NEW YORK – Wall Street ended a tumultuous two-week run relatively quietly Friday, finishing another back-and-forth session mixed as investors were cheered by signs of easing in the credit markets and managed to absorb lackluster economic news with equanimity. But while there was less volatility than during recent sessions, analysts warned that the market still faces rough times.
The expiration of options contracts helped tug stocks in different directions. Still, the Dow Jones industrial average traded within a narrower range than it had in much of the past two weeks and ended down 127. The market's big rallies on Monday and Thursday gave all the major indexes gains of well over 3 percent for the week — but that was just a partial recovery from the devastating double-digit drops of the previous week.
"The stock market has finally realized one thing — that the governments around the world have thrown in a lot of money and they're using all the tools that they possibly can" to restore order to the credit markets, said Peter Cardillo, chief market economist at Avalon Partners Inc., a New York brokerage house. "I'm sure we'll still have a strong bear grip to the market but I do believe the market was way oversold. I do believe we've made a bottom."
In recoveries from past market plunges, trading has remained volatile even after the major indexes reached their lows, so it is widely expected that Wall Street will ratchet higher and lower for some time. And, it is not yet clear that the market has actually touched bottom.
"I think were going to be groping along for the bottom for the next few weeks," said Phil Orlando, chief equity market strategist at Federated Investors.
Cardillo said economic data are likely to remain bleak but that market has already taken into account much of the economy's problems. Some of this week's heavy selling came in response to disappointing economic reports.
"Everything is ugly. It's going to stay this way for a while," Cardillo said.
The market spent the first half of Friday's session moving between gains and losses after the government said new home construction dropped by more than expected last month to the lowest pace since early 1991. Investors' mood seemed to pick up later in the session as lending rates for bank-to-bank loans edged lower, indicating that some bank fears about not being repaid by borrowers are easing. Demand for safe-haven investments like Treasury bills also decreased. The final hour of trading again proved pivotal as in much of October; stocks fluctuated as investors squared away positions for the week.
Given the magnitude of most of the market's moves in October, the indexes' moderate declines Friday seemed barely noteworthy. And advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, where consolidated volume came to 6.48 billion shares, down from 7.86 billion Thursday.
The revival of dormant credit markets — which follows a series of moves by governments around the world — appeared to draw most of investors' attention. The London interbank offered rate, or Libor, for three-month dollar loans fell to 4.41 percent from 4.50 percent on Thursday, the fifth consecutive day of declines.
Demand remains high for Treasury bills, regarded as the safest assets around, an indication that there is uncertainty lingering in the markets. The three-month Treasury bill Friday yielded 0.82 percent, up from 0.47 percent on Thursday. That indicates a let-up in demand, though the yield has not surpassed 1 percent in more than a week.
The yield on the benchmark 10-year Treasury note fell to 3.93 percent from 3.97 percent late Thursday.
The credit markets began to seize up in mid-September, after the bankruptcy filing of Lehman Brothers Holdings Inc. raised fears among banks that other financial institutions would also be unable to repay their debts. That in turn brought the lending industry to a near-standstill, threatening the economy that depends on a free flow of cash and liquidity.
"I think we're beginning to get a slightly better feeling in the credit market," said Cardillo, pointing to the move in Libor.
It was an erratic week on Wall Street, with the Dow soaring 936 points on Monday, slipping moderately Tuesday, sinking 733 points Wednesday, and then rallying 401 Thursday. The volatility is not providing investors with much relief, but it is a welcome change from last week's relentless plunge, during which the Dow logged its worst week ever and Wall Street lost about $2.4 trillion in shareholder wealth.
The Dow fell 127.04, or 1.41 percent, Friday to 8,852.22, after falling 261 points in the early going and rising 302 points — a 563-point range.
Broader stock indicators showed more modest declines. The Standard & Poor's 500 index fell 5.88, or 0.62 percent, to 940.55, while the Nasdaq composite index fell 6.42, or 0.37 percent, to 1,711.29.
For the week, the Dow rose 4.75 percent, the S&P 500 added 4.6 percent, while the Nasdaq rose 3.75 percent. But the gains follow the previous week's huge losses, when the Dow dropped 18.2 percent, the S&P 500 fell 15.3 percent and the Nasdaq lost 15.3 percent.
The dollar was mixed against other major currencies, while gold prices fell.
David Dietze, president at Point View Financial Services Inc. in Summit, N.J., contends that much of the market's whipsaw moves in the past month have come as hedge funds and mutual funds were forced to sell positions because some shareholders were cashing out.
"These hedge funds are getting hit by redemptions, their credit lines are being pulled and they are having to sell furiously," he said. "Selling begets selling, which begets selling, which begets more selling."
While Dietze sees risks for the economy, he questions whether the rapidity of the stock market's retreat signals the pullback was overdone.
"We have a credit crunch which is morphing into a general recession and certainly a lot of the economic data points down but still, to come in this week and see the markets down 20 percent — basically a bear market within a bear market just this month — you wonder if there isn't just this massive overreaction," he said.
A rise in oil prices helped energy companies, some of which had weighed on the market earlier in the week as oil showed steep declines. Light, sweet crude rose $2 to settle at $71.85 a barrel on the New York Mercantile Exchange. On Thursday, it sank to a 14-month low on worries about a deep global recession obliterating fuel demand.
Chesapeake Energy Corp. rose $2.12, or 11.6 percent, to $20.47, while XTO Energy Inc. rose $2.08, or 7 percent, to $31.68.
Late Thursday, Google Inc. posted a 26 percent increase in third-quarter profit. Google rose $19.52, or 5.5 percent, to $372.54; early Thursday, the Internet company's stock had fallen to a three-year low.
Economic readings that appeared to trouble the market early in the session seemed to lose their importance as investors looked to improvement in the credit markets.
The Commerce Department reported that housing starts fell more than 6 percent in September to an annual rate of 817,000 units. The figure is lower than the 880,000 units forecast by Wall Street economists surveyed by Thomson/IFR. Building permits also sank.
The report was yet another piece of evidence that the nation is struggling with a weak economy that, if the financial crisis is not solved, could weaken. President Bush on Friday said in a speech that the credit market — where many companies find funding for their operations — will take a while to thaw, but that Americans should be confident that it will.
The Russell 2000 index of smaller companies fell 10.14, or 1.89 percent, to 526.43.
Markets overseas were mostly higher Friday. In Asia, Hong Kong's Hang Seng index dropped 4.44 percent to its lowest level in almost three years, but Japan's Nikkei average rose 2.78 percent after a 11.4 percent loss Thursday. In Europe, Britain's FTSE index rose 5.22 percent, Germany's DAX index rose 3.43 percent, and France's CAC-40 rose 4.68 percent.
The Dow Jones industrial average ended the week up 401.03, or 4.75 percent, at 8,852.22. The Standard & Poor's 500 index finished up 41.33, or 4.60 percent, at 940.55. The Nasdaq composite index ended the week up 61.78, or 3.75 percent, at 1,711.29.
The Russell 2000 index finished the week up 3.95, or 0.76 percent, at 526.43.
The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended at 9,514.37, up 393.59 points, or 4.32 percent, for the week. A year ago, the index was at 15,577.43.
Saturday, October 18, 2008
Stocks end back-and-forth session mixed
Monday, September 15, 2008
US Financial Worries Weigh on Equities
MUMBAI: Investor sentiment was marred Monday on worries about the health of the US financial sector after Lehman Brothers became the latest casualty to the mortgage crisis fallout, Merrill agreed to be taken over by Bank of America for $50 billion and troubled insurer American International Group asked the Fed for a lifeline.
With Lehman and Merrill Lynch out of the picture, three of the top five US investment banks have effectively departed the scene in less than six months. Bear Stearns was acquired in a fire sale by JPMorgan in March.
"We are witnessing a turning point in the modern history of the financial system, as three major brokers have now disappeared from the scene. The coming days and weeks will be crucial to the global economic outlook," said Anita Gandhi, head-institutional business at Arihant Capital.
Stock markets in Australia, Singapore and Taiwan fell by around 2 to 4 percent, with shares of many banks suffering bigger losses. Holidays in most major Asian markets, including Tokyo and Hong Kong, kept volumes thin.
The gloom across global markets took its toll on Indian bourses as well, which plunged over 6 per cent intra-day as investors braced for more FII outflows. However, the market recovered lost ground towards the fag end of the session on the back of short covering in battered index heavyweights.
Bombay Stock Exchange's Sensex settled at 13,531.27, down 469.54 points or 3.35 per cent, recovering from the day's low of 13,150.81. The index opened at 13,666.28.
National Stock Exchange's Nifty ended 3.68 per cent or 155.55 points at 4072.90. The index fell to a low of 3955.40 earlier in the day.
"The mood is pessimistic than ever before; even insurance companies that generally come to support the market at times of distress, are not on the buy side. Lehman's exposure in heavyweights like DLF and Unitech sent the BSE Realty Index on a downward spiral," Gandhi added.
The selling spree sent the BSE Midcap and Smallcap indices down 4.49 per cent and 4.93 per cent respectively.
After remaining in the negative terrain for most of the day, Maruti Suzuki (2.8%), HDFC (1.16%), and ACC (0.61%) managed to eke out decent gains.
Reliance Infrastructure (-9.72%), Satyam Computer (-9.45%), Ranbaxy Laboratories (-7.6%), DLF (-7.54%) and ONGC (-6 .01%) were under pressure.
While the fate of the US financial system loomed in investors' minds around the world, initial reports that Hurricane Ike had not severely damaged infrastructure in Texas knocked benchmark oil prices below $100 a barrel. Oil tumbled 6 per cent to $94.83 although traders were cautious as they awaited status reports on more Texas refineries.
The financial turmoil halted US dollar's rise against other currencies, however, there was no respite for the Indian rupee. The Indian currency was down 46.04/05, down 32 paise against the US dollar.
Financial Woes Rattle - Investor Confidence Call Buying at 4000 Holds Nifty
MUMBAI: Markets tumbled to their lowest levels in two months after Lehman .Brothers filed for bankruptcy. However, markets came off from day's low as value buying emerged at lower levels.
National Stock Exchange's 50-share Nifty closed the day 3.68 per cent lower at 4072. Nifty recovered nearby 100 points from the lows of 3955, thanks to call buying and put writing at 4000 level. The futures provisionally ended at a premium of 21 points.
The September futures price declined 3.6 per cent while open interest added 18 lakh shares. Cost of carry was positive. Given the order book positions, players have squared off shorts and have gone long at lower levels.
Significant amount of call buying was observed from 4000 to 4500 levels. On the other hand, put writing was observed at 4000, 3900 and 3800 levels. However, put buying was seen at 4200 levels. Hence, until Nifty recovers and stays above 4200, bears have an open ground to hammer markets.
All sectoral indices were trailing in the negative. Realty, IT, metal and power were the worst hit.
In stock futures, Reliance Infrastructure plunged 9.13 per cent while open interest added 5.3 lakh shares. Satyam Computers plummeted 9.2 per cent, Ranbaxy fell 5.11 per cent and open interest shed 3.57 lakh shares.
Unitech dropped 7.41 per cent and Tata Communications fell 7.09 per cent. Reliance Capital nose-dived 10.18 per cent, DLF declined 7.19 per cent and Renuka Sugar slumped 7 per cent.
Reliance Industries fell 2.21 per cent, Larsen & Toubro skid 3.92 per cent and Tata Steel slid 4.7 per cent. Reliance Natural plunged 6.93 per cent, BHEL shed 4.11 per cent and Reliance Petro reduced 4.9 per cent.
Stocks in Europe and Asia tumbled Monday and futures on Wall Street and the dollar slid as the collapse of Lehman Brothers and the takeover of Merrill Lynch battered investor confidence.
