Wall Street Facing 12-year Lows, Buffet’s Berkshire Takes a Knock, GE Cuts Dividends

Wall Street ended last week on the brink of 12 year lows with the Dow Jones industrial average posting its worst February since 1933 and closing at 7,063, while the Standard & Poor’s 500 ended the week at 735 and the Nasdaq composite dropped to 1,378. A number of factors had a negative impact on stock market performance last week, including the worse than expected GDP reading for the fourth quarter of 2008 and the news that the US government is set to take a large stake in Citigroup, which in turn sparked fears that other major banks may be heading the same way.

With bad news coming from all quarters, the news that Berkshire Hathaway Inc. reported a net worth decline of $11.5 billion in 2008 – its worst result in the 44 years that legendary investment mogul Warren Buffet has been at the helm – came as a shock to many investors. In his letter as Chairman of Berkshire Hathaway Inc., Buffet noted that 2008 had some good points mixed in with the bad. He goes on to admit that he had made some unwise investment choices, with the worst being his purchase of a large amount of ConocoPhillips stock at a time when oil prices were peaking, not anticipating the subsequent plummeting oil prices which cost Berkshire billions of dollars. The $5 billion drop in Berkshire’s American Express shares, along with the $3 billion decline in its Coca-Cola stake also took its toll on the company.General Electric’s announcement that it will be cutting its quarterly dividend payout to shareholders by 68% caused its shares to tumble by 6.5% on Friday. In a written statement, GE’s chairman and CEO Jeff Immelt noted that while recognizing the importance of paying a dividend to shareholders, management believes that cutting the dividend payout is a sound precautionary measure for the long-term benefit of the company.

The upcoming week will present stock market traders with a number of challenges, including the release of the ISM manufacturing index on Monday; the January home sales index on Tuesday; payroll company ADP’s February employment report on Wednesday; the weekly jobless claims report and US retailer sales reports on Thursday and the US government’s February employment report on Friday – all of which analysts anticipate will reflect a deepening of the economic crisis. With investors desperately looking for indications that enough of the bad news has been factored in to stabilize the market to some extent, it is becoming painfully clear that nobody is yet able to predict where the bottom is.