Stocks recovered from losses and finished mixed Friday amid more earnings reports and hopes for economic stimulus plans. Google's (GOOG) results were mixed, while General Electric (GE) reported lower earnings and warned about challenging economic conditions in 2009.
On Friday, hopes for a quick economic stimulus came after President Barack Obama lobbied Congress hard again on the topic. However, Goldman Sachs says preliminary estimates imply that of the $825 billion Congress is considering for economic stimulus, only $250 billion will make it into the economy in the current calendar year. Goldman says "these estimates highlight the political and practical challenges in enacting an effective fiscal package, particularly for 2009."
In other news, Britain has fallen into its worst recession since 1980, after a report showed a 1.5% decline in Britain's fourth quarter GDP.
Gold rallied above $900 an ounce amid rising global risk aversion and dire bank forecasts, says Action Economics. The U.S. dollar index initially rallied above 86.0, but finished flat at 85.6 after commodities rebounded. Crude oil rebounded $2.80 to $46.47 a barrel. Treasuries fell, with the yield on the benchmark 10-year note rising to 2.62%.
On Friday, the 30-stock Dow Jones industrial average fell 45.24 points, or 0.56%, to 8,077.56, after dipping below 8,000 during the session. The broader S&P 500 index rose 4.45 points, or 0.54%, to 831.95. The tech-heavy Nasdaq composite rose, helped by gains in Google, ending up the week up 11.8 points, or 0.81%, at 1,477.29.
The recent trends in the financial markets remain in place, with the major indices still in downtrends and "setting up what appears to be a crucial price test of their bear market lows posted in November," wrote Mark Arbeter, chief technical strategist for Standard & Poor's on Friday. "The financial sector remains the ten-ton elephant sitting on top of the overall market, with little sign that the great pachyderm wants to get up."
Also on Friday, Senate Finance Committee Chairman Max Baucus unveiled a Senate version of the tax-cutting portion of the bill. Social Security recipients would get a bonus payment of $300 under the plan. Its tax cuts and spending proposals total $355 billion. It will be paired with $400 billion in further spending proposed by the Appropriations Committee on the Senate floor.
There was no U.S. economic news Friday to stir the pot ahead of next week's Federal Reserve meeting. The Fed meets Tuesday and Wednesday, but significant changes on the interest rate front are not expected, says Action Economics. Look for the Fed to maintain its 0% to 0.25% target band.
There are plenty of economic reports coming next week too, and the numbers are expected to a show bleak outlook on the economy, says Action Economics. One of the major reports is fourth quarter GDP, which is expected to drop 5.6%, with estimates ranging from -6.5% to -4.3%.
Among stocks in the news Friday, Intel (INTC) announced that Craig Barrett, who is 69 years old, plans to retire as chairman at the company's annual stockholders' meeting in May. Board member Jane Shaw will become non-executive chairman, and Paul Otellini remains CEO. The stock rose 2% to 13.12 following the news.
Google (GOOG) posted $5.10 (non-GAAP), vs. $3.79 a year ago, fourth quarter EPS on 18% revenue rise. It plans to offer employees a voluntary, one-for-one stock option exchange.
General Electric (GE) reported $0.36, vs. $0.68 a year ago, fourth quarter EPS on 4.8% revenue drop. The company notes results include $1.5 billion of after-tax restructuring and other charges, including increased reserves in current environment, which are above the company's original plan; says restructuring will lower costs for 2009 and beyond. GE says it's committed to its dividend plan for $1.24 per share for the year.
Capital One Financial (COF) posted $3.67 fourth quarter loss from continuing operations, vs. $0.85 EPS, on 19% total revenue decline. COF recognized $810.9 million non-cash impairment of goodwill in conjunction with its revised outlook for its Auto Finance business. S&P Ratings Services says it revised its outlooks on COF to negative from stable, based on the firm's lower profitability as the weak phase of consumer credit cycle elevated credit losses on loans.
Advanced Micro Devices (AMD) reported $2.32 fourth quarter loss from continuing operations on 33% revenue decline. The results for continuing operations include an unfavorable impact of $996 million, or $1.64 per share. Given current macroeconomic conditions, very limited visibility and continued corrections in the supply chain, AMD expects first quarter revenue to decrease sequentially.
Xerox (XRX) posted breakeven, vs. $0.41, fourth quarter EPS on 10% revenue drop. The company reported $0.30 fourth quarter adjusted EPS. Street was looking for $0.33-$0.34. It cited continued weakening economy, rapid shift in exchange rates. It sees $0.16-$0.20 first quarter EPS.
In foreign markets, stocks in London rose 0.01%, Paris stocks fell 0.71%, Frankfurt stocks fell 0.96%. In Tokyo, stocks dropped 3.81%, while the market in Hong Kong fell 0.63% and Shanghai stocks fell 0.71%. Japan's Sony forecast an annual loss and South Korea's Samsung reported a loss.
McCormack is senior producer for BusinessWeek.com's Investing channel.