Commentary Saturday Market Review

The Market This Week

Market Snapshot:

Dow 12,207.17 -171.44 -1.38%

Nasdaq 2,326 -34.72         -1.47%

S&P 500 1,330.61 -21.46 -1.59%

After a break on Monday celebrating the great Martin Luther King Jr., Tuesday saw what would have been a disastrous morning. The Dow was poised to open almost down 500 points and in the first few minutes did fall about 465 points. But it was the Federal Reserve to the rescue as an emergency rate cut was issued, cutting the federal funds rate 0.75 points helping the markets bounce back. By the end the Dow was down only 128 points, an easier number to digest. Further, the Fed also cut the discount rate another three-quarter-points. However, how long can such Fed actions sustain a market from recession. Many investors agree that cutting rates is simply a temporary relief to a much more immanent threat. 

Another big worry that spooked investors was the golden  egg of the Tech sector, Apple Inc. Considered a “safe haven” amongst investors alike, especially following the holiday season, Apple shocked Wall Street when they forecasted second quarters at 94 cents per share, falling far short of the expected $1.09 per share. 

Wednesday saw an opening with another big drop of more than 300 points but soon turned around almost 631.86 points, recovering all its losses and gaining 300 points by the end of the day. Why? Investors optimism proved strong after the earlier rate cuts on Tuesday and even more optimism that next weeks Fed meeting could bring another cut as well.  Then on Thursday Congress announced a new Economic plan that would send checks to every American varying from $600 – $1,200. Is this really a progressive move for the economy? Such a tax cut is highly unlikely to solve any problem other than to provide citizens with a little breathing room. Congress’s action is simply a suited man throwing rocks at a speeding train. Yet good news soon followed when Microsoft posted earnings better than expected due to increased sales of P.C. computers. Also with the Xbox and the new line of Zunes, Microsoft posted an impressive 31 percent increase in revenue. 

Friday saw initial gains due to enthusiasm over Microsoft’s earnings but that was short lived as investors cashed in on gains of the previous two days, sending the Dow down 170 points. But reflecting on the previous days, what can one take from this past week? Are we doomed? Not so fast investors. Yes recession might be coming but reflecting on the enormous bull market of the past five years, it is only a matter of time before the markets take a breather. Another shocker was Apple which proves that even the most financially sound companies can show vulnerability to consumer weakness. Yet after Microsoft’s earnings, it comes to show that it is not time to write the Tech sector off quite yet. 

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