Earning reports fail to cheer US stocks

Friday's losses push US stocks for a weekly loss

With a sharp drop on Friday, 15 January, 2010, US stocks registered losses for the week that ended on that very day. It was the largest daily loss for US stocks on Friday after a long time and it came in spite of better than expected earning reports from a couple of important Dow components. The economic reports that checked in for the day were mixed in nature.

For the week, that ended on Friday, 15 January 2010, Dow ended lower by 8.54 points (0.1%) at 10,609.65. Nasdaq ended lower by 29.18 points (1.3%) at 2287.99. S&P500 lost 8.95 points (0.8%) at 1136.03. Stocks gained in the earlier part of the week. Alcoa kicked off the earning season on Monday, 11 January, 2010.

Stocks once again had registered gains on Wednesday, 13 January and Thursday, 14 January after a drop earlier on Tuesday, 12 January. But Friday witnessed huge loses for the indices.

At the end of the day on Friday, 15 January, 2010, the Dow Jones Industrial Average ended lower by 100.9 points at 10,609.95. Nasdaq ended lower by 28.75 points at 2287.99. S&P 500 ended lower by 12.43 points at 1136.03. All ten sectors ended in the red led by financial, technology and telecom sectors.

There were quite a few catalysts to dictate market momentum on Friday. First came earning reports and then economic reports.

Among earning reports for the day, JP Morgan Chase reported stronger-than-forecast $3.3 billion quarterly profit but failed to lift its dividend as some had hoped. On the other hand, Intel announced better-than-expected earnings of $0.40 per share. It even went on and issued solid revenue guidance for the current quarter.

But stocks failed to react positively to these earnings. Stocks deepened their losses after a survey of consumer sentiment for January showed less confidence than expected.

Also, the Federal Reserve in US reported on Friday, 15 January, 2010 that output of the nation's factories, mines and utilities rose a seasonally adjusted 0.6% in December, 2009, the sixth increase in a row. The 0.6% gain in output in December was stronger than the 0.5% expected by market. But, output in December was down 2% compared with December 2008.

Colder-than-usual weather contributed to the gain in December, with utility production rising a seasonally adjusted 5.9%. The output of factories dropped 0.1% in December after a 0.9% gain in November. Output of mines rose 0.2% in December.

Separately, the Commerce Department in US reported on Friday, 15 January 2010 that its consumer price index increased 0.1% in December 2009, down from a 0.4% advance in November. This is the lowest rate since July and is slightly below expectations of a 0.2% rise. The core CPI, excluding food and energy costs, also rose 0.1%, little more than the unchanged reading in November.

Crude oil prices slipped once again on Friday, 15 January 2010. With Friday's drop, it ended lower on all the days of the week. Prices fell as the dollar turned strong as earning and economic reports failed to cheer investors at Wall Street. On Friday, crude-oil futures for light sweet crude for February delivery closed at $78/barrel (lower by $1.39 or 1.8%). Crude ended the week lower by 5.7%. On a year to date basis till date, crude is lower by 2.1%.

Paris based, IEA, left its forecasts for global oil demand for 2010 virtually unchanged in its latest monthly report. It forecasts demand of 86.3 million barrels a day in 2010, up 1.7%, or 1.4 million barrels a day higher than 2009.

In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.7%.

Most of Indian ADRs ended lower on Friday. VSNL, Rediff.com, and ICICI bank was the main losers shedding 2.23%, 1.7% and 1.4% respectively. Wipro Technologies and WNS Technologies each gained around 0.4%.

Earnings reports will start to pick up next week. Quite a few Dow components are slated to report their earnings including IBM, Mc Donald's, Bank of America, American Express and GE etc. US market will remain closed on Monday, 18 January 2010 in observance of Martin Luther King Jr. Day.