Friday Market Recap

Markets reopened Friday with low volume that continued till close as the Dow Jones Industrial Average was up to 8,515 points, after gaining over 47 points. The Nasdaq added a little over 5 points and closed at 1,530 points, while the S&P 500 added almost 5 points and closed with 872. Markets overseas were mixed, with Japan’s Nikkei up 1.63% and Britain’s FTSE down 0.93% to finish off the trading week.

Markets seemed to shake off poor retail data as Mastercard (MA) reported an overall decline in consumer spending during the holiday season. Consumers in general took a seat this holiday season, cutting back spending despite heavy price cuts. Luxury sales saw a 35% decline YOY, but e-commerce retail outlets saw just a 2% decline from the 2007 holiday season.

It also appears that consumers are realizing their purchasing power and putting off purchases till companies offer better deals. However, this poses a problem, as many retailers cannot cut any further due to margin pressure and even the threat of taking losses on some of their products. Consumer confidence must return as the housing market bottoms for us to see a rebound in the capital markets.

Thirty-year fixed rate mortgages hit another low, now at 5.14% from last week where it was at 5.19%. This drop in rates should continue as the markets slowly accept the liquidity provided, making mortgages more available to the American population. GMAC’s approval to become a bank holding company to access TARP funds is seen as a lifeline for General Motors (GM) as it struggles to stay afloat. This access to government funds can help it offer financing to customers at low rates. The worry now is that other industries do not follow suit asking the government for money.

Federal prosecutors continue to sift through books and make further inquiries on the Madoff case. The last week has brought attention to family ties to the SEC and various other relationships that would have allowed Madoff to get away with such a large ponzi scheme. Madoff is currently secluded to his New York City home as investigations continue.

Comments

[herbert hoover:]

" Markets seemed to shake off poor retail data as Mastercard (MA) reported an overall decline in consumer spending during the holiday season."

The markets spend a lot of time ignoring the data. What happens when reality sets in?

2008 Dec 27 04:22 PM