YAHOO[BRIEFING.COM]: Weekly
Recap - Week ending 13-Mar-09
The stock market posted its
largest weekly gain in months, with the Dow rallying 9.0%, the Nasdaq up 10.6%,
the S&P 500 strengthening 10.7% and the Russell 2000 advancing 12.0%. But
while there were some potential headline events -- reinstitution of
the uptick rule, suspension of mark-to-market accounting -- and positive
commentary from some major banks (C, JPM), this week's move was really a bear
market rally, with stocks rebounding from extremely oversold positions.
Some of this week's best
performers were some of this year's worst, with Financials notably soaring 34%
on the week. Ideally, one would like to see the cream rise to the top to feel
better about the character of the move. Nonetheless, you take what you can get
in periods like this. Other sectors that showed double-digit gains on the week
include Consumer Discretionary, Industrials, Materials and Retail.
Following an inside trading
session Monday, the major averages exploded to the upside on Tuesday. They opened
the session sharply higher, supported by financial stocks, after beleaguered
financial giant Citigroup (C) told investors that it earned a
profit in the first two months of 2009 (First Call EPS consensus ($0.32)) and
House Financial Services Chairman Barney Frank said he believes the SEC will
reinstate the uptick rule as early as next month. The S&P 500 managed to
extend its opening gains, closing up 6.4%, while the financial sector surged
15.6%.
The stock market took a
breather on Wednesday, as the major averages traded in a consolidative fashion
throughout the session. One story of note was JPMorgan (JPM),
who followed peer Citigroup by telling CNBC it was profitable in the first two
months of 2009 (First Call EPS consensus $0.32).
Thursday was the stock
market's second big day of the week, as the major averages put together an
impressive follow through rally. This session's positive tone was inspired by
better-than-expected retail sales data, renewed buying interest in bellwether General
Electric (GE) and more encouraging news from the financial sector,
though all three catalysts need to be taken with a grain of salt.
February Retail Sales declined
just 0.1%, which was better than the 0.5% decline that was expected. Excluding
autos, Sales increased 0.7%, better than the 0.1% that was expected. In
addition, January Retail Sales and Sales ex-Autos were revised sharply higher.
That said, the data was
somewhat offset by Weekly Initial Claims, which continued their poor trend.
Specifically, Claims rose 9,000 to 654,000, bringing the four-week moving
average to 650,000 from 643,250.
In corporate news, S&P
disclosed it lowered General Electric's credit rating one notch to AA+ from
AAA. However, the downgrade was widely expected, so investors had already priced
in the bad news, allowing shares to rebound.
Finally, a House Financial
Services Subcommittee held its highly-anticipated hearing on mark-to-market
accounting. While no announcement was made, it seemed the majority of members
favored suspending the rules temporarily.
Friday proved to be a choppy
session, but following a modest morning sell-off the major averages rebounded
to close with slight gains. It was a slow trading day, though there was one
notable piece of economic data as the Trade Deficit narrowed to $36.0 bln in
January from $39.9 bln the prior month. While an improvement, what the
narrowing deficit really reveals is that we are experiencing an overall
contraction in global trade. In addition, the real Trade Deficit widened to
$44.0 bln in January from $42.9 bln in the prior month, and that number
(unfortunately) is what counts for GDP forecasts.
Despite the lack of economic
evidence to support this week's rally, the fact that investors still hold a
healthy degree of skepticism regarding the move could mean the stock market has
more room to run. Those potential headline events mentioned
above (reinstitution of the uptick rule, suspension of mark-to-market
accounting), as well as any details on a government plan to buy toxic assets
from banks, could neutralize the bearish bias going forward and curtail short
selling.
Nevertheless, economic data
has to follow suit. They will get their change next week with Industrial
Production on Monday (3/16), PPI and Housing Starts on Tuesday (3/17) and CPI
on Wednesday (3/18). Also on Wednesday, the Federal Reserve will release its
most recent rate decision and policy statement. The latter will be the catalyst
as rates are expected to remain in a range of 0.00%-0.25%.
--David M Campione, CFA,
Briefing.com
|
Index |
Started Week |
Ended Week |
Change |
% Change |
YTD % |
|
DJIA |
6626.94 |
7223.98 |
597.04 |
9.0 |
-17.7 |
|
Nasdaq |
1293.85 |
1431.50 |
137.65 |
10.6 |
-9.2 |
|
S&P 500 |
683.38 |
756.55 |
73.17 |
10.7 |
-16.2 |
|
Russell 2000 |
351.05 |
393.09 |
42.04 |
12.0 |
-21.3 |