Weekly Recap - September 8, 2008

September started in a sour note. After the holiday-curtailed week, the stocks have tested the July lows, but the bottom seems to hold for now. The economic news was mostly bad. U.S. August retail sales were lackluster. Friday the Labor Department said payrolls shrank by 84,000 last month, more than expected, and down for the eight straight month. The jobless rate rose to a 5-year high of 6.1% from 5.7%.
Dow Jones Industrials was down 2.8% for the week, to close at 11,220.96. There was a nearly 345-point drop on Thursday in anticipation of grim employment data.
The Standard & Poor’s 500-stock index was down 3.2% for the week, to close at 1,242.31.
The Nasdaq Composite Index was off 4.7% for the week, to close at 2,255.88. Tech stocks have been hit hard lately by expectations that the global economic slowdown will cut spending on new technology.
Monday could see a rebound following a Wall Street Journal report that the Treasury was close to concluding a plan to inject capital into troubled mortgage giants Fannie Mae (ticker: FNM) and Freddie Mac (ticker: FRE). U.S. federal regulators outlined their bailout for Fannie Mae and Freddie Mac, including a takeover of the firms by their regulator and a Treasury Department purchase of the firms' senior preferred stock. The bailout also includes a plan for the Treasury to purchase mortgage-backed securities from the firms in the open market, and a lending facility through the Treasury from its general fund held at the Federal Reserve Bank of New York.
What else?
- Oil dips as dollar climbs. Oil swung widely amid threats of hurricanes Gustav, Hanna, and Ike, rising as high as $118 and falling as low as $105 a barrel. It settled near the low-end of the range at $106.23, down 8% for the week. Natural gas futures slid 6%, their lowest weekly close since December. The dollar gained in 10 of the past 11 sessions, pushing the U.S. Dollar Index up 2%.
- Warnings hit Nokia, Ciena. Shares of No. 1 cell phone maker Nokia tumbled 7.6% to 20.62 after it warned that its Q3 market share will drop because it said it will not match rivals’ price cut. Network gear maker Ciena plunged 25% Thursday after it said its telecom customers are delaying orders. The report helped fuel fears of a broadening tech sector slump
- Mortgage woes increase. Home loan delinquencies in Q2 rose to a record 6.41% from Q1’s 6.35% and a year-earlier 5.12%. Subprime delinquencies actually fell, but higher-quality prime mortgages – especially those with adjustable rates – rose. The new foreclosure rate hit a new high of 1.19%.
- U.S. economy in neutral. ISM’s manufacturing index fell to 49.9 in August, just below July’s break-even 50. ISM’s service-sector gauge rose to 50.6 from 49.5. Export orders picked up on the factory side, but slowed for service firms. The Fed’s beige book report said economic activity has been “slow”.