14 Apr 2008 | 07:41
US Market ends week with huge losses
A relay of not-so-good news on the earning front together with mixed data on the economic front took US market substantially lower for the week that ended on Friday, 11 April, 2008. But most of the weeks loss was due to the huge loss incurred the by the market on Friday it self which was mainly instigated by below-expected first quarter earnings and disappointing outlook from General Electric (GE). Or else, market would have ended the week with a little or modest losses. Other than that, commodities once again reached a sky-high price.
The Dow Jones Industrial Average lost 283 points for the week. Tech - heavy Nasdaq lost 80.75 points. S&P 500 lost 37.5 points. In percentage terms the three indices lost 2.3%, 3.4% and 2.7% respectively.
On Friday, 11 April, GE reported a 12% decline in continuing earnings and an 8% decline in continuing earnings per share. This was shocking not only because the company missed by such a big margin. GE attributed the bulk of its shortfall to the adverse effects of disruptions in the capital markets that hurt its financial services business. The company also slashed its full-year EPS guidance to reflect a slower economy and an assumption that capital markets remain challenging.
The disappointment from GE unnerved the market on Friday and prompted a deep sell-off that accounted for the bulk of this week's losses. The GE stock itself lost 13%, which was the biggest one day loss for the stock in last twenty-one years. Dow lost a huge 256 points on that day itself.
Other earnings-related disappointments included an earnings miss from Alcoa, a first quarter earnings warning from UPS, and a downward revenue revision from semiconductor company AMD.
The only silver lining in this market was Wal-Mart who raised its first quarter EPS guidance after reporting March same-store sales on Thursday, 10 April. That news was one of the few positive considerations in sea of disappointing same-store sales results.
Among major economic report of the week, weekly initial claims fell 53K to 357K. The trade deficit for February, meanwhile, widened to $62.3 billion from $59.0 billion in January. That widening contributed to downward revisions in Q1 GDP forecasts.
Among other negative news in the market, February pending home sales fell 1.9% month-over-month, which was worse than the expected decline of 1%. January pending home sales rose 0.3%. Sales have declined on average 1.7% each month since last year.
Also, The International Monetary Fund said total losses due to the financial market turmoil might grow to $945 billion.
Executive Summary
For the week, indices registered huge losses. DJIx and S&P 500, each closed down by 2.3% and 2.7% respectively. Nasdaq closed down by 3.4%. Market once again showed its erratic nature as indices whipsawed almost on all the days of the week.
But it was GE, which played the spoilt sport for the market. The company missed its earnings by a huge gap and also lowered its full year guidance. GE weighed on the indices extensively and most of the weeks loss for the market was due to Fridays loss. The GE stock itself fell by 13% on Friday.
0 comments:
Post a Comment