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.