Weekly Recap - Week ending 02-Oct-09Despite a strong start on Monday, U.S. equity markets closed lower for the second straight week as a raft of poor data suggested the economic recovery may be losing momentum.  The S&P 500 declined 1.8% and probed key resistance around 1,020 on Friday, near its 200-day moving average.

Nine of the ten sectors that make up the index declined this week, led by Industrials (-3.5%).  Consumer Staples played defense, rising a modest 0.7%.

Last week the market saw the return of IPOs (there were three more this Thursday and Friday), and this week merger and acquisition activity resumed.  Specifically, Abbott Labs' (ABT) $6.6 billion acquisition of the Salvoy Group's pharmaceutical business and Xerox's (XRX) $6.4 billion cash and stock acquisition of Affiliated Computer Services (ACS) helped the S&P climb 1.8% on Monday.

But that just shows how sharp the decline was over the remainder of the week.  Most of the damage was done on Thursday, when back-to-back days of poor employment data painted a bearish picture for Friday's highly-anticipated Nonfarm Payrolls figure.  Specifically, the ADP Employment change showed a larger-than-expected decline of -254,000 on Wednesday vs. the consensus of -200,000 and Initial Jobless Claims rose by a larger-than-expected 551,000 on Thursday vs. the consensus of 535,000.

Investor fears were realized this morning, when Nonfarm Payrolls showed a larger-than-expected decline of -263,000 vs. the consensus of -175,000.  Surprisingly, it looks like the market had already priced in a poor number on Thursday, as the S&P followed up its 2.6% plunge with a much more modest 0.5% decline.

But it wasn't just employment data that was poor this week, as investors were more attentive to weaker-than-expected data, when in past weeks it was quick to dismiss any disappointments in favor of a belief that future reports would only show improvement.

Specifically, the market saw quick moves downward following disappointing Consumer Confidence (53.1 vs. 57.0 consensus), Chicago PMI (46.1 vs. 52.0 consensus) and ISM Manufacturing (63.5 vs. 66.0 consensus) figures throughout the week.

There will be little chance of changing that economic perspective next week, as the calendar is very thin.  But we will see another round of key Treasury auctions, including $39 billion in 3-year Notes, $7 billion in 10-year TIPS reopening, $20 billion in 10-year Notes reopening and $12 billion in 30-year Bonds reopening.  They all precede this weekend's G-7 meeting in Istanbul, which already had a positive effect on the dollar , as euro region finance ministers and central bankers will reportedly discuss the euro's strength and signal that further dollar weakness is unwelcome.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	9665.19	9487.67	-177.52	-1.8	8.1
Nasdaq	2090.92	2048.11	-42.81	-2.0	29.9
S&P 500	1044.38	1025.21	-19.17	-1.8	13.5
Russell 2000	598.94	580.20	-18.74	-3.1	16.2