Wall Street on Friday had a mixed opening following a second consecutive session of strong gains. Disappointing earnings from Merrill Lynch (MER) and influential tech companies like Google Inc. (GOOG) and Microsoft Corp. (MSFT) both U.S. centric, prompted a downward start for U.S. markets, particularly in the Nasdaq Composite.
Meanwhile, as oil prices rose in news of an output cut in Nigeria, the Dow Jones Industrial and S&P 500 showed a little if no intraday direction. However, the indices, with the exclusion of Nasdaq Comp. which spent the entire session lower weighed down by disappointing earnings posted by Google and Microsoft, after hovering in negative territory and experiencing short-term deterioration in prices, began pulling back just before midday.
The Dow kept mostly unchanged levels heading into the final hour of trading, to only stage a late-session mini-rally, helped by financials – and finish the day near session highs. The Dow rose almost 50 points.
This was an important week for the entire market but in particular, for the financial sector. Given the sense of pessimism that has dominated the action lately ; to have buyers get aggressive again despite fundamental uncertainties, is certainly a positive development for all major averages. Perhaps is not premature to say, we may have finally seen financials hit the bottom. The financial sector with today’s gains, brought its week-to-date advance to 11.4%.
In other news
– The largest U.S. Bank Citigroup (C) delivered stronger results than the market anticipated. The co. reported a smaller-than-expected loss of $2.5 billion for the second-quarter due to write-downs tied to credit markets. Citigroup also announced more than $7 billion in write-downs from its securities and banking unit. Citi’s smaller-than-expected loss report, prompted the Dow to recovery from an early loss of more than 60 points during trading hours.
– Shares of Google Inc. tumbled yesterday below $500, almost 10% from a Nasdaq close of $533.44 as the co. reported a weaker-than-expected 35% rise in net profits. The company blamed lower returns from managing its massive cash pile (totaling $12.7 billion ) rather than softening sales of online advertising. 2Q net income rose to $1.25 billion, or $3.92 per diluted share, from the year-earlier quarter’s $925 million, or $2.93 per diluted share. Non-including stock-based compensation costs, according to Reuters estimates it was $4.63 a share, below a $4.72 average of Wall Street forecasts.
– Lehman Brothers (LEH) had its rating cut to “A2” from “A1” by Moody’s with a negative outlook. Both ratings are considered investment grade. Moody’s “expects Lehman to take further charges tied to investments in residential and commercial mortgages”. Lehman Brothers took nearly $8 billion in write-downs during fiscal ’07.
– In merger news, Teva Pharmaceuticals (TEVA) announced it will buy Barr Pharmaceuticals (BRL) the fourth largest generic drug company worldwide, for $7.46 billion plus the assumption of net debt of approximately $1.5 billion.
– Gold closed its Friday session lower by $13.60 to $957.00 while crude lost $0.59 to close at $128.70. Oil prices have retrieved $16 from start of the week.