A usually quiet Friday turned out to be a bloody day on Wall Street. All three major indices ended the day and the week lower by more than 2%. Almost all economic news of the day was negative. Import prices jumped 2.8% in March and brought the y-o-y increase to 14.8%. Consumer confidence, on the other hand, tumbled to a 26-year low. On top of that, a huge earning miss by General Electric cast clouds among investors and next week can be a big test for the market with 35% of the S&P 500 companies scheduled to release their earnings.
GE’s earning miss really caught most on the Street off guard. This week marks the beginning of the Q1 earning season and so far things are not looking good. It is one thing that we had earning misses or warnings from likes such as Alcoa, AMD and UPS. It is quite another that GE posted a big earning miss and lowered its full year outlook by a wide margin. The company represents a broad range of industries and is well known for its ability to meet or beat earning expectations. Following today’s GE earning miss, investors are really starting to wonder if a company as diversified and international as GE can miss expectation by such a wide margin, who else can not? Hopefully we will know the answer better next week.
With stock prices tumbling across the board, treasuries once again became a safe-heaven. The yield curve got steepened as traders increased their bets for more aggressive cuts in the next Fed meetings. Commodities on average posted a small loss but for the week they are still ahead by more than 3%. The US dollar was traded lower against most major currencies ahead of this weekend’s G-7 meeting. The recent financial turmoil and its impact are likely to be the main topic while any coordination to stem the dollar from sliding further is less likely to be agreed.  Any surprising announcement from the meeting can be a potential market mover for the Monday session.

All three major indices ended the session modestly higher. Interestingly, Nasdaq outperformed the broad market this time and it was up 1.3% for the day. The news on the economic front of the day was quite mixed. Luckily, two Dow components raising their earning expectations along with a $9 billion buyout offer in the biotech sector were enough to offset generally disappointing same-store sale results for March. 
Start with the weekly jobless claims number. Economists that were afraid of being left behind had revised this number higher almost every week since early January and they expected 383K for the latest report. Instead, the number came at 357K. It seems that the previous week’s reading of 410K might be distorted by the Easter holiday, similar to what happened in late January. But based on recent economic trends, we would rather believe that this week’s drop was temporary and the trend is still pointing to higher weekly claims in the weeks ahead. Separately, the trade deficit for February unexpectedly widened to $62.3 billion while economists called for a drop to $57.5 billion from $58.2 billion in the previous month. Both equity futures and the US dollar were traded lower following the news. 
Technologies and transportations were among the biggest winners of the day. Financials once again lagged the broad market as investors remained concerned about the first quarter earnings for the group. The US dollar reversed earlier losses and ended the day higher against most major currencies. The Chinese yuan crossed the 7 yuan/dollar mark for the first time since the peg was removed in 2005. Treasuries were sold off following a very weak demand in the latest auction of Term Securities Lending Facilities. The daily borrowing from primary dealers also dropped $5 billion in the latest week. It seems that liquidity may not be a concern anymore.

The market closed lower on this Wednesday. The Dow, which was somewhat distorted by a 5% gain in Boeing shares, posted a modest loss of 0.4%. Nasdaq continued to be the worst performer among the big three and ended the day lower by more than 1%. Although financials got an early boost from the news that Citigroup is close to sell $12 billion or more than a quarter of its leveraged loans, reports that Goldman and Morgan saw their Level 3 assets climb during the latest quarter quickly changed investors’ sentiment. Record oil price along with a profit warning from UPS only made things from bad to worse.  
Financials and transportations were the biggest laggards of the day. The latter was impacted not only by the UPS warning, but also the record crude oil price. Commodities had another great day. Crude oil price, helped by a surprisingly big drawdown in weekly inventory, touched $112 before closing at a new historical high. Other than crude oil, several other commodities including corn and copper also closed at their highest prices ever. The CRB commodity index jumped 10 points and now is only 2.5% below the record close reached on Mar 13th. The US dollar was mixed against major currencies while treasuries continued to rally. Traders now bet a 40% chance that the Fed is going to cut the key interest rate by 50 bps at its next meeting, up from only around 10% a week ago. It is interesting that back in Apr 1999, when the Internet mania was at its heyday, the total market cap for the energy industry was a little more than $400 billion(at the same time oil was traded at around $12 per barrel) and the market cap of two Internet companies, AOL and Yahoo, was worth more than $200 billion. Nine years later, the market cap for Exxon Mobil alone was close to $500 billion while AOL’s name was almost forgotten(well, to be fair it was probably still worth $20 billion based on the equity investment by Google). Indeed, things changed a lot during the last decade. What about the next?

It was another quiet day on Wall Street. The Dow swung in a range of 80 points before ending the day with a loss of 36 points. Nasdaq, the worst performer among the big three, closed the day lower by 0.7%. There was simply little good news in today’s session. In fact, we got some worse-than-expected economic news plus disappointing earnings news from the Alcoa and AMD. WaMu’s capital injection plan was not as rosy as some had hoped for either. But at the end of the day, the market still held up relatively well. 
Start with latest reading in the small business optimism index. According to the National Federation of Independent Business (NFIB), their members have never been more pessimistic as the monthly index just dropped to the lowest level in the 22 years since the NFIB started conducting this survey. Unlike their big counterparties, many small businesses derive most if not all of their revenue locally so a domestic recession tends to hurt them the most. Since small businesses account for 36% of all net job gains from 1990-2005(based on the Bureau of Labour Statistics), we may see further weakness in the job market ahead. The news on the housing front was not cheerful either. The number of Pending Home Sales for February dropped -1.9% while economists forecasted a decline of 1%. It suggested that there is still a long way to go before we see the bottom of the housing downturn. Finally, we got a chance to look at the Fed minutes for their March 18th meeting. Based on the minutes, many Fed officials (maybe “majority”?) felt that an economic contraction was likely and the economy may be in recession in both Q1 and Q2 of 2008. Although recession never sounds pleasant, it does mean the Fed is ready to make more interest rate cuts during the next few meetings. Indeed, the bond market increased the chance of two more rate cuts by June right after the minutes were released. 
Financials and techs were the biggest losers of the day. Commodity stocks continued to do well despite a pull back in the CRB commodity index. The US dollar was mixed against the major currencies but it strengthened quite noticeably against the GBP. Treasuries were mixed with shorter maturity regaining some recent losses. It is worth noting that the transportation index continued to outperform the broad market in a pretty significant way: It was up by 9% so far in 2008 compared to a 7% drop in the S&P500. It was quite amazing that the transportation index can outperform by a wide margin despite imminent recession worries and sky-high oil prices. After the bell, UPS just issued a profit warning and it will be interesting to see how the transportation index will react in tomorrow’s trading.

The market started the new week in a relatively quiet mood. All three major indices closed the day within 0.3% from the unchanged levels. There was little economic news scheduled to be released but a potential capital injection into WaMu without government involvement along with several M&A announcements managed to keep the market in the positive territory for most of the day. 
Commodities, following a sharp rebound in the CRB commodity index recently, continued to do well in today’s trading. The CRB index advanced for the third consecutive day and is back above 400. It is worth noting that with today’s $2 advance, the crude oil price is only inches away from its previous historical high reached on Mar 13th. Financials were also outperforming the broad market following the WaMu news. Treasuries were sold off and the yield curve continued to flatten. The US dollar was mixed: It gained some ground against the euro and the yen but weakened against several emerging currencies, especially the Chinese yuan. The yuan is set to break the 7 yuan/dollar mark within days based on recent trend. As for tomorrow, we are going to get the latest Fed minutes – a potential market mover.