Stock Ends Lousy Week With Late Day Rally

Weekly Market Roundup

By Lou Scatigna

Stocks rallied back from over a 100 point loss late Friday but ended the week close to a 12 year low. This was worst week for stocks this year with the Dow down 6.2% and the SP 500 closing down 7%.

Once mighty icons of American manufacturing and finance plummeted to levels no seen in decades. Largest hit were banks and insurance companies. There is real fear that a number of these once blue chip companies are insolvent.

Let's take a look at how some stocks fared this week:

Citigroup 1.03 down 31%

JP Morgan 15.95 down 27%

GM 1.45 down 36%

GE 7.06 down 15%

PNC Bank 18.51 down 31%

Wells Fargo down 22%

Hartford 3.62 down 38%

Prudential 11.38 down 28%

Metlife 12.22 down 29%

Genworth 0.84 down 27%

Lincoln National 5.40 down 35%

These declines are truly staggering for such financial giants. This week I voiced my concern over the decline in the major insurance stocks. Fixed annuities, once considered quite safe are now at extreme risk. If a major issuer of annuities fails, all hell will break loose as panicky investors make a run on the insurance companies. If you can get your money out without big penalties I would consider doing it while you still can. If we see a run on annuities (and it has already started to some extent) the companies may limit or prevent withdrawals. Absolutely do not add to or establish new annuity accounts at this time!

From a technical point of view the stock markets are at extreme oversold conditions and do for a significant bear market rally. My 2009 Financial Forecast (available on the right column of this blog) called for the Dow to hit 6,500 during the first half of 2009. Friday afternoon the market broke 6,500 before rallying the last 15 minutes to close at 6,627.

The economic data continues to surprise to the downside with virtually every report weaker than economists expected. Retail sales, unemployement, manufacturing, and consumer confidence all remain at depression like levels.

Did Friday afternoon mark the bottom of this market? I would not bet my retirement on it. Let's see if the market can turn positive early next week, if not we could see further losses in the major indexes.