Volatile US stocks end session higher

Indices register their second consecutive weekly gains

US stocks registered their second consecutive weekly gains for the week that ended on Friday, 19 February 2010. Several notable earnings reports, some economic data and news from the Fed were all responsible for taking stocks higher for the week. It was mainly the financial sector that helped market register the gains. Other than that, the dollar fluctuated as and when Fed came out with its statements regarding the economy and ultimately hiked the discount rate after a long time.

For the week, that ended on Friday, 19 February 2010, Dow ended higher by 303.21 points (3%) at 10,402.35. Nasdaq ended higher by 60.34 points (2.8%) at 2243.87. S&P 500 gained 33.66 points (3.1%) at 1109.17. Financial, industrial, materials and consumer discretionary were the main sectoral gainers.

During the week, the big story was the release of the FOMC meeting minutes on Wednesday, 17 February and an announcement of a discount raise the following day after the close. The FOMC meeting minutes stated the Fed continues to believe economic conditions warrant low interest rates, though the Fed did increase its 2010 GDP to 3.2% from 3.0%. In addition, the Fed stated that an increase to the discount rate does not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January FOMC meeting.

That change in the discount rate came about the next day, with the Fed increasing the discount rate 25 basis points to 0.75% as part of further normalization of the Fed's lending facilities. But the stock market shrugged off the news and managed to gain on Friday, 19 February.

Among earning reports for the week, Deere, Merck, Kraft, Hewlett-Packard and Wal-Mart all topped EPS estimates.

Among economic reports for the week, The Labor Department in US reported on Thursday, 18 February 2010 that the number of people filing initial claims for state unemployment benefits rose by 31,000 to a seasonally adjusted 473,000 last week. Market was expecting initial claims to rise to about 447,000. The four-week average of initial claims fell by 1,500 to 467,500, about 20,000 more than expected. State jobless claims have risen in five of the seven weeks so far in 2010.

Also, housing starts jumped 2.8% from an upwardly revised December reading of 575,000 to a seasonally adjusted annual rate of 591,000 (consensus 580,000). The January 2010 level is 21.1% above the year-ago period. The increase in starts was driven mostly by a 9.2% increase in starts of structures with 2 or more units. Single-family starts rose a more modest 1.5% to 484,000, which is comparable to the rate seen last August.

On Friday, 19 February 2010, stocks remained volatile for most part of the day for the fluctuating dollar but ultimately stocks registered their fourth straight gains.

On that day, the Dow Jones Industrial Average ended higher by 9.45 points at 10,402.35. Nasdaq ended higher by 2.16 points at 2243.87. S&P 500 ended higher by 2.42 points at 1109.17. Dow was trading lower by 38 points earlier during the day. Seven of ten sectors ended higher for the day led by utilities, industrials, and financial sectors.

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 0.3%. But then it pared its gains partly.

Among economic report scheduled for the day, The Labor Department in US reported Friday, 19 February 2010 that core consumer prices fell 0.1% in January, the first such decline since 1982.

Crude prices ended higher on Friday, 19 February 2010. Prices were volatile and pared earlier losses as Fed decided to hike its discount rate after a long time leading to speculation about withdrawal of stimulus package. The dollar rose to nine-month highs on Friday once again.

On Friday, crude-oil futures for light sweet crude for March delivery closed at $79.81/barrel (higher by $0.75 or 0.9%). During intra day trading, prices fell to a low of $77.76. For the week, crude gained 7.7%. In January 2010, crude ended lower by 8.3%. On a year to date basis, crude is higher by 0.8%.

Natural gas fell to its lowest price in 10 weeks in New York on Friday anticipation of milder weather that would cut demand for the heating fuel. Natural gas for March delivery fell 12.8 cents, or 2.5% to settle at $5.044 per million British thermal units. Gas fell 7.8% this week.

Indian ADRs ended mixed on Friday. Tata Motors was a loser shedding 1.9%. HDFC Bank gained 0.3%.

For the year, Dow, Nasdaq and S&P 500 are lower by 0.2%, 1.1% and 0.5% respectively.