Week In Review: December 14, 2007
A look back at the week that was...
Stocks were poised for another tumultuous ride this week as investors wondered which direction the Fed announcement and key economic data would take the market. The bears resoundingly answered that question on Tuesday by taking the Dow for a 300 point free fall after the Fed announced that they would cut the Fed funds and discount rate by only 25 basis points.
The bulls attempted to make a stand on Wednesday after the Fed's injection of liquidity but were quickly halted as the bears were able to once again turn stocks south. In the midst of this volatility the pivotal SPX 1488 level was breached and once again stands as a short term resistance level.
Friday's higher than expected inflation numbers threw another speed bump into the bulls' path. Investors now stand in a precarious position wondering if strong retail sales will be enough to help Santa and his reindeer break through SPX 1488 before the holiday season ends.
The "Four Sisters" Performance
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UBS (UBS) announced a further $10 bln in subprime write-downs on Monday morning, saying that the continued deterioration of the U.S. mortgage market has required the bank to update their assumed losses; though shares were to the upside on news that the government of Singapore and an unnamed investor injected nearly $11.5 bln into the company. (12/10)
Markets tumbled Tuesday as the Fed cut both the discount and Fed funds rate by 25 basis points. Though investors were clearly disappointed with the decision, with the prevailing sentiment indicating that a quarter percent drop was not enough to ease the current turmoil in the market. Though Wall Street rebounded on Wednesday after the Fed announced that it will infuse liquidity into markets by holding term auctions that will allow banks to borrow at a discounted rate without the negative perception that often comes with borrowing from the Fed`s discount window. (12/12)
Retail sales were stronger than expected in November, rising 1.2% and marking the largest gain in six months. Retail outlets, department stores, gasoline and hardware stores all shared in the sales gains for the month, with auto sales being the only sector experiencing a decline. (12/13)
Inflation for the month of November came in higher than expected with CPI rising 0.8%. This spike, the largest since March, was due mostly in part to a 5.7% rise in fuel costs and a 0.3% increase in food prices. Core CPI which excludes food and energy prices was up a modest 0.3%, slightly higher than the expected 0.2%. (12/14)
Saic Inc. (SAI) reported a 3Q rise in net income to $105 mln, up from $98 mln a year ago. The company cites an increase in winning new business and managing indirect spending as reasons for their strong performance. (12/10)
Kroger (KR) outperformed the street`s estimates this week as the largest supermarket operator in the country saw 3Q profit rise an impressive 18%. Despite these strong numbers, share prices fell after its year end outlook was slightly lower than expected. (12/11)
Lehman Brothers (LEH) displayed further evidence of the ongoing credit crunch as the financial giant saw net income drop 12% from a year ago. The company also stated that it has no plans of reducing their workforce in 2008.(12/13)
Costco (COST) saw shares fall after reporting an 11% increase in net income for the quarter. Despite outperforming estimates, investors did not see these results as strong enough evidence of strength in the company's earning potential. (12/13)
Market Movers: Winners & Sinners
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