Weekly Recap - November 16, 2008

Stocks have hit a new low during Thursday’s session, on mounting evidence of quickening economic decline, but the buyers returned from the sidelines once the Dow hit 8000, and sent it straight up. And speaking the language of technical analysis, S&P500 has held to its support of 840. Should it break through it, the next level of support is 769, its October 2002 low. The 840 pts support line could be tested next week as well, as we helplessly noticed during Thursday’s final hour. Oil has continued its astonishing descent, from a peak of $147 in July to $57 this week, on continuing weak global demand, which puts some money back into consumers’ pockets. It seems that just yesterday – OK, July – that the picture was reversed and the $147 price was ‘justified’ by the increased global demand. Huh?

Every bit of help in the right direction is welcome. Governments around the world continue to throw money at the problem, with China announcing the $586 bailout – the Chinese TARP – and Korea cutting rates. Europe is already in recession, WSJ announced yesterday, and the leaders gathered in D.C. this weekend to figure out a solution. It’s the first recession for the euro zone – the 15 countries that now use the euro currency – since 1999, when the shared currency was launched. Most economists doubt that any new rescue plan will come out of D.C.

On other news:
- U.S. Won’t Buy Mortgages – Treasury Secretary Henry Paulson said the government won’t buy troubled mortgage debt from banks – the original focus of the $700 billion financial rescue plan. Instead, it’ll keep injecting capital directly into banks and will try to help revive securitization markets for credit card, auto and other consumer debt. Paulson said the TARP should not be used for automaker aid. Hmm, you wanna bet?
- Retail Sales, Outlook Grim – October retails sales fell a record 2.8% vs. Sept, as job losses and other economic woes kept consumers on hold. Circuit City filed for bankruptcy amid what larger rival Best Buy called the worst retail climate in its history. Several dept stores and apparel chains also expect a tough holiday season. Wal-Mart beat Q3 views and is reasonably upbeat.
- Jobless Claims Hit 516,000 – New claims rose 32,000 to their highest since just after 9/11. The number of people still collecting benefits jumped 65,000 to 3.987 million, a 25-yr high. Businesses continue to slash jobs, as Sun Microsystems will cut 5,000-6,000 jobs, or 15-18% of its job force. Citi will cut 10,000 jobs. Applied Materials, Fidelity, Office Max, Textron, US Steel and others announced layoffs.
- Intel, Nokia Weigh On Tech – Intel sees Q4 sales of roughly $9 billion vs. its old midpoint of $10.5 billion, citing weakness across the board. No. 1 cell phone firm Nokia cut industry targets for Q4 and ’09. Researcher IDC cut its ’09 tech spending growth forecast to 2.6%. Intel fell 9%, Nokia 18%.
- Lenders Redo Mortgages – Owning or backing $5 trillion in mortgages, Freddie Mac and Fannie Mae will modify delinquent loans by cutting rates, extending terms or reducing principal. Citi offered to revise $20 billion in home loans. The FDIC called for using $24 billion of the $700 bil rescue fund to help 1.5 million homeowners avoid foreclosure.
- Dollar Firms, Crude Slips – The dollar fell hard Thursday, but ended the week higher vs. the euro as data showed the euro zone in its first recession. December crude settled $1.20 lower to $57.04 a barrel, a 7% drop for the week. Copper and silver jumped 8%, as gold edged up 1%.
- Credit Markets Gains Stall – The 3-month dollar Libor rate rose Thu-Fri from 4-yr lows after diving from the Oct. 10 4.82% peak. Despite Fed buys, commercial paper barely rose last week after big gains the prior 2 weeks. But there were signs that huge Fed liquidity efforts are satisfying banks.