Goldman Sachs news batters Wall Street

End of winning streak for US stocks after six consecutive days

Despite nervousness once again entering Wall Street on Friday, 16 April 2010, US stocks registered gains for seventh straight week that ended on that day. Earning reports dominated the week with quite a few companies reporting their first quarter earnings and easily beating estimates. Economic reports that checked in were also mixed in nature. But the last day of the week witnessed selling pressure with Goldman Sachs reportedly coming under scrutiny for fraud.

For the week, that ended on Friday, 16 April, 2010, Dow ended higher by 21.31 points (0.2%) at 11,018.66. Nasdaq ended higher by 27.21 points (1.1%) at 2481.26. S&P 500 witnessed marginal losses shedding 2.24 points (0.2%) at 1192.13.

The major averages began the week on a positive note and gained from Monday through Thursday. The Nasdaq outperformed thanks to strength in large-cap tech names following better-than-expected earnings results from Intel. Intel rose 6.1% this week. Google also reported earnings that were ahead of estimates.

Several influential companies reported earnings this week, with most besting bottom line estimates. Alcoa marked the unofficial start to first quarter earnings reporting season Monday evening. The Dow component reported in-line earnings of $0.10 per share, though its revenue came up short.

Among banks, JPMorgan Chase and Bank of America both topped expectations. ,

General Electric beat on the bottom line, but shares still fell after its report as the company's top line results failed to live up to expectations. In other corporate news, UPS raised its first quarter and fiscal year guidance on better-than-expected business conditions.

The economic reports during the week were mixed in nature. On the positive side, March CPI showed inflation remained muted, with CPI increasing 0.1% on a m-o-m basis and core CPI coming unchanged. March retail sale rose 1.6% on a m-o-m basis topping the 1.2% consensus, with gains in all categories except electronic and appliance stores, and gas stations.

On the downside, initial unemployment claims rose 24,000 to 484,000, missing the consensus estimate of 440,000. Industrial production in March increased a much smaller-than-expected 0.1% (consensus +0.7%).

On Friday, 16 April, 2010, stocks suffered their worst percentage loss in two months following news that the Securities Exchange Commission (SEC) has levied a charge against Goldman Sachs.

On that day, the Dow Jones Industrial Average ended lower by 125.91 points at 11,018.16. Nasdaq ended lower by 34.43 points at 2481.26. S&P 500 ended lower by 19.54 points at 1192.13. Seven of ten economic sectors ended in the red led by financials, materials, and industrial sectors. Better than expected housing sector report and earning reports failed to make market reverse its course.

Wall Street was stunned on Friday after news hit the wires that the U.S. Securities and Exchange Commission has filed a civil suit accusing Goldman Sachs and one of its vice presidents of defrauding investors in connection with a mortgage derivative. The fraud is related to subprime securities. Goldman Sachs saw some $12 billion, or 13%, of its market cap evaporate. Concern that other investment banks and brokerages may be implicated led the financial sector tumble.

Among economic reports for the day, the Commerce Department in US reported on Friday, 16 April 2010 that housing starts in US rose 1.6% in March to a seasonally adjusted 626,000 annualized units. The figure was stronger than the 610,000 expected. In addition, February starts were revised higher to 616,000 from the 570,000 previously reported. This was up 1.1% from the prior month. The initial estimate had been a 5.9% drop. As a result of the revisions, starts have risen for three straight months and are now at their highest level since November 2008.

Also, the preliminary Consumer Sentiment Survey for April from the University of Michigan came in at 69.5, which was not only below the 75.0 that had been widely expected, but it was also the worst reading since November.

All commodities tumbled on Friday. Crude oil prices ended substantially lower on Friday, 16 April 2010. The strong dollar added further woes. Mixed batch of economic data also affected crude prices. The dollar index rose by 0.4% on Friday.

On Friday, crude-oil futures for light sweet crude for June delivery closed at $84.67/barrel (lower by $2.08 or 2.3%). For the week, crude ended lower by 1.2%. Year to date, crude is higher by 5.4%.

On Friday, gold for June delivery ended at $1,136.9 an ounce, lower by $23.4 (2%) an ounce on the New York Mercantile Exchange. For the week, gold ended lower by 2.5%. On a year to date basis, gold is higher by 3.8%. On Friday, May Comex silver futures ended lower by 76 cents (4.2%) at $17.67 an ounce. For the week, silver lost 3.7%. On a year to date basis, silver is higher by 4%.

Barring Rediff.com, all Indian ADRs ended in the red on Friday. ICICI Bank, Tata Motors, Dr Reddy's and Wipro Technologies – all shed almost 2.6%. Rediff.com climbed up by 2.1%.

For the year, Dow, Nasdaq and S&P 500 are higher by 5.7%, 9.3% and 6.9% respectively.

Looking ahead to next week, the first quarter earnings season will take the centre stage.