A little dose of reality from the CEOs of two of the nation's biggest banks hit stocks on Friday, but the market still finished with its third weekly gain in a row and one of the great three-week runs in history.
The Dow Jones industrials were off 148 points, or 1.9%, to 7,776, their biggest point loss since March 5. The Standard & Poor's 500 Index was off 17 points, or 2%, to 816, and the Nasdaq Composite Index was down 42 points, or 2.6%, to 1,545.
For the week, the Dow was up 6.8%, with the S&P 500 up 6.2% and the Nasdaq up 6%.
Since the market bottomed on March 9, however, the Dow is up 18.5%, with the S&P 500 up 20.6% and the Nasdaq up 21.8%. The S&P's gain since March 9 is its best 14-day gain since October 1938.
The Dow has risen 17% in the last three weeks, gains exceeded only by a 17.4% gain in September 1982 and a 20% gain in July 1938.
With Friday's loss, the Nasdaq is off 2% for the year after moving to a 0.6% gain on the year on Thursday. It had been down 19.6% on March 9.
The Dow is down 11.4% for the year, with the S&P 500 down 9.7%.
The market may be a bit more volatile Monday and Tuesday as the first quarter comes to an end. Thursday may bring volatility to foreign exchange markets because of the meeting of G20 finance ministers in London.
In the next month, the rally will face huge tests first from earnings warnings and then from the earnings themselves and guidance for the rest of the year.
In addition, Research In Motion's (RIMM, news, msgs) fourth-quarter earnings report after Thursday's close will be closely scrutinized. Research In Motion was off 0.1% to $45.01 on Friday.
Who are the winners since the March bottom? Every single Dow stock, for one thing. Here are their performances.
| Company | Friday | Chg. since 3/9 | Company | Friday | Chg. since 3/9 |
|---|---|---|---|---|---|
| Citigroup | $2.62 | 149.52% | 3M | $50.33 | 19.63% |
| General Motors | $3.62 | 115.48% | Walt Disney | $18.59 | 19.24% |
| Bank of America | $7.34 | 95.73% | United Technologies | $44.48 | 18.42% |
| JPMorgan Chase | $27.40 | 72.33% | Chevron | $68.90 | 18.22% |
| General Electric | $10.78 | 45.48% | Verizon | $30.62 | 16.96% |
| Alcoa | $7.80 | 44.71% | Coca-Cola | $45.10 | 16.39% |
| DuPont | $22.70 | 40.64% | Johnson & Johnson | $52.83 | 13.37% |
| American Express | $14.45 | 35.81% | IBM | $94.15 | 12.78% |
| Hewlett-Packard | $33.33 | 30.55% | Pfizer | $14.04 | 11.16% |
| Home Depot | $23.63 | 29.62% | Intel | $15.42 | 10.78% |
| Merck | $27.16 | 29.39% | Wal-Mart Stores | $52.57 | 10.65% |
| Caterpillar | $30.35 | 26.88% | Procter & Gamble | $48.57 | 9.94% |
| Boeing | $37.53 | 21.06% | Exxon Mobil | $69.98 | 8.38% |
| AT&T | $26.00 | 19.71% | Kraft Foods | $22.89 | 7.82% |
| Microsoft | $18.13 | 19.67% | McDonald's | $55.01 | 5.14% |
Why the market fell
The market was due for a sell-off on Friday after Thursday's gains; several catalysts combined to hit shares.Let's start with an acknowledgement that business in March wasn't as good as in January and February by JPMorgan Chase's (JPM, news, msgs) Jamie Dimon and Bank of America (BAC, news, msgs) CEO Ken Lewis.
When the two made their comments, the Dow dropped from a loss of roughly 130 points to as much as 188 points. Comments by both about their January and February business had helped set off the rally.
JPMorgan was off 5.8% to $27.40. Bank of America fell 3.2% to $7.34.
A further note should be added. Dimon and Lewis said the issue was that their securities trading operations had not performed so well. What that meant, CNBC's Jim Cramer said, was that both companies' traders had shorted the stock market and were caught when the market turned higher.
The day's other catalysts:
- Disappointing guidance from consulting firm Accenture (ACN, news, msgs), which knocked its shares down 13.6% to $27.66.
- Intel's (INTC, news, msgs) announcement that it may sell up to $1 billion in common stock to make new investments. That may be good for the company, but it will dilute the interests of existing shareholders, and Intel was off 2.5% to $15.42.
- Unhappiness on Wall Street with possible compensation limits that may come with the administration's financial stabilization plan. UBS Financial Services' Art Cashin told CNBC that staff at a number of trading desks were threatening to quit en masse to start unregulated hedge funds.
In addition, falling commodity prices knocked down energy and materials stocks. Crude oil was lower by midday, down 3.6% to $52.38 a barrel, and energy shares were lower. Exxon Mobil (XOM, news, msgs) was off 1.8% to $69.98; Chevron (CVX, news, msgs) was down 1.8% to $68.90.
Intel's announcement hurt tech shares generally. IBM (IBM, news, msgs) was off 4.7% to $94.15 after reports said the company will be laying off 5,000 workers. Microsoft (MSFT, news, msgs) fell 3.7% to $18.13. Apple (AAPL, news, msgs) dropped 2.8% to $106.85. (Microsoft is the publisher of MSN Money.)
Amazon.com (AMZN, news, msgs) fell 4.3% to $70.52. Goldman Sachs analyst James Mitchell took the stock off his "Conviction List," citing the stock's decline since he added it to the list last May and its essentially flat performance in the last year. He still rates the stock a "buy" and raised his target price to $81.
Google (GOOG, news, msgs) shares were down 1.6% to $347.70 after a report on Thursday said it was laying off 200 sales staff because of the recession. Analyst Trip Chowdhry of Global Equities Research told CNNMoney.com that he expects Google to cut an additional 600 jobs.
Only four of the 30 Dow stocks were higher, led by General Motors (GM, news, msgs), up 6.2% to $3.62. The stock was up 13.8% for the week and is up 20.3% this month.
Meanwhile, only 64 S&P 500 stocks were higher, led by instrument maker Waters (WAT, news, msgs), up 9.2% to $37.31.
Only four stocks in the Nasdaq-100 Index ($NDX.X) moved higher. Three of the winners were biotech companies: Gilead Sciences (GILD, news, msgs), up 1% to $44.37; Amgen (AMGN, news, msgs), up 0.4% to $51.65; and Genzyme (GENZ, news, msgs), up 0.3% to $59.23. The fourth was apparel retailer Urban Outfitters (URBN, news, msgs), up 2.2% to $16.59.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $52.38 | $54.34 | -$1.96 | 17.02% | 17.44% |
| Heating oil (per gallon) | $1.4328 | $1.4813 | -$0.0485 | 13.18% | 1.93% |
| Natural gas (per million BTU) | $3.6310 | $3.9470 | -$0.3160 | -13.51% | -35.41% |
| Unleaded gasoline (per gallon) | $1.4879 | $1.5311 | -$0.0432 | 16.18% | 47.58% |
Obama meets with executives
Top Wall Street executives met with President Barack Obama at the White House Friday to discuss the administration's plans to fix the troubled banking sector.When all was done, members of the group said they were impressed by the administration's grasp of the nation's economic problems and mostly backed the efforts to get the economy back on track. Goldman Sachs' (GS, news, msgs) Lloyd Blankfein told Bloomberg Television that he believed the stimulus program, efforts to stabilize home prices and the administration's proposal to fix the banking system are good steps and should get the economy moving faster than if no efforts were made at all.
Blankfein was part of a group of 15 executives at the meeting. Others included Vikram Pandit of Citigroup (C, news, msgs), Dimon of JP Morgan Chase and John Mack from Morgan Stanley (MS, news, msgs).
- Video: Obama meets with bank chiefs
Obama's move to extend an olive branch to finance chiefs marks a change in tone for the administration. Obama and his team have been sharply critical of the banking sector, particularly after the bonus fiasco at American International Group (AIG, news, msgs), but the government now needs their help to turn things around.
"It's terribly important that an environment of consensus replace the polarization of recent weeks," Arthur Levitt, former chairman of the Securities and Exchange Commission and now a senior adviser to the Carlyle Group, told Bloomberg News before the meeting. "It's essential to the business community that they be very much part of this process."
Treasury Secretary Tim Geithner released details of the administration's public-private plan to relieve the banking sector of its toxic assets.
"We're reliant upon them to help rebuild our economy," Valerie Jarrett, senior adviser to Obama, told Bloomberg. "It would be very unnatural if we didn't engage them and have a direct opportunity to pick their brains and look to the future."
Meanwhile, Sun Bancorp (SNBC, news, msgs) CEO Thomas Geisel told CNBC Friday that he wants to return the Troubled Asset Relief Program funds his bank received soon as possible.
Geisel's comments echo recent news from Goldman Sachs, which said it expects to start repaying the TARP bailout funds it received from the government next month.
| Close for week | Wk. ago close | % chg. | 2009 YTD chg. | |
|---|---|---|---|---|
| Dow Jones Industrial Avg. | 7,776.18 | 7,278.38 | 6.84% | -11.40% |
| S&P 500 Index | 815.94 | 768.54 | 6.17% | -9.67% |
| Nasdaq Composite Index | 1,545.20 | 1,457.27 | 6.03% | -2.02% |
| Russell 2000 Index | 429.00 | 400.11 | 7.22% | -14.11% |
| Crude oil per barrel | $52.38 | $51.06 | 2.59% | 17.44% |
| 10-yr. Treasury yield | 2.76% | 2.63% | 0.14% | 23.04% |
| Gold per troy ounce | $925.30 | $956.20 | -3.23% | 4.64% |
Consumer spending is stabilizing
Consumers tiptoed back into the world of spending in February, according to a Commerce Department report released Friday.Consumer spending rose 0.2% last month, in line with economists' expectations, after a revised 1% increase in January. Consumer spending makes up about 70% of the economy.
Personal incomes fell 0.2% in February, slightly worse than the 0.1% drop economists had predicted. Incomes rose a revised 0.2% in January.
Personal saving, as a percentage of disposable personal income, was 4.2% in February, following a 4.4% rate in January. The last time the saving rate exceeded 4% two months in a row was in August and September 1998.
"We're seeing a minimal amount of consumption, as people are just spending on bare necessities," Lindsey Piegza, an economic analyst at FTN Financial, told Bloomberg News. "You can't have stable consumer spending until you have stable incomes or wealth accumulation."
Consumer sentiment is also stabilizing, a separate report showed Friday, but confidence remained at the lowest level in nearly 30 years.
The University of Michigan's consumer confidence survey came in at a reading of 57.3 for March, up from a revised reading of 56.3 in February. Economists had expected a reading of 57.2.
The index was at 96.9 in January 2007, before the recession started, and averaged 112 over the last three decades. It hit a 28-year low of 55.3 in November.
KB Home's loss narrows
Homebuilder KB Home (KBH, news, msgs) Friday said its fiscal-first-quarter loss narrowed to $58.1 million, or 75 cents per share, from a loss of $267.9 million, or $3.47 per share, in the same period a year earlier.Stock Chart (Year)
KB Home
Net orders rose 26% in the quarter.
CEO Jeffrey Mezger sounded a cautious note about a housing market turnaround, however. The company sees "no meaningful improvement in market conditions for the remainder of this year," Mezger said in a statement.
KB Home is operating in a market that is "severely challenged by inventory oversupply, declining home prices, tightening lending standards, rising unemployment and weakening consumer confidence," Mezger said.
GM could miss key deadline
March 31 is right around the corner, and that could mean trouble for General Motors (GM, news, msgs), which is trying to convince the government that it has a viable plan for survival.GM has made progress on its plan to restructure, but it will likely miss Tuesday's deadline for getting concessions from the United Auto Workers union and bondholders, The Wall Street Journal reported Friday.
No deal with either is in the offing, according to the newspaper. Bondholders are especially unhappy, CNBC's Michelle Caruso-Cabrera reported. GM has succeeded in getting about 7,000 workers to accept buyouts, but the company needed to get 10,000.
More from MSN Money
Failure to meet the deadline could be a step toward bankruptcy, but the Obama administration is likely to extend the deadline by 30 days, the report said.
Accenture gives weak forecasts
The recession has hit consulting company Accenture. The company late Thursday warned that revenue for its fiscal-third quarter will fall short of expectations.Accenture expects third-quarter revenue to come in between $5.1 billion and $5.3 billion, lower than the consensus estimate of $5.8 billion.
Stock Charts (Year)
Accenture
"This increasingly uncertain environment is affecting business broadly and has had a dramatic impact on some of our clients," Accenture Chief Executive William Green said in a statement.
The report "was a little worse than feared," Jamie Friedman, an analyst at Susquehanna Financial Group, told Bloomberg News. "Consulting is discretionary. It's a great thing to have, but it's the first thing to go when you don't have better visibility on your own business."
Consulting bookings fell 17% in its fiscal second quarter from a year earlier, the company said. And Accenture posted a second-quarter profit of $411.4 million, or 63 cents per share. Accenture earned $406.6 million, or 64 cents per share, in the same period a year ago. Sales in the most recent quarter fell 6.6% to $5.66 billion.
Morgan Stanley tops M&A list
Investment bank Morgan Stanley moved to the top of the global M&A league, Thomson Reuters reported Friday. JPMorgan Chasewas second, ahead of Citigroup.The bank was an adviser on the largest M&A deal of the year, the acquisition of Wyeth (WYE, news, msgs) for $64.5 billion by Pfizer (PFE, news, msgs), and also advised Schering Plough (SGP, news, msgs) on its $46 billion takeover by Merck (MRK, news, msgs).
Andrew Rosenbaum contributed to this report.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.125% | 0.140% | -0.015 | -50.00% | 8.70% |
| 5-year Treasury note yield | 1.799% | 1.783% | 0.016 | -10.94% | 15.99% |
| 10-year Treasury note yield | 2.761% | 2.733% | 0.028 | -9.21% | 23.04% |
| 30-year Treasury bond yield | 3.618% | 3.651% | -0.033 | -2.79% | 34.45% |
| Currencies | |||||
| U.S. Dollar Index | 85.580 | 84.610 | 0.970 | -2.92% | 4.18% |
| British pound in dollars | $1.4308 | $1.4463 | -0.0155 | -0.10% | -2.89% |
| Dollar in British pounds | £0.6989 | £0.6914 | 0.0075 | 0.10% | 2.98% |
| Euro in dollars | $1.3286 | $1.3532 | -0.0246 | 4.77% | -5.17% |
| Dollar in euros | € 0.7527 | € 0.7390 | 0.0137 | -4.55% | 5.45% |
| Dollar in yen | 98.17 | 98.81 | -0.64 | 0.57% | 8.30% |
| Canadian dollar in U.S. dollars | $0.807 | $0.814 | -$0.0065 | 2.80% | -1.27% |
| U.S. dollar in Canadian dollars | $1.239 | $1.229 | $0.0108 | -2.73% | 1.29% |
| Commodities | |||||
| Gold | $925.30 | $942.20 | -$16.90 | -1.82% | 4.64% |
| Copper | $1.8295 | $1.8550 | -$0.03 | 18.91% | 29.75% |
| Silver | $13.2630 | $13.6200 | -$0.36 | 1.17% | 20.58% |
| Corn | $3.8700 | $3.9075 | -$0.04 | 10.33% | -4.91% |
| Crude oil (NYMEX) (per barrel) | $52.38 | $54.34 | -$1.96 | 17.02% | 17.44% |
Rate this Article
High