The Markets:
For the fourth straight week the major indices ended negative, this time mostly because of European geopolitical concerns. Although deep into earnings season, it was the credit concerns in Portugal, Italy, Ireland, Greece, and Spain that shook investor confidence. Wall Street's concern is that they may begin to default on some of their debt, and this sent investors looking for less risky investments like the U.S. Dollar and U.S. Government bonds. By the time the closing bell shut down markets for the week, the S&P 500 index lost 0.7% and the Dow average was down 0.6%, even after the markets rebounded from steep losses Friday afternoon.
So far, the S&P's decline of 7.57% since January 19th is the steepest of the four corrections since the bull market began last March. The other three were 5% in May, 7.1% in July, and 5.6% in October.
The losses for the week didn't tell the whole story though, with profits beating expectations, and a drop in unemployment also grabbing the headlines. With 314 companies, or 63% of the S&P 500 companies having reported 4Q numbers, earnings are on track to have risen 206% versus a year ago and revenue to have gained 7%. That being said, if you strip out the financial sector, earnings are up only 16% versus a year ago, and revenue is expected to have risen just 2%. Still, the results so far have been mostly positive, with 74% of companies beating earnings estimates and 71% beating revenue estimates.
As far as unemployment, the news was mixed with the household survey's headline unemployment rate dropping to 9.7% while, at the same time, the US Labor Department showed a loss of 20,000 jobs for January against consensus expectations of a small increase. On a positive note, the average workweek increased slightly which is commonly viewed as a precondition of future employment growth as employers get more out of current workers before hiring others.
Key things we'll be watching this week:
Tuesday - Wholesale Inventories
Wednesday - Treasury Budget
Thursday - Initial Unemployment Claims, Retail Sales
Highlights
Proud residents of New Orleans took to the streets, threw beads from the balconies of bars in the French Quarter, and cheered out windows Sunday night as the New Orleans Saints overcame the Indianapolis Colts to win their first Super Bowl, an outcome that just a few years ago seemed improbable both for the team and the city it calls home.
Toyota's U.S. chief Yoshimi Inaba is on the hot seat. When he took over the North American operations of Toyota Motor Corp. last year, the veteran executive was charged with turning around the company's largest unit by restoring it to profitability. Now the 63-year-old Mr. Inaba is preparing for a job he never imagined: testifying before Congress to explain Toyota's safety troubles.
President Barack Obama, seeking to give new momentum to his languishing health-care legislation, said he would sit down with Republican and Democratic lawmakers this month to exchange ideas on an issue that has deeply divided the parties. With the GOP united against the Democratic bill, Mr. Obama said Sunday he would ask Republicans "to put their ideas on the table." The half-day meeting will be February 25th and broadcast live, the White House said.
Federal Reserve Chairman Ben Bernanke will begin this week to lay out a blueprint for a credit tightening, to be followed once the Fed decides the economy has recovered sufficiently. The Fed is still at least several months away from raising interest rates or beginning to drain the flood of money it poured into the financial system in 2008 and 2009. But looking ahead to when the economy is strong enough to warrant tightening credit, officials have been discussing for months which financial levers to pull, when to start and how best to communicate their intent
