Bartlett Market Week
Market Week: April 19, 2010
The Markets
The Dow and S&P 500 finally cranked it up to 11 and 12 respectively--until Friday, when the Securities and Exchange Commission's fraud charges against Goldman Sachs detonated the Wall Street equivalent of the Icelandic volcano. The news helped spook investors already concerned that stocks were overdue for a tumble. The Dow recovered a bit later in the day from a 180-point drop to end the week up, but the S&P fell back below 1200. Renewed risk aversion also hit prices for gold and other commodities but helped buoy Treasury prices.
Note: Market indexes listed are unmanaged and are not available for direct investment.
Last Week's Headlines
- It was a good news/bad news week for the financials. Both Bank of America and J.P. Morgan Chase reported strong earnings. However, the SEC filed civil charges alleging that Goldman Sachs committed securities fraud by selling a subprime-mortgage derivative it had structured in April 2007 with the help of a hedge fund that then profited from taking a short position against the security (thereby betting the derivative would fail).
- Increased housing starts in the South pushed March figures up for the third straight month; the starts also were up 20.2% from a year ago. Building permits, an indicator of future construction, were up 7.5% from February, and 34% from March 2009.
- After February's bad weather, shoppers turned out in force in March. Retail sales were up an encouraging 1.6% from the month before, according to the Commerce Department. Though electronics and appliance sales were down, they were still better than in March 2009, and sales of cars, clothing, building materials, and furniture rose. And according to the Federal Reserve, manufacturing output for such big-ticket items as furniture, cars, and appliances also rose 0.9% in March.
- Consumer inflation remained tame in March at an annual rate of 2.3%, according to the Bureau of Labor Statistics. Prices were up only 0.1% for the month; not counting food and energy, they remained the same.
- The National Bureau of Economic Research (NBER) said it's not yet ready to put an end date to the recession.
- In the first three months of 2010, foreclosures were up 7% from the previous quarter and up 16% from a year earlier. The number of real estate owned (REO) properties is at its highest level since January 2005, according to RealtyTrac, which said that number coupled with a 19% monthly jump in March foreclosures may indicate the pace of foreclosures on distressed properties is picking up.
- Despite solid demand for short-term Greek debt at last week's auction, yield spreads on longer-term debt continued to reflect investor anxiety, and Greek leaders asked to meet with the International Monetary Fund.
Eye on the Week Ahead
Public and financial fallout from the Goldman shocker will be interesting to watch, especially as the company is scheduled to announce first-quarter earnings Tuesday. The news also will likely heat up debate on legislation introduced last week in the Senate that would regulate derivatives. Investors will be assessing the financial impact of the volcano-related chaos, and earnings season gets into high gear.
Key data releases: Wholesale inflation, existing home sales (4/22); durable goods orders, new home sales (4/23).
Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
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