The Market This Week

Market Snapshot

Dow 12,348.21 -28.77

Nasdaq 2,321.80 -10.74

S&P 500 1,349.99 +1.13

The market began the week higher as more rate-cuts were again expected with the Federal Reserve meeting on March 18th approaching. Such optimism helped give a slight boost to the retail and homebuilders stocks. But investors still could not shake off worries of continuing subprime casualties, amongst who were American International Groups, which according to reports, might still have more mortgage debt to write off. However, toy maker Hasbro Inc. gave some needed lift to Wall Street with fourth-quarter income rising an impressive 24 percent helped by 16 percent increase in sales. Yahoo also made headlines when they surprised many by rejecting Microsoft’s $44.6 billion bid. CEO Jerry Yang defended this move, claiming that Microsoft has “undervalued” his company and the takeover offer is not in the best interest of the shareholders. However, another merger seemed more immanent as reports are coming in that Motorola Inc. and Nortel Networks are in talks to merge.

Gains continued into Tuesday’s session when Warren Buffet offered, “to help out troubled bond insurers” calming the Market’s worries of the “deterioration in the credit markets”. Buffet’s Berkshire Hathaway Inc. will offer a second level of insurance up to $800 billion but would only back municipal bonds. The move by Buffet will surely supply Wall Street with a little bit more confidence and possibly help set some stable ground for investors. One firm has rejected Buffet’s offer but he says that he is waiting on two others. But many investors warned to be careful on such up days because this is no indication of a reversal. “Stock markets will have good days in bear markets”. The technology sector, however, took a hit Tuesday with Yahoo’s rejection of Microsoft Corp.’s bid and the Blackberry e-mail outage that caused problems for Research in Motion.

Wednesday brought a surprising report from the Commerce Department that unexpectedly reported a 0.3 percent increase in retail sales last month, giving some positive confidence in the consumer again. Such news translated to gains as investors expected 0.3 percent decline in retail sales. Coca-Cola, Applied Materials, and Deere & Co. all reported increase in profits and sales helping add to confidence. This optimism was not sustained for Friday brought disappointing economic data on manufacturing, consumer confidence and import prices giving the investors the reality check that despite such positive news throughout the week, the economy is still slowing.

What should investors take away from this week? Do not jump the gun. Friday brought a cold reminder that the economy is slowing. A Bear Market can a have a few good days but investors need to focus on the big picture. Remember, the trend is your friend. Markets are poised to take more hits as the mortgage crisis continues, so play it short in financials and industries effected by the weakening consumers, namely technology. Apple and Google have already showed vulnerability, so maybe there is trend here?


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