Oscillating US stocks end in the red

Indices witnesses their first weekly loss in a long time

US stocks ended lower for the week that ended on Friday, 15 May, 2009. While earning season is approaching to an end, economic reports dominated the week. But after almost eight consecutive weeks of gains, it was Dow's first weekly loss in two month's time. All the ten sectors ended in the red led by the financial sectors. The other sectors that led the declines were industrials, consumer discretionary and energy sectors.

The Dow Jones Industrial Average lost 306.01 points (3.6%) for the week to end at 8,268.64. Tech - heavy Nasdaq lost 58.86 (3.4%) to end at 1,680.14. S&P 500 lost 46.35 (5%) to end at 882.88.

The indices registered losses during the three alternate days of the week – Monday, 11 May, Wednesday, 13 May and Friday, 15 May.

Among earning news for the week, retailers dominated the headlines. Kohl's posted better-than-expected first quarter earnings and in-line guidance for the second quarter. Kohl's also raised its outlook for fiscal 2010, but the company's forecast still falls short of the consensus forecast. Also, retail giant Wal-Mart reported in-line quarterly earnings and in-line outlook.

The Commerce Department reported on Tuesday, 12 May, 2009, that the U.S. trade gap with the rest of the world increased in March for the first time in eight months, as exports declined faster than imports. The trade deficit, the difference between exports and imports, increased by 5.5% to $27.6 billion in March from a nine-year low of $26.1 billion in February as the global recession tightened in major U.S. trading partners in North America, Europe and Asia.

On Wednesday, 13 May, the Commerce Department reported in USA that U.S. retail sales dropped a seasonally adjusted 0.4% in April, the eighth decline in the past 10 months. Markets on average had expected a slight increase. The Commerce Department's retail sales data measure revenues at stores selling durable and nondurable goods. Consumer spending accounts for about 70% of the U.S. economy and is a key element in economic growth.

A separate report showed that business inventories for March decreased 1%, which is on par with the 1.1% decline that was widely forecast, and not as bad as the 1.4% decrease seen in February.

Stocks managed to rebound back on Thursday, 14 May, 2009.

Finally, on Friday, 15 May, 2009, stocks oscillated between red and green for the entire day but ultimately ended the day with modest losses. The Dow Jones Industrial Average ended lower by 62.68 points at 8,268.64. The Nasdaq Composite Index, ended lower by 9 points at 1,680. S&P 500 ended lower by 10 points at 882. Dow was up by 47 points at one time. As a result, stocks logged a weekly loss of 5%, which is its worst in two months.

Market started on a strong note on news on Friday that the Treasury will offer $22 billion in TARP funds for certain life insurers. However, there has been some recent concern that the TARP funds may not help the ratings of certain companies.

Weakness in the financial and energy sectors acted as a hindrance for market's hindrance. The technology sector got some support from big names like RIMM, Microsoft and Google.

Among economic reports for the day, the Labor Department reported on Friday, 15 May, 2009, that falling energy prices offset another big jump in cigarette prices in April, leaving the U.S. consumer price index flat for the month. With energy prices down 20% since April 2008, the CPI has fallen 0.7% in the past 12 months, the largest decline since 1955.

However, core inflation - which excludes volatile food and energy prices - has not declined and in fact has accelerated in the past four months, rising 0.3% in April, the biggest increase since July. The core CPI was boosted in April by a 9.3% increase in tobacco prices as a new federal excise tax to pay for children's health care kicked in.

Crude oil prices ended lower on Friday, 15 May, 2009. With Friday's losses, crude suffered its first weekly loss in a month's time. Prices ended lower as traders remained a bit pessimist about hopes of quick global recovery from the current recession. International Energy Agency reducing its crude demand forecast in the latest monthly report and the movement of dollar also affected the crude prices.

On Friday, crude-oil futures for light sweet crude for June delivery closed at $56.34/barrel (lower by $2.28 or 3.9%) on the New York Mercantile Exchange. For the week, crude ended lower by 3.9%.

Executive Summary

For the week, indices registered good losses at Wall Street. The financial sector led the pack of decliners after surging last week following the stress test results by banks. This week's loss marked the first weekly loss for Dow after almost eight consecutive weeks of gains. Economic reports and earning reports from retailers dominated the headlines.

In percentage terms, Dow lost 3.6%, Nasdaq lost 3.4% and S&P 500 lost 5% during the week.

For the year 2009, Dow, Nasdaq and S&P 500 are down by 5.6%, 3% and 5.9% respectively.

The following week will look forward to earning reports from H-P and Home Depot. Other than that, there will be a couple of economic reports.