Well, there went the year's gains, lost in a maelstrom of selling linked to the following worries: (a) that the global economic engine known as China was about to reach for the brake handle, (b) that investors appear to have decided that the economic rebound -- which looked like it was well underway, and drove big stock gains last year - was not as strong or as certain as they once believed, (c) that Investors have also been disappointed in how earnings season is going, let down by a reality of stagnant revenue growth and poor profit gains that contrasts with high expectations, and (d) that of the sudden shift of political power in Washington.
- Would President Barack Obama's plans for reforming financial regulation hurt banks?
- Would the Democratic Party's unexpected loss of a seat in the U.S. Senate derail Obama's domestic agenda?
- What about Federal Reserve Chairman Ben Bernanke's chances for approval by the Senate?
There were so many things for investors to be unsure about this week. Their reaction? Sell.
Upset in the Bay State. In a stunning victory that complicates President Barack Obama's proposed overhaul of the U.S. health-care system, Republican Scott Brown won Tuesday's special Senate election in Massachusetts, defeating the state's Attorney General Martha Coakley to win the seat held by liberal icon Edward Kennedy for nearly 50 years. The win by Brown, a previously obscure state senator, ends the Democrats' 60-seat supermajority in the Senate and spells trouble for easy passage of a health-care bill. Read more about the Massachusetts special election .
Limits on big banks In his toughest response yet to the financial crisis, Obama proposed Thursday that strict limits be imposed on the size and trading activities of the nation's biggest banks. The proposal aims to deter commercial banks from becoming so large that they put the broader economy at risk and distort normal competitive forces. The president endorsed some recommendations by former Federal Reserve Chairman Paul Volcker, but didn't go as far as Volcker's urgings to break up the banks. Read more about Obama's bank proposal.
Goldman Sachs (GS) swung to a fourth-quarter profit that topped analyst estimates as lower-than-expected compensation levels boosted the bottom line, while performance at its various businesses was mostly in line with expectations. The Wall Street firm, which has faced public anger over recording big profits after accepting bailout funds, said total compensation and benefits have decreased by 20% since 2007. Read more about Goldman's results .
Growth worries at Google Shares of Google slipped late in the week as investors reacted to the Internet giant's fourth-quarter financial results, which gave some cause for concern about the company's growth prospects. Although its earnings generally fell in line with Wall Street estimates, they didn't quite outperform higher "whisper" numbers. Read more about reaction to Google's report .
A sweet deal after months of wrangling, Kraft Foods (KFT) lifted its offer for Cadbury PLC (CBY)(UK:CBRY) to around 11.9 billion pounds ($19.5 billion) in a bid that won approval from its British target. The agreement follows a four-month war of words between the companies' executives. The acquisition of the 186-year-old Cadbury will make Kraft the world's biggest chocolate and confectionery producer by revenue and the No. 2 gum producer behind privately-held Mars Inc. Read more about Kraft's deal for Cadbury .
Rehab for Japan Airlines as Japan Airlines Corp. filed for court-led rehabilitation, the Japanese equivalent of a Chapter 11 bankruptcy, which will allow the carrier to operate as it undergoes restructuring. The Tokyo-based carrier, Asia's second largest in terms of annual customers and destinations, is also at the center of showdown between U.S. carriers Delta Air Lines (DAL) and American Airlines (AMR), rivals that both want tighter relations to better tap into fast-growing markets on the continent. Read more about the troubles at JAL .
Another tough year for builders
The International Builders' Show went on this week without its signature exhibit: The New American Home, which for years has served as a showcase for some of the latest trends in building, design and home products. The private lender financing the project ran into credit problems and had to withdraw funding, according to the show's Web site. It's a fitting development and a familiar story for an industry that has been so battered during this housing downturn. Read more about the builders' show .
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