Stocks Make Uphill Climb (Market Review for Oct. 3-7, 2011)

The fourth quarter started out on a low note with a sell-off but rebounded as the week continued. Stocks tumbled on Monday, with the dismal Dow closing at just 10,655.30, down -258 points and 2.36% from the previous week’s close. The Nasdaq closed at 2,335.83, a drop of -79.57 points and 3.29%, and the S&P was down to just 1099.23, having lost 32.19 and -2.85%. Every major sector was affected by the sell-off. The debt problems in Greece are still being blamed for the wild swings in the market, as economists continue to predict a Greek default is imminent.

Asian and European markets also experienced losses. France’s CAC 40 lost 2.18%, The UK’s FTSE 100 lost 2.29%, and Germany’s DAX fell 3.27% on Monday. In Asia, the Hang Seng dropped more than 4% and the Nikkei nearly 2%. The Shanghai Composite did not open in observance of the Chinese National Holiday. It seems it picked a good day to take a vacation from trading.

Flying Low

American Airlines stock nosedived on Monday, falling 33% to $2.00 amid fears of a possible bankruptcy. Several times, AA’s falling stock triggered NYSE circuit breakers which paused the trading. At its lowest point on Monday, AA shares were selling for the price of a cup of coffee: $1.75. Unlike Delta and many other U.S. carriers, American did not suffer bankruptcy in previous years, however, it has failed to turn a profit for four years running. Due to the recent mergers of Delta with Northwest Airlines and United with Continental Airlines, there is less competition than ever in the airline business. Aircraft maker Boeing experienced a ripple effect, with their stock losing 4% on the news of American’s woes. Shares of America’s competitors were also affected, with all major U.S. carriers seeing a drop in the stock prices on the heels of American’s freefall.

The airlines weren’t alone. Microsoft, Starbucks, IBM and Kroeger shares took hits, among many others. As usual, gold ascended as the market dropped, closing at $1,657.70 per troy ounce. November light, sweet crude was commanding just $77.61 per barrel on Monday, a loss of 2%.

The major U.S. indexes had already begun to rally with some gains on Tuesday. The Nasdaq rebounded best, gaining 2.95%, while the S&P gained 2.25%, and the hard-hit Dow gained 1.44%. Goldman Sachs cut its price forecasts for 2012 Brent crude by $10, to $120.00 per barrel, and its forecast for light, sweet crude from $123.50 to $109.00 per barrel, an adjustment of -$14.50.

The markets continued to rally the rest of the week. At Thursday’s close, the Nasdaq showed little movement, while the Dow and the S&P both posted gains 1.68% and 1.83%, respectively. Gold closed just above $1,650.00 per troy ounce on Thursday.

Jobs and jobs

Steve Jobs died just one day after the release of Apple’s fifth and latest iPhone, the 4S. On Wednesday, the day news of Jobs’ death was announced, Apple Stock closed at $378.25 per share. On Friday, the shares closed at 369.80, down -7.57 points and 2.01%. Jobs, who co-founded Apple in 1976, died of cancer. He was 56. Both the release of the iPhone 4S–which is not so different from previous versions–and the death of Jobs negatively affected Apple’s stock price on Tuesday and Wednesday.

According to employment data for September, the U.S. added 103,000 jobs in the month of September. The unemployment rate remains unchanged at 9.1%.
It appears that Ford Motor Company has reached an tentative agreement with the United Auto Workers Union, and that Chrysler is very close to following suit.
The U.S. also experienced an increase in manufacturing during September, according to data furnished by The Institute for Supply Management.

European Credit Crunch

The euro grew weaker against the yen and the U.S. dollar for yet another week in a row. The 0.5% drop in the euro was likely caused by the decreases in the credit ratings of Italy and Spain, which were announced this week. Fitch Ratings reduced Italy’s credit rating from AA- to A+, and Spain’s rating from AA+ to AA-. Moody’s also reduced Spain’s rating from Aa2 to A2. Standard and Poor’s had already downgraded Italy’s rating in the third week of September. This was in spite of the announcement by the European Central Bank that it would take new measures to aid regional banks in Europe.

Can You Hear Me Now?

Sprint Nextel stock also fared badly, losing a whopping 19.93% of its value on Friday, to close at just $2.41 per share. Sprint Nextel, the third-largest mobile service provider un the U.S., has 47 million customers. It acquired Virgin Mobile in 2009. Clearwire shares also plummeted, losing 24% to rest at just $1.56 on Friday, after an announcement from Spring Nextel that they would stop selling phones which would work with Clearwire’s network. Sprint expects to migrate its customers to Sprint Nextel’s 4G network. Sprint Nextel owns a 53% stake in Clearwire.

Summary

Let’s compare the numbers of the major U.S. Indexes from Monday to Friday. From closing bell on Monday to the closing bell on Friday, the Dow recovered +447.82 points, the Nasdaq +143.52 point, and the S&P gained back +56.23 points. The gold price fell roughly 1%, to $1,635.80 per troy ounce on Friday, while silver is commands $31.14. Light, sweet crude for November delivery closed at $81.75.

All of the major European markets closed with gains as well. London’s FTSE closed at 5,303.40, up 12.14 points and 0.23%; the CAC 40 gained 0.66%, closing at 3,095.00; the DAX gained %0.54 to close at 5,675.70; and the IBEX gained 1.08% to close at 8,798.40. The Irkutsk Open Joint Stock Co. For Energy And Electrification gained 4.00 points, an increase of 20.00%.

The Hang Seng soared 3.11% with a gain of 534.73 to end with lucky 7’s at 17,707.00. Japan’s Nikkei gained 83.60 points to finish at 8,605.62, up 0.98%.

How Stocks ended on Friday: