Positive Drivers in Negative Environment

The Financial Times on US stocks’ best weekly performance in 30 years. Note the followiing in particular:

For the week, Tuesday overwhelmed all other sessions with a stunning 10.8 per cent advance after widespread selling of yen positions left traders with cash to invest in US stocks.

The article is short, so I’ll reproduce the whole thing.

US stocks bouyant despite grim economic data

By Alistair Gray in New York
Published: October 31 2008 13:04 | Last updated: October 31 2008 20:44

US stocks extended their dramatic weekly gains on Friday as investors once again overlooked a fresh glut of grim economic data and hunted for bargains.

The market finished in positive territory even though downbeat consumer data and a key measure of business activity illustrated the toll that the financial crisis had taken on the economy.

A lacklustre morning session gave way to a sharp afternoon rally, which eased into the close. The S&P 500 closed up 1.5 per cent at 968.75, the Dow Jones Industrial Average 1.6 per cent at 9,324.69 and the Nasdaq Composite Index 1.3 per cent at 1,720.95.

JPMorgan, up 9.7 per cent at $41.25, was the biggest winner on the Dow after the bank said it would modify terms on mortgages and delay foreclosures. The financial sector led the market gains, up 5.5 per cent.

In spite of official confirmation that the US economy had shrunk, the market enjoyed its strongest week for more than three decades.

For the week, Friday’s rally left the S&P up 10.5 per cent, the Nasdaq up 10.9 per cent and the Dow up 11.3 per cent. Illustrating the market’s wild volatility, the recovery was still not enough to stop the worst monthly sell-off since 1987.

Further developments on Friday served as a reminder of the difficulties facing company earnings.

Carnival tumbled 11.5 per cent to $25.40 after the cruise liner group suspended its post-December dividend, while Electronic Arts dropped 17.9 per cent to $22.78 after the video game publisher issued a profit warning.

Meanwhile, Chevron edged up 0.6 per cent to $74.60 after spending much of the session in negative territory, even though the oil group disclosed that third-quarter profit had doubled on the back of soaring crude prices earlier in the summer.

ExxonMobil, which struggled to find positive territory in the previous session despite unveiling a world-record corporate profit, slid another 1.2 per cent to $74.12. Traders were concerned about the prospects for energy groups as the oil price continued to slide.

For the week, Tuesday overwhelmed all other sessions with a stunning 10.8 per cent advance after widespread selling of yen positions left traders with cash to invest in US stocks.

The Federal Reserve’s move to cut interest rates and the easing of strain in money markets also gave stocks a boost.

In financials, regional banks ended the week 16.3 per cent higher after a host of them accepted government cash under its banking recapitalisation scheme.

Airlines soared, up 7.4 per cent for the week. Boeing climbed 15.9 per cent during the week to $52.42 amid hopes that a machinists’ strike would be called off this weekend.

Meanwhile, General Motors swung wildly and was on track to end the week down 2.7 per cent.

Although Moody’s downgraded its rating on the motor group, investors were heartened by reports that the government was considering providing financial assistance in a possible merger with Chrysler and that the group had resolved “major issues” with the potential partner’s owner, Cerberus Capital Management.

The latest chapter in the saga came on Friday when Reuters reported that the Bush administration had ruled out funding for a possible deal, and the stock fell 4.6 per cent to $5.79.

Procter & Gamble gained 9.6 per cent for the week to $64.54, even though the consumer products group lowered the bottom end of its full-year earnings guidance.

Motorola added 7.2 per cent to $5.37 in spite of the group posting an unexpected third-quarter loss and saying that the mobile device business spin-off would be delayed.

The Chicago Board Options Exchange Volatility Index, known as Wall Street’s fear gauge, shed 25.2 per cent over the week, although at 59.75 it continued to indicate signs of severe distress.

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