08-May-09
Friday’s Market Recap (05/08/2009)
The markets sustained their week long rally on Friday with advances across the three major U.S. indicies. The Dow Jones Industrial Average moved up 1.96% to close at a level of 8,574.65. The Nasdaq Composite and S&P 500 rose 1.33% and 2.41% respectively closing at levels of 1,739.00 and 929.23. The rallies in the major indicies represent a move of almost 40% off of the market bottom. The rally was mostly attributable to the results of the stress tests, but every sector participated in the move today.
The government released the results of the stress tests after the close on Thursday and they concluded that 10 out of the 19 largest banks would need to raise an additional $75B in capital to protect against potentially $600B more in losses under the government’s worst case scenario. Bank of America [BAC: 14.17, +0.66 (+4.89%)] came in with the worst results with the government asking them to raise $33.9B in capital. Wells Fargo [WFC: 28.18, +3.42 (+13.81%)] turned in the second worst results needed to raise $13.7B in new capital while GMAC [GMAC: 0.00, N/A (N/A)] was the third worst needing to raise approximately $11.5B in new capital. It was no surprise to investors that Bank of America and Wells Fargo needed the most capital as their purchased Merrill Lynch and Wachovia during 2008.
Energy and commodity stocks had another good day on Friday as oil closed up $1.92 to $58.63 a barrel while gold closed prices slipped during the day but rose in after hours trading to $917.30 an ounce. The biggest news of the day however was in the employment reports that turned out much better than expected. The Labor Department announced that employers cut 539,000 jobs during April, the fewest number of jobs lost in any of the last six months. Many investors are becoming more optimistic about the economic future domestically and believe that some of the worst data may be behind us.
Berkshire Hathaway [[BRK.A]], the firm operated by the world’s richest man Warren Buffett, reported a $1.5B dollar loss on the quarter. Much of this loss was related to the firms investment in U.S. oil and natural gas giant ConocoPhillips [COP: 46.91, +3.17 (+7.25%)] whose value has declined drastically over the last 6 months. Buffett admitted in a letter to shareholders that buying into ConocoPhillips when crude oil prices were near their peak of $147 dollars a barrel during the summer of 2008 was a mistake, and that has firm has sold over 15% of their almost 80M shares. Berkshire Hathaway said that over the course of all of its investments it lost $241M on the quarter. The company also noted that it sold even more shares of multiple companies after the fiscal quarter ended so that they could generate capital losses to offset capital gains that were achieved during previous periods.
Please join us next week for the Market Recap, have a great weekend.
- Charles W. Petredis
Disclosure: None.
Posted at 19:41 in External Blog | Permalink | Top
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