The Market This Week

Market Snapshot

Dow                        12,266.39            -315.79            -2.51%

Nasdaq                    2,271.48             -60.09             -2.58%

S&P 500                 1,330.63              -37.05              -2.71%

Monday saw Wall Street move higher after the S&P confirmed that they would keep their AAA rating for Ambac Financial Group Inc. and MBIA Inc. giving confidence that the two bond insurers will find stable ground even after the losses sustained from the credit market disaster. Essentially what the S&P’s announcement did was reassure Wall Street with good news to help boost the markets, which have been troubled recently by the possibility of faltering bond insurers. Tuesday, the markets opened in negative territory after two economic numbers were released, bringing bad news for investors. Wholesale prices shot up more than expected the previous month and confirming reports of consumer confidence is draining, showing that the subprime crisis is continuing to take its horrible toll on the economy. However, Wall Street saw a reversal later in the afternoon when IBM approved $15 billion stock buyback. Such a bold move gave investors confidence that there are still companies with financial strength.

Wednesday, markets finished the day mixed after reports came that Fannie Mae and Freddie Mac got to the go ahead by regulators to buy more mortgages. Yet the real news came from Mr. Bernanke who announced that the Fed is ready to take steps to ease the slowing economy, which is their highest priority, not inflation. Yet inflation is becoming a serious threat as the dollar sunk to new lows against the Euro sending both oil and gold prices even higher. Investors now saw a new problem growing, stagflation. Thursday brought more bad news as the Labor Department released that first-time unemployment claims rose last weeky by 19,000 to 373,000 giving serious threat that our economy is tilting toward the brink of recession. To add even more stress to Wall Street, worries arose over continuing failure in the financial sector where Bernanke admitted in his testimony to Congress that some banks may fail and not see the credit crisis through. The Federal Reserve Chairman gave some positive comments, claiming that the large banks will bounce back and inflation will ease but it was not enough to relieve the stress.

Yet the worst day to come was thankfully Friday, giving markets a weekend to cool off. The Dow plunged over 300 points, Nasdaq fell 60, and S&P 500 lost over 30 points. It was not hard to see why as investors had plenty to worry about. The Commerce Department reported that spending saw no gain in January due to inflation, yet the ultimate cause of the large drop was the long series of disappointed economic news and corporate earnings including American International Group and Dell Inc. Oil moved above 103 on inflation and supply concerns. A dismal week to be sure but is their any positive prospects to be looking out for? One optimistic view some investors have taken is Bernanke’s concern of the slowing economy over inflation giving hope for more rate cuts to come. Also Apple saw a small shot of life this week after gaining more than 9 points in anticipation of their March 6th special event where a business iPhone is rumored to be introduced. Investors should keep an eye on this potential resurge of a golden apple. 


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