Friday, October 23, 2009

Economy Worries Overshadow Tech Titans

Stocks slid badly on Friday, marring an otherwise upbeat earnings week by ending marginally lower. The Dow Jones Industrial Average, which crashed through the 10,000 mark on Monday, and closed at the high point for 2008, wavered back and forth all week, finally capitulating on Friday, finishing 24 points in the red for the week. Other averages reacted in similar manner, with the NASDAQ losing just more than two points and the S&P 500 dropping 8 points. The NYSE Composite, the broadest measure, was down by 68 points for the 5 days.

Investor skepticism over the health of the economy dimmed the outstanding results from Amazon (AMZN) and Microsoft (MSFT), both of which blew away analyst estimates when reporting 3rd quarter results. Amazon was by far the biggest winner, gaining 25 points, to 118.49, an historic high for the stock, and a one-day gain of nearly 27% for the world's largest internet retailer. Volume on the stock was 9 times the average daily.

Unfortunately, market participants were taking hard-fought gains in other companies amid speculation that the recovery may not be as robust as previously assumed. Underscoring the market sentiment was the massive downside slide on the Dow Jones Transportation Index (^DJT), which slid 137.73 points, a decline of 3.5%.

The major issue upon which many are dwelling is still unemployment, or the lack of new job creation, and the government's abject refusal to offer programs which would stimulate job creation. The halls of congress and the White House have been focused on a partisan health care debate, no doubt a matter of great importance, but paling by comparison to the general welfare of the American people and their need for steady, solid employment.

Talk of a "jobless recovery" has begun to circulate, though even the most ardent proponents of fiscal stimulus have to admit that a recovery without new jobs is really not a recovery at all. There is also growing impatience with the federal government on their handling of the financial crisis and various "socialist" policies, not the least of which is capping executive pay via proclamation from their "pay czar" Kenneth R. Feinberg, who this week proposed 50-90% pay cuts for executives whose companies received TARP funds and have yet to repay.

If there has been one culprit responsible for any slowness in the nascent recovery, the finger can be pointed directly at he White House and congress, whose plodding pace and partisan bickering have been a detriment, rather than a benefit, to the public welfare. With the huge federal government out of the way, the American people and American businesspeople could surely forge a new way forward, but threats of pay cuts and excessive taxation are killing the attitude of everyone from Main Street to Wall Street and from Skid Row to Beverly Hills.

Then again, stocks have been rocketing skyward for some time now, and the market seems to have run considerably out of steam. even though roughly half the companies in the S&P 500 have already reported, the indices haven't budged out of a range from 9950 to 10,100 for more than a week.

Dow 9,972.18, -109.13 (1.08%)
NASDAQ 2,154.47, -10.82 (0.50%)
S&P 500 1,079.60, -13.31 (1.22%)
NYSE Composite 7,066.80, -116.11 (1.62%)

Simple indicators offer a snapshot of the depth and breadth of Friday's decline. Losers hammered winners, 4881-1566, a better than 3-1 ratio, the worst in some time. New highs were 356, to just 54 new lows. Volume was roughly in line with the pace set Tuesday through Thursday.

NYSE Volume 5,506,861,000
NASDAQ Volume 2,476,571,750

Commodity prices continued to retreat from mid-week highs. Oil slipped 69 cents, to $80.50. Gold was off $2.20, to $1,056.40, but silver bucked the trend, gaining 18 cents, to $17.72.

More companies report next week in what will be the busiest week for earnings reports. It's also a busy week for economic reports, highlighted by Thursday's preliminary release of 3rd quarter GDP, which will be a market mover.

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