Closing Wrap-Up, May 9
May 9, 2008
Worries about the credit markets and record high oil prices lead to losses Friday and for the week. The Dow ($INDU) fell 120.90 points to close the session at 12,745.88. The S&P 500 ($SPX) lost 9.40 points, closing at 1,388.28. The NASDAQ ($COMPQ) gave up 5.72 points to 2,445.52. Volume was extremely light Friday with 1.10 billion shares traded on the NYSE and 1.70 billion shares exchanged on the Naz. Market breadth was negative by a 14-to-16 and 14-to-15 margin on the Big Board and Naz respectively.
News that American International Group (AIG) and Citigroup (C) continue to be hurt by write-downs took a toll on financials Friday and this led the entire market lower. AIG announced that it lost $7.8 billion and that it would raise $12.5 billion to firm its capital base. Of course, losses for AIG were mainly due to problems with swaps and investment portfolios. The news took a toll on the stock with AIG down 8.77 percent to $40.28.
Citi shares fell 2.76 percent to $23.63 after the financial giant announced it would sale half a trillion in assets. This is part of a major plan to cut costs, which also means that more job cuts are in store. More than 13,000 job cuts have already been announced since last summer. Though still above its 52-week low at $17.99, Citi is also well below its 52-week high at $55.55.
Oil prices continue to put downward pressure on stocks with crude closing at yet another record high. Oil rose $2.27 a barrel to close at $125.96 after hitting a high of $126.25 intraday. A falling dollar continues to provide speculative premiums in oil, although global demand is also a factor. The problem is that when prices are high for energy, it can lead to a significant slowdown in consumer spending, especially when we already have a soft labor market.
Economic news was at least positive Friday with the trade gap narrowing to $-58.2 billion in March from $-61.7 billion in April. This was better than estimates for a reading of $-60.8 billion. Exports and imports declined during the month, but imports dropped more at 2.9 percent compared to 1.7 percent.
For the week, the Dow gave up 2.39 percent; the SPX off 1.18 percent and the Naz declining 1.27 percent. This basically offset the gains from the prior week, leaving the major market indices in the middle of its trading range.
Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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