YAHOO [BRIEFING.COM]: Weekly
Recap - Week ending 01-May-09
The major indices resumed
their two-month advance this week, albeit modestly, with the bulk of gains
coming on Wednesday -- S&P 500 +1.3%, Dow +1.7%, Nasdaq +1.5%, Russell 2000
+1.7%. It was a choppy, volatile week of trade due to a myriad of catalysts,
beginning with swine flu on Monday and ending with the announcement on Friday
of a delay for the release of the government's bank stress tests.
Investors got into work Monday
morning with equity futures sharply lower on reports of a swine flu outbreak.
On Sunday, Janet Napolitano, U.S. Homeland Security Secretary, declared a
"public health emergency" in the U.S. as about 20 people at the time
were confirmed to have been infected, though none seriously ill. The influenza
remained a headline throughout the week, and by Friday the World Health
Organization announced that the worldwide total for confirmed cases of the
virus had risen to 331, up from 257 the prior day. Mexico has officially
reported seven deaths from the virus and the U.S. has reported one, while no
other countries have reported deaths.
A number of industries have
felt the effects of the outbreak, most notably the pork industry. The travel
industry was also under pressure this week, including airlines and cruise
operators. Hotels were under pressure early in the week, but managed to regain
most of their losses on a number of better-than-expected earnings releases.
There were benefactors, however, particularly the drugmakers.
Switching gears, economic data
based on surveys have been strong over the last couple of weeks, and that trend
continued this week. On Tuesday, Consumer Confidence came in at a
better-than-expected 39.2 for April, well above the 29.7 consensus estimate. On
Thursday it was Chicago PMI's turn, as it came in at a better-than-expected
40.1 for April vs. the 35.0 consensus. Finally on Friday, ISM Manufacturing
came in at a better-than-expected 40.1, above the 38.4 consensus.
That's not to say all economic
data have been positive. Wednesday's Advanced reading for first quarter GDP
came in at a much weaker-than-expected -6.1% (consensus -4.7%), in part because
inventory contraction sliced a whopping 2.8% off the change. Real PCE rose at a
stronger-than-expected 2.2% annual rate, but the business data were terrible --
investment in software and equipment fell at a 33.8% annual rate, while
nonresidential construction spending fell at a 44.2% annual rate. Residential
construction spending continued to plunge, and was down at a 38.0% annual rate,
while government spending fell at a 3.9% annual rate as state and defense
spending contracted.
However, Wednesday proved to
be the market's big day as stocks shrugged off the GDP figure and rallied ahead
of the FOMC's rate decision and policy statement that afternoon. The FOMC kept
its key interest rate in a range of 0.00%-0.25%, as expected, and seemed to
carefully word its policy statement so as not to spook the market. But as
always, the release was followed by volatility, with the major indices spiking
to new highs shortly after, only to see aggressive profit taking in the final
hour of trade. In the end, the S&P gained 2.1%.
Thursday was another volatile
session for the market, as it got off to an impressive start, only to lose
those gains after reports confirmed Chrysler would declare bankruptcy. Talks
between the Treasury Department and lenders aimed at keeping the automaker out
of bankrupcty broke down Wendesday evening, particularly with a group of hedge
funds that owned approximately 30% of the company's debt and voted no to the
government's offer.
Friday proved to be an
extremely slow, but modestly higher session. The big headline of the day came
late morning when a government source said it would announce information on the
bank stress tests late afternoon on Thursday, May 7, later than the original
date of May 4. This follows a slew of headlines on the tests throughout the
week. They began on Tuesday when reports indicated regulators had told Bank
of America (BAC) and Citigroup (C) that they may need
to raise additional capital based on early results of the tests. Reportedly,
Bank of America's capital hole is in the billions, while it wasn't clear how
big a capital deficit Citigroup faces. Speculation continued throughout the
week until today's announcement.
Looking ahead to next week,
earnings results will continue to come out at a fast pace, but note a number of
the bigger companies have already reported. Economic data will be light until
Friday's (5/8) Nonfarm Payrolls report for April. And before that, as mentioned
above, investors will finally see the results of the government's bank stress
tests late afternoon on Thursday (5/7).
|
Index |
Started Week |
Ended Week |
Change |
% Change |
YTD % |
|
DJIA |
8076.29 |
8212.41 |
136.12 |
1.7 |
-6.4 |
|
Nasdaq |
1694.29 |
1719.20 |
24.91 |
1.5 |
9.0 |
|
S&P 500 |
866.23 |
877.52 |
11.29 |
1.3 |
-2.8 |
|
Russell 2000 |
478.74 |
486.98 |
8.24 |
1.7 |
-2.5 |