US Market Week Wrap Up And It's Impact On The Currency Market

Traders were taken for a wild ride this week as markets were roiled by a series of dramatic events, starting with steep falls in European and Asian markets on Monday (US markets were closed for the Martin Luther King holiday), and a surprise 75 bps rate cut before the open on Tuesday followed by a precipitous drop and recovery later that day.

Wednesday brought revelations of the largest fraud on record, as French bank Societe Generale (GLE) admitted that a rogue trader had managed to evade oversight and lose over $7 billion. The week ended on a down note despite largely strong quarterly earnings from the tech sector, as renewed rumors about European subprime problems gave traders an excuse to take profits.

Overseas markets plummeted on Monday after President Bush failed to provide new details or reassurance on an expected economic stimulus plan. US stock futures were hit hard before Tuesday's open, but at 8:20 amET, the first emergency Fed rate cut in since 9-11 injected a modicum of confidence, allowing the US markets to close down only marginally that day.

Rumors of some form of bailout for bond insurers rallied the market midweek, as debate continued over whether these companies, which are emerging as critical pressure points in the overall subprime crisis, will survive or slide into bankruptcy. Press reports later confirmed rumors that Wilbur Ross was in discussions with Ambac for a possible takeover, and that NY State Insurance Superintendent Dianallo was tapped to lead the government's efforts to resolve the problems in the bond insurance industry.

The fraud at Societe Generale (GLE) captured headlines on Thursday morning, as the venerable French bank revealed how Jerome Kerviel hacked computer systems and lost $7 billion in a series of complex, concealed deals on European stock derivatives. There was some speculation that the fraud precipitated Monday's turbulence, as the bank's management unwound Kerviel's out-of-money trades, putting immense pressure on the futures market.

There was also some speculation that the fraud precipitated the Fed's surprise rate cut, though later in the week the Fed issued a statement noting it was not yet aware of the problems at SocGen at the time of its decision.Strong earnings from tech stocks Microsoft (MSFT), MEMC Electronic Materials (WFR), Broadcom (BRCM) and Juniper Networks (JNPR) capped off the week. MSFT's better-than-expected quarterly earnings and revenue were complimented by the company's prognosis of healthy demand from both businesses and consumers. Apple's (AAPL) quarterly report provided a less positive counterpoint to these tech wins, as Steve Jobs & Co. reported weaker iPod shipments than had been expected.

The generally strong earnings reports were not enough to prevent a sell off Friday afternoon, as stock traders took profits on rumors of subprime problems emerging at Fortis and ING, and a report that Wall Street paragon Goldman Sachs would trim its workforce by 5%. For the week, the DJIA and S&P 500 ended marginally higher, the Nasdaq composite was down fractionally over the four day week.