Weekly Recap - Week ending 25-Sep-09The stock market suffered broad-based declines, settling with a 2.2% decline, with weak housing and durable goods orders data driving much of the selling interest.

All ten sectors fell, though some of the areas that have seen the biggest rebound this year fell the most, with materials falling 4.8%, financials shedding 3.6% and industrials declining 3.1%. Within the S&P 500, 84% of stocks posted a loss.

With regard to economic data, both new and existing August home sales did not meet expectations. New home sales reported a modest increase of 3,000 homes to 429,000 in August, which was short of the consensus that expected sales to increase to 440,000 homes.

Meanwhile, existing home sales climbed 2.7% to 5.10 million homes in August., snapping four consecutive months of increasing sales. The reading was well short of the 5.35 million consensus. The existing home sales report reflects the continued challenges facing the housing market, such as excess inventory, lack of credit and increasing unemployment. Meanwhile, the first time homebuyer tax break is expected to end in November and we expect home sales to drop sharply over the next few months.

Also weighing on sentiment this week was news that August durable goods orders fell 2.4%, compared to the expected increase of 0.4%. The drop was largely due to a decrease in aircraft orders, and weaker-than-expected growth of 0.4% in the motor vehicles sector. Nondefense capital goods excluding aircraft fell 0.4%, which was the second consecutive month-over-month decline. The durable goods orders data does not bode well for a strong recovery.

On a more mixed note, weekly initial jobless claims fell 21,000 to 530,000, topping the consensus of 550,000. While the beat is welcome, claims remain elevated. The slow decline tells us that many sectors are still feeling the negative effects of the recession and have not been privy to the recovery effort. We need to see a much faster decline if we are to believe the recovery will be sustainable once the government stimulus package peters out in 2010.

Separately, the latest FOMC policy statement once again did not provide much surprise. The FOMC indicated that economic activity has picked up since the severe downturn, but believes that economic conditions are likely to warrant exceptionally low levels of the fed funds rate (left unchanged at 0.00% to 0.25%, as expected) for an extended period. The FOMC went on to say that it will purchase $1.25 trillion of agency mortgage backed securities and $200 billion agency debt, but it will gradually slow the pace of purchases to promote a smooth transition in markets.

In corporate news, shares of BlackBerry maker Research In Motion (RIMM) tumbled 17.6% for the week after its Q2 earnings report.  Though the company reported an in-line quarter and Q3 EPS outlook, it disappointed traders after it forecast Q3 revenues of $3.60 billion to $3.85 billion, shy of the $3.92 billion consensus.

In positive earnings news, General Mills (GIS) reported fiscal first quarter earnings that easily topped consensus estimates and raised its full year earnings outlook as the company continues to see what it calls "strong consumer demand" for its products. General Mills reported fiscal first quarter earnings of $1.28 per share, excluding mark-to-market valuations of commodity positions. The results were $0.25 better than the First Call consensus of $1.03. Shares of GIS rose 4.9% for the week

In M&A news, Dell (DELL) announced Monday that it will acquire IT services company Perot Systems (PER) in a deal valued at approximately $3.9 billion, a 69% premium to PER's closing price before the deal was announced. Shares of DELL fell 8.1%.

In commodity trading, it was an active week, with oil dropping more than 8%, while the CRB index shed around 3.5%. Meanwhile, the dollar saw some large swings, but settled the week nearly unchanged.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	9820.20	9665.19	-155.01	-1.6	10.1
Nasdaq	2132.86	2090.92	-41.94	-2.0	32.6
S&P 500	1068.30	1044.38	-23.92	-2.2	15.6
Russell 2000	617.88	598.94	-18.94	-3.1	19.9