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Monday, January 25, 2010
Dismal week for US stocks at Wall Street
Materials sector registers maximum losses
With stocks witnessing a third consecutive sell-off on Friday, 22 January, 2010, it turned out to be a dismal week for stocks at Wall Street for the week that ended on that day. Earning reports dominated the week but the positive ones also failed to cheer investors. Concerns over financial sector regulation failed to induce buying interest among traders. Economic reports had limited impact on stocks. It was a holiday-shortened week with market being closed on Monday, 18 January, 2010.
For the week, that ended on Friday, 22 January 2010, Dow ended lower by 436.67 points (4.1%) at 10,172.98. Nasdaq ended lower by 82.7 points (3.6%) at 2205.29. S&P500 lost 44.27 points (3.9%) at 1091.76. All ten economic sectors ended in the red led by the materials sector. A large number of notable names reported earnings this week, including five Dow components.
During the week, President Obama proposed some reforms in the financial sector. Obama's plan lacked details, but it was announced that commercial banks will not be allowed to own, invest in or sponsor a hedge fund or a private equity fund. In addition, commercial banks will be prohibited from proprietary trading operations unrelated to serving customers for their own profit.
Several banks reported earnings during the week. The financial sector's losses were compounded by news of regulatory overhauls by the Obama administration. Among the companies in the financial sector that reported earnings were Citigroup, Goldman Sachs and American Express that beat earning estimates. Bank of America and Morgan Stanley missed estimates.
In the other earning space, industry bellwether General Electric reported upside results, as did McDonald's, Google and IBM.
At the end of the day on Friday, 22 January, 2010, stocks closed with steep losses for a third straight day paced by technology shares, which suffered from analyst downgrades and huge earnings expectations. The selling picked up in the afternoon as fears swirled regarding the possibility that Ben Bernanke might not get confirmed to a second term as Federal Reserve Chairman.
On that day, the Dow Jones Industrial Average ended lower by 216.9 points at 10,172.98. Nasdaq ended lower by 60.41 points at 2205.29. S&P 500 ended lower by 24.72 points at 1091.76. All ten sectors ended in the red led by financial, technology and materials sectors.
Losses cumulated at Wall Street despite better than expected earning reports from AMD and Google. Also, Mac Donalds and GE reported good earnings but the stocks ran out of gas by the end of the day.
Crude oil prices dropped significantly on Friday, 22 January 2010. Prices fell as traders mulled over China's tightening of the current monetary policies, which will lead to demand concerns for crude in coming months. Sell-off of US stocks at Wall Street also pressured to declining commodity prices.
On Friday, crude-oil futures for light sweet crude for March delivery closed at $74.54/barrel (lower by $1.54 or 2%). For the week, crude ended lower by 4.7%. On a year to date basis till date, crude is lower by 8%.
In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies stayed steady against most of its counterparts. The dollar strengthened during the week on fears that China will curb bank lending. The China Banking Regulatory Commission said it hasn't "specifically" told banks to suspend lending in January, but a report said that it had asked several banks to stop issuing loans. The dollar index dropped by a mere 0.2%. The dollar index lost 1.6% for the week.
Barring ICICI Bank, all the Indian ADRs ended in the red on Friday. Wipro Technologies and Punjab Tractors were the largest losers, each shedding almost 4.5%. HDFC Bank shed 3.5%. ICICI Bank added 0.25%.
Earnings reports will continue to pour in the coming week.
Bullion metals turn pale
Prices register significant weekly drop
Precious metal prices ended considerably lower on Friday, 22 January 2010. Prices fell as traders mulled over China's tightening of the current monetary policies. Sell-off of US stocks at Wall Street also pressured to declining commodity prices.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.
On Friday, gold for February delivery ended at $1,089.7 an ounce, lower by $13.5 (1.2%) an ounce on the New York Mercantile Exchange. Earlier during the day, it fell to a low of $1,081.9. For the week, it ended lower by 2.4%. Year to date in FY 2010, gold has dropped by almost 0.3%.
Last year, after hitting a low at $807.30 per ounce on 15 January 2009, gold futures rallied almost 51% to hit an all-time high at $1217.40 per ounce during early December of 2009 but fell from those levels at the end.
On Friday, March Comex silver futures ended lower by 40 cents (2.3%) at $16.93 an ounce. For the week, silver ended lower by 8.1%. Year to date in FY 2010, silver has risen by almost 2.8%.
Silver futures had hit a low at $10.42 on 15 January 2009 and hit a high at $19.30 per ounce on 2 December 2009. Like gold, silver also ended lower than its all time high level.
In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies stayed steady against most of its counterparts. The dollar strengthened on fears that China will curb bank lending. The China Banking Regulatory Commission said it hasn't "specifically" told banks to suspend lending in January, but a report said that it had asked several banks to stop issuing loans. The dollar index dropped by a mere 0.2%.
Gold had ended FY 2009 higher by 24%. Silver futures had ended 2009 up 50%. The dollar index had lost 4.2% against its counterparts last year.
Crude accumulates more losses
Prices shed almost 5% for the week
Crude oil prices dropped significantly on Friday, 22 January 2010. Prices fell as traders mulled over China's tightening of the current monetary policies, which will lead to demand concerns for crude in coming months. Sell-off of US stocks at Wall Street also pressured to declining commodity prices.
On Friday, crude-oil futures for light sweet crude for March delivery closed at $74.54/barrel (lower by $1.54 or 2%). For the week, crude ended lower by 4.7%. On a year to date basis till date, crude is lower by 8%.
Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 52% since then. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.
During the week, in the weekly inventory report, the EIA reported that crude inventories fell by 471,000 barrels in the week ended 15 January 2010. Market was expecting the report to show a build up of 2 million of crude inventories. The report also showed that gasoline inventories increased by 3.9 million barrels.
In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies stayed steady against most of its counterparts. The dollar strengthened on fears that China will curb bank lending. The China Banking Regulatory Commission said it hasn't "specifically" told banks to suspend lending in January, but a report said that it had asked several banks to stop issuing loans. The dollar index dropped by a mere 0.2%.
Earlier during the week, in the latest report, the Organization of the Petroleum Exporting Countries said that world oil demand is forecast to grow by 800,000 barrels a day this year to average 85.1 million barrels a day, representing no major change from last month's forecast.
Paris based, IEA, left its forecasts for global oil demand for 2010 virtually unchanged in its latest monthly report last week. 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.
Among other energy products on Friday, reformulated gasoline for February delivery fell 1.3 cents to $1.97 a gallon and heating oil for February delivery dropped 4.5 cents to $1.94 a gallon.
Also on Friday, bucking the trend in energy, February natural-gas futures rose 21.5 cents, or 3.8%, to $5.82 per million British thermal units.
Copper gains strength
Prices rise as dollar turns weak
Base metal prices ended higher on Friday, 22 January 2010. Prices rose in tandem with the slipping dollar, which increased the appeal of base metals as an alternate investment.
At USA, copper futures for March delivery ended higher by 5.2 cents (1.6%) to 3.347 a pound. For the week, copper ended lower by 0.6%. This year, till date, copper is lower by 3.4%. Copper ended FY 2009 higher by 140%.
At LME, copper for delivery in three months ended higher by $115 (1.6%) at $7,390. On 3 July, 2008, prices had touched an all time intra day high of $8,940.
Copper ended substantially higher last year on expectations of revived global economic growth along with a decline in the dollar. The dollar index had dropped almost 4.2% last year. The metal was also pushed higher by record first-half imports to China, the world's largest user.
The U.S. buys about 13% of the 17 million metric tons of copper sold annually and China buys about 20%.
In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies stayed steady against most of its counterparts. The dollar strengthened on fears that China will curb bank lending. The China Banking Regulatory Commission said it hasn't "specifically" told banks to suspend lending in January, but a report said that it had asked several banks to stop issuing loans. The dollar index dropped by a mere 0.2%.
In FY 2008, copper prices dropped by 54%. Prior to 2008, copper prices ended FY 2007 with a gain of mere 5.5% after a whopping 44% gain in FY 2006. The price of copper gained every year since 2002 as global economic growth boosted demand for the metal used in pipes and wires.
Among other metals traded in the LME on Friday, lead ended 2% lower at $2,247 a ton and zinc dropped 5% to end at $2,343 a ton. Nickel dropped 2% to end at $18,510. Aluminium shed 1.6% to end at $2,220 a ton.
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