A volatile week that saw some major stock indices rise and fall by more than 2% continued with a rebound Friday on positive reports on US consumer spending and rising confidence. Overall, US economic data were positive, including signs of a bottoming housing market, fewer jobless claims and an increase in durable goods orders.
Investors got some added relief on Friday after eurozone finance ministers agreed to increase the bailout fund to €700 billion in an effort to keep Europe’s financial turmoil under control. Concerns about Europe’s sovereign debt crisis kept yields on Portuguese, Italian and Spanish government bonds elevated throughout the week.
Amid this environment the DJIA was up 1.0%, the S&P 500 was up 0.8%, the Russell 2000 was flat, the Global Dow ex-US was down -0.2% and crude oil fell -3.6%.
Economic activity in the eurozone economy has decreased for two quarters, marking a technical recession, according to the Eurocoin indicator, a measure of activity compiled by the Centre for Economic Policy Research and the Bank of Italy. The indicator also pointed to contraction in the eurozone economy in each month of the fourth quarter. The Organization for Economic Cooperation and Development said it expects the German, French and Italian economies to contract by 0.4% in the first quarter. In its struggle to avoid a worsening debt crisis, Spain introduced an austerity budget that seeks to cut its deficit by €27 billion, or $36 billion. The draft budget calls for a 17% cut in central government ministry spending, a freeze in civil servant wages, and a tax increase on large companies.
US consumer spending rose a robust 0.8% in February, despite a more modest 0.2% increase in incomes, according to the US Department of Commerce.
The personal savings rate fell to 3.7% in February from 4.3% in January. The Thomson Reuters/University of Michigan consumer sentiment index rose to 76.2 in March from 75.3 last month. Economists had expected a reading of 74.5.
The Conference Board’s confidence index dipped slightly in March, to 70.2 from 71.6 in February. The Board’s present situation index rose to its highest level since September 2008.
US orders for durable goods rose 2.2% in February, the fourth gain in the last five months, as demand increased for cars, computers, and capital equipment according to the US Commerce Department. Economists had forecast a 3% gain.
Similarly, US annualized gross domestic product grew 3.0% in the fourth quarter of 2011, according to the third and final revision of fourth-quarter GDP. However, this fell short of the 3.2% GDP growth economists had expected.
Home prices continued to fall in January, but at a slower pace than previously. Prices of homes in 20 cities in the Standard & Poor’s /Case-Shiller Home Price Indices fell 3.8% in January from a year earlier. The report was viewed favorably because it indicated a possible bottoming of the weak housing market. The National Association of Home Builders/Wells Fargo sentiment index in March remained at its highest level since June 2007 as the outlook for home sales brightened for the sixth consecutive month. However, the number of Americans signing contracts to buy previously owned homes fell 0.5% in February after reaching a two-year high in January, according to the National Association of Realtors.
Initial claims for US unemployment benefits fell again for the week ended March 24, the US Department of Labor reported. Economists had forecast an increase of 2,000, but the drop of 5,000 brought the weekly number to a seasonally adjusted 359,000, its lowest mark since April 2008. The previous week’s reported initial jobless claims were revised from 348,000 to 364,000.
Crude oil prices fell during a rocky week on rising expectations that the United States and Europe will release strategic oil reserves. The Energy Information Administration reported that US stockpiles rose by 7.1 million barrels last week to a seven-month high. Comments by a French official fed speculation of potential strategic oil releases. On Friday morning, crude oil futures were trading at just below $103 after starting the week above $107.
Best Buy reported a $1.7 billion quarterly loss and announced that it would revamp its business model. The dominant electronics big-box retailer plans to close 50 stores, test smaller store formats, and lay off 400 corporate and support employees in an effort to cut $800 million in costs and turn its business around.
Canada’s Research in Motion reported a 25% drop in sales in the last quarter as the once-dominant BlackBerry smartphone continues to lose market share to Apple’s iPhone. RIM will write off $267 million worth of unsold BlackBerry 7 smartphones, its newest model.
PetroChina, China’s largest oil company by output, reported a 5% drop in net profit in 2011 as refining losses outweighed robust energy demand and higher oil prices. The company’s revenue rose 37%, but net profit failed to meet analyst expectations.
Unicredit, Italy’s largest bank by assets, posted a 65% decrease in fourth-quarter net profit. However, the bank beat analysts’ expectations, writing off fewer loan losses and maintaining steady income in its core business. Unicredit’s €9.21 billion net loss for the year included a goodwill write-down of €8.67 billion related to bank acquisitions.