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Investors Cautiously Optimistic as First Trading Week of 2009 Kicks Off

5 January 2009 - Markets - Editor

The first trading day of 2009 on Wall Street proved to be somewhat encouraging, with advances across the board resulting in the Dow Jones industrial average rising 2.9 percent, the Nasdaq composite gaining 3.5 percent and the Standard & Poor’s 500 index rising 3.2 percent. With Monday 5 January signaling the start of the first full week of trading for 2009, U.S. investors are cautiously optimistic despite anticipating less than favorable economic news in the days ahead.

With the U.S. government’s December unemployment statistics due to be released on Friday, experts warn that the U.S. unemployment rate is likely to rise above 7 percent in January and may even reach 10 percent in the year ahead. Having cut roughly 533,000 jobs in November, employers are estimated to have cut 475,000 jobs during December. The ADP survey of employment in the private sector is also due out this week, with the weekly reading on the numbers of jobless U.S. citizens filing for unemployment benefits due on Thursday.

Monday sees the start of a House hearing into the Bernard Madoff scandal, which stripped investors of $50 billion, while reports due on Monday that will be of interest to investors include statistics on November construction spending and monthly truck and auto sales figures. The National Association of Realtors will be releasing data on November pending home sales on Tuesday. This report serves as a primary indicator of activity in the housing market. Also on Tuesday, the Institute for Supply Management will make known the results of its December survey on the services sector of the U.S. economy, while the government’s report on November factory orders will also be released. Analysts anticipate that all these reports are likely to confirm that the U.S. economy continues to languish in recessionary territory. Moreover, the Federal Reserve will release the minutes of its policy making meeting held on 15-16 December where the target range for the federal funds rate was established.

The original $700 billion bailout plan comes under the spotlight on Wednesday at a meeting of the House Financial Services Committee, which will focus on how the Obama administration may make use of the remaining TARP funds. Also on Wednesday’s agenda is a hearing by a House panel, featuring some of the nation’s top economists discussing a proposed economic recovery plan. Thursday will reveal just how badly U.S. consumers have been hit by the current economic woes as the nation’s chain stores release December sales reports and the Fed releases its monthly consumer credit report. Experts are already predicting that thousands of retailers are likely to close during 2009 as cash-strapped Americans count each dollar.

Many analysts agree that gains on Wall Street may be sustainable in the short term with investors factoring in the negative economic reports, but it is likely that markets will echo the lows of last November, with a strong possibility of falling even further as the recession drags on.

 


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