Wall Street suffered another pullback on Friday from its recent hot streak but the Dow still eked out its first back-to-back weekly rally since May.
Today's Markets
The Dow Jones Industrial Average sank 122.42 points, or 1.65%, to 7278.38, the S&P 500 fell 15.50 points, or 1.98%, to 768.54 and the Nasdaq Composite Index lost 26.21points, or 1.77%, to 1457.27. The consumer-friendly FOX 50 dropped 10.20 points, or 1.74%, to 575.48.
Friday’s losses came as little surprise to market participants who have seen the Dow soar almost 1,000 points since plummeting to 12-year lows earlier this month. Taking advantage of the gains from this recent hot streak, some traders took profits while other said it was time to for the markets to take a breather.
“We’ve had a very good week and a very good run. So I think everybody expected a pullback,” NYSE trader Doreen Mogavero told FOX Business.
While banks likeJPMorgan Chase (JPM) and Bank of America (BAC) led Friday's dive, the losses didn't appear to be sparked by any new negative economic or financial developments.
“It’s just been a protracted selloff. There is nothing really new,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. “It’s not bad that it’s pulling back like this. It had to make a stop sooner or later. As long as the pullback is not too deep, then I think you are positioned to continue the rally."
Bank of America and General Electric (GE) helped lead the way down on the Dow on Friday, offsetting gains for Johnson & Johnson (JNJ) and General Motors (GM).
“The big question is: Does this rally have any legs, technical or otherwise?” NYSE trader Ted Weisberg of Seaport Securities told FOX Business. “I’m not sure I’m a believer because I think politics continues to trump the economics. If we can get beyond the politics, perhaps the market has a shot.”
Friday's volatility may have been caused by the fact the day was considered a "quadruple witching" session, which is a phenomenon where stock options contracts, single stock futures, stock index options and stock index futures all expire on the same day. Options expirations often allow for “moves that are inconsistent with rational thoughts,” said Saluzzi.
There weren't any major economic or earnings reports for the markets to analyze but the stocks were clearly weighed down by a second-straight selloff in the financial sector, which sank almost 5%.
General Electric (GE)saw its shares tumble as a trio of analysts slashed their price targets and 2009 earnings forecasts for the conglomerate despite GE saying Thursday its embattled financing unit will turn a profit.
The commodity markets were once again in focus as gold held onto its $70-rally from Thursday by falling just $2.50 per ounce to settle at $955.80. Crude tumbled 55 cents, or 1.07%, to settle at $51.06 but still ended with its fifth straight weekly gain. Considered inflation hedges, the commodities have received a boost from those worried about the side effects of the Federal Reserve's decision to pump an additional $1.1 trillion into the money supply.
While the dollar rebounded Friday from its two-day plunge that was sparked by the Fed move, the greenback was still poised to take its biggest one-week plunge against a basket of rival currencies since 1985.
Corporate Movers
IBM’s (IBM) potential buyout of Sun Microsystems (JAVA) has been held up by extensive due-diligence but the process isn’t expected to prevent a takeover worth $6.5 billion to $8 billion, The Wall Street Journal reported.
Citigroup (C) said Gary Crittenden, previously the bank's chief financial officer, will take over the newly-created role of chairman of Citi Holdings. Citi said Edward "Ned" Kelly, previously head of global banking, will replace Crittenden as CFO.
Bank of America(BAC) was influential in determining writedowns for CDOs and leveraged loans at Merrill Lynch before BofA acquired the brokerage firm, the Financial Times reported.
Xerox (XRX) lost almost one-fifth of its market value after the company slashed its first-quarter earnings guidance below the Street's view and said it plans to cut an additional $300 million in spending.
Ford (F) ended sharply higher after UBS started coverage of the auto maker with a “buy” rating and a price target of $5. UBS predicted Ford will avoid seeking a bailout, making the risk/reward tradeoff compelling.
American Express (AXP) could post losses in 2009 and 2010 and is likely to cut its dividend to 5 cents from 18 cents in the second quarter, analysts at Friedman, Billings, Ramsey predicted in a research note.
Apollo Management is considering taking a large stake in Paul Allen-controlled Charter Communications (CHTR) in exchange for its control of the cable company’s debt, the Journal reported. Allen will hold onto voting control of Charter, which said last month it will file for Chapter 11 bankruptcy protection.
Stiefel Laboratories, a privately-held pharmaceutical company, is considering selling itself for $3 billion to $4 billion and has already drawn interest from a number of big-name drug makers, including Johnson & Johnson (JNJ) Novartis and Glaxo Smith Kline (GSK), the Journal reported.
Lennar (LEN) is nearing a deal to create a new company that would acquire at a discount much of the land from LandSource Communities Development LLC, which it sold its interest in for $707 million in cash in 2007, The Wall Street Journal reported.
Global Markets
European stocks capped off their second straight week of gains with a solid rally Friday. London's FTSE 100 rose 0.68% to end at 3842.85 and Germany's DAX rallied 0.63% to 4068.74.
Asian markets ended in the red overnight as Hong Kong's Hang Seng plunged 2.26% to 12833.51 but Japan's Nikkei 225 tumbled 0.33% to 7945.96.
Four in a Row for Stocks
Will stock market’s rally stick or vanish?
