Technology sector takes US stocks higher

Wall Street ends its weekly losing streak

US stocks ended their weekly losing steak and managed to sport modest gains for the week that ended on Friday, 12 February 2010. It was mainly the technology sector that helped market register the gains. Other than that, the dollar fluctuated as and when Fed came out with its statements regarding chances of interest rate hike. Solution to Greece's debt problems thereby improving the country's fiscal health was another factor that dictated market momentum during the week.

For the week, that ended on Friday, 12 February 2010, Dow ended higher by 86.91 points (0.9%) at 10,099.14. Nasdaq ended higher by 42.41 points (2%) at 2183.53. S&P 500 gained 9.52 points (0.9%) at 1075.91. Eight of ten economic sectors ended in the green led by materials, technology, consumer discretionary and energy sectors.

During the week, the big story was a potential aid package for Greece. The news propped up the market on Tuesday, 9 February 2010, helping it more than regain Monday's, 8 February's declines.

The stories were speculative and conflicting at first. But as per latest reports the European Union met to discuss Greece's plans to reduce its large deficit. EU President Rompuy pledged to help Greece, but he did not provide any specific details. Specifically, the IMF also pledged support for Greece, while the European Central Bank and the European Commission said they will monitor Greece and draw up "necessary additional measures" to maintain stability in the eurozone.

The dollar was also influenced this week by Federal Reserve Chairman Bernanke's prepared testimony on unwinding the central bank's emergency liquidity programs. Mr. Bernanke suggested the possibility of an increased discount rate "before long," resulting in a spike in the dollar.

On Friday, 12 February 2010, leadership from the tech sector helped stocks trim steep losses that stemmed from a stronger dollar. The stock market gapped down in the early going to trade with a loss of as the Dollar Index climbed to a near 1% gain amid a sharp decline in the euro, which was weakened by a weaker-than-expected fourth quarter eurozone GDP reading. But at the end, Nasdaq was the only major index to end in the green. Economic reports dominated the day.

On that day, the Dow Jones Industrial Average ended lower by 45.05 points at 10,099.14. Nasdaq ended higher by 6.12 points at 2183.53. S&P 500 ended lower by 2.96 points at 1075.51. Dow was trading lower by 131 points earlier during the day. Nine of ten sectors ended lower for the day led by utilities, industrials, and energy sectors. Technology sector was the sole gainer.

Among economic data expected for the day, the Commerce Department reported on Friday, 12 January 2010, that U.S. businesses cut their inventories for the first time in three months, but strong sales reduced the key inventory-to-sales ratio to below its pre-recession average. Paced by a large drawdown in autos, business inventories fell 0.2% in December. Inventories had risen in October and November, which had ended a 13-month span of declines. Market was expecting inventories to remain flat.

On the other hand, the University of Michigan and Reuters reported on Friday that American consumers were more pessimistic about the path of the economy in February. The UMich index fell to 73.7 in February from 74.4 in January. Consumers were more upbeat about currrent economic conditions, with the current index rising from 81.1 in January to 84.1, the highest since March 2008. However, attitudes about the near-term deteriorated, with the expectations index falling to 66.9 in February from 70.1 in January. Expectations had risen three months in a row.

Separately, January retail sales surprised to the upside. Specifically, total retail sales rose 0.5% (consensus +0.3%) from the prior month, which was revised up to a decline of 0.1% from a decline of 0.3%, while sales excluding autos jumped 0.6% (consensus +0.5%). Sales gains were broad-based in January.

Semiconductor stocks in the technology sector supported the market for second straight day. Intel was a main gainer for the day.

After four consecutive days of rise, crude oil prices fell on Friday, 12 February 2010. An interest rate move by China strengthened the dollar thereby pressuring commodities. Nevertheless, crude gained for the week. Economic data also pressured crude oil prices. On Friday, crude-oil futures for light sweet crude for March delivery closed at $74.13/barrel (lower by $1.15 or 1.5%). For the week, crude gained 4%. In January 2010, crude ended lower by 8.3%. On a year to date basis, crude is lower by 6.6%.

On Friday, the Energy Information Administration reported an increase of 2.42 million barrels in U.S. crude inventories in the week ended 5 February 2010, a bigger buildup than had been expected. The report was delayed by two days because of a snowstorm that shut down government offices in Washington, D.C.

The EIA also said gasoline supplies rose by 2.3 million barrels, while distillate stocks fell by 356,000 barrels. Market was looking for an increase of 1 million barrels for gasoline and a decline of 1.75 million barrels for distillates.

In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies, went up by almost 0.3%. However, the greenback pared some of its gains at the end.

Heavy selling pressure was seen in Asian trade on Friday after the People's Bank of China said it would raise the ratio of reserves banks must set aside by 0.5 of a percentage point, the second such move this year.

Indian ADRs ended mixed on Friday. Tata Motors was a gainer adding 0.5%. WNS and HDFC Bank were the main losers shedding 1.1% and 0.5% respectively.

For the year, Dow, Nasdaq and S&P 500 are lower by 3.2%, 3.8% and 3.6% respectively. Next week, U.S. markets will be closed on Monday in observance of Presidents Day. While fourth quarter earnings season will continue to wind down next week, with a few exceptions, the economic calendar will pick up. Industrial Production and the Minutes from the 26-27 January 2010 FOMC meeting are due next week.