A Week in the Rearview - week ending 6/13/08
In the headlines
A look at some of the market movers over the past week:
- Fed chief Ben Bernanke made it clear that he has his eye on inflation
- Lehman Brothers (NYSE: LEH) projected a $2.8 billion quarterly loss and said it will raise $6 billion
- Apple (Nasdaq: AAPL) announced its much anticipated new 3G iPhone
- Staples (Nasdaq: SPLS) finally found a price to close the Corporate Express (NYSE: CXP) acquisition
- Belgian beverage giant InBev made a $46 billion bid for Budweiser (NYSE: BUD)
- Lender Thornburg Mortgage (NYSE: TMA) announced a big first quarter loss
- It appears the discussions with Microsoft (Nasdaq: MSFT) and Yahoo! (Nasdaq: YHOO) are over for good, and Yahoo! has signed an advertising agreement with Google (Nasdaq: GOOG)
- Economists surveyed by The Wall Street Journal showed support for The Fed’s policies
- ExxonMobil (NYSE: XOM) announced its intention to get out of the retail gas business
- May retail sales came in much higher than anticipated
- Jobless claims and business inventories rose more than expected
- US Airways (NYSE: LCC) made the most recent of the airline cutbacks
- Foreclosure filings continue to soar
- Oil prices sagged a bit on OPEC comments about the high price and recent volatility
- Food and oil continue to propel price inflation
Commentary
Better than expected retail sales numbers and a positive outlook on rising inflation were enough to keep the market flat for the week after carry-over concerns from last week provided an early week hit.
The week started off on a sour note after the plunge last Friday due to the unemployment rate. Continued concerns over financial services companies, particularly the much embattled Lehman Brothers, also added to the rocky first half of the week.
As expected, though, economic indicators took center stage for most of the week. Because of the importance of consumer spending for the economy and the current pressures on consumers, retail sales were a major focus for the week. Despite the forecast of a 0.5% increase in overall consumer spending and a 0.7% increase in spending excluding auto sales, readings came in markedly higher at 1% and 1.2%, respectively. Though this was well received by the market, the reaction was muted to some extent by the assumption that the jump was at least in part due to the government stimulus checks.
Meanwhile, a somewhat higher than expected inflation reading on Friday surprisingly played in the markets favor. Though the rise in core CPI — which excludes food and energy — came in at the anticipated 0.2%, the broader measure of CPI was up 0.6% against the 0.5% expectation. The sharp rise for CPI continues to stem from skyrocketing food and fuel prices. Investors took the news in stride, though, and seemed to be placated by a slight drop in oil prices on Friday.
Looking ahead
We will have much of the same to look forward to going into next week. Weekly economic indicators like crude inventories and initial jobless claims are sure to grab some eyeballs. Those looking for direction on the housing market will likely be focused on building permits and housing starts, both of which are expected to be down from the prior readings. Center stage, though, will likely be given to the producer price index, which will give investors another view on inflation, and the reading on economic leading indicators.
Earnings will likely play a bigger part in the market next week as we’ll have a handful of notable earnings reports. On Monday Lehman Brothers will finally turn weeks of speculation into reality when it reports earnings, and tech giant Adobe (Nasdaq: ADBE) will also announce. We’ll have more reads from the financial services industry later in the week as Goldman Sachs (NYSE: GS) reports on Tuesday and Morgan Stanley (NYSE: MS) follows on Wednesday. We’ll likewise get a good consumer data point from Best Buy (NYSE: BBY) when it reports on Tuesday.
But of course while these events will help paint the picture for the market next week, we are still not recommending that retirement investors make any changes to their long-term savings strategy.
