Friday’s Market Recap: Investors Flee From Stocks To Bonds On Bank Nationalization Fears

The week ended considerably lower on building fears that the United States government’s bank rescue plan might involve nationalization and that the recession is worsening further than once thought.  This has caused investors to flee towards U.S. government bonds.  The Dow Jones Industrial Average (^DJI) fell -1.34% to a close of 7,365.67 while the Nasdaq (^IXIC) and S&P (^GSPC) fell equally -0.11% and -1.14% respectively to closes of 1,441.23 and 770.05.  Gold boosted $17.1 on the day to a close of $993.60 while copper fell -0.28 cents on the day to a close of $1.46.  There are also concerns that the $787 billion economic stimulus signed into law by U.S. President Barack Obama this week might not blunt the impact of the recession soon enough.

Consumer prices rose modestly in January, fueled by higher energy costs, but economists said they remain more concerned about the threat of price declines throughout the economy.  The Labor Department reported that consumer prices rose by 0.3% percent last month, which was the first increase since prices were up 0.7% percent in July.  Prices fell flat in August and September, and continued to post huge declines in the fourth quarter of last year.  Core inflation, which excludes energy and food, showed a modest increase of 0.2% percent, slightly higher than the 0.1% percent gain economists expected.

New York Attorney General Andrew Cuomo has subpoenaed Bank of America (NYSE:BAC) Chairman and Chief Executive Kenneth Lewis over whether the bank withheld information from investors in its purchase of Merrill Lynch, this may also hurt market sentiment.

Morgan Stanley (NYSE:MS) plans to offer its top-producing financial advisers and those at Citigroup Inc.’s (NYSE:C) Smith Barney as much as 105% of their annual production to stay with the two firms as they create a joint venture.  This retention deal was announced to branch managers at both firms a few hours after Wells Fargo & Co. (NYSE:WFC) said it won’t be handing out retention bonuses to the Wachovia Securities brokerage force.

Wal-Mart Stores Inc. (NYSE:WMT) will pay $17.5 million as part of a settlement in a lawsuit that alleged the company discriminated against African-Americans on the basis of race in recruiting

Disclosure: The mutual fund the author manages is long WMT.

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