A Week in the Rearview - week ending 7/18/08
In the headlines
A look at some of the market movers over the past week:
- The US government announced plans to backstop Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) if necessary
- InBev succeeded in its takeover of Anheuser-Busch (NYSE: BUD)
- Investors and deposit holders alike started the week squeamish after the FDIC’s seizure of IndyMac
- The SEC got serious about cracking down on the spread of false rumors, then set its sights on short selling
- Following the US tax scandal with Swiss bank UBS (NYSE: UBS), the IRS closed certain tax loopholes
- Driven by food and energy, the producer price index jumped 1.8% in June
- Despite the government rebate checks retail sales posted a lower than expected gain
- Merrill Lynch (NYSE: MER) reported yet another big loss and announced the sale of its stake in Bloomberg
- The consumer price index also jumped in June, likewise at the hands of food and energy
- Earnings from Wells Fargo (NYSE: WFC) helped spark a major rally in the shares of banking stocks
- Citigroup (NYSE: C) posted another major loss, but beat analysts’ expectations
- Oil prices fell hard during the week and closed under $130 per barrel
- Both Google (Nasdaq: GOOG) and Microsoft (Nasdaq: MSFT) posted disappointing earnings that pulled down the Nasdaq market on Friday
Commentary
I thought last week was wacky, but it doesn’t hold a candle to this week. Worries over Fannie and Freddie along with the flop of IndyMac started the week off on a dour note and then the release of the producer price index jump made things worse on Tuesday. By the end of the day on Tuesday the S&P 500 was down 2% . But that’s when the real excitement started.
Bank earnings, SEC actions, and oil prices all came together to provide serious spark for certain areas of the market. Earnings announcements from financial institutions seemed to convince many investors that the banking industry may not be in as bad of shape as assumed. This, combined with the SEC crack down on shorting practices, had bank shares soaring — Wells Fargo finished the week up 21%, while Bank of America (NYSE: BAC) was up 27%, and Citigroup jumped 20%.
Meanwhile, oil prices finished the week just under $129 per barrel, well below their high of $147 from the prior week. The 12% dive not only helped fuel the market rally, but also stoked talk of a bursting bubble in oil prices.
Sobering the market’s run in the second half of the week were the disappointing earnings reports from Google and Microsoft. Many had expected that tech would be a safe haven from much of the economic malaise and though Intel (Nasdaq: INTC) reported positive earnings earlier in the week, the Microsoft and Google reports served to weaken that assumption.
Looking ahead
It is anyone’s guess at this point how this crazy market will start the next week. The most likely scenario is that investors will be riding the positive note of the strong performance in the financial sector, but it’s also likely that they shrug off those gains and focus on the weak Google and Microsoft earnings and the cries that any rally would just be a bear market rally.
There will be less to examine on the economic front next week — existing and new home sales will likely be the most notable points. The earnings schedule, on the other hand, is packed. We’ll continue to hear more from the financial industry in the form of earnings reports from Bank of America, SunTrust (NYSE: STI), and Wachovia (NYSE: WB), among others. But we’ll also have some heavyweight earnings calls from a host of companies in other industries including Yahoo! (Nasdaq: YHOO), Halliburton (NYSE: HAL), Amazon.com (Nasdaq: AMZN), and McDonalds (NYSE: MCD). Expect that the movement of the market next week will be a combination of the actual earnings results reported and the way in which investors read the news.
In closing, after a strong week, just as after a tough week, it’s important to remember that retirement savings is a long term endeavor and no one week or one month or even one quarter should swing your savings routing in a particular direction. We continue to recommend that the best way to sleep well and build your retirement nest egg is to stick to a consistent savings plan.
July 19th, 2008 at 3:50 pm
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I’ve logged into Smart401k, gone to your Blog and looked (repeatedly) for any comments from other than the authors. I have yet to find any so it’s obvious you’re not providing what will attract people to comment.