Stocks started the month off with a decline as a rise in oil and larger than expected loss from General Motors rekindled worries about the economy.
The Dow Jones Industrial Average shed 50 points, or half a percent, to close at 11326.32, below the bear mark. The S&P 500 and Nasdaq each lost 0.6 percent but stayed out of bear territory.
For the week, major indexes were flat: The Dow lost 0.4 percent, while the S&P gained 0.2 percent and the Nasdaq finished about where it was last Friday.
It's now more than a year from when the credit crunch exploded into a full-blown crisis and market pros say there's still more to go. The good news is that financial stocks have finally stopped falling.
In fact, financials were the week's best performer, climbing 4 percent, and Bank of America had the most positive influence on both the Dow and S&P, rising nearly 13 percent since last Friday.
ExxonMobil was the biggest drag on the S&P 500 this week, sliding more than 2 percent, while Google was the biggest decliner on the Nasdaq, falling nearly 5 percent.
Crude oil rose more than $1 to settle at $125.10 a barrel, after earlier reaching above $128. For the week, crude gained 1.5 percent but it's still nearly $20 below its record close aove $145 in early July.
Market sage Art Cashin, director of floor operations for UBS, once again called for capitulation this morning on CNBC, saying it “might be more of a platypus bottom –- an unusual bottom.”
But Gordon Charlop of Rosenblatt Securities said don’t hold your breath.
“It’s feeling like a bottom a bit here,” Charlop said. “Maybe we’re starting to get to that spot where most of it, all of it is priced in -- We’re not going to see that washout” that everyone is looking for.
So, is it time to jump back into the market?
“I think you have to at this point,” Charlop said.
(Click on the video at left to see the interview with Cashin and Charlop.)
Today's big economic news was the July jobs report, which showed a seventh straight decline and an uptick in the unemployment rate to 5.7 percent. Employers shaved 51,000 jobs from nonfarm payrolls last month, though that was better than the 65,000-75,000 decline expected. Revisions to the prior two months showed a total of 26,000 fewer jobs were lost than previously expected. That brings the number of jobs lost so far this year to 463,000. (See a breakdown of job losses by sector.)
The better-than-expected report initially gave the market a boost but as investors dug in, the gains quickly evaporated.
"The headline payroll does not reflect the real story in the labor market, which is the alarmingly rapid rise in unemployment [rate] -- up 0.7% in just three months," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients. Overall, this report was "pretty awful," Shepherdson said, and it's only going to get worse.
"[W]e're still waiting for a blockbuster plunge in headline payrolls," Shepherdson said. "It will happen, sooner or later."
Meanwhile, the Institute for Supply Management reported its gauge of manufacturing activity slippedtwo-tenths of a percent to 50, which is right on the line, indicating neither expansion nor contraction.
General Motors fell 7.6 percent after the auto makerreported a loss of $15.5 billion. Analysts expected the number to be bad, but it was even worse than expected -- by a long shot. North American sales tumbled 20 percent and SUV prices plunged.
Auto makers reported U.S. sales for July today, and the results were grim. The July sales rate fell to its lowest point since April 1992.
If you adjust for two extra sale days, GM sales plunged more than 32 percent, while Ford's sales declined more than 21 percent. Even Toyota and Honda posted declines.
Chevron reported its earnings jumped 11 percent, blowing past expectations, as record crude prices helped offset a loss from its refining operations. Sales jumped 49 percent.
Shares of drug maker Elan and its US partner Biogen Idec came under pressure after patients taking their jointly-developed multiple-sclerosis drug Tysabri developed brain diseases.
The dollar gained against most major currencies and could extend its rally next week as the Federal Reserve meets on Tuesday to decide what to do about interest rates.
Fed-funds futures are only predicting only a slight chance of a rate increase at that meeting, and a higher one-in-three chance of an increase at the September meeting. The economy and inflation will dictate the when but most economists expect that the Fed will raise rates before year end.
Tuesday will also be a big day for earnings, with reports due from consumer-products maker Procter & Gamble before the bell and tech bellwether Cisco Systems after the close. Insurer AIG reports on Wednesday after the bell. Friday brings results from Buffett's Berkshire Hathaway .
For sure, we've rounded the bend but we're only about two-thirds of the way through the earnings season.
The key to this earnings season has been keeping expectations low. On that basis, we've actually had quite a few surprises.
Investors will also be keeping a keen eye on oil next week. The rebound in crude prices has left some investors jittery but some strategists say it's likely just a retracement after how far and how fast oil fell.
Bruce McCain, head of investment strategy at Key Private Bank in Cleveland, said fundamentals have led his team to believe oil's going back down -- perhaps below $100 -- but may pop up to the mid $130s before it gets there.
Of course, Iran is the wild card, which could throw a monkey wrench in the normal pattern if geopolitical tensions escalate.
And finally, financials may be looking up but they'll be on the radar next week. Merrill Lynch is still doing some housecleaning, while Lehman Brothers is in talks to sell its CDOs and mortage-related assetsto BlackRock. This week, there was already buzz that Lehman's third-quarter writedown could be as much as $3 billion.
Citigroup, meanwhile, is facing charges that it fraudulently marketed auction-rate securitiesand destroyed documents that had been subpoenaed by the state.
Should be an interesting week.
Next Week's Roster:
MONDAY: Personal income and spending; factory orders
TUESDAY: ISM services index; Fed meeting, decision on rates; Earnings from P&G, Cisco and News Corp.
WEDNESDAY: Mortgage applications; crude inventories; Earnings from Freddie Mac, Time Warner, Sprint Nextel and AIG
THURSDAY: Jobless claims; existing-home sales; consumer credit; Earnings from Barr Pharma, Toyota
FRIDAY: Productivity; wholesale trade; Earnings from Berkshire Hathaway
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