Weekly Recap - Week ending 01-May-09
The major indices resumed their two-month
advance this week, albeit modestly, with the bulk
of gains coming on Wednesday -- S&P 500 +1.3%,
Dow +1.7%, Nasdaq +1.5%, Russell 2000 +1.7%. It
was a choppy, volatile week of trade due to a
myriad of catalysts, beginning with swine flu on
Monday and ending with the announcement on Friday
of a delay for the release of the government's
bank stress tests.
Investors got into work Monday morning with
equity futures sharply lower on reports of a swine
flu outbreak. On Sunday, Janet Napolitano, U.S.
Homeland Security Secretary, declared a
"public health emergency" in the U.S. as
about 20 people at the time were confirmed to have
been infected, though none seriously ill. The
influenza remained a headline throughout the week,
and by Friday the World Health Organization
announced that the worldwide total for confirmed
cases of the virus had risen to 331, up from 257
the prior day. Mexico has officially reported
seven deaths from the virus and the U.S. has
reported one, while no other countries have
reported deaths.
A number of industries have felt the effects of
the outbreak, most notably the pork industry. The
travel industry was also under pressure this week,
including airlines and cruise operators. Hotels
were under pressure early in the week, but managed
to regain most of their losses on a number of
better-than-expected earnings releases. There were
benefactors, however, particularly the drugmakers.
Switching gears, economic data based on surveys
have been strong over the last couple of weeks,
and that trend continued this week. On Tuesday,
Consumer Confidence came in at a
better-than-expected 39.2 for April, well above
the 29.7 consensus estimate. On Thursday it was
Chicago PMI's turn, as it came in at a
better-than-expected 40.1 for April vs. the 35.0
consensus. Finally on Friday, ISM Manufacturing
came in at a better-than-expected 40.1, above the
38.4 consensus.
That's not to say all economic data have been
positive. Wednesday's Advanced reading for first
quarter GDP came in at a much weaker-than-expected
-6.1% (consensus -4.7%), in part because inventory
contraction sliced a whopping 2.8% off the change.
Real PCE rose at a stronger-than-expected 2.2%
annual rate, but the business data were terrible
-- investment in software and equipment fell at a
33.8% annual rate, while nonresidential
construction spending fell at a 44.2% annual rate.
Residential construction spending continued to
plunge, and was down at a 38.0% annual rate, while
government spending fell at a 3.9% annual rate as
state and defense spending contracted.
However, Wednesday proved to be the market's
big day as stocks shrugged off the GDP figure and
rallied ahead of the FOMC's rate decision and
policy statement that afternoon. The FOMC kept its
key interest rate in a range of 0.00%-0.25%, as
expected, and seemed to carefully word its policy
statement so as not to spook the market. But as
always, the release was followed by volatility,
with the major indices spiking to new highs
shortly after, only to see aggressive profit
taking in the final hour of trade. In the end, the
S&P gained 2.1%.
Thursday was another volatile session for the
market, as it got off to an impressive start, only
to lose those gains after reports confirmed
Chrysler would declare bankruptcy. Talks between
the Treasury Department and lenders aimed at
keeping the automaker out of bankrupcty broke down
Wendesday evening, particularly with a group of
hedge funds that owned approximately 30% of the
company's debt and voted no to the government's
offer.
Friday proved to be an extremely slow, but
modestly higher session. The big headline of the
day came late morning when a government source
said it would announce information on the bank
stress tests late afternoon on Thursday, May 7,
later than the original date of May 4. This
follows a slew of headlines on the tests
throughout the week. They began on Tuesday when
reports indicated regulators had told Bank
of America (BAC) and Citigroup (C)
that they may need to raise additional capital
based on early results of the tests. Reportedly,
Bank of America's capital hole is in the billions,
while it wasn't clear how big a capital deficit
Citigroup faces. Speculation continued throughout
the week until today's announcement.
Looking ahead to next week, earnings results
will continue to come out at a fast pace, but note
a number of the bigger companies have already
reported. Economic data will be light until
Friday's (5/8) Nonfarm Payrolls report for April.
And before that, as mentioned above, investors
will finally see the results of the government's
bank stress tests late afternoon on Thursday
(5/7).
| Index |
Started
Week |
Ended
Week |
Change |
%
Change |
YTD
% |
| DJIA |
8076.29 |
8212.41 |
136.12 |
1.7 |
-6.4 |
| Nasdaq |
1694.29 |
1719.20 |
24.91 |
1.5 |
9.0 |
| S&P 500 |
866.23 |
877.52 |
11.29 |
1.3 |
-2.8 |
| Russell 2000 |
478.74 |
486.98 |
8.24 |
1.7 |
-2.5 |
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