US stocks end almost flat

Rally in the earlier part of the week fizzles out at the end

US stocks ended almost flat for the week that ended on Friday, 22 May, 2009. Though stocks had made a strong start during the beginning of the week, gains fizzled out in the later part of the week. The economic reports that checked in were not so exciting. But the earning reports from a couple of important home improvement retailers tried to give market a strong boost. Six of the ten sectors advanced during the week led by the materials sector. The telecom sector was the sole laggard.

The Dow Jones Industrial Average gained 8.68 points (0.1%) for the week to end at 8,277. Tech - heavy Nasdaq gained 11.87 (0.7%) to end at 1,692.14. S&P 500 gained 4.12 (0.5%) to end at 887.88.

The indices rallied on Monday, 18 May, after Bank of America rallied after being added to Goldman Sachs' Conviction Buy List. The Indian stock market also acted as a good booster after India's BSE Sensex struck the upper circuit twice on that day following an unexpected thumping victory by the Congress led UPA and its alliances.

Among earning news for the week, home improvement retailer, Lowe's announced better-than-expected earnings and upbeat forecast. Lowe's report much less than expected drop in first quarter profit. This also boosted market sentiments on Monday.

But grim economic data did not allow the rally to continue for long. The housing report showed that housing starts and building permits fell to record laws. Starts fell -12.8% from March to an annualized rate of 458,000 units (consensus 520,000) while permits dropped -3.3% to an annualized rate of 494,000 (consensus 530,000).

Also, initial unemployment claims for the week ended 16 May totaled 631,000 (consensus 625,000), which was down from an upwardly revised reading of 643,000 (from 637,000) in the prior week. Continuing claims jumped by 75,000 to a record 6.662 million, which brought the four-week moving average for this series to 6.48 million from 6.35 million. The report reflected a strained U.S. labor market.

On Wednesday, 20 May, the Fed released the minutes from the April FOMC meeting, which didn't bring much in terms of surprises. The Fed lowered its real GDP projections for 2009, 2010, and 2011. The Fed specified that the committee members believe the near-term economic outlook has weakened relative to the projections made in January. However, a recovery in sales and production is still expected to begin in the second half of this year.

Finally, on Friday, 22 May, 2009, stocks ended the day with modest losses. The Dow Jones Industrial Average ended lower by 15 points at 8,277.64. The Nasdaq Composite Index, ended lower by 3 points at 1,692. S&P 500 ended lower by 1 point at 887. It was a low volume session trading in positive territory, but some late selling pressure led stocks to close with a modest loss.

Banks were the primary drag on the financial sector on Friday. Though banks have been looking to raise capital in the wake of the government's bank stress tests, an official from the FDIC indicated during the week that additional assessments on banks are probable. There were also reports that the FDIC expects losses in its deposit insurance fund to total $70 billion during the next five years.

Among other earning reports that checked in during the week, it was mainly retailers that dominated. Target, Home Depot, Sears and Gap – all beat estimates. Among non – retailers, Hewlett-Packard reported in-line earnings, while Deere beat but provided downside guidance.

Crude oil prices ended substantially higher on Friday, 22 May, 2009 after the dollar dropped to its lowest level of the year. Credit rating concerns over US increased the pressure on dollar after Standard & Poor's Ratings Service warned Britain that it may lose its triple-A rating. Prices also rose as energy department's weekly inventory report showed earlier during the week that there was more than expected drop in crude inventories for last week. On Friday, crude-oil futures for light sweet crude for June delivery closed at $61.67/barrel (higher by $0.62 or 1%) on the For the week, crude ended higher by 8.2%.

In the currency market on Friday, the U.S. dollar index, fell 0.9%. The greenback fell to the lowest level this year against the euro as worries increased that the U.S. could lose its triple-A credit rating.

The U.S. stock and bond markets are closed on Monday, 25 May, in observance of Memorial Day.