Market Report: Sainsbury's rises after Goldman endorsement

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Traders buttoned their lips and strapped on the tin hats yesterday as further bad news from the financial sector sent the markets spiralling. One stock made it through to the other side unscathed, and surprisingly it was from the much maligned retail sector.

One of the six stocks to end in positive territory was J Sainsbury after support from Goldman Sachs. The powerhouse US broker added Sainsbury's to its "conviction buy" list, saying it saw the stock as a source of opportunity.

Goldman said the supermarket is "the only company in our universe where the property value of £8.6bn is higher than its current enterprise value... As a result, investors are now buying the underlying property with a 'free option' on a continued recovery and potential corporate activity, should credit conditions improve later in the year." Sainsbury's shares closed up 1.78 per cent at 386p.

It was also up at the expense of one of its bitter rivals. The big retail story in the morning was Tesco, which was spanked after releasing disappointing sales figures. The group fell on a poorer than expected 3.1 per cent rise in UK sales in the six weeks to January 5. It was overtaken by events and so was not among the worst performers when it finished down 13p at 407p.

Martin Slaney, head of derivatives at GFT Global Markets, said: "The like-for-like sales figure is a big miss and is significantly below the worst estimates." It dragged down several other retailers, with Home Retail Group the worst, down 6.85 per cent at 261.75p.

News that Citigroup had reported a write-down of $18bn (£9.1bn) in its fourth-quarter results sent the top tier into freefall. Further rumours that JP Morgan was set to follow today with a similar announcement dented the market further.

The FTSE 100 collapsed 3 per cent, closing 190.1 points down at 6025. One trader said: "There is just a lot of doom, gloom and despondency out there."

The banks took the hit, with Royal Bank of Scotland coming off worst as it fell through the 400p level. It ended down 5.88 per cent at 392p. Big pharma suffered on a bearish note from Morgan Stanley, which downgraded the sector to "in line". "We think the market has yet to acknowledge the extent of the structural challenges facing the sector," it said, cutting GlaxoSmithKline's target from 1400p to 1391p and AstraZeneca's from 2677p to 2450p. GSK closed 32p down at 1322p, while Astra was 81p down at 2227p.

As fears over housing and the economy returned, some of the old whipping boys were lashed again. Taylor Wimpey took the biggest hit of the day, down 7.71 per cent to 159.2p, despite a positive trading update.

Rumours of consolidaion in the sector had Restaurant Group up at the top of the mid-cap stocks – 10.57 per cent higher at 136p.

Also up was Northern Foods, following a third-quarter trading update. It said revenue was in line with the board's expectation, up 3.5 per cent on a like-for-like basis. It closed up 2.39 per cent at 85.75p.

A couple of big contract wins had Autonomy looking sprightly, up 20p to 986p. The infrastructure software group said it had entered into a licence agreement to provide software to mining giant BHP Billiton and US technology group AT&T.

On the second tier, Northern Rock continued to plunge to record lows. On the day of its extraordinary general meeting, and with heightened fears of nationalisation, the beleaguered lender ended 16.06 per cent down at 69.25p.

Another heavy faller was Burberry Group, as its sales figures missed expectations. The stock was checked 16.44 per cent to 406.5p despite revealing that total revenue had grown 26 per cent. The company said "retail sales did come in modestly behind our plan".

Takeover talks lifted a small-cap stock to the top of the risers for the second day in a row. Yesterday it was Regent Inns, which stormed up in the morning before retreating to close 27.27 per cent up at 21p, after revealing a number of preliminary approaches. The news helped offset its statement that it continues to experience more challenging market conditions.

Another small-cap to benefit from takeover interest was Whatman, up 21.36 per cent to 250p. It confirmed yesterday it was in discussions with unnamed third parties.

Top riser was media and games group tiddler YooMedia, which closed 50 per cent up at 0.15p. This followed an agreement with parking group NCP Services related to the payment of penalty notices.

On the downside, i-mate suffered after the group, which develops Microsoft Windows Mobile hardware and software, revealed one of its chip suppliers had failed to provide enough chips this quarter. That, along with a recent court ruling, "will significantly disrupt its strategy for the US market". I-mate shares closed down 38.06 per cent at 20.75p.