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Apr-07-2009Wall Street Takes A Breather, Stocks Slip On Monday(topic overview)
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Forecast: Wall Street's consensus expectation is that overall earnings at S&P; 500 companies will be down almost 37 per cent. The Dow Jones Industrial Average fell 41.74 points, or 0.5 per cent, to 7975.85, after climbing back from its low for the day at 7862, to mark its first drop in five sessions. [1] Trader Jon Najarian, of OptionMonster Holdings in Chicago, said that that seemed overly pessimistic, considering the tens of billions of dollars in total losses that have piled up since last fall. Echoing a sentiment held by many market veterans these days, Mr Najarian said stocks seemed to be settling into a new trading range, unlikely to return to their bear-market lows but unable to mount a lasting rally because of the likelihood of bad earnings reports and economic data. With the first-quarter earnings season due to kick off this week, Wall Street's consensus expectation is that overall earnings at S&P; 500 companies will be down almost 37 per cent, according to Thomson Reuters. A late round of strength in healthcare companies helped the market pare some of its earlier losses.[1]
The stock market tends to trade on investors' expectations for how business will look six months to a year down the line. The outlooks that companies issue with their earnings reports in April will be critical to whether Wall Street goes bull or bear. Quincy Krosby, chief investment strategist at The Hartford, expects that, at best, the market will hold its gains but not push much higher as investors examine the coming quarterly reports from companies. "Going sideways," she said, "would be a victory."[2]
The Dow's recent surge, for example, does not change the basic guidance that money needed soon - within the next five years - needs to be protected, rather than exposed to stock market volatility. While investors may sleep better after a 1,500-point increase, they can't lose sight of the fact that a market that rises that quickly can give it back just as fast. The key is your personal investment policy, which most people confuse with their "financial plan." The latter is how you execute the former. Say an investor went into the most recent bear market with 75 percent of their assets in stocks and the rest in bonds and cash. While the market was imploding, the investor decided that they could not stomach the volatility, that they did not want that much risk in their portfolio. If they ultimately decide that they want to become an active market timer, or that they want to expose no more than half of their assets to the market, that is a change in their personal investment policy; picking the actual means for making the change - deciding if they will buy and hold or try to trade more actively - is their plan for carrying out the policy.[3] Each day both benchmarks are widely quoted in the financial media as key barometers for the performance of U.S. stocks. While both the Dow Industrials and S&P; may be adequate measures of U.S. stocks, investors wanting to build a portfolio that accurately represents the total U.S. stock market might want to look elsewhere.[4] Despite the fact that the Dow and S&P; get most of financial media's spotlight, other broader measures of domestic stocks offer more investors more complete market exposure. These benchmarks include the DJ Wilshire 5000 (NYSEArca: TMW ), the MSCI U.S. Broad Market Index (NYSEArca: VTI ), and Russell 3000 (NYSEArca: IWV ). Each of these indexes includes a mix of large, mid, and small company stocks. In the past, the Dow's performance has been helped by its lower exposure to sinking financial stocks. With so many of the Dow's companies engulfed in financial turmoil, the turnover of its membership ranks is higher than it's been historically.[4] S&P;'s index committee makes the decisions about which stocks get included inside the S&P; 500's membership. Even though the Dow and S&P; both have committee members that decide which stocks enter and exit their respective barometers, both measures are using passive strategies to select companies. Many large cap mutual fund managers will benchmark their performance to the S&P; 500 rather than the Dow. The primary reason for this is because the S&P; is a broader measure of U.S. stocks. The Dow's obvious advantages over the S&P; are its longer history of 113 years versus 52 years.[4]
The disadvantages of the Dow are that it doesn't give a broad representation of U.S. stocks, like the S&P; 500.[4]
The Dow Jones industrial average fell 74 points, or 0.9 per cent, to 7,943. The broader S&P; 500, which had been up more than 25 per cent from its low in March, fell 9 points, or 1.1 per cent, to 833.[5] At noon, the Dow Jones industrial average was down 132 points, or 1.7 per cent, to 7,886.[6]
No, that only happens when a big move goes to the down side. That is precisely why many investors see only hope and promise, rather than danger, in the nearly 1,500 points that the Dow Jones industrial average has gained since hitting a bear-market low in March. They kept some money in equity mutual funds, expecting to capture any rebounds, including the sharp moves up from the bottom. With cash apparently starting to flood into equity funds, there are also signs that investors may not have learned much from the market's slide, and that they are about to repeat old mistakes, chasing performance and letting their emotions get the best of their portfolio.[3] Now investors head for spring still unsure which side is in control. From the second week of the year to early March, the Dow Jones industrial average lost more than a quarter of its value, plunging from just above 9,000 to below 6,550. Retirement accounts were suddenly worth half what they were in 2007.[2]
Last week the Dow Jones Industrial Average commanded the attention of investors - this time for going up rather than down.[7] A month of gains in the Dow Jones industrial average and the Standard & Poor's 500 could be fitful anomalies, like November's rise that cheered investors briefly before crumbling into a longer pattern of disarray.[8] Sydney - Monday - April 6: (RWE Aust Business News) - Wall Street proved its resiliance overnight by closing above 8000 on the Dow Jones Industrial Average index and racking up four weeks of gains, its best since 2007.[9]
The Dow Jones Industrial Average rose 39.51 points (0.50 percent) at 8017.59, closing above the the psychological 8000 level for the first time since February 9.[10] The Dow Jones Industrial average fell 42 points or 0.5 percent to close below the 8,000 mark after surpassing the figure just a session ago. 19 of 30 Dow Components finished the session lower.[11]
Plus, an analyst warned Monday that the U.S. government has not succeeded in stabilizing the banking sector despite six months of effort and myriad programs. The Dow Jones Industrial Average was recently down 100 points, or 1.3%, at 7916, about 50 points off its low.[12] The Dow Jones Industrial Average gave up 41.74 points, or 0.5%, to 7975.85, and the S&P; 500 lost 7.02 points, or 0.8%, to 835.48.[13] At the close, the Dow Jones Industrial Average was down 41.74 points or 0.52%, to shut shop at 7,975.85.[14]
To further emphasize that the market, most of the time, can be very quiet and very frustrating, here's another reality: from 1965 to 1982 the Dow Jones Industrial Average price level barely moved. It averaged.6% a year during that period.[15] November. The Dow Jones Industrial Average has bounced 22.5% in 19 trading days, the best such stretch since 1938.[16] Here's an interesting note on the Dow Jones Industrial Average ( ^DJI ).[17]
MarketWatch, the MarketWatch logo, BigCharts and the BigCharts logo are registered trademarks of MarketWatch, Inc. Dow Jones is the registered trademark of Dow Jones & Company, Inc. Intraday data delayed at least 15 minutes.[1] Dow Jones Reprints: This copy is for your personal, non-commercial use only.[18]
A day in the red would cap the Dow's most recent winning streak at four consecutive sessions. Heading into today, the blue-chip index is up 21.6% since hitting its low for the year on March 5. The market's performance this week will hinge largely on the start of earnings season, which gets more or less officially underway on Tuesday when Alcoa ( AA ) releases its first-quarter results. [19] International Business Machines Corp. fell 1.3 per cent and Sun Microsystems Inc. plunged 23.8 per cent after takeover negotiations by IBM appeared to fall through, a potential blow to anyone hoping that mergers and acquisitions activity might be picking up. Alcoa Inc., which kicks off the first-quarter earnings season when it reports its results on Tuesday, fell 3.4 per cent. In Canada, the S&P;/TSX composite index fell 121 points, or 1.3 per cent, to 8,945 hit by weakness at all three of its major sectors: financials, materials and energy.[5] The stock rose another 7.2 per cent, contributing more than 30 points to the benchmark index.[20]
"The market has had a 25 per cent run almost uninterrupted," said Bruce Bittles, chief investment strategist at RW Baird. As long as the S&P; 500 holds above 750, Mr Bittles believes the stock market will battle upward until the northern summer as investors realise that the economy is not quite as weak as they feared.[1] Energy and basic materials were close behind, off more than 2 per cent each, reflecting investors' renewed concerns about the stagnant global economy.[1]
Among energy stocks, Suncor Energy Inc. fell 2.2 per cent and Canadian Oil Sands Trust fell 2.6 per cent after the price of crude oil dipped to $50.56 (U.S.) a barrel, down about $2. [5] Ford Motor was a rare bright spot Monday, up 16 per cent after the carmaker announced $US9.9 billion in debt reduction through securities repurchases and issuing new stock.[1]
Lockheed Martin Corp. rose 8.9 per cent on government plans to cut work on the F-22 fighter jet but buy more of the F-35s. Ford Motor Co. surged 16 per cent after the struggling auto maker managed to restructure its debt, reducing its obligations by $10-billion (U.S.) using a combination of cash and shares and cutting its interest costs by $500-million a year.[20] Financials led the way, falling 3.8 per cent after a gloomy report from Mike Mayo of Calyon Securities and suggestions that the U.S. administration's private/public plan to buy up toxic assets isn't being received well by the market.[6] Bank of America Corp. fell 6.1 per cent and JPMorgan Chase & Co. fell 4.5 per cent on renewed concerns about the stability of the U.S. financial system likely related to comments from Timothy Geithner on Sunday, when the Treasury Secretary said on Sunday that the Obama administration would consider removing top executives if the government had to offer "exceptional" assistance to struggling firms.[5] Among financials, Royal Bank of Canada fell 1.1 per cent and Manulife Financial Corp. fell 1.5 per cent.[5]
Among the banks, Royal Bank of Canada finished the day down 0.7 per cent and Toronto-Dominion Bank fell 2 per cent.[20]
Caterpillar, another industrial stock that has had a good run recently, fell 2.6 per cent.[1] In other moves, energy stocks fell 2.7 per cent, materials fell 3.4 per cent and consumer discretionary stocks fell 2.3 per cent.[6]
The good news? Information technology stocks rose 4.2 per cent after Research In Motion Ltd. continued the remarkable rally that began on Friday. All other subindexes were down.[6]
Many traders came into Monday's session thinking the financial sector might be due for a pullback after leading a market rally from bear-market lows hit in early March. Through last week's action, the S&P; had soared 24.5 per cent from its lows, led by a nearly 55 per cent surge in the financial category.[1] Nineteen of 30 Dow components traded lower. The S&P; 500 was off by 0.8 per cent, hurt by a 2.1 per cent slide in its financial category.[1] The broader S&P; 500 closed at 835.42, down 7.08 points, or 0.8 per cent, marking a similar improvement toward the end of the trading day.[20]
In Canada, the S&P;/TSX composite index was down 138 points, or 1.5 per cent, to 8,928.[6]
Stocks wobbled after a private research firm reported deepening declines in the massive U.S. services sector. The Institute for Supply Management said its nonmanufacturing index stood at a seasonally adjusted 40.8 percent in March, 0.8 percentage point lower than the 41.6 percent registered in February. It was the sixth consecutive monthly contraction in the sector that dominates the world's biggest economy.[10] The companies that did best in the March rally showed traders were betting that a stabilizing economy would mean higher demand for natural resources and electronics. Stock in Alcoa, which makes aluminum, rallied 40.6 percent off its lows.[2]
Small investors are more wary. Even with the gains in March, investors have pulled more than $30 billion out of U.S. stock funds this year, according to TrimTabs Investment Research.[2] U.S. stocks fell for the first time in five days posting modest losses. The drop came after stocks posted their best four-week gains in more than 75 years amid doubts over the health of the banking industry.[14]
"The stock market will recover months before the job market will recover," said Kim Wooden, financial advisor with Ameriprise Financial in Niles. Last week's rally, she said, is bigger than just breaking 8,000 points for the first time in two months because, "there are some early warning signs that the recession is coming to an end and this is just one of them." Edward Jones recently released a report to their employees addressing the current financial situation with an article entitled "10 reasons to be a long-term bull." In the article, today's current economic situation is compared to that of the Great Depression - a comparison commonly made these days but which the investment company said doesn't quite compare.[7] Over just 13 trading days, the Dow soared 21 percent, bouncing back almost to 8,000. When the dust settled, the stock market was left with its sixth straight quarter of declines, the first time that's happened since 1969 and 1970.[2]
American International Group (NYSE: AIG) got the boot and with bankruptcy looming, General Motors (NYSE: GM) looks to be next. Other Blue Chip components contained within the Dow are Kraft Foods (NYSE: KFT), International Business Machines (NYSE: IBM) and The Home Depot (NYSE: HD). Because the Dow weights companies by their stock price, this makes it the very first fundamentally weighted measure ever invented. The S&P; 500 began publishing its results in 1957 and follows a basket of 500 stocks.[4] Over the past year, faltering stock prices have been the Dow's Achilles' heel. Major Dow members like Alcoa (NYSE:AA), Bank of America (NYSE: BAC), Citigroup (NYSE: C) and General Electric (NYSE: GE) have seen their share prices crushed to under $10.[4] Traders said that after a remarkable four-week winning streak, Wall Street was rattled early on Monday by an analyst report assigning an underweight rating to the banking sector. Financials were hit after Calyon Securities analyst Mike Mayo initiated coverage of 11 big-name banks with "underperform" or "sell" ratings, saying recent government efforts to stabilise the financial system would not prevent Wall Street's loan losses from exceeding those of the Great Depression by late 2010.[1] Home sales and other economic reports came in surprisingly upbeat. "It's very possible that the lows we put in in March were the lows that hold for the rest of our lives," said Jerry Jordan, portfolio manager at the Jordan Opportunity Fund in Boston. Of course, the day-to-day swings on Wall Street can still be wrenching, as they have been since the financial meltdown of last September.[2] What now? The answer could be found in a mixture of economic reports that will help Wall Street determine whether there really is hope that the recession, among the longest since the Great Depression, is turning around- or at least stabilizing. Manufacturing reports coming this week will give investors clues about whether business is picking up, and the March employment report will shed light on whether the job market pain is still getting worse.[2]
Stocks within the DJIA are selected by editors of the Wall Street Journal. There are no pre-determined criteria except that components should be established U.S. companies that are leaders in their industries. Even with this relatively simple mandate for selecting stocks, the Dow's membership ranks have been rocked.[4] As the oldest barometer of U.S. stocks, the Dow has also stood the test of time.[4]
A drop for U.S. stocks interrupted the recent rally Monday as old worries about banks and deals caused new woes for investors on the eve of earnings season.[12] U.S. stocks fell at the start of a short week as worry about banks and acquisitions returned on the eve of earnings season.[1]
North American stocks fell at the start of trading on Monday on concerns about the financial systems and the jitters over the upcoming earnings season.[5] North American stocks ended down on Monday on renewed concerns about the stability of the financial system and the start of earnings season but managed to rebound substantially from their lows earlier in the day.[20] Stocks began the week lower on renewed concern over the financial sector, bearish corporate news and fears that earnings season may deflate some of the market's optimism.[19]
North American stock market indexes remained down at midday on Monday, as investors reacquainted themselves with those twin concerns: financial stability and earnings.[6] Some investors worry that gloomy earnings reports and outlooks will dishearten recent buyers for industrial, technology and commodities stocks.[1]
If you learned anything, it was the importance of concentrating on what are your goals and why you are investing to begin with, and then having a plan that you stick with." Financial experts are not critical of investors who stuck with their funds, or with those who felt sufficient pain and worry that they needed to dial down their stock exposure and permanently increase their margin of safety. It's the investors who blew up their financial plan out of fear - selling at the darkest time - who missed out on the most recent market bottom and explosive rise, and who are now going back hard into stocks that are the problem. These investors didn't consciously make market-timing decisions, but reacted at the gut level and are now doing it again. They are living proof of the long-running Dalbar Financial Services study, which shows that funds routinely deliver bigger returns than average investors actually get, because individuals only buy after a rise or sell after a decline.[3] While it's human nature to compare your current results against where your portfolio stood at the peak, it's not always relevant. "It is a disservice to pick an arbitrary date of October 2007 as the reference point against which all future gains must be measured," said Jeff Young, an investment adviser at First Financial Equity Corp. in Scottsdale. If you're obsessed with the old high, you probably feel remorse now and might make unwise decisions such as getting too aggressive in hopes of rebounding sooner. Investors can still succeed, Young adds, even if they don't sell at the top. "It is not at all necessary for one to exceed or even match former highs to have a portfolio that generates enough income to live a retirement in dignity (or meet other objectives)," he said.[21]
Some market participants weren't so worried by the approach of earnings season, which is likely to show the eighth straight decline in quarterly earnings in the S&P; 500, according to Thomson Reuters. Matthew Kaufler, portfolio manager at Federated Clover Investment Advisors in New York state, said: "This is the first quarter in some time that I haven't been so apprehensive about buying ahead of the announcements.[1] Alcoa, which kicks off earnings season tonight in the U.S., slid 3.4 per cent.[1] Citigroup Inc. fell 4.6 per cent and JPMorgan Chase & Co. fell 3.7 per cent. Alcoa Inc., which reports its first quarter results on Tuesday, fell 3.2 per cent.[20] Research In Motion Ltd. finished with another fine gain after it surged about 20 per cent on Friday following and upbeat quarterly report.[20]
Insurers did well: Manulife Financial Corp. rose 1.9 per cent and Sun Life Financial Inc. rose 0.8 per cent.[20] Kinross Gold Corp. fell 3.6 per cent and Barrick Gold Corp. fell 3 per cent. Even Teck Cominco Ltd. fell 1 per cent after the miner announced major asset sales to reduce its heavy debt load.[5] Among gold producers, Barrick Gold Corp. fell 4.6 per cent and Goldcorp Inc. fell 1.8 per cent.[20] Cisco Systems fell 3.5 per cent after being cut to a "neutral" rating from "buy" by Goldman Sachs.[1]
The jobless climbed to 8.5 per cent in March against 8.1pc for the previous month, the highest since 1983.[9]
The Dow finished at 7,608.92, a gain of more than 1 percent for the day, still looking a lot better than the lows of early March. Just a day earlier, the market showed its fragility: The Dow plunged 254 points after President Barack Obama rejected the restructuring plans of General Motors and Chrysler. [2] Over the week, the Dow gained 241 points or 3.10pc, the S&P; 500 27 or 3.26pc and the Nasdaq Composite 77 or 4.96pc. It produced the strongest four weeks gain since 1938.[9] At the bell, the Dow settled 40 points in front, the S&P; 500 gained 8 and the Nasdaq Composite rose 19.[9]
The Nasdaq Composite was down 15.16 points or 0.93%, to close at 1,606.71 while the S&P; 500 closed at 835.48, down 7.02 points or 0.83%. Major indices fell as much as 2 percent led by financials when a reputable analyst from Calyon Securities gave a pessimistic analysis of the banking industry by stating that banks' loan losses relative to their total loans should increase to levels that exceed those of the great depression.[14] Financials lagged on a whole, down about 3 percent as Mayo's comments on the banks weighed on the sector. The analyst said that bank losses will rival those suffered in the Great Depression and that losses in the industry could reach $1 trillion.[11]
Construction payrolls fell 126,000 after a 107,000 loss in February and the service sector axed 358,000 positions after cutting 366,000. The economy now in its 16th month of recession remained on track to recover in the second half of this year and the intense phase of job losses was likely over, economists believe.[9] If it seemed hard to find the silver lining when reports of record job losses were released following the Dow's rally, Surber said not to look at the economy's overall recovery based on unemployment. "Unemployment is a lagging economic indicator," he said. "The markets are the first thing to recover. the next thing is corporate profits and then it's consumer profits."[7] Treasuries took a bad hit with with the 10-year cash losing more than a full point. It seemed surprising as the U.S. government is buying debt. The non-farm payroll numbers underlined the economy's distress, as the Labor Department also revised its data to show job losses of 741,000 in January, the biggest decline since October 1949.[9]
Crude, however, gained some grounds later and rose to USD 51/bbl. It was trading at USD 50.91 a barrel. In metals, gold fell to the lowest price in more than two months, erasing this year's gains, on speculation that the U.S. economy will rebound, eroding the precious metal's appeal as a haven.[14] In other data, U.S. inflation pressures fell again in March to a new 50-year low, indicating continued declines in consumer prices, according to a research group.[9]
U.S. stocks shrugged off a dismal March jobs report to end higher on Friday, capping their fourth weekly gain amid market expectations that the economic contraction is easing.[10] Ferri believes that the S&P; 500 is a better measure of large cap U.S. stocks.[4] According to S&P;, companies with market caps larger than $4 billion can be included as index components. The S&P; weights companies by their market size, meaning stocks with the largest market caps dominate the performance of the index. Although the S&P; 500 is supposed to represent large company stocks, many of its members have actually become mid cap stocks due to the stock market's slide.[4]
Demand for technology stocks made the Nasdaq index the standout among major market averages. It fell only 3 percent for the quarter.[2] Put more simply, long periods of poor results usually are followed by lengthy periods of good gains. In the past, when stocks delivered an average annual return below 5 percent over a 10-year stretch, they've followed with average annual returns of 13 percent over the next 10 years, according to an analysis by the Davis Funds. It's notable that the past decade has been one of the worst stretches ever.[21]
Stocks in New York pared their losses late in the day to close just modestly lower Monday, but the drop ended a streak of four consecutive wins for the major averages.[13] Earlier in the day, the index had been down by about 145 points on weakness in energy stocks, gold miners and financials.[20] Chip stocks weighed on tech the most as the semiconductor index slid 2.3 percent on Monday.[11] Selling was broad-based as more than 70 percent of stocks in the index finished Monday lower.[11]
The tech-heavy Nasdaq composite climbed 19.24 points (1.20 percent) to 1621.87 and the broad-market Standard & Poor's 500 index was up 8.12 points (0.97 percent) to 842.50. The S & P index had advanced 3.2 percent this week.[10] The $31 billion Vanguard 500 Index Fund (NasdaqGM: VFINX) is a favorite among mutual fund investors.[4] Investors also reacted to reports that International Business Machines' proposed $US7 billion ($9.8 billion) acquisition of Sun Microsystems may fall apart.[1] Crude oil fell for a second straight session, down $1.46 a barrel to settle at $51.05 on the New York Mercantile Exchange. In corporate news, IBM has withdrawn its $7 billion acquisition offer for Sun Microsystems, according to recent reports.[11]
U.S. aerospace giant Northrop Grumman lost 3.68 percent to 3.98 dollars after it agreed to pay $325-million to settle a suit filed over defective parts for spy satellites. Top drugmaker Pfizer dropped 1.60 percent to 13.55 dollars amid reports U.S. antitrust regulators wanted to give a closer review of its proposed $63-billion purchase of rival Wyeth, down 0.21 percent to 42.74 dollars.[10]
The U.S. Federal Reserve orchestrated the quickest turn in the month, pumping $300 billion into U.S. Treasuries and billions into the mortgage market, pushing mortgage interest rates to historic lows. The Treasury, in turn, announced its plan to put a public-private program together to buy toxic assets from financial firms, and that gave markets a brief push. That hasn't happened yet.[8] The unemployment rate rose to 8.5 percent in March, leaving no doubt that stimulus spending will take some time. It is also too early to tell if Treasury Secretary Timothy Geithner's plan will attract funds willing to gamble on the assets banks don't want, but don't want to simply give away.[8]
The Dow had staged a 16 percent rally in November and December. It turned out investors still had a list of worries longer than a roll of ticker tape. Banks were still struggling with bad debt, people were losing their jobs by the hundreds of thousands and whole neighborhoods were succumbing to home foreclosures.[2] Earnings season is here again, and it's going to be dismal. The markets are zooming into this period on the heels of the most aggressive four-week rally in more than 70 years. Even though pretty much every investor acknowledges just how ugly things are, they could be setting themselves up to be disappointed. And, if the past eight years are any guide, they probably will be.[18] Technology stocks set the stage for Friday's rally with an impressive earnings report from Canadian tech titan Research In Motion.[10] Bank deposits and money-market funds just don't yield enough to cover the terrain quickly. Plenty of investors cut their stock holdings after the market tanked, and they likely will recover more slowly.[21] I'm not making any new investments for a while," said Howard Green, a retiree in New York. The market is still being driven by institutional investors such as mutual funds and hedge funds.[2] New York, NY (AHN) - U.S. markets opened the week lower as investors took profits following the best four-week rally since the 1930's.[11] U.S. investors will look at a consumer credit report Tuesday and wholesale inventories Wednesday.[8]
The Nasdaq lost 15 at 1606, and the S&P; 500 dropped 7 to 835. Financials took a hit after banking analyst Mike Mayo of Calyon Securities offered a gloomy outlook on the sector and advised investors scale back their holdings of several large institutions. Separately, billionaire investor George Soros offered a weak prognosis for the space when he called the banking system "basically insolvent."[19] Despite the weak data, however, the bulls overcame the bears in late trading, buoyed by Federal Reserve Chairperson Ben Bernanke's assurances that government programs to unfreeze credit markets were working, said Wachovia Securities chief market strategist Al Goldman. Based on latest data covering key sectors such as manufacturing, there is rising investor confidence that the end of the recession is finally coming into sight, said Frederic Dickson, chief market strategist of DA Davidson & Co. "We are holding to our view that the rate of decline in the economy is beginning to slow leading us to believe the economy has a good chance of bottoming out this summer," he said.[10]
You can't tell when it will take off. Of course, you won't know when it's going to crash either, but all investors know there are risks to investing. Over the last 109 years, a lot of money has been made by investors who stayed with their investments through the very tough times. [15] In 109 years, 20 days have been very influential on the returns for investors.[15]
One month does not make a rally. He found that if you took away the10 best days, two-thirds of the cumulative gains produced by the Dow over the past 109 years would disappear.[15] In a fractious quarter for the stock market, each month was remarkable. The Dow had its worst January ever and worst February since the Depression, then, in March, turned in its best month in six years.[2] The DJIA was created by Charles Dow on May 26, 1896. The original DJIA was a simple average of stock prices, but today it's price-weighted. This means the highest priced stocks within it will have a greater impact on the Dow's movement.[4] On top of that, the Dow's weird weighting by price instead of market value also would have hurt you. I don't have the numbers on this but my guess is that a lot of the untouched Dow's gain is due to one stock, IBM ( IBM ).[17]
Fiddling with the Dow average is simply what we do, and it renders that average worthless. That's why professionals don't fret over the Dow. They use the S&P; 500 index, because that is less prone to fiddling. [17] For others, exchange-traded funds or ETFs like the SPDRs S&P; 500 (NYSEArca: SPY ) and Dow DIAMONDS (NYSEArca: DIA ) are popular choices.[4]
When it comes to choosing the financial products that track the Dow and S&P;'s performance, there are many choices.[4]
Just last week the Dow soared almost 500 points in a day. It fell more than 400 over Friday and Monday.[2] The Dow last fell in six consecutive quarters in the period ending on June 30, 1970. It was the worst first quarter in percentage terms since 1939, when the average fell 14.81%.[15]
Why? Because you would have been putting money to work along the way at low prices using a dollar-cost averaging strategy. That could mean you don't have to wait until the Dow returns to its former trading peak around 14,280 before you hit a new personal high.[21] Our interactive charting tool lets you dig deep into the price and news history of any company quoted on the Australian Stock Exchange.[1] Access stock quotes, Financial Market interactive charts and the latest business news from your mobile or iPhone.[1] FTSE (Footsie) is a trade mark of the London Stock Exchange and the Financial Times and is used by FTSE International under license.[1] What's known as Wall Street's fear gauge, the Chicago Board Options Exchange Volatility Index, stands at 44. It trades around 30 in less turbulent times but was above 80 in November.[2] The first quarter on Wall Street was so extreme it included a bear market and a bull market all its own - moves that sometimes take years or more.[2]
In the market, median salary and bonuses for the CEOs of 200 big U.S. companies fell 8.5pc to $2.24 million last year. [9] Commodity producers were generally weaker after the price of crude oil fell to $51.05 (U.S.) a barrel, down $1.46; gold fell to $872.80 an ounce, down $24.50.[20]
From here you can use the Social Web links to save U.S. stocks fall as analyst downgrades banking sector to a social bookmarking site. [1] There's always the chance that any one investment will go out of business so no one stock should hold too much of a portfolio's assets. Other asset classes such as bonds and real estate (which hasn't done well either but should benefit from inflation should it return) need to also be in the mix.[15] Create a company watch-list, track your stocks using email and mobile alerts and monitor their performance through the day with our portfolio tool.[1]
Keep in mind that gold doesn't earn money, pays no dividend and requires someone else to buy it from you at a higher price for you to make money. This is just a reminder that investing in stocks makes sense if done in a broader context. It's only one investment.[15]
The broader S&P; 500 has jumped 24.5% during that time. Amid the cheer it is easy to forget that the short-lived bounce off the market's November 2008 bottom was nearly as strong as this one. Until this past Thursday, November's rally was bigger, with the S&P; 500 up 21% in 17 days, compared with 20% for the current bounce. [16] Copper too fell from a five-month high as declining equity markets spurred concern that a recent rally may have been overdone, given the slumping global economy.[14] The U.S. economy plunged into recession in December 2007, with growth contracting to 6.3 percent in the last quarter.[10] The market opened mostly lower on Friday after the Labor Department reported the U.S. unemployment rate in March leapt to a new 25-year high of 8.5 percent as recession-battered employers shed another 663 000 jobs.[10] The report was roughly in line with expectations of 658 000 job losses and an unemployment rate of 8.5 percent.[10]
Research in Motion was a bright spot in the tech sector, adding nearly 8 percent following Friday's strong earnings report.[11] The move came after Sun ended an agreement to exclusive negotiate with IBM about a possible deal. Tuesday will bring the release of quarterly earnings by Alcoa, widely regarded as the start of "earnings season" since they are the first bellwether company to report each quarter.[11]
Tech fell as well with the Nasdaq Composite falling 15 points or 0.9 percent. [11] Why a sudden shift? "Across the board, there's just several different things," Surber said. He lists a rise in retail home sales, existing home sales, new home starts, a rise in factory orders and actions taken following the Group of 20 summit in the United Kingdom, as elements that have contributed to the positive turn in the overall economy. "Banks and finance companies have not been able to loan out any money," he said.[7]
SOURCES
1. US stocks fall as analyst downgrades banking sector | The Australian
2. TheDay.com - A Historic Quarter
3. As Dow rises, what did you learn from the fall?
4. ETF Guide: What's a Better Measure? The Dow or S&P; 500?
5. globeandmail.com: Market Blog - At the open: Sun sets
6. globeandmail.com: Market Blog - At noon: Rally arrested
7. Niles Michigan - The Niles Star
8. Economic Outlook: What is working? - UPI.com
9. American Chronicle | (IE) Wall St Confidence Improves After Official Remarks
10. iafrica.com | business | markets | us market report US defies odds
11. Wall Street Takes A Breather, Stocks Slip On Monday
12. Article - WSJ.com
13. Stocks in U.S. Start Week With Losses | Business News Update | Financial Articles & Investing News | TheStreet.com
14. US mkts end with modest losses; Dow down 42 pts
15. Comfort Zone Investing: Market realities - BloggingStocks
16. It's Starting to Look a Lot Like November - WSJ.com
17. Leaving the Dow Jones Alone Would've Been the Best Thing -- Seeking Alpha
18. Time to Brace for Trouble as Profits Debacle Starts - WSJ.com
19. Three-Day Rally Comes to an End as Dow Drops at SmartMoney.com
20. globeandmail.com: Market Blog - The close: Ford revs
21. Trekking the long road to recovery
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