Fed’s Dim View Helps Drag Stocks Lower For The Week
August 14th, 2010The Fed announces a new policy to stabilize economic activity. Retailers post solid earnings, but reduce 2010 guidance. Meanwhile, gold rallies on safe-haven buying and crude oil fades. Equity markets closed lower for the week.
Crude oil futures dropped sharply, trading just under $76 a barrel on Friday afternoon.
Gold futures were spurred higher by rising safe-haven investor demand for the week, selling for $1,215 an ounce on Friday. On Wednesday, analysts at Goldman Sachs ( GS – news – people ) said gold could rally to $1,300 an ounce this year.
On the economic front, the Federal Reserves Open Market Committee indicated they would reinvest its holdings of maturing Fannie Mae ( FNM – news – people ) and Freddie Mac ( FRE – news – people ) debt into long-term Treasuries on Tuesday. The Fed cited a weakening economy as the reason for the policy change. Observers expect the Fed to take additional steps to avoid deflation.
On Thursday, initial jobless claims came in higher than forecast, with 484,000 people filing. Expectations were for 460,000 new unemployment claims for the week of August 7th.
On Friday, the July consumer price index was in-line with expectations of a 0.3 percent change.
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Retail sales disappointed investors, climbing 0.4 percent for July, with expectations of a 0.5 percent gain for the month. Nevertheless, this was a positive trend change, following negative retail sales growth in May and June. Retailers JC Penney ( JCP – news – people ) and Kohls lowered profit forecasts for the second half of 2010.
On the earnings front, theme park giant Walt Disney ( DIS – news – people ) posted profits of 67 cents per share on Tuesday. Analysts were expecting 59 cents.
Jaguar Mining disappointed investors with zero earnings reported for the second quarter, dropping shares 22 percent on Tuesday. Analysts had forecast 6 cents per share.
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