Weekly Recap - Week ending 14-Aug-09The stock market snapped a four-week winning streak, dropping 0.6%, following a broad-based decline as investors focused on several worse-than-expected economic items.  Corporate news was on the slow side, though there were several notable earnings reports from major retailers.  The FOMC policy announcement also grabbed headlines, but was largely as expected.

All ten of the sectors fell, with notable weakness in consumer discretionary (-3.0%) and industrials (-2.5%).  Trading volume was on the light side, averaging roughly 1 bln shares per day on the NYSE, versus the one-year average of around 1.5 bln.

Disappointing economic data caused much of the selling interest this week.  In short, wholesale inventories, business inventories, retail sales and consumer sentiment were all worse-than-expected. The latter two items seemed to disappoint the market the most.

July retail sales slipped 0.1% as the consumer was hesitant to spend due to weak wage growth, depressed asset prices and concerns about job security.  This was worse than the consensus estimate that called for an increase of 0.8%.  Excluding autos, sales fell 0.6%, also worse than the consensus of +0.1%.  While there might be some makeup due to tax-free holidays that were pushed into August, the July data is still a disappointment.

The University of Michigan Consumer Sentiment Index for August fell to 63.2 from 66.0 in July.  This was well short of the 69.0 consensus estimate.

Some economic data did not disappoint, though it failed to lift the market. July CPI met expectations, while Q2 productivity and July industrial production were stronger-than-expected.

On a related note,  there were some signs of improvements in the global economy.  Germany, France and Hong Kong all posted unexpected GDP expansion in the second quarter.

Meanwhile, the Federal Reserve left the fed funds rate unchanged at a range of 0.00%-0.25%, as expected. The Fed's statement also said that the FOMC expects inflation to remain subdued for some time and economic activity is likely to remain weak for some time.  As a result the Fed said it will keep interest rates at exceptionally low levels for an extended period.

In corporate news, retailers were in focus with earnings reports from Wal-Mart (WMT), JCPenney (JCP), Nordstrom (JWN), Kohl's (KSS) Macy's (M).  All five retailers reported slightly-better to in-line EPS, though guidance was mixed. Wal-Mart and Macy's  issued in-line guidance, Kohl's and JCPenney issued downside guidance, while Nordstrom issued upside guidance.

McDonald's (MCD) continued its strong showing, with same store-sales rising 4.3%.

In the end, the market's decline of 0.6% was small, especially considering the rapid gains since the March low.  The S&P 500 is up ~50%  from that low, and is up 11.2% year-to-date.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	9370.07	9321.40	-48.67	-0.5	6.2
Nasdaq	2000.25	1985.52	-14.73	-0.7	25.9
S&P 500	1010.48	1004.10	-6.38	-0.6	11.2
Russell 2000	572.40	563.89	-8.51	-1.5	12.9