A great obstacle to happiness is to expect too much happiness.
The bulls and most investors may been happy with last week’s gains. For the month, US stock indices (except Nasdaq) had their worst January on record, with the Dow losing 8.8%. Back home though, the Sensex and the Nifty fell by 2-3% in January. Still, one should not allow complacency to set in, as the outlook remains bleak. Much of the fears, relating to the health of the western financial systems and its global ramifications are still in place. A raging debate is underway on whether a bad bank be created to take toxic debt from troubled banks. While US President Barack Obama seems to be in favour of the plan, others like Joseph Stiglitz bag to differ. Obama’s much-hyped new stimulus is also facing stiff opposition from Republicans. Senate will take up the bill this week.
Global markets will be on edge this week ahead of monthly US jobs data. No big events are due in India for the time being. Politics will dominate headlines over the next few months. Today, we expect some softening after last week’s stellar gains.
RIL and RNRL will be in focus post the Bombay High Court order. Auto and cement companies will hog the limelight as they release monthly sales data. Satyam will continue to see action based on the news-flow.
FIIs were net sellers in the cash segment on Friday at Rs641.5mn (provisional) while the local institutions pumped in Rs3.98n. In the F&O segment, the foreign funds were net buyers at Rs668.2mn. On Thursday, FIIs were net buyers at Rs2.75bn in the cash segment.
Castrol India and Gujarat State Petronet will declare their results today.
L&T, BHEL, Wipro, HCL Tech and Bharat Electronics might gain amid news that Boeing Co. will buy aerospace structures and aviation electronics products worth at least $600mn, or Rs29.4bn, from seven India companies as part of the so-called offsets against winning a $2.1bn contract early in January to supply eight P-8I reconnaissance planes to the Indian Navy.
US stocks slid on Friday after government data showed that fourth-quarter GDP contracted at its fastest pace in well over two decades, capping the worst January for the Dow Jones Industrial Average and the S&P 500 index.
The Dow ended the day down 148 points, or 1.8%, at 8,000.86. The S&P 500 lost 19 points, or 2.3%, to 825.88. The Nasdaq Composite index shed 31 points, or 2%, to 1,476.42.
US stocks gained in the morning as investors welcomed news that fourth-quarter GDP report was not as bad as many economists had expected. Upbeat earnings from Amazon.com and a few other companies also helped stocks in early trading.
But the early euphoria soon fizzled out and stocks turned lower. Weak reports on manufacturing and consumer sentiment added to the grim sentiment, as did more layoff news. Speculation that Senate Republicans could derail the proposed US$819bn economic stimulus plan also weighed on the sentiment.
Stocks had tumbled on Thursday following bleak reports on earnings, housing and employment. That caused the Nasdaq and S&P 500 to break a four-session winning streak and the Dow to break a three-session advance.
It was the worst January ever for the Dow industrials and S&P 500, according to Stock Trader's Almanac data. The Dow lost 8.8% and the S&P 500 dropped 8.6% in the month. The Nasdaq's loss of 6.4% was eclipsed by last January's loss of 9.9%. That 2008 loss was the worst in the tech average's history.
Among the sector decliners during January, it was a particularly ugly month for bank stocks. According to some Wall Street observers, a weak January means a down year.
S&P market historian Sam Stovall has looked at the correlation going back to 1945. Since then, whenever the S&P 500 gained in January, the market continued to rise during the rest of the year 85% of the time, posting an average gain of 11.6% during those 11 months.
But, the statistics are less consistent when the market fell in January. Since 1945, a decline in that month yielded a decline in the next 11 months only 48% of the time, for an average loss in that period of 2.2%.
In the day's economic data, GDP growth plunged at a 3.8% annual rate in the fourth quarter of last year. It was the biggest drop in GDP since the first quarter of 1982, when it declined 6.4%. Economists had forecast that GDP would decline 5.4%.
In other economic news, the Chicago PMI, a regional reading on manufacturing, declined to 33.3 from a revised 35.1 in the prior month. Wall Street economists had expected the reading to come in at 34.9.
The revised reading on January consumer sentiment fell to 61.2 from an initial reading of 61.9, according to a University of Michigan report. Economists thought sentiment would hold steady. Confidence stood at 60.1 in December.
Amazon.com reported quarterly sales and earnings that topped analysts' forecasts after the market close on Thursday. Shares rallied 17% Friday afternoon, but failed to help the broader market.
Dow component Exxon Mobil reported the largest yearly profit in US history, earning US$45.22bn amid high oil prices. Its fourth-quarter profit fell 33% from a year ago. Nonetheless, results still topped analysts' forecasts.
Fellow oil company and Dow component Chevron reported higher quarterly earnings that topped estimates. Shares of both Exxon and Chevron ended lower.
Dow component P&G reported a higher quarterly profit that was nonetheless short of forecasts. The company also warned that full-year earnings would not meet its earlier forecast due to weakening demand. Shares fell 6.4%.
Caterpillar announced that it was cutting another 2,110 jobs at three Illinois production plant on top of the 20,000 job cuts announced earlier this week. Shares of the Dow component fell almost 3%.
US companies announced over 100,000 layoffs last week alone, including Starbucks, Boeing, Eastman Kodak and Target.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.83% from 2.86% on Thursday. Treasury prices and yields move in opposite directions. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last month.
Lending rates worsened. The 3-month Libor rate rose to 1.18% from 1.17%, according to Bloomberg.com. Overnight Libor rose to 0.30% from 0.22%. Gasoline prices rose three-tenths of a cent to a national average of US$1.846 a gallon.
US light crude oil for March delivery rose 42 cents to settle at US$41.86 a barrel on the New York Mercantile Exchange. Earlier it rose more than 4% to US$43.44. In a week of volatile trading, crude has fallen three out of five sessions. It ended the week down 10% and the month down 14%.
The dollar gained versus the euro and fell against the yen.
Gold futures rose, ending the week at their highest level in six months, as investors sought the safety of the metal amid grim economic reports, disappointing corporate earnings and mounting job losses. COMEX gold for April delivery rose US$21.90 to settle at US$928.40 an ounce. The benchmark contract has risen 3.5% this week and 4.9% this month.
Investors put money back into stock mutual funds over the past week, after withdrawing money in the previous week. For the week ended Jan. 28, investors poured US$6.5bn into stock funds. In the previous week, investors pulled US$138mn out of funds.
European stock indices ended higher after a volatile session, with BNP Paribas, Rio Tinto and Switzerland's Roche leading the gains amid deal-related news.
The Dow Jones Stoxx 600 index closed up 0.2% at 191.23, having bounced in and out of positive territory throughout the session. It declined earlier in the day after the release of unemployment data for the eurozone.
The French CAC 40 index closed down 1.2%, at 2,973.92, having dropped back below the 3,000 level earlier in the session. The UK's FTSE 100 index lost 1% to 4,149.64 and Germany's DAX 30 index fell 2% to 4,338.35.
Unemployment in the euro area rose to 8% in December from 7.9% in November. The latest reading represents a two-year high and compares to an unemployment level of 7.2% a year earlier. Inflation in the region, meanwhile, fell faster than expected, to a 1.1% rate in January from 1.6% in December.
European markets turned higher after figures showed that the US economy contracted less than expected in the fourth quarter. GDP growth plunged at a 3.8% annual rate in the fourth quarter of last year. It was the biggest drop in GDP since the first quarter of 1982, when it declined 6.4%. Economists had forecast that GDP would decline 5.4%.
Shares in France's BNP Paribas rose 1.7% in Paris. The bank agreed to a new deal to acquire parts of Fortis after the Belgian company's shareholders won a court battle to challenge an earlier deal. Under the revised agreement, BNP will take a much smaller stake in the Fortis insurance business than originally planned.
Other banks were also mostly higher, though shares of Dexia fell 7.2% after it announced a loss of about €2.3bn (US$3bn) in the final quarter of 2008. Dexia said it won't pay a dividend for the year and is also planning to cut 900 jobs and close its operations in several countries.
Markets ended the week with solid gains on Friday with the BSE benchmark Sensex rising over 2% and the NSE Nifty surging nearly 2%. The rally was led by the realty, metals’ and oil & gas stocks. However, the Pharma stocks were under pressure. Finally, the BSE benchmark Sensex rose 187 points to close at 9,424 and the Nifty rose 50 points to close at 2,874.
Among the 30-components of Sensex, 25 stocks ended in the green and only 5 stocks ended in the negative terrain. Among the major gainers in the Sensex were Reliance Industries, SBI, L&T and ITC. BHEL, Sun Pharma, Infosys and NTPC were among the major laggards.
Shares of Spice Communication shot up by over 80% to Rs47. The only available news was that BK Modi, Chairman, Spice Group was reported as saying that "Spice Innovation is interested in acquiring 51% stake in Satyam Computers." The scrip touched an intra-day high of Rs47 and a low of Rs27 and recorded volumes of over 9mn shares on BSE.
Shares of Akruti City declined by over 6% to Rs816 after the company registered a net profit of Rs190.80mn (down 79%) for the quarter ended December 31, 2008 as compared to Rs924.10mn for the quarter ended December 31, 2007.
The total Income decreased from Rs1,400.2mn for the quarter ended December 31, 2007 to Rs516.8mn for the quarter ended December 31, 2008.On Consolidated basis, the Group posted a net profit of Rs217mn for the quarter ended December 31, 2008 as compared to Rs1,017.70mn for the quarter ended December 31, 2007.
The total Income decreased from Rs1,363.50mn for the quarter ended December 31, 2007 to Rs495.90mn for the quarter ended December 31, 2008.
Shares of Tata Power ended flat at Rs761. The company posted a net profit after tax of Rs1.01bn (down 48%) for the quarter ended December 31, 2008 as compared to Rs1.97bn for the quarter ended December 31, 2007.
However, Total Income increased from Rs14.562bn for the quarter ended December 31, 2007 to Rs18.228bn for the quarter ended December 31, 2008. The scrip touched an intra-day high of Rs771 and a low of Rs729 and recorded volumes of over 1,00,000 shares on BSE.
Shares of BHEL declined by over 2.5% to Rs1320 after the company posted a net profit of Rs7.90bn for the quarter ended December 31, 2008 as compared to Rs7.71bn for the quarter ended December 31, 2007.
Total Income has increased from Rs52.290bn for the quarter ended December 31, 2007 to Rs63.285bn for the quarter ended December 31, 2008.
Shares of Cairn India gained by 3% to Rs164 after the company reported a profit of Rs2.4bn in the fourth quarter compared with a loss of Rs139.1mn a year earlier. The scrip touched an intra-day high of Rs166 and a low of Rs158 and recorded volumes of over 6,00,000 shares on BSE.
Shares of Jindal Steel & Power surged by over 13% to Rs1037 after the company posted a net profit of Rs3251.7mn for the quarter ended December 31, 2008 as compared to Rs3190.5mn for the quarter ended December 31, 2007.
Total income increased from Rs14074.1mn for the quarter ended December 31, 2007 to Rs17914.6mn for the quarter ended December 31, 2008. The scrip touched an intra-day high of Rs1060 and a low of Rs896 and recorded volumes of over 7,00,000 shares on BSE.
Markets might drift lower in the coming week with the US economy contracting at the fastest pace in nearly three decades in the fourth quarter of last year sentiments continue to remain weak.