The market closed mixed for the day but for the week, all three major indices managed to post a gain of around 1% following previous week’s 4% loss. The news on the economic front was mostly negative this morning. Start with the latest inflation trend. The import price index jumped 1.7% in January and brought the year-over-year increase to 13.7%, the highest on record. Meanwhile, US export prices rose 1.2% during the same period, which is the biggest increase in almost 20 years. The February NY Empire Manufacturing Index, on the other hand, came at -11.7 compared to the consensus of 7.0, the first contraction in that region in more than 3 years. This reminded investors of “stagflation”.

Consumers and foreign investors didn’t give the market an easy time either. The University of Michigan Consumer Sentiment Survey fell to 69.6, a 16- year low. Economists forecast a reading of 76.5. Although the consumer sentiment is not always a good indicate to their future spending, it is still worth some attention considering the service sector contracted for the first time in 5 years last month. Foreign investors purchased a net $56.5 billion in US financial assets in December, below $73.5 billion expected and dropping for the second month in a row. Since US needs foreign investors to finance their massive trade deficits each month, a lack of interest from foreign investors will not be good news, especially for the dollar.

As if things were not worse enough, UBS provided its latest update today that financial institutions around the world may have to take as much as $203 billion further write-downs in addition to the $152 billion already reported. Within the potential $203 billion write-downs, CDOs and sub-prime-related losses account for $120 billion. SIVs(Structured Investment Vehicles) may need another $50 billion write-downs and commercial mortgage-backed securities can take as much as $18 billion. The balance goes to the leveraged buyout loans. Interestingly, financials held up remarkably well and provided much support to the broad market in the afternoon. As for the coming week, which is a shortened one due to holiday on Monday, we are going to get latest data for CPI and Housing Starts. The Fed minutes for its January meeting will also be released in the middle of the week.