Just when you thought the equity world was about to fall apart, markets were greeted with five consecutive days of upswings during the second full week of trading in September. Worries that several countries in the European Central Bank region would default on their debt had caused stocks to begin the month with one of its worse performances on record. However, news that five of the world’s central banks would provide for some much-needed liquidity has for now dissipated the majority of the ‘bears’ for now. Currently, it looks like this action is nothing more than a band-aid, as the only way you can eventually solve these debt issue problems is to actually write them off as bad debts. For the time being, this huge rally may be ‘short–in-the-teeth,’ so enjoy it while you can.
As the wild fluctuations in the equity markets continued, the problems across the pond certainly overshadowed the $447 billion jobs program that President Obama unveiled this past Thursday before a joint session of Congress. The Dow Jones Industrial Average fell 2.7% that following Friday alone, and now has the Dow sitting below the psychologically important 11,000 mark. The Dow’s 4.08% decline in the first three days of September is its fourth worst three-day start going all the back to 1900. For the week, the Dow gave up 248.13 points or 2.21%. Meanwhile the Standard & Poor’s 500 dropped 1.68% on the holiday-shortened week to a level of 1,154.23. The tech-laden Nasdaq fared noticeably better as it only lost 0.5% to the 2,467.99 mark. The smaller-cap stocks as represented by the Russell 2000 didn’t fare much better than the overall market, as it gave up 1.38% on the week and now sits at the 673.96 level.
Looking ahead to economic news this week, the biggest news will be the Federal Open Market Committee meeting, which we’ve already mentioned. More than likely they’ll announce some sort of additional stimulus for the economy in hopes of jump-starting such. Given the current weak state of the economy, look for Bernanke and the Fed to throw the market some sort of big, juicy bond on September 21st. Such an act could possibly rally the markets as we head into the end of the third quarter, which would be great news for the ‘bulls’ out there. In the earnings space, retailers such as Bed Bath & Beyond, FedEx, Darden Restaurants and Nike are all scheduled to report. These earnings numbers will give us some type of indication as to the tone of consumer confidence and spending, in an environment that is now be perceived as likely to be a “double-dip” recession.
Look for another action–packed week of stock market activity, and hopefully the volatility will lessen up somewhat. In the meantime, take care and please do not hesitate to get a hold of us with any questions or concerns as we head into the final weeks of September.
Sources:Barron’s, Wall Street Journal, Associated Press, Econoday, Gorilla Trading, Dow Jones & Company, Briefing.com