Apparently minimal movements for Wall Street stocks masked another wild week, capped on Friday with the long-awaited rescue of the US car industry.
General Motors soared 22.7 per cent to $4.49 on Washington’s move to grant the industry a temporary lifeline under the Troubled Assets Relief Program. Gains for Ford, which had said it did not require cash immediately, were more modest. It finished up 3.9 per cent to $2.95.
Yet initial euphoria over the move faded later in the session and the benchmark S&P 500 index closed just 0.3 per cent higher at 887.88 having drifted between positive and negative territory throughout the day. The Dow Jones Industrial Average finished 0.3 per cent lower at 8,579.11.
The technology sector was among the better-performing on Friday, helped by well-received results from Oracle and Research in Motion, which leapt 7 per cent to $17.78 and 11.4 per cent to $42.83, respectively. The Nasdaq Composite index closed 0.8 per cent higher at 1,564.32.
For the last full trading week of the year, Friday’s move left the S&P up 0.9 per cent, its second consecutive weekly gain. The Dow ended the week 0.6 per cent lower, but the Nasdaq was 1.5 per cent firmer.
The Federal Reserve’s aggressive interest rate cut and move to use unorthodox measures took the market at one point in the week to its highest closing level in more than a month.
Bulls were also encouraged by upbeat readings of key technical gauges. During the week, the benchmark S&P 500 index surpassed its 50-day moving average for the first time since shortly after the bankruptcy of Lehman Brothers.
Furthermore, the Chicago Board Options Exchange Volatility Index, known as Wall Street’s fear gauge, fell 5.1 per cent to 44.93 over the five-day period, its lowest level since October.
Energy stocks saw heavy selling pressure as the price of US crude oil sank 21.3 per cent. The sector shed 4.6 per cent over the week.
Defensive stocks were snapped up amid further evidence of a deep recession. Healthcare and consumer staples were up 4.3 per cent and 1.5 per cent, respectively.
Retailers also did well after Macy’s quashed fears over its ability to repay debt. It soared 24.9 per cent over the week to $10.62 on the back of plans to amend covenant terms on its credit facility, which sparked hopes that indebted peers may be able to do the same. However, heavy snow across the country pushed retailers 1.1 per cent lower overall on Friday amid fears the bad weather could hit demand in the last shopping weekend before Christmas. That pared the sector’s weekly gain to 2.6 per cent and held the wider market back on Friday.
Financials were the strongest-performing sector, up 4.1 per cent overall and were among the main beneficiaries of the Fed’s move into uncharted waters.
The sector was helped by results from Goldman Sachs, which soared 19.2 per cent over the week to $80.73 despite reporting its first quarterly loss for the first time since going public in 1999. The figures were no worse than the most bearish predictions.
Rival Morgan Stanley stood 11.6 per cent higher at $15.45 even after the bank reported a fourth-quarter loss that was worse than feared. Traders were encouraged by the bank’s attempt to reduce its leveraged capital structure. Standard & Poor’s move to cut credit ratings on the two banks on Friday only slightly pared their weekly gains.
Morgan and Goldman were among 12 institutions around the globe for which S&P cut its outlook or ratings. Among them, Citigroup lost 8.8 per cent for the week to $7.02 after S&P cut its rating. Earlier in the week, General Electric sparked a sell-off as S&P’s negative credit rating outlook led investors to question which other companies could be vulnerable. GE lost 3.6 per cent to $16.50 over the week.