Stocks Close Down
So much for the so-called ‘Santa Claus’ rally as stocks close down this past week as investors were treated to a big lump of coal in their stockings as all the major equity indexes were down on the week. Sentiment was particularly negative the first three days of trading for the past week as Moody’s Investors Service and Fitch Ratings issued new warnings for the European countries as to their debt situation. In addition, Fitch downgraded several global banks, including Bank of America and Goldman Sachs. Shares also declined on Tuesday after the Fed left its policy rates unchanged but took no immediate action to bolster the economy. Some of the more optimistic pundits had expected the Fed to at least expand on its communication policy. And finally, equities made a partial comeback the last two days of trading as the economic news won out with a score of 3 to 1. Initial jobless claims unexpectedly fell sharply, the empire state topped expectations for December, and the Philly Fed jumped for the same month. However, with just five trading days left until the Christmas holiday, it was certainly a ‘bummer’ of a week for investors.
Stocks close down as on the week, the Dow Jones Industrial Average fell by nearly 2.6%, or more than 300 points to close at a level of 11,866.39. The broader-based Standard & Poor’s 500 index also gave up nearly 3%, closing out the week at the 1,219.66 mark. The tech-laden Nasdaq Composite also finished to the downside as it slipped by 3.5%, and now sits at 2,555.33. Meanwhile, the smaller-cap stocks as represented by the Russell 2000 continues to lag the overall market, it pared its weekly performance by another 3.1 percent, and is the furthest behind on a year-to-date market by a good margin. The one good tidbit of news is that despite a week in with both Europe and the U.S. fell by around 3%, U.S. stocks still remain by far the best-acting equity market thus far this year.For the year-to-date statistics, the major equity indexes still remain mainly to the downside, with the exception for the Dow. The S&P 500 is down 3.0 percent; the Nasdaq Composite is down 3.7 percent; and the Russell 2000 is off by 7.9 percent. The Dow Jones Industrial Average however is still higher in 2011 by a meager 2.5 percent.As 2011 draws to a close, the 10-year Treasury-note yield is still comfortably below the 2% mark and the five-year note is well under 1%, and the two-year is under 0.25%. And on the 30th anniversary of long-term Treasury bond yields reaching their record high of 15%, the 30-year bond yield is still below 3%. Keep in mind that these declines to those incredibly low yields also came as the U.S. lost its triple-A rating by the Standard & Poor’s grading system. The big question going forward is how low can these yields go? The overwhelming consensus is that that yields will probably have no further room to fall and will be headed higher next year. At least we can say that it was a great run while it lasted.
 
Upcoming Data
This week’s economic calendar will be jam packed with economic news as the holiday schedule moved some releases forward to this week. Housing is a major focus beginning with starts on Tuesday, and existing homes sales on Wednesday. On Thursday we’ll get the FHFA home prices report and Friday brings us new home sales. In addition, both gross domestic product and personal income will post on Thursday and Friday respectively. And Friday we’ll wrap up the pre-holiday wee with the durable goods orders.In recapping, although not every economic report this past week was positive, the overall picture is that the U.S. economy is still growing at a moderately positive rate. There is no doubt that this much-needed recovery continues to gain traction and is headed higher. And while Europe continues to weigh on equities, favorable U.S. news has limited the damage somewhat and has led some to think that there are now more factors pointing to an upside for U.S. equities. Let’s just hope they’re right, as that would certainly make for one nice Christmas gift!As we approach the much-anticipated Christmas holiday, all of us at Money Management Services Inc., wish you and your family a very Merry Christmas and Happy Holidays!! Until next week, take care and enjoy the season!!Sources:Sources:Barron’s, Wall Street Journal, Assoc. Press, Econoday, Bloomberg, Dow Jones & Co., Briefing.com, The Kirk Report