Weekly Recap - Week ending 23-Oct-09Following a volatile week of trade, U.S. equity markets closed with modest declines.  Small cap stocks notably underperformed, though, as evidenced by a 2.5% decline in the Russell 2000.  The S&P 500 lost a more modest 0.7%.

The declines were broad-based as nine of the ten sectors that make up the index ended lower, led by Materials (-1.8%).  Only IT finished in positive territory (+1%), benefitting from blowout results from the likes of Apple (AAPL) and Amazon.com (AMZN).

Third quarter earnings results remained in focus, and the list of companies that surprised to the upside this week goes on and on, including names such as Amazon.com, American Express (AXP), Apple, AT&T (T), Capital One (COF), Caterpillar (CAT), McDonald's (MCD), Texas Instruments (TXN), UPS (UPS) and Yahoo! (YHOO).

But as mentioned above, the better-than-expected results did not translate to market gains.  Once again corporate America demonstrated a unique ability to wring out operating costs.  In the process it also revealed just how chubby operating budgets had gotten in the credit-driven bacchanal of recent years.

Basically, it appears as if we're seeing a tired market.  That was never more evident than on Wednesday afternoon when the market plunged in the final 45 minutes of trade, with the move attributed to a late-session downgrade of Wells Fargo (WFC).

The ease with which the market broke, however, suggested to us that investors knew they was operating on borrowed time, trying to climb a wall of worry while staring at $81 a barrel oil, digesting word of government mandated pay cuts for select companies receiving bailout funds and realizing that the 1,100 mark for the S&P 500 proved to be another tough nut to crack earlier that day.

There were also disappointing pieces of economic data this week, particularly Initial Jobless Claims, which after falling the prior two weeks climbed in the week ended Oct. 16 (531,000 vs. 515,000 consensus).  Housing data was mixed, as a jump in Existing Home Sales in September (5.57 million vs. 5.35 million consensus) offset weaker-than-expected Housing Starts and Building Permits.

Looking ahead to next week, third quarter earnings results and economic data, particularly the Advance reading for third quarter GDP on Thursday (10/29), will be in focus.  There is also another potential catalyst as the calendar is full of Treasury auctions -- 5-year TIPS reopening Monday (10/26), $44 billion in 2-year Notes Tuesday (10/27), $41 billion in 5-year Notes Wednesday (10/28) and $31 billion in 7-year Notes Thursday.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	9995.91	9972.18	-23.73	-0.2	13.6
Nasdaq	2156.60	2154.47	-2.13	-0.1	36.6
S&P 500	1087.68	1079.60	-8.08	-0.7	19.5
Russell 2000	616.18	600.86	-15.32	-2.5	20.3