Weekly Market Recap: Mortgage Settlement Controversy, Alcatel-Lucent Rockets

Monday

Markets closed down on Wall Street: Dow -0.13%, S&P -0.04%, Nasdaq -0.13%, Oil -0.67%, Gold -0.25%.

On the commodities front, Oil (NYSE:USO) fell to $97.18 a barrel. Precious metals were also down, with Gold (NYSE:GLD) falling to $1,723.10 an ounce while Silver (NYSE:SLV) fell 0.99% to settle at $33.67.

Hot Feature: More Than Half of Wall Street Says Bonuses Met Expectations

Markets were down because:

1) Greece. Stocks slipped lower today investors awaited a Greek government decision on budget cuts that are key to securing a second bailout needed to avoid a disorderly default when 14.5 billion in bond payments come due on March 20. No deal was reached over the weekend on austerity measures and financial reforms necessary to secure the bailout package from the European Union, International Monetary Fund, and European Central Bank. Furthermore a formal offer for a debt swap with private creditors must be made by February 13 if all procedures are to be completed in time for the troika to release the bailout funds before the bond redemption next month.

2) Companies. A relative absence of major news, unfortunate in the instance of Greece, allowed companies to take the fore on Monday. Micron Technologies (NASDAQ:MU) was trading down after CEO and chairman Steve Appleton died in a small-plane crash on Friday. Mark Duncan was appointed over the weekend to take his place. Coinstar (NASDAQ:CSTR), Verizon (NYSE:VZ), and Netflix (NASDAQ:NFLX) all climbed higher today after Coinstar, the parent of video rental company Redbox, announced that it had formed a joint venture with Verizon to compete against rival Netflix.

3) Earnings. Earnings season is still in full force, and results are being looked to as economic indicators. Hasbro (NYSE:HAS) shares climbed after fourth-quarter earnings beat forecasts by a penny a share, though sales fell short, while Humana (NYSE:HUM) shares dropped nearly 5 percent after reporting that fourth-quarter profit rose from a year earlier while providing upbeat guidance for 2012. Yum! Brands (NYSE:YUM), which owns KFC, Taco Bell, and Pizza Hut, also rose Monday in anticipation of results due after the bell.

BONUS: Obama Orders Tighter Sanctions on Iran

Tuesday

Markets closed up on Wall Street: Dow +0.26%, S&P +0.20%, Nasdaq +0.07%, Oil +1.88%, Gold +1.36%.

On the commodities front, Oil (NYSE:USO) rose to $98.73 a barrel. Precious metals were also up, with Gold (NYSE:GLD) climbing to $1,748.30 an ounce while Silver (NYSE:SLV) rose 1.41% to settle at $34.23.

Hot Feature: Precious Metals Remain Strong as Greece Nears Deadline

Markets were up because:

1) Greece. Again. Until the (hopefully) soon-to-be twice bailed out nation is able to satisfy its troika of lenders — the European Commission, European Central Bank, and International Monetary Fund — markets will continue to be slaves to the government that makes U.S. lawmakers look effective. Today, stocks opened lower amid concerns that Greek politicians might not reach an agreement on reforms needed to secure fresh bailout money and avoid a default, but markets bounced back after reports suggested that progress was being made in negotiations.

2) Consumers. The Federal Reserve announced this afternoon that consumer borrowing in the U.S. rose more than forecast in December, driven by demand for auto and student loans. Analysts say consumers’ willingness to take on debt signals a growing confidence in the economy. Of course, Americans could also be taking on debt because gains in employment have yet to push wages high enough for consumers to continue shopping.

3) Earnings. BP (NYSE:BP) shares fell on Tuesday, though the oil company reported increased fourth-quarter profits and raised its dividend. Investors remain wary of how much the Deepwater Horizon oil spill will cost following a trial that is set to begin later this month. UBS (NYSE:UBS) shares also declined after the Swiss bank posted a 75 percent drop in fourth-quarter profit. Yum! Brands (NYSE:YUM) shares spiked after the fast-food operator beat earnings, thanks to growth in China, while Coca-Cola (NYSE:KO) shares also climbed higher after topping earnings and sales estimates for the fourth quarter. Disney (NYSE:DIS) shares were up in anticipation of earnings after the bell.

BONUS: Big Banks Play Let’s Make a Deal

Wednesday

Markets closed up on Wall Street: Dow +0.04%, S&P +0.22%, Nasdaq +0.41%, Oil +0.68%, Gold -0.71%.

On the commodities front, Oil (NYSE:USO) rose to $99.08 a barrel. Precious metals were down, with Gold (NYSE:GLD) falling to $1,736.00 an ounce while Silver (NYSE:SLV) fell 0.58% to settle at $34.00.

Hot Feature: Banks Brace for Epic Costs from Incredible Incompetence

Markets were up because:

1) Greece. It seems almost redundant to mention Greece at all. You’re probably all growing sick of hearing the same news day after day — progress has been made in negotiations, but with a deadline fast approaching, leaders have yet to make a deal — and yet the little Mediterranean country continues to make more headlines than the Kardashians. Unfortunately, investors continue to monitor developments in Greece rather closely, and as a result, small advances or hiccups are usually felt in the markets. Today was no different. Greek Prime Minister Lucas Papademos is meeting with political party leaders to discuss a draft of proposed spending cuts, including layoffs and pension reforms, that are a precondition for Greece to receive more bailout money from international lenders, the so-called troika consisting of the European Commission, European Central Bank, and International Monetary Fund. And if you’ve kept up with the headlines, you’ll know how important it is that Greece receive those rescue funds.

2) Earnings. News of Greece was even less substantial today than it has been in the preceding weeks. Markets seem to have begun to discount the fact that Greece is headed for an orderly default, instead focusing on more substantial facts and figures, namely earnings. Scores of U.S. companies have reported quarterly results over the past few weeks, some of which have been poor, but many of which have been better than expected. Today the trend continued, with Sprint (NYSE:S) trading lower as the expense of launching the iPhone took a bite out of fourth-quarter profits, while Time Warner (NYSE:TWX), CVS Caremark (NYSE:CVS), and Buffalo Wild Wings (NASDAQ:BWLD) all reported steep increases in quarterly revenue that had shares trading higher today.

3) Rally. Oftentimes a rally can be self-perpetuating. Yes, earnings have been more optimistic than in quarters passed, but also Americans are ready for the economy to get back on track. It helps that most major economic reports have been relatively positive this last month. Unemployment fell another two-tenths of a percent, while service and manufacturing sector gauges have demonstrated improvement, but ultimately investors are choosing to take risks, choosing to believe that the European debt crisis will eventually be worked out and that the economy will continue to create more jobs. Faith in the recovery may be what finally effects a recovery, as Americans respond to positive data by putting more money into the markets and by increasing spending.

BONUS: Investors Wake Up to the Return of Dividends

Thursday

Markets closed up on Wall Street: Dow +0.05%, S&P +0.15%, Nasdaq +0.39%, Oil +1.04%, Gold +0.03%.

On the commodities front, Oil (NYSE:USO) rose to $99.74 a barrel. Precious metals were also up, with Gold (NYSE:GLD) rising to $1,731.80 an ounce while Silver (NYSE:SLV) rose 0.49% to settle at $33.87.

Hot Feature: Warren Buffet: Gold is for Losers, Stocks are for Winners

Markets were up because:

1) Unemployment. New applications for jobless benefits fell by 15,000 in the week ended February 4, Labor Department figures showed today in Washington, continuing a fairly consistent downward trend that has brought down the four-week moving average to 366,250, the lowest since the week ended April 26, 2008. Initial jobless claims reflect weekly firings, and their decline demonstrates an easing of dismissals that correlates with the drop in the unemployment rate, which fell in January to a three-year low of 8.3 percent.

2) Banks. Bank stocks were trading mixed today, taming what might have been a more vigorous rally, after five of the nation’s biggest banks — Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), and Ally Financial — agreed to a $25 billion mortgage settlement. Bank of America managed to claw its way to gains of around 0.6 percent, but the other three publicly-traded banks involved in the settlement spent most of the day in the red.

3) Greece. It would be impossible not to mention Greece at all, given that negotiations finally gave way to some weighty developments today, with party leaders (finally) reaching an agreement on austerity measures and reforms. Though a deal has long been expected, any lingering doubts that the country would be able to secure more bailout funds and avoid a default have been assuaged, at least for the moment.

BONUS: Dick Bove: Everyone Stop Paying Your Mortgage NOW!

Friday

Markets closed down on Wall Street: Dow -0.69%, S&P -0.69%, Nasdaq -0.80%, Oil -0.83%, Gold -1.13%.

On the commodities front, Oil (NYSE:USO) fell to $99.01 a barrel. Precious metals were also down, with Gold (NYSE:GLD) falling to $1,721.50 an ounce while Silver (NYSE:SLV) fell 1.30% to settle at $33.48.

Hot Feature: IEA: Sanctions Hit Iran Oil Output, Sales

Markets were down because:

1) Greece. The Greek deal isn’t done. Though Prime Minister Lucas Papademos’ coalition has taken some important steps this week, they have by no means reached the finish line. Today markets soured as euro-zone finance ministers called the new Greek austerity deal into question, saying it simply wasn’t enough. Now it’s back to the drawing board for Parliament, which must somehow find another 325 million euros to cut from the federal budget, among other things, if it is to secure another bailout, the only thing standing between Greece and default.

2) Consumers. Consumer sentiment dropped sharply and unexpectedly in February, according this month’s edition of the Thomson Reuters/University of Michigan Consumer Sentiment Index, which declined to 72.5 from 75 last month. Only 23 percent of all consumers surveyed in early February reported an improving financial situation, down from 29 percent in January, as one in four families reported declines in income, despite an improving job market.

3) Companies. Alcatel-Lucent (NYSE:ALU) and LinkedIn (NYSE:LNKD) shares jumped after the two companies announced better-than-expected earnings, the latter reporting a 30 percent jump in profit during the fourth quarter. Barclays (NYSE:BCS) tacked on about 1 percent despite posting an unexpected loss for the fourth quarter, as it also announced that it would cut its bonus pool by 25 percent. Activision Blizzard (NASDAQ:ATVI), Nuance Communications (NASDAQ:NUAN), and First Solar (NASDAQ:FSLR) were all trading lower, with one earnings beat, one earnings miss, and one delay of funding for a massive solar farm planned for the Los Angeles area.

BONUS: How Will the Mortgage Loan Settlement Affect the Housing Market?

To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com