufacturing payrolls also shrank as the employment index fell to 29.9% from November's 34.2%. The institute's price index dropped to 18.0% from 25.5%.

On Friday, crude-oil futures for light sweet crude for February delivery closed at $46.34/barrel (higher by $1.74 or 3.9%) on the New York Mercantile Exchange. During intra day trading, prices touched a low of $41.05. Prices reached a high of $147 on 11 July but have dropped almost 68% since then.

Executive Summary

For the week, indices registered very good gains at Wall Street. It was a holiday shortened week. Market ignored the bad news and economic reports that checked in were mixed in nature.

In percentage terms, Dow gained 6.1%, Nasdaq gained 6.7% and S&P 500 gained 6.8%. The market has surged 8% since the close of trading on 23 December, 2008.

For the year 2009, Dow, Nasdaq and S&P 500 are up by 2.9%, 3.5% and 3.2% respectively.