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Recap of Last Week’s Market

By Steve Romasko

In the face of a short trading week with light volume, continuing trends advanced and investor response remained indifferent—in other words, investors conceded little ground to the relatively poor economic news as the results no longer carry the ‘shock value’ of the past.

Throughout the week, oil prices continued their slide on the front-month contract, settling at 37.71, the Fed announced new emergency plans and a wave of reports displayed a continually weakening economy. Particularly, (1) initial jobless number spike to a high of 586,000, (2) durable goods orders fell 1% in the month of November , (3) November existing home sales plummeted 8.6% from October, (4) new home sales hit a 17-year low of only 407,000 units and (5) personal income and spending dropped 0.2% and 0.6%. Read the rest of this entry »

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Recap of Last Week

By Steve Romasko

All eyes were on the Federal Reserve this week as they met on Monday and Tuesday to discuss further policy action in order to stem the economic crisis. From the meeting, the FOMC cut the target rate from 1.00% to a first-ever ‘range’ of 0.00-0.25%—effectively eliminating a major policy tool. However, the Fed made it clear that aggressive action will stay the course, and they will do everything possible to stimulate the credit market and the economy— perhaps by buying long-term treasury securities.

Bond traders reacted to this news by piling into long-term Treasuries—notably, the yield on the 10-yr note fell 49bps to 2.08%, while the 30-yr bill returned 2.52%, down 52basis points from the week prior. The seemingly relentless resolve of Bernanke & Co. to stimulate the economy on an infinite basis sent shorts heading for the exits and caused markets to rally 5.1% on Tuesday. However, the market gave back roughly 3.5% of Tuesday’s gains on Wednesday and Thursday, as economic reports were poor and investors returned to the notion that there’s no short-term panacea to fix the economy overnight.

Regarding economics—Industrial production declined 0.6% in November, housing starts declined 18.9% (the largest since March 1984), building permits hit a low and initial jobless claims – while  better than  consensus – are at a 26-year high.

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NOTE: This week’s report is appearing late and in shortened form as a result of of the Holidays. It will return to its original form next Sunday.

Recap of last week

By Steve Romasko

Despite the amount of horrid headlines that surfaces on newspapers this week, equities managed to finish the week on a positive note with the S&P 500 giving a 0.4% gain. Wall Street got off to a good start on Monday, following President-Elect Barack Obama’s comments over the weekend—where he supported the need for a massive stimulus package when he takes office to jumpstart the economy and put fiscal prudence on the back burner. The stimulus, as it seems, will be put toward an infrastructure plan, and will potentially create 2.5 million jobs— something not seen since the Reagan era, which led to the development of the US highway system. The market took the announcement as a sign of the incoming administration’s willingness to do whatever it takes to solve the current crisis and rallied as such—closing up 3.8% for the day.

 However, this particularly good news was overshadowed by a wave of poor earnings guidance, economics, and emerging scams. Tribune filed for Chapter 11; 3M, FedEx, Texas Instruments, Kroger, and Electronic Arts to name a few issued downward earnings guidance—suggesting that the crisis has officially spread from a few concentrated sectors to the broad market. Onward, economics were poor with Jobless Claims touching a 26-year high, 573,000, and continuing claims hit 4.43 million; November retail sales fell 1.8% in October—the 3-month trend to month-end November is down 4.7% from 3-month-end August. As a sign of current times, yields on the 1-3 month Tbills turned briefly negative—meaning that some investors actually were ready to pay the government to hold their money. Read the rest of this entry »

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Recap of Last Week

By Steve Romasko

Despite the short trading week due to the Thanksgiving holiday, the market managed to spark a 12% rally, largely driven by government action. The week opened with the announced rescue of Citigroup, Obama’s new economic team and an $800 billion plan from the Federal Reserve. Read the rest of this entry »