US stocks manage a steady finish

Gains in the later part of the week offset earlier losses

After quite a few ups and downs during the course of the week, US stocks ended almost in an unchanged fashion for the week that ended on Friday, 26 June, 2009. Stocks had kicked of the week on a weak note but gains in the later part of the week offset those losses. Economic reports, corporate news and the Federal Open Market Committee meeting details dominated the week.

The Dow Jones Industrial Average lost 101.34 points (1.2%) for the week to end at 8,438.39. Tech - heavy Nasdaq gained 10.75 (0.6%) to end at 1,838.22. S&P 500 lost 2.33 (0.3%) to end at 918.9. Energy and financials sectors were the main laggards for the week.

The week started with the World Bank report that revised down global growth forecast in 2009 from - 1.7% to - 2.9%. As per the report, US economy is expected to contract deeper by - 3.0%, down from - 2.4%. Euro zone is expected to contract by - 4.5%, down from - 2.7% while Japan is expected to contract by - 6.8%, down from - 5.3%. This soured market sentiments since the very start of the week.

The FOMC left the benchmark rates unchanged (fed funds at range of 0.00% and 0.25%), noting that there is a slowdown in the economic contraction. But the committee also stated that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period of time.

The National Association of Realtors reported on Tuesday, 23 June, 2009 that falling prices boosted sales of pre-owned homes in May to the highest level since October, 2008. Existing-home sales in May rose 2.4% to a seasonally adjusted annual rate of 4.77 million. But new home sales were down 0.6% month-over-month versus an expected increase of 2.3%.

Among other economic data for the week, initial jobless claims for the week ended 13 June totaled 627,000, which was worse than expected and up from the previous week. Continuing claims crept up to 6.74 million. Though that is still off of its record high, it was worse-than-expected.

The Commerce Department reported during the week that the U.S. economy just went through its worst two quarters in more than 60 years, as businesses reduced their investments at the fastest pace since the Depression. Real GDP, the measure of the value of goods and services produced in the economy, fell at a 5.5% annual rate in the quarter after plunging at a 6.3% pace in the fourth quarter of 2008. A month ago, the government had estimated GDP fell at a 5.7% pace in the January-through-March quarter.

Among major corporate news of the week, Boeing pushed back the first flight date of its long anticipated and much delayed 787 Dreamliner. The stocks weighed heavily on the Dow for the whole week.

In the US market on Friday, 26 June, 2009, stocks spent the entire session struggling to find direction. Stocks attempted to reverse modest losses in the final minutes of trading, but the effort failed, which made for an anticlimactic finish to what was already a choppy and listless session.

The Dow Jones Industrial Average ended lower by 34 points at 8,438.39. The Nasdaq Composite Index, ended higher by 8.6 points at 1,838.22. S&P 500 ended lower by 1.3 points at 918.9.

Among economic reports for the day, The Commerce Department reported on Friday, 26 June, 2009 that U.S. personal incomes jumped 1.4% in May due to one-time stimulus checks, sending the savings rate to a 15-year high.

Incomes were boosted by one-time $250 checks sent to about 50 million Social Security beneficiaries as part of the Obama stimulus program. Excluding the one-time payments, disposable incomes rose 0.2%. Real disposable incomes (after taxes and inflation-adjusted) rose 1.6%. With the boost to incomes, the savings rate rose to 6.9%, the highest in 15 years. Consumer spending rose 0.3% in nominal terms, and 0.2% after adjusting for inflation, the largest gain since January.

Meanwhile, inflation measures rose 0.1% for the month. In the past, core inflation (excluding food and energy) is up 1.8%, while overall inflation is up just 0.1%, the lowest inflation rate in the 50-year history of the data.

In other earnings news, Accenture reported better-than-expected earnings for its latest quarter and raised its full-year outlook.

Large-cap tech showed relative strength, though its gains remained restrained. Nonetheless, it had helped the Nasdaq make its way into positive territory, while the Dow and S&P 500 mired in the red. Weakness, in the market was widespread. All 10 major sectors in the S&P 500 traded with losses. Their declines range from a fractional loss in the tech sector to a 1% loss in the energy sector.

Fresh demand concerns took crude prices at Nymex below $70 once again on Friday, 26 June, 2009. Prices fell on Friday as economic report showed that savings rate in US climbed to fifteen year high in US. Prices had crossed $70 mark a day earlier after militants attacked a key pipeline in Nigeria, the fifth largest oil exporter to the U.S. With Friday's drop, crude ended lower for the second consecutive week.

On Friday, crude-oil futures for light sweet crude for July delivery closed at $69.16/barrel (lower by $1.07 or 1.5%). For the week, crude ended lower by 1.2%.

In the currency market on Friday, the dollar was under renewed pressure after China's central bank reiterated a call to lessen the currency's role as the world's reserve currency. The dollar also slipped on speculation about global central banks' efforts to stabilize the economy that will boost demand for higher-yielding assets. The dollar index, which measures the strength of the dollar against a basket of six other currencies, fell almost 0.6%.

For the year 2009, Dow is down by 3.9%. The Nasdaq and S&P 500 are up by 16.6% and 1.7% respectively.

For the coming week, there are a few notable economic releases. U.S. stocks face a busy schedule of economic reports next week packed into four days because of the July 4th holiday. The key June employment report, along with manufacturing and housing data, will be the main items of the week. Markets will be closed on Friday, 3 July, 2009, to mark the Independence Day holiday the following day.