Week in Reviews

Week in reviews as on 27^th August;2010

Stocks closed the week out lower as the Dow Jones Industrial Average fell 0.62% and the S&P 500 lost 0.66%.  A rally was ignited Friday as Fed Chair Ben Bernanke stated the Fed is not “impotent” and ready to defend the U.S. economy.

In economic news, existing home sales fell 27.2% in July to a 3.83 million annual rate for the lowest level since 1995.  Expectations would have placed the annual rate at 4.65 million for July.  Despite the extremely slow pace of sales, prices only were down 0.2% for the month.  New home sales for July also fell to a new record low as the annualized rate dropped to 276,000.  Durable goods orders also disappointed this week as new orders were up 0.3% for July, significantly below expectations of a 2.5% jump.  Better news came later in the week as jobless claims surprised on the upside as the new claims level rose to 473,000, well below the anticipated 495,000 level.  Gross domestic product also came in higher than expected as the, although low, quarter over quarter growth was 1.6%.  Expectations were set at a growth rate of 1.3% for the second quarter.

In earnings news, an extremely slow week was highlighted as Barnes & Noble disappointed as the specialty retailer reported a loss of $1.02 per share, well below the expected loss of 80 cents per share.  Burger King Holdings, on the other hand, surprised on the upside as the company posted earnings of 36 cents per share, 5.88% higher than analysts’ estimates.

The buying continued in the Indian markets and helped broader indices to surge to two and a half year highs. While negative sentiments in the global markets led to profit booking with major markets closing in the negative on weekly basis. The Federal Reserve Bank of Philadelphia’s general economic index dropped to the lowest reading since July 2009 to minus 7.7 this month, signaling contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.The unemployment claims unexpectedly shot up by 12,000 to 500,000 last week more than the economist estimates. U.S. recovery is fading and European governments would struggle to reduce their deficits are the worrisome factors that are lingering on in the investors mind. The producer price index in U.S. increased 0.2 percent following a 0.5 percent drop in June.

Excluding food and energy costs it climbed 0.3 percent signaling that world’s largest economy may not face deflation moving with slower growth. Japan Economy saw an expansion of an annualized 0.4 percent in the quarter ending June pushing it into third place behind the U.S. and China.In India, with good monsoon season the prospects of harvest have improved and now it is widely believed that inflation would come down by the end of this quarter. The primary articles index rose 14.85% in the year to 7 August 2010, lower than previous week’s annual rise of 15.66%. The food price index rose 10.35%, lower than previous week’s annual rise of 11.4%, as prices of vegetables, potatoes and onions fell.

Going forward the domestic market is expected to remain firm with the support of foreign investment.

Gold has benefited from last few weeks as investors are escalating the insurance like metals in their portfolio. However, gold silver ratio is rising once again as silver is moving in a range due to falling base metals. After touching many week highs, base metals washed off their previous gain on unexpected drop in Philadelphia Fed survey and bad employment data.

Equity benchmarks closed lower this week; the 30-share BSE Sensex closed at 17,998.41, down 403.41 points or 2.2% and the 50-share NSE Nifty fell 122 points or 2.2% to settle at 5,408.70.

Among the frontliners, Jaiprakash Associates was down 9%. Reliance Infrastructure and Hero Honda were down 7.8% & 6.2%, respectively. However, BPCL shot up 12.2%. ONGC rose 4.8% and NTPC gained 2.4%. On the sectoral front, the BSE Metal Index tumbled 3% and Bankex lost 2%.

In the metal space, Hindalco crashed 8%. Sterlite slipped 4.5% and SAIL was down 3.3%. HDFC Bank, ICICI Bank and Kotak Mahindra Bank from banking & financial space were down 3.4-2.5%.

The NSE Nifty Junior, CNX Midcap and BSE Small-Cap indices declined 1.7-2%.Midcap pharma companies like Ind Swift Labs shot up 35% and Surya Pharma up 30%. Natco Pharma rose 16%.