YAHOO - BRIEFING.COM Weekly Recap - Week ending 12-Dec-08

We concluded last week's recap with the thought that it was tough to imagine the body of news getting much worse this week.  It's all a matter of perspective, but let's take a look at some of the major headlines from a week that had an ample amount of bad news.

--  Media giant, Tribune Co., filed for Chapter 11

--  3M, FedEx, Texas Instruments, Kroger, Nucor, and Electronic Arts issued earnings warnings (note the diversity of industry groups here)

--  Dow Chemical said it will cut 11,000 jobs; Rio Tinto said it will cut 14,000 jobs; and Bank of America said it will cut up to 35,000 jobs over the next three years (many other companies also announced job cuts)

--  Weekly initial jobless claims were 573,000 (a 26-year high) while continuing claims hit 4.43 million (also a 26-year high)

--  Yields on the 1-month and 3-month T-bills both went negative for a time, indicating a willingness on some investors' part to pay the government for holding their money versus the other way around

--  Illinois governor Rod Blagojevich was indicted amid several allegations that included a charge he tried to sell President-elect Obama's vacated Senate seat

--  JPMorgan Chase CEO Jamie Dimon said November was a terrible trading month for the bank, that December hasn't been much better, and that it's possible U.S. home price could fall another 20%

--  November retail sales declined 1.8% from October and were down 4.7% in the 3-month period ending in November from the 3-month period ending in August

--  Former Nasdaq Chairman, Bernard Madoff, was arrested on allegations he orchestrated a $50 billion Ponzi scheme

--  After being approved in the House, legislation that would have provided $14 billion in financial aid to the automakers was voted down in the Senate, raising the risk of imminent bankruptcy filings in the auto industry

There were some positive developments, like Procter & Gamble reaffirming its earnings guidance and core producer prices moderating.  Also, there was a positive buzz Monday over the news that President-elect Obama favors a massive stimulus package when he takes office that centers around improvement to the nation's infrastructure.

Mr. Obama didn't provide a specific price tag, yet his acknowledgment that his aim is to jumpstart the economy now and worry about the budget deficit later suggests it will be a big number.  Many economists think it will be at least $500 billion.  Again, depending on one's perspective, this could be viewed either positively or negatively.

Currency traders didn't seem all that enthused by it as the dollar index dropped 4.0% this week.  The stock market, though, rallied on the news Monday before giving way to a roller coaster trade the rest of the week.

The volatility was nothing new to this market, although there was a new pattern that emerged, which was that the stock market digested all of the bad news with a sense of aplomb.

Despite the topsy-turvy trading action at times and a preponderance of headlines that skewed to the negative side of things, the S&P 500 ended the week modestly higher.  It wasn't that long ago that this battery of bad news would have produced a week of material losses.

In this respect, it can be argued convincingly that sentiment has improved.  However, the piling up of bad fundamental news and the continued flight-to-safety trade in the Treasury market leaves plenty of room for second-guessing whether this newfound perspective can be maintained. 

The current take on things, though, is that bad news just isn't carrying the shock value that it used to.  Consequently, the market's resilience in the midst of the bad news is attracting buyers who see this behavior as a sign of a bottoming process.

Looking ahead, the Bush administration's decision on whether to use TARP funds to help the automakers and the success, or lack thereof, of GMAC's bid to become a bank holding company should get things started in the coming week, which will also produce the industrial production report (Monday), earnings reports from Best Buy and Goldman Sachs (Tuesday), the FOMC meeting (Tuesday), the OPEC meeting (Wednesday), General Electric's Annual Outlook Meeting (Wednesday), and a quarterly options expiration (Friday).

--Patrick J. O'Hare, Briefing.com