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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.633720 |
| Euro to US Dollar | 1.398406 |
| Japanese Yen to US Dollar | 0.010414 |
| Canadian Dollar to US Dollar | 0.861846 |
Despite dreadful news on jobs and the state of the auto industry, stocks managed a strong rebound on Friday that may give investors some hope for the next week.
Indeed, futures trading and rallies in Asian markets early Monday suggest that U.S. stocks may open strongly Monday, with the Dow Jones industrials rising as much as 110 points to around 9,050 and the Standard & Poor's 500 Index up 16 points to 947.
The possibility of a decent open appears mostly a reaction to China's announcement of a $586 billion package to revive growth in the world's fourth-largest economy.
In addition, there were hopes that American International Group (AIG, news, msgs) will win additional government aid.
And pressures seem to be building in Congress as well as from President-elect Barack Obama to extend government help to General Motors (GM, news, msgs), Ford Motor (F, news, msgs) and privately held Chrysler Group.
GM had warned on Friday that it could run out of cash in the first half of 2009 without government assistance or a dramatic reversal in sales.
Despite the growing crisis for U.S-domiciled auto makers, the Dow closed up 248 points, or 2.9%, to 8,944 on Friday. The S&P 500 was up 26 points, or 2.9%, to 931, and the Nasdaq Composite Index added 39 points, or 2.4%, to 1,647.
A large part of Friday's rally was a simple market reaction to heavy losses on Wednesday and Thursday that saw the Dow suffer its worst two-day point loss ever and its worst two-day percentage loss since the 1987 market crash.
But it could also be a positive reaction to Obama's news conference on Friday, his first since Tuesday's election.
The gains came despite the highest unemployment rate in 14 years, the loss of 240,000 jobs in October and GM's dire warning. GM also said it was no longer in merger talks with privately held Chrysler Group.
GM was down 9.2% to $4.36 and was one of just two of the 30 Dow stocks to show a loss on the day. The other was JPMorgan Chase (JPM, news, msgs), down 1.3% to $37.75.
At the same time, Ford, which also reported dismal results on Friday, was up 2% to $2.02.
Meanwhile, the National Association of Realtors said tightening credit conditions and the slumping economy knocked down pending home sales.
In his news conference, Obama promised to push an economic stimulus program if one isn't in place already. And, while he continued to push his plan to raise taxes on the most affluent taxpayers, he also said the health of the economy would dictate the timing.
"I do not underestimate the enormity of the task that lies ahead," he added.
The Dow had been up more than 260 points just before the news conference and dropped 160 points in the next 45 minutes on apparent disappointment when the president-elect carefully said that the Bush administration controlled the government until his inauguration on Jan. 20. After the news conference, buying resumed.
Because of Wednesday's and Thursday's selling, the Dow finished the week down 4.1%. The S&P 500 suffered a 3.9% decline, and the Nasdaq dropped 4.3%. For the year, the Dow is down 32.6%, with the S&P 500 down 36.6% and the Nasdaq off 37.9%.
The Dow has fallen seven out of the last 10 weeks; the S&P 500 and Nasdaq have fallen six of the last 10 weeks.
| Close for week | Wk. ago close | % chg. | YTD. chg. | |
|---|---|---|---|---|
| Dow Jones industrials | 8,943.81 | 9,325.01 | -4.09% | -32.57% |
| S&P 500 | 930.99 | 968.75 | -3.90% | -36.60% |
| Nasdaq Composite | 1,647.40 | 1,720.95 | -4.27% | -37.89% |
| Russell 2000 | 505.79 | 537.52 | -5.90% | -33.97% |
| Crude oil per barrel | $61.04 | $67.81 | -9.98% | -36.40% |
| 10-yr. Treasury yield | 3.78% | 3.97% | -0.19% | -6.32% |
| Gold per troy ounce | $734.20 | $718.20 | 2.23% | -12.39% |
Energy, materials push market higher
Pushing the market higher Friday were energy, utilities and materials stocks. ExxonMobil (XOM, news, msgs) and Chevron (CVX, news, msgs), up 6.3% to $73.95 and 4.8% to $73.46, respectively, added more than 50 points to the Dow by themselves.Crude oil closed up 27 cents to $61.04 Friday after dropping to $60.77 on Thursday, its lowest close since April 2007. Oil has been falling along with stocks amid fears about weakening demand.
Alcoa (AA, news, msgs), up 9.1% to $11.19, was the top Dow performer. U.S. Steel (X, news, msgs) was up 5.6% to $33.68. Freeport-McMoRan Copper & Gold (FCX, news, msgs), down most of the day, closed up 0.7% to $27.07.
In addition to the 28 Dow stocks that finished ahead on Friday, 425 S&P 500 stocks were higher, along with 86 stocks in the Nasdaq-100 Index ($NDX.X). The index finished the day up 30 points, or 2.4%, to 1,272.
Despite the ugly selling on Wednesday and Thursday, bulls should have been cheered by Friday's close. The major averages did not come close to testing their intraday or closing lows in October. Nearly all the Dow stocks are ahead of their October lows, except General Motors.
That lends support to theory that a bottom has been forming.
The key numbers are 840.54, the S&P 500's intraday low on Oct. 10, and 1,493.79, the Nasdaq's intraday low on Oct. 27.
- Check the S&P 500 chart here and the Nasdaq chart here.
These levels will get tested again. An important test will come possibly before the end of the year if one of the automakers is forced into chapter 11 bankruptcy.
If the market survives that, the next serious test will come either in late January and early February when fourth-quarter earnings come in, or April, when first-quarter 2009 earnings come in.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $61.04 | $60.77 | $0.27 | -9.98% | -36.40% |
| Heating oil (per gallon) | $1.9784 | $1.9424 | $0.0360 | -1.39% | -25.33% |
| Natural gas (per million BTU) | $6.7570 | $6.9790 | -$0.2220 | -0.38% | -9.70% |
| Unleaded gasoline (per gallon) | $1.3495 | $1.3360 | $0.0135 | -6.37% | -45.82% |
Highest unemployment rate since March 1994
If there was any good news from the Labor Department's jobs report, it was that the 240,000 jobs lost were within the 200,000 to 250,000 job losses economists had expected.The unemployment rate ticked up to 6.5% from 6.1% -- its highest level since March 1994.
Payrolls for August and September were revised down by an additional 179,000 jobs. Job losses through October now total 1.2 million, with half of the cuts occurring in the last three months.
Manufacturing lost an additional 90,000 workers in October -- the 28th straight monthly decline. Construction lost 49,000 jobs, and retail lost 38,000 jobs.
The only sectors that saw growth were education and health services, which gained 21,000 jobs.
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It could be as bad as the 1980-82 recession, Miller Tabak Chief Bond Strategist Tony Crescenzi wrote in a note to clients Friday morning. That slump, one of the worst of the post-World War II era, was set off by soaring interest rates and oil prices.
Philippa Dunne and Doug Henwood of the Liscio Report, a newsletter that specializes in tracking state and local tax trends, say job losses in the last year are approaching those in the 1990-91 and 2001 recessions. But this recession looks like it will be worse than either.
"Our best guess is that we're halfway through this (if we're lucky)," they wrote. But "massive amounts of stimulus coming from Washington" may help matters.
Starbucks, Macy's, Wal-Mart earnings due
More than 1,800 companies will report quarterly profits next week. It is a week dominated by retailers.The biggest to report will be Dow component Wal-Mart Stores (WMT, news, msgs), due Thursday morning.
Also reporting:
Profit falls at Berkshire Hathaway
Not even Warren Buffett can avoid the recession.Buffett's Berkshire Hathaway (BRK.A, news, msgs) said Friday that third-quarter profit fell 77%, the fourth straight quarterly decline, hurt by weaker results from insurance underwriting and a big loss on derivatives contracts.
Net income for the insurance and investment company declined to $1.06 billion, or $682 per Class A share, from $4.55 billion, or $2,942, a year ago.
Operating profit fell 18% to $2.07 billion, or $1,335 per share, from $2.56 billion, or $1,655. It fell short of the consensus estimate for $1,429 per share, Reuters said. Revenue fell 7% to $27.93 billion.
Berkshire's net worth nevertheless rose to $120.2 billion from $118 billion at the end of June.
"You can look at the results as a glass half-full or half- empty," said Frank Betz, a principal at Carret/Zane Capital Management in Warren, N.J. "Earnings were down, but book value went up. Berkshire hasn't been battered by extraordinary insurance claims, and there's nothing alarming in the results that's tied to Berkshire's exposure to the economy."
Berkshire owns businesses in such areas as insurance, energy, housing, kitchen supplies, clothing and food.
Berkshire Hathaway shares were up 0.7% to $113,000 on Friday before the report came out. The stock is down 20.2% this year.
Ugly numbers for GM, Ford
Ford and GM Friday morning reported terrible earnings, highlighting the massive troubles facing the auto industry.GM lost $4.2 billion in the quarter, or $7.35 per share, on an operating basis. The Street was expecting $3.70 per share. GM has lost more than $50 billion over the past three years. It used $6.9 billion of its available cash, which GM said will reach critical levels by the end of this year.
Revenue fell 5.8% to $37.9 billion, and sales are getting worse because of the credit crisis, which has made getting a car loan difficult for many buyers.
New cost-cutting moves would include $2.5 billion in capital spending reductions, a $500 million reduction in salaried worker expenses and $1.5 billion in additional structural cost reductions in North America.
Stock Charts (Year)
Ford Motor
General Motors
CEO Richard Wagoner insisted, however, that GM had no interest seeking bankruptcy protection. "You just can't sell cars in bankruptcy," he told CNBC on Friday.
If GM were to suspend operations, analysts said, there would be enormous problems for its suppliers and affect jobs across the Midwest. Shares of American Axle (AXL, news, msgs) were down 8.1% to $2.15 on the GM and Ford news. Dana (DAN, news, msgs), which makes drive shafts and other parts, was down 5.9% to $1.60.
Ford, meanwhile, lost $129 million, or 6 cents per share, up from a loss of $380 million, or 19 cents per share, last year.
But the key number to look at is Ford's $3 billion operating loss in the third quarter. Amounting to $1.31 per share, it was worse than the consensus estimate of a 94-cent loss for the quarter -- and far worse than last year's loss of a penny per share.
Revenue slumped 22% to $32.1 billion, with revenue from autos falling 23% to $27.8 billion.
Ford also said it will cut an additional 10% of its North American salaried workers.
Microsoft: No interest in a Yahoo deal
Shares of Yahoo (YHOO, news, msgs) fell 12.6% to $12.20 Friday after Microsoft (MSFT, news, msgs) Chief Executive Officer Steve Ballmer said the software giant is not interested in revisiting a possible acquisition of Yahoo."We are not interested in going back and re-looking at an acquisition," Ballmer said at a conference in Sydney, Australia.
Stock Charts (Year)
Yahoo
On Wednesday, Google (GOOG, news, msgs) backed out of an advertising partnership with Yahoo. Yahoo CEO Jerry Yang responded to the move by saying that the best option for the company was a deal with Microsoft.
In May, Microsoft walked away from talks to buy Yahoo for $33 per share after three months of back-and-forth negotiations; Yahoo said the offer undervalued the company.
Microsoft shares rose 3% to $21.50. Googlewas essentially flat at $331.14.
Andrew Rosenbaum contributed to this report.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.290% | 0.315% | -0.025 | -33.33% | -90.76% |
| 5-year Treasury note yield | 2.558% | 2.487% | 0.071 | -9.32% | -25.96% |
| 10-year Treasury note yield | 3.780% | 3.707% | 0.073 | -4.79% | -6.32% |
| 30-year Treasury bond yield | 4.261% | 4.200% | 0.061 | -2.47% | -4.44% |
| Currencies | |||||
| U.S. Dollar Index | 86.450 | 86.460 | -0.010 | 0.12% | 12.72% |
| British pound in dollars | $1.5657 | $1.5588 | 0.0068 | -2.68% | -21.29% |
| Dollar in British pounds | £0.6387 | £0.6415 | -0.0028 | 2.75% | 27.05% |
| Euro in dollars | $1.2728 | $1.2694 | 0.0034 | -0.17% | -12.92% |
| Dollar in euros | € 0.7857 | € 0.7878 | -0.0021 | 0.17% | 14.83% |
| Dollar in yen | 98.20 | 97.43 | 0.77 | -0.43% | -12.20% |
| Canadian dollar in U.S. dollars | $0.841 | $0.835 | $0.0057 | 1.67% | -15.28% |
| U.S. dollar in Canadian dollars | $1.189 | $1.197 | -$0.0081 | -1.69% | 17.96% |
| Commodities | |||||
| Gold | $734.20 | $732.20 | $2.00 | 2.23% | -12.39% |
| Copper | $1.6970 | $1.7255 | -$0.03 | -7.22% | -44.20% |
| Silver | $9.9630 | $10.0550 | -$0.09 | 2.39% | -33.22% |
| Corn | $3.7550 | $3.7800 | -$0.02 | -6.48% | -17.56% |
| Crude oil (NYMEX) (per barrel) | $61.04 | $60.77 | $0.27 | -9.98% | -36.40% |
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