YAHOO [BRIEFING.COM]: Weekly Recap - Week ending 15-May-09Following a two-month rally, in which the Nasdaq Comp and Russell 2000 were up nine straight weeks and the S&P 500 and Dow were up eight out of nine, the major averages finally saw profit taking this week.  Despite being an options expiration week, things slowed down considerably as the bank stress test results have been released, first quarter earnings season has wound down and summer is fast approaching.

All four of the major averages ended the week lower, but the Russell underperformed, falling 7.0%. The S&P was next in line, down 5.0%, followed by the Dow at -3.6% and the Nasdaq at -3.4%.  Among sectors, Financials led the way, declining 12.1%, which is fitting as the sector outperformed during the rally, particularly last week when surged 23% on the bank stress test results.  It wasn't the only sector to see sizable declines, though, as Industrials lost 7.6%, Consumer Discretionary fell 7.3% and Energy decreased 6.8%.  All ten sectors that make up the S&P 500 ended in negative territory this week.

Monday proved to be the first of three lower sessions this week, as investors took profits on last Friday's (5/8) post-bank stress test rally.  But the Nasdaq outperformed on a relative basis due to strength in large-cap technology stocks, which helps explain its better performance for the week.

Following a choppy, but consolidative session on Tuesday, the major averages traded sharply lower on Wednesday following much worse-than-expected retail sales data.  Advance Sales came in at -0.4% in April (consensus 0.0%), while the prior month was revised lower to -1.3% from -1.1%.  Sales ex-autos came in at -0.5% for the month (consensus 0.2%), while the prior month was also revised lower to -1.4% from -1.3%.

It is starting to look like the consumer spending gains in January and February were just rebounds off a very weak fourth quarter, supported by strong seasonal factors.  The markets were looking to a rebound in consumer spending as a signal of overall economic recovery later this year, but the two months in a row of declines don't support that argument.  With unemployment continuing to rise and wage gains stagnating, the outlook for consumer spending remains poor.

The stock market managed a modest rebound Thursday, but gave up those gains today.

Both sessions saw mixed economic data.  On Thursday, PPI came in at 0.3% month/month in April (consensus 0.2%), while core PPI was in line at 0.1%.  That was followed up by CPI on Friday, which was in line at 0.0% in April, while core CPI came in at -0.7% (consensus -0.6%).  But perhaps the more important data today was Industrial Production, which came in slightly better-than-expected at -0.5% in April (consensus -0.6%), though that was offset by a downwards revision in the prior month to -1.7% from -1.5%.

The pressing message in the Industrial Production report is that demand continues to be weak.  Capacity Utilization fell to 69.1%, and while better than the 68.8% consensus estimate, it is still the lowest point since records began in 1967.  The excess capacity will serve to keep any pricing pressures in check and goes to show how quickly business has ramped down its production capabilities to deal with the drop in aggregate demand.

Looking ahead to next week, there will be a smattering of important earnings release, with Home Depot (HD) and Hewlett-Packard (HPQ) out on Tuesday (5/19) and Deere (DE) and Target (TGT) out on Wednesday (5/20).  It will be a much slower week on the economic calendar, however, with the only notable releases being Housing Starts/Building Permits on Tuesday and FOMC Minutes from the April 29 meeting on Wednesday.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	8574.65	8268.64	-306.01	-3.6	-5.8
Nasdaq	1739.00	1680.14	-58.86	-3.4	6.5
S&P 500	929.23	882.88	-46.35	-5.0	-2.3
Russell 2000	511.82	475.84	-35.98	-7.0	-4.7