Friday, August 1, 2008

Markets Fall on GDP and Greenspan Comments, Friday Looks Up - Jobs Report and GM Posts Loss

For the week, the Dow is almost exactly flat, but you would hardly know it day in and day out. Monday saw a big drop, Tuesday brought it back to even, Wednesday continued the rally, and Thursday's drop brought it back to flat for the week.

Thursday's fall started prior to the opening bell with the 2nd quarter Gross Domestic Product (GDP) report from the U.S. Commerce Department. According to the report, the GDP grew at a 1.9% clip. This was not in line with the economists' estimates of 2.4%. To compound matters, initial jobless claims climbed to the highest level in 5 years, but since they are weekly figures, most economists thought the reports could be just an anomaly.

Then the man that just wants to be heard made some comments on CNBC. Yes, our old friend former Federal Reserve Chairman Alan Greenspan just had to be interviewed. At 3:00 the market was down about 75 points, and as he talked, the Dow dropped another 125 points. Greenspan quipped that there is a 50% chance now of a recession in the U.S. Can't he just ride off into the sunset?

Interestingly, Greenspan has been increasingly blamed for the "credit crunch" and "housing crisis" by various economists, analysts, publications, and websites, but he just cannot accept any of the blame.

For the month of July, the Dow finished up 0.4%, the S&P 500 ended down 0.8%, and the NASDAQ finished up 1.5%. The gains and losses were small, yet they were a vast improvement over June (the Dow fell more than 10% and the S&P 500 and NASDAQ were off more than 9%).

Many stock analysts believe a bottom was hit on July 15 for financial stocks. The S&P Banking Index ($BIX.X) was up 9.3% for the month. But it was up 52% from July 15 to July 31. Bank of America (BAC) was the top performer of the Dow stocks for the month by being up nearly 38%. BAC was followed by JP Morgan Chase (JPM) up 18.4% and Citigroup (C) up 11.5%.

On Friday morning, the jobs report came in for July with a better than expected loss of 51,000 jobs versus the estimates of 70,000-72,000 jobs. Also, May and June reports were revised down. Industries losing jobs in July were manufacturing, construction, retail, and temporary help. The unemployment rate ticked up to 5.7%. These numbers were seen as a positive by most economists since the economy has remained resilient in weathering the "perfect storm" - credit crunch, housing crisis, and gas and energy prices. All major market indices futures were trading up pointing towards a positive open.

Also on Friday morning, General Motors (GM) - a Dow component - posted a loss of $15.5 billion with several of the items being from one time charges. Excluding those charges, GM still disappointed with revenues falling short and the loss being greater than expected. As a follow up to yesterday's blog - U.S. Automakers in Perspective - GM, Ford, Chrysler, Toyota - for the first half of the year, Toyota Motor Corp. outsold GM by 277,532 vehicles. It was only the second time Toyota beat GM in sales for the first six months of a year.

Sources: Yahoo, MSN Money

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