US stocks back in the red

Profit taking in the financial sector offsets gains in material and energy sectors

After registering gains in the past six sessions out of seven sessions, stocks at Wall Street were back in the red on Thursday, 19 March, 2009. The losses came after quite a few days of consecutive gains. Though there were a couple of better than expected earning reports, economic reports checked in line with expectations. The financial sector bore the brunt of the recent rally in the past few days as profit takers have stepped in today.

Stocks started the day in the red and continued to linger in the red for the entire day. The Dow Jones Industrial Average ended lower by 85 points at 7,400, the Nasdaq closed lower by 7.7 points at 1,483 and the S&P 500 closed lower by 10 points at 784.

Four of the ten sectors ended in the green today led by energy and materials sector. But financial sectors led the pack of losers.

Among earning reports for the day, Nike reported better-than-expected quarterly earnings results. FedEx on the other hand reported disappointing earnings and a disappointing outlook. But surprisingly, Nike traded lower and FedEx traded higher today.

Among major economic news at Wall Street today, The Labor Department reported today that the number of people collecting state unemployment benefits jumped by 185,000 to a record seasonally adjusted 5.47 million in the week ending 7 March, 2009 while new claims dipped by 12,000 to 646,000. The 185,000 weekly increase in continuing claims was the second largest in the past year.

Initial claims represent job destruction, while the level of continuing claims indicates how hard or easy it is for displaced workers to find new jobs. The jobless claims report shows businesses are laying off workers at a rapid pace, and finding a replacement job is ever harder for those who've lost work.

The report detailed that the four-week average of new claims rose by 3,750 to 654,750, the highest level in 26 years. The four-week average of continuing claims rose by 118,750 to 5.25 million, also a record high. Compared with the same week a year ago, new jobless claims are up about 84%, while continuing claims are up 87%. Since the beginning of the year, new claims have risen 18% and continuing claims have risen 17%.

In a separate report, the Conference Board in US reported that the index of leading economic indicators fell 0.4% in February, following a downwardly revised gain of 0.1% in January. The interest rate spread was the largest positive contributor in February, while initial claims for unemployment insurance were the largest negative contributor.

The index is designed to forecast economic activity six to nine months ahead. For February, six of the 10 indicators rose, and four fell. The recession will continue in the near term, and a return to strong growth is unlikely until next year. As per the report, with losses in the financial and job markets taking their toll, the recession will continue in the near term, and a return to strong growth is unlikely until next year.

Crude prices shot up substantially today. The weak dollar was mainly the reason for this. The dollar once again slumped today after Fed said yesterday that it will buy long term treasuries and this also increased the appeal of precious metals as a safe haven against alternatives. Fed's recent moves sparked some good notions about the recovery from the recent recession in US.

On Thursday, crude-oil futures for light sweet crude for April delivery closed at $51.61/barrel (higher by $3.47 or 7.2%) on the New York Mercantile Exchange. The more active May contract rose 6.4% to settle at $52.04/barrel. The April futures contract will end tomorrow.

In the currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by almost 1.5% following yesterday's 3% drop.

Tomorrow, among economic reports, February leading indicators and March Philadelphia Fed will be released at 10:00 ET. Fed Chairman Bernanke will speak at the Independent Community Bankers America convention at 11:00ET.