The major indices closed on Friday in far better shape than might have been expected, suffering only modest declines for the week as a whole after Fed Chairman Ben Bernanke sparked a sustained rally on Friday with comments suggesting the Fed was willing to consider more muscular intervention in the economy to quicken the pace of recovery. The S&P 500 slid only 0.7% for the week after being down as much as 2.3%—eventually settling at 1,064.59 at Friday’s close (+17.37, 1.66%). Bernanke made clear his belief that growth will pick up significantly in 2011, suggesting that the Fed will consider “unconventional measures” to forestall any slide into double-dip recession. Bernanke’s statement reassured investors, and stocks rallied 1.7% following the announcement, with the Dow up 164.84 on Friday to finish at 10,150.65 (+1.65%) and the Nasdaq rising 34.94 to close at 2,153.63 (+1.65%). Friday afternoon also witnessed a sustained Treasury sell-off.
YTD Stock Market Performance
Response to the Fed’s message was mixed overall. Only three of the ten major sectors rose, led by utilities (+2.0%), with the tech sector acting as a significant drag on the market—down 2.1%. The majority of economic data remain far from reassuring, with the housing market once again on the precipice. Existing home sales were down 27.2%, reaching an adjusted annual rate not seen since record-keeping began in 1999. At the same time, new home sales plummeted to between 276,000-334,000—the lowest figure since 1963. Second-quarter GDP was revised down to 1.6% from 2.4%, though most analysts had expected a lower figure.
On the corporate front, Dell and Hewlett-Packard are involved in a bidding war for 3Par, a data storage company. Dell, which had seemed to have a takeover of 3Par well in hand prior to HP’s involvement, was forced to raise its offer significantly, to $27 per share. HP has since responded with $30 per share offer.
Canadian-based Potash (POT) has rejected a $130 per share offer from BHP Billiton (BHP) and is said to be encouraging other bidders.
Intel has lowered its third-quarter revenue projections significantly, to between $10.8 and $11.2 billion.
In Europe, the FTSE 100 was up 45.72 to finish at 5,201.56 (+0.89%), the DAX rose 38.59 to close at 5,951.17 (+0.65%), and the CAC 40 gained 32.41 to end Friday’s session at 3,507.44 (+0.93%).
In Asia, shares finished mixed on Friday, aided by a major reversal in Tokyo as investors shrugged off losses amid hopes of further stimulus action and a government initiative to counter the recent rise of the yen. The Nikkei 225 Index added 84.58 points, or 1%, to finish at 8,991.06. Hong Kong’s Hang Seng fell 14.71 points, or 0.1%, to close at 20,597.35–its sixth straight negative session. Shanghai’s CSI 300 Index rose a modest 8.47 points, or 0.3%, to settle at 2,858.57.
Light crude oil finished at 75.57 per barrel, up 0.53%; gold closed at 1,235.70—up 0.01%. The 10-year Treasury bond rose 6.12%, producing a yield of 2.65%.
The rocky ride for investors is expected to continue in the coming week, as the glow from recent corporate earnings reports fades and the focus shifts to weak—and weakening—economic data.
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