US stocks end lower for third consecutive week

Better than expected fourth quarter GDP reading fails to take US stocks higher

US stocks registered drop for the third consecutive week on Friday, 29 January 2010. It was mainly due to a sell off during the last two days of the week that stocks suffered losses for the week. Earning reports dominated the week but the positive ones also failed to cheer investors.

For the week, that ended on Friday, 29 January 2010, Dow ended lower by 105.65 points (1%) at 10,067.33. Nasdaq ended lower by 57.94 points (2.6%) at 2147.35. S&P 500 lost 17.89 points (1.6%) at 1073.87. All ten economic sectors ended in the red led by the materials, energy and IT sectors. A large number of notable names reported earnings this week.

During the week, The Federal Reserve's statement on U.S. monetary policy came out during the middle of the week. The central bank, as expected, kept its federal-funds rate unchanged and said it would keep them exceptionally low for an extended period.

On the same day, President Obama focused on job creation instead of on banking reforms, a topic that had spooked financial markets last week. But the address played out very much as expected, and had little effect on the market.

Among earning reports expected for the week, Procter & Gamble, Colgate Palmolive, Nokia and fellow Dow component 3M exceeded earnings expectations. AT&T met expectations but Eli Lilly fell short of the same.

Apple, introduced its new iPad tablet device during the week. But expectations appeared to have gotten too high prior to the product's unveiling and the stock dropped more than 4% the following day after launch.

In the other earning space, Caterpillar , United Technologies, Boeing and ConocoPhillips released upside earnings surprises for the latest quarter. However, themes like low quality earnings and mixed guidance made for an underwhelming response to the announcements. Boeing reported fourth quarter profit more than expected. Caterpillar's fourth quarter profit was below expectation and the company lowered its FY 2010 earning outlook.

In the technology sector, Apple, Microsoft and Sandisk reported that their bottom-line exceeded expectations but it was mainly due to cost cutting initiatives. Amazon.com beat estimates and issued upward guidance.

At the end of the day on Friday, 29 January, 2010, economic reports dominated the day. Though they checked in better than expected, stocks ended in the red despite attempting to trade higher. It was mainly due to the strong dollar.

On that day, the Dow Jones Industrial Average ended lower by 53.13 points at 10,067.33. Nasdaq ended lower by 31.65 points at 2147.35. S&P 500 ended lower by 10.66 points at 1073.87. Dow was trading higher by 37 points earlier during the day. All ten sectors ended in the red led by energy, technology, and materials sectors.

In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies headed up by almost 0.7% following stronger than expected fourth quarter GDP reading in the US.

The Commerce Department in US reported on Friday, 29 January 2010 that the U.S. economy grew at the fastest pace in six years during the fourth quarter of 2009, even as consumer spending and business investment remained tepid. As per the report, real gross domestic product increased at a 5.7% seasonally adjusted annual rate in the final three months of the year, the best quarterly growth since late 2003. The economy grew 2.2% in the third quarter. A year ago, the economy fell at a 5.4% pace.

The 5.7% increase in the fourth quarter was in line with the 5.4% gain expected by by market. In the fourth quarter of 2009, about two-thirds of the growth came via the swing in inventories. Excluding the change in inventories, final sales increased at a 2.2% annual rate. But, even with healthy growth in the second half of the year, the economy shrank 2.4% in 2009, the worst year for GDP since the 10.9% drop in 1946.

Separately, there was an upbeat report on consumer sentiment. The Reuters/University of Michigan consumer sentiment index rose to a reading of 74.4 in January from 72.5 in December, reaching its highest level since January of 2008.

Crude oil prices ended lower on Friday, 29 January 2010. Prices dropped as the dollar headed up based on strong fourth quarter GDP reading by the Commerce Department. The strong consumer sentiment data added further fuel. Prices were also slipping since last couple of days due to impending worries from China front where tightening monetary policies are bothering investors due to shaky demand of metals in coming months. Strong economic reports generally tend to push crude prices higher. But with a firm dollar, commodity prices were pressured on Friday.

On Friday, crude-oil futures for light sweet crude for March delivery closed at $72.89/barrel (lower by $0.75 or 1%). For the week, crude ended lower by 2.4%. In January 2010, crude ended lower by 8.3%.

Indian ADRs ended mixed on Friday. ICICI Bank soared 5.4% while Rediff.com shed 4.7%.

For the year, Dow, Nasdaq and S&P 500 are lower by 3.5%, 5.4% and 3.7% respectively. Earnings reports will continue to pour in the coming week and will include big names such as Exxon Mobil and Pfizer.