YAHOO [BRIEFING.COM]: Weekly Recap - Week ending 22-May-09

The stock market kicked off the week with a strong start, but gave up a substantial portion of the advance throughout the week, eventually settling with modest 0.5% gain.  Economic data did not help matters with the number housing starts falling to a record low, and the number of continuing unemployment claims hitting a fresh record high.

Stocks surged on Monday, led by a 7.2% gain in financials as Bank of America (BAC) rallied after being added to Goldman Sachs' Conviction Buy List.  Goldman cited "another solid mortgage and capital markets quarter, given observable activity levels since March." Lowe's (LOW) also added to the bullish sentiment after the home improvement retailer posted better-than-expected earnings and issued upside guidance.

But the positive bias was short-lived.

Economic data were poor. The housing industry remains weak, with both housing starts and building permits falling to record laws. Starts fell -12.8% from March to an annualized rate of 458,000 units (consensus 520,000) while permits dropped -3.3% to an annualized rate of 494,000 (consensus 530,000).

Meanwhile, initial unemployment claims for the week ended May 16 totaled 631,000 (consensus 625,000), which was down from an upwardly revised reading of 643,000 (from 637,000) in the prior week.  Continuing claims jumped by 75,000 to a record 6.662 million, which brought the four-week moving average for this series to 6.48 million from 6.35 million. This reflects the weak U.S. labor market.

The Fed released the minutes from the April FOMC meeting, which didn't bring much in terms of surprises.  The Fed did, however, lower its real GDP projections for 2009, 2010, and 2011. The FOMC also discussed increasing purchases of agency and Treasury securities, but all members felt it was appropriate to wait further to see how policy actions implemented to date influence the economy and financial conditions before adjusting the size and timing of such purchases.

The U.K. had its sovereign debt rating outlook downgraded to negative from stable at Standard & Poor's, which cited an increasing debt-to-GDP ratio.  In turn, this spurred a sharp decline in the dollar and Treasuries on concern that the U.S. may also face a negative outlook on its AAA rating.  For the week, the dollar fell 3.6%.

The drop in the dollar gave commodities a boost, with crude prices surging 9.4% and the CRB Index advancing 3.3%

In corporate news, earnings flow was on the slow side, although there were a larger number of retailers announcing their quarterly results.  For the most part, earnings were better than expected, with Target (TGT), Saks (SKS), TJX (TJX), Lowe's (LOW), Home Depot (HD), Sears (SHLD), and Gap (GPS) beating estimates.

Outside of retail, Hewlett-Packard (HPQ) reported in-line earnings, while Deere (DE) beat but provided downside guidance.

There was some action on Capitol Hill, with Treasury Secretary Geithner testifying before the Senate Banking Committee and House Financial Services regarding the state of the financial market.  In addition, the Senate passed a bill increasing restrictions on the credit card industry, which was subsequently signed into law by President Obama.

Meanwhile, General Motors (GM) was back in the news on word it reached an agreement with the UAW, though it still has to reach a deal with bondholders.

In the end, six of the 10 sectors advanced.  Materials (+2.6%) led the way thanks gains in commodities.  The telecom sector (-3.2%) was the main laggard.

The U.S. stock and bond markets are closed Monday in observance of Memorial Day.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	8268.64	8277.32	8.68	0.1	-5.7
Nasdaq	1680.14	1692.01	11.87	0.7	7.3
S&P 500	882.88	887.00	4.12	0.5	-1.8
Russell 2000	475.84	477.62	1.78	0.4	-4.4