Pop Goes the Nasdaq

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There certainly was a huge dichotomy when it came to the equity markets this past week, as on the one hand we had outstanding results for some of the big technology names, while on the other hand, we had the stagnation of the big banks thanks to new worries surrounding the mortgage foreclosure proceedings.  Strong earnings from Google gave a big boost to the technology sector as the Internet-search giant leap above the $600 mark this past Friday. Google jumped $60.52, or 11%, to $601.45, its highest close since January after the company posted a 32% rise in its third-quarter profit. The climb in the company’s stock boosted its market capitalization by $19.1 billion as investors were encouraged to see Google finally indicating progress in developing other significant revenue streams beyond its dominance in online-search advertising. Google’s report lifted the broader technology sector, including the well known Apple name, which rose $12.43, or 4.1%, to $314.74, and was higher by 7% on the week.  It seems investor appetite for Apple’s stock cannot be satisfied as shares are now up an astonishing 30% since the beginning of September

With decent earnings reports thus far along with improving economic reports and more quantitative easing apparently on its way, the markets prospered for a second consecutive week.  Equities netted moderate to strong gains this past week with blue chips posting on the low end and techs on the high end.  With more than half of October already behind us, here is where we now stand following the 41st week of the year:

  • Dow: +0.51% this week & +6.09% this year
  • S&P 500: +0.95% this week & +5.48% this year
  • Nasdaq: +2.78% this week & +8.80% this year
  • Russell 2000: +1.35% this week & +12.44% this year

The bond market focused this past week on a speech that Federal Reserve Chairman Ben Bernanke gave on Friday, which confirmed that the central bank has every intention of trying to force down interest rates and juice the economy by purchasing Treasuries for the Fed portfolio. However, there was weak demand as to the Treasury auction, given all the talk of quantitative easing, so the 30-year bond settled in at 3.988%, a jump of 24 basis points (0.24 percentage point) on the week.  The benchmark 10-year Treasury not yield rose 18 basis points to 2.567%.

Speaking of lower interest rates, last week the 30-year mortgage plunged to a record low of 4.19%, furthering its all time low for the third consecutive week., according to Freddie Mac’s weekly survey of mortgage rates.  The 30- and 15-year fixed-rate mortgages and the five-year adjustable-rate loan are all now sitting at record lows.  The Federal Housing Administration said that the last time the 30-year was this low was in April of 1951.

This will be a big week for earnings reports as we enter the second inning of the third quarter earnings season.  Citigroup kicks off  such on Monday, with several other big financial institutions like Bank of America, Goldman Sachs,Wells Fargo, Bank of New York , and U.S. Bancorp following.  These reports will hopefully give us some indication as to how big this foreclosure-proceedings debacle really is.  Others corporations set to to report this week include; United Technologies, Abbott Labs, eBay, Morgan Stanley Boeing, Amazon.com, AT&T, Caterpillar Eli Lilly, Halliburton, IBM, Apple, Coca-Cola, Occidental Petroleum and Johnson & Johnson to name just a few.

That being said, all of us at Money Management Services, Inc. continue to hope that “Uncle Ben” and the Federal Reserve will continue to mount their full court press against a severe stock market downturn.  In addition, let’s hope that the earnings parade that is now in full swing continues to display the necessary evidence to support higher stock prices.  Until next week, take care!



Sources:  Barron’s, The Wall Street Journal, CNN, The New York Times, The Financial Times, Bespoke Investment Group, Yahoo1finance

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