YAHOO: The week's wild ride
has concluded, but onlookers might not know it by the relatively mild close had
on Friday. The S&P 500 surged almost 12% Monday, suffered its biggest drop
since the 1987 crash on Wednesday, and rallied more than 4% Thursday. On Friday
alone the index swung nearly 7% from low to high before finishing with
a 0.6% loss.
The wide swings persist as
participants look for direction, even after renowned investor Warren Buffett
indicated he was buying stocks. Buffett stated in a New York Times op-ed piece
that he is adding U.S. stocks to his personal portfolio, which typically holds
government debt. Buffett indicated he will continue to do so as stocks remain
attractive. For instance, the S&P 500 currently trades at 18.6x trailing
earnings, which is below its five-year average multiple.
Google (GOOG 373.11, +20.09) attracted interest,
for its part. The Internet search giant announced better-than-expected earnings
per share results for the latest quarter. Its shares finished appreciably
higher, though off their best level of the session. IBM (IBM
90.78, -0.74) preannounced upbeat earnings per share results last week, so the
company didn't garner the same attention as Google.
Announcements were mixed
elsewhere. Stryker (SYK 52.19, -2.56) missed expectations
while Advanced Micro Devices (AMD 4.21, +0.09) announced
strong growth. Honeywell (HON 29.37, -1.56) and Schlumberger
(SLB 49.99, -3.21) both posted an upside earnings surprise, but had a
cautious outlook.
Schlumberger's caution
reflects concerns that energy companies will be pressured by softer demand amid
slower global growth. After being down more than 5% early on, the energy sector
climbed to a gain in excess of 7%. It finished 0.4% lower, despite the fact oil
prices finished 3% higher near $72 per barrel. Still, the threat of slower
growth has oil prices down 51% from their July high.
Further data was released
indicating that U.S. housing remains weak. Housing starts in September fell
6.3% to an annualized rate of 817,000 units. That was well below expectations
and marked the lowest level since January 1991. Meanwhile, building permits
dropped 8.3% to an annualized rate of 786,000. That number also matched a level
also seen in January 1991.
The data reflect continued
weakness in the moribund housing industry, which will weaken fourth quarter GDP
and continue to spur write-downs at financial firms. The financial sector was a
laggard, closing 2.3% lower.
The wild swings of the past week had volatility at record highs with the Volatility Index hitting 81 yesterday. Though today marked the expiration of options, the VIX finished the week at 70.DJ30 -127.04 NASDAQ -6.42 SP500 -5.88 NASDAQ Adv/Vol/Dec 1160/2.76 bln/1580 NYSE Adv/Vol/Dec 1734/1.74 bln/1373