A Week in the Rearview – week ending 12/4/09
In the headlines
A look at some of the market movers over the past week:
- The United Arab Emirates took steps to ease concerns over the debt issues in Dubai
- Spending during the post-holiday Black Friday increased 0.5% from a year ago
- India’s third quarter growth outpaced expectations
- General Motors ousted its CEO, Fritz Henderson
- Economic data from the manufacturing sector showed tepid growth
- Bank of America found itself facing pressure from CEO candidates to break up the bank
- Bank of America announced that it will be repaying its TARP loans
- GE and Comcast finally made their NBC tie-up official, though regulatory review may postpone the end of the process
- The government has started to look at unspent TARP money as a way to stimulate jobs
- The Federal Reserve’s Beige Book report showed modest economic growth in most of the Fed’s regions
- Fed Chairman Ben Bernanke defended his work at the Fed as Congress mulls reappointment
- CME Group says that it hopes to have a clearinghouse for credit default swaps up and running by December 15th
- Fewer jobs were cut in November and the unemployment rate fell from 10.2% to 10.0%
Commentary
The S&P 500 index climbed 1.7% during the week thanks to four out of five up days. A 2% gain during the first two trading days of the week, along with a positive reaction to the end-of-week unemployment data was enough to counteract a 0.8% drop on Thursday. The index is now up 22% year-to-date and 64% since the March bottom.
The situation in Dubai fell off of the market’s radar almost as quickly as it popped on. In the U.S., investors seemed to get comfortable with the relatively small exposure that U.S. banks have to Dubai’s troubles.
By mid-week, investors were focused more on the state of the U.S. economy. Specifically, the week’s unemployment releases and the Federal Reserve’s Beige Book report.
In broad terms, the data from the Fed’s Beige Book seemed to continue to show modest improvement in the U.S. economy. Eight of the twelve Fed regions reported improvements while conditions remained stable in the remaining four.
Drilling down to industry-level data, many aspects of the non-financial economy appear to be on the mend. Manufacturing, consumer spending, and tourism were noted as areas showing improvement. Real estate — particularly commercial real estate — and financial services, on the other hand, appear to still be struggling.
Capping the week, and providing some of the more hopeful economic news in a while, was the report that nonfarm payrolls were cut by a mere 11,000 in November. This was far better than the 125,000 job losses that were expected, and it brought the unemployment rate down to 10.0% from 10.2%.
Adding to the positive employment picture was a reported uptick in the average workweek — from 33.0 hours to 33.2 — and a slight increase in hourly earnings.
Looking ahead
Earnings reports will be a sidebar to the market’s news reports next week as the pace of third quarter reports has ground down to a crawl and investors have begun to look ahead to the fourth quarter. As we approach the end of December we may begin to see company’s update guidance for the quarter, which could have an impact on markets ahead of the beginning of reporting season.
The economic calendar will slow back down next week after the month-end reports we saw this past week. After the positive employment news on Friday, initial unemployment claims will likely be a focus as investors look for confirmation that the employment picture is, in fact, brightening.
Investors are likely to put more focus on retail sales and consumer confidence reports that will come at the end of the week. With the holiday season approaching, investors are going to be very interested in the potential for shoppers to break out of their slumber and get back to spending. Retail sales excluding auto purchases are expected to show a 0.4% increase in November after a 0.2% hop in October, while the University of Michigan’s preliminary report on December consumer confidence is expected to climb to 68.5 from its 67.4 November reading.
