US stocks continue to remain in the grip of recessionary fears

Stocks register huge weekly losses led by technology, financial and materials sectors

Volatile US stocks once again registered substantial losses for the week that ended on Friday, 19 August 2011. Stocks kicked off the week on a strong note. But macro economic data during the week at home front and also globally pointed out to another spell of recessionary trends that might engulf the US and global economy soon. Uncertainty regarding the state of Europe pressured stocks, especially financials. Treasuries rallied, with the 10-year yield hitting a record low. Gold prices rallied as the precious metal broke through another all-time nominal high.



For the week, that ended on Friday, 19 August 2011, Dow ended lower by 451.4 points (4%) at 10,817.6. Nasdaq ended lower by 166.14 points (6.6%) at 2,341.84. S&P 500 ended lower by 55.28 points (4.7%) at 1,123.53. All ten economic sectors ended lower led by the technology, materials and financials sector.

There were quite a few items that caught the headlines in the tech sector during the week within the technology sector. Google shed 13% after the company announced it will acquire Motorola Mobility for $60 a share, a 60% premium. Dell came under pressure as the company's downside guidance cast a pall over its upside earnings surprise. Pessimism about the company's near-term prospects lends credence to concerns that some analysts have about tech spending amid a slowdown in macro activity. Hewlett-Packard plunged 27% on word that the company plans to sell its PC business and purchase UK-based data analytics company Autonomy for $11 bln.

The economic calendar was heavy this week. Stocks were pressured since amid news that during the second quarter Germany's economy grew at a paltry pace of 0.1% and that broad eurozone GDP grew just 0.2%.

At home, economic data for the week showed that reflecting rising prices for both fuel and nonfuel imports, import prices rose a stronger-than-expected 0.3% in July. Agricultural and industrial supplies led export prices lower on the month. Export prices declined for the first time in a year, down 0.4%. Also, industrial production climbed a solid 0.9% in July, building on June's upwardly revised 0.4% gain. Separate report showed that housing starts fell 1.5% to a 604,000-unit pace in July from a downwardly revised 613,000-unit pace in June. Single-family starts fell 4.9%, while multifamily starts rose for the second consecutive month.

But it was mainly the data that hit the wires on Thursday, 18 August that gave more fodder to talks of a recession. Ahead of the open, weekly initial jobless claims increased slightly more than expected to 408,000, overall CPI increased at a sharper than expected clip of 0.5% for July, but core CPI for July increased by an in-line 0.2%. Once the session was underway, stocks were knocked another leg lower by news that the Philly Fed Survey unexpectedly sank to -30.7 in August from 3.2 in July, the lowest reading since March 2009. Existing home sales also slowed more than expected to an annualized rate of 4.67 million. Leading indicators provided a positive surprise with a 0.5% increase, however.

U.S. stock indices stretched losses into a fourth week on Friday, 19 August, as apprehensive investors remained on alert for any sign of trouble or resolution from the European Union and its banks. After climbing as much as 120 points during Friday's session, the Dow industrials lost 172.93 points, or 1.6%, to end at 10,817.65. The Nasdaq Composite Index fell 38.59 points, or 1.6%, to 2,341.84. The Standard & Poor's 500 Index fell 17.12 points, or 1.5%, to 1,123.53.

Financials were one of the worst performing sectors in the S&P 500. Bank of America lost 0.6% after announcing they will cut 3,500 jobs this quarter.

Citigroup Inc. and J.P. Morgan Chase reduced their growth outlooks for the U.S. economy, while Germany's chancellor rejected the notion of a jointly issued euro-zone bond.

Precious metals continued to shine on Friday, 19 August 2011 at Comex. Prices rose as investors flocked to bullions as a safe haven for investment as global recession fears continued o linger across investors' minds. Gold for December delivery rose $30.2 or 1.7%, to end at $1,852.2 an ounce on the Comex division of the New York Mercantile Exchange on Friday. During intra day trading, prices rose to a high of $1,881.4. It was all time new record for the yellow metal. For the week, the yellow metal gained 6.4%. On Friday, silver prices for September delivery rose by $1.74 (4.3%) to end at $42.43. It was silver's highest settlement since early May. For the week, silver gained 8.5%.

Crude prices ended little lower on Friday, 19 August 2011 at Nymex. Prices continued to drop as global recession fears resumed. The day at Wall Street did not feature any economic data. Worse than expected economic data in most cases a day earlier exacerbated weakness in the market as investors feared that US will once again enter into another recession and the global economic recovery will be doomed. Thus oil prices dropped in tandem with US equities on fears of future demand concerns.

On Friday, crude oil futures for light sweet crude for September delivery closed lower by $0.12 (0.2%) at $82.26/barrel. Prices fell to a low of $79.17 during intra day trading. For the week, crude lost 3.7%.

For every stock rising three fell on the New York Stock Exchange, where 1.5 billion shares traded. Composite volume neared 5.4 billion shares.

All Indian ADRs ended strictly lower on Friday. MTNL shed 5.2%. It was followed by Tata Motors, HDFC Bank and ICICI Bank which shed 3.5%, 1.4% and 1.1% respectively.

For the year, the Dow, the Nasdaq and S&P 500 are lower by 6.6%, 11.7% and 10.7% respectively. Next week's calendar is relatively light until the end of the week, which brings the annual Jackson Hole economic policy meeting next week (Aug 26-28), where central bankers and economists will be discussing the current economic situation. Prior to that however, economic data of interest includes New Home Sale, Durable Orders, revised GDP and Michigan Sentiment on Friday.