A Week in the Rearview – week ending 12/24/09
In the headlines
A look at some of the market movers over the past week:
- The much-debated healthcare bill passed a crucial first milestone in the Senate
- Citadel Broadcasting filed for protection under Chapter 11 bankruptcy
- Moody’s downgraded Greece‘s sovereign debt rating to A2
- The U.S. housing market continues to experience severe headwinds
- Microsoft’s CFO, Chris Liddell, was named General Motors‘ new CFO
- Ford expects to close its sale of Volvo to a Chinese auto manufacturer in mid-2010
- The FDIC saw strong interest for the loans from failed banks
- Existing home sales jumped to the highest level in three years, while third quarter GDP growth was pared back again
- New home sales didn’t fare nearly as well
- Research in Motion dipped after its Blackberry smartphones experienced two outages in a week
Commentary
Through Wednesday — the last full trading day of the week — the S&P 500 index posted a 1.6% gain. Three straight trading days ending with gains, including a 1.1% jump on Monday, led to the index’s uptick. The index is now up 24% year-to-date and 66% from its March low.
As expected, the newswires were relatively quiet this week as investors prepared for the Christmas holiday. However, economic news was less-than-cheery heading into the break. The final estimate for third quarter GDP saw the reading cut from 2.8% to 2.2%. While many noted that this is still a marked improvement from the 0.7% growth rate in the second quarter of this year, the reduction was the second from an initial reading of 3.5%.
Both personal income and spending came in below market expectations, though the 0.4% increase in personal income was above the prior month’s growth rate of 0.3%. The University of Michigan’s consumer sentiment index also revealed a revision to its December reading, dropping it below both the level that the market was anticipating and the prior month’s level.
On the housing front it was a stronger-than-expected jump in existing home sales that grabbed the majority of the headlines. The gains were in large part attributed to the government’s extension and expansion of the first-time homebuyer tax credit. Weighing on the positive sentiment from the existing home sales report was the sister report for new home sales, which showed sales dropping at an 11% rate. News of continued mortgage delinquencies and falling home prices also suggested that the housing market is far from cured.
Looking ahead
It will likely be another quiet week on the market next week as investors return from the extended Christmas weekend and prepare for the New Year’s long weekend.
Notable economic releases for next week include the Case-Shiller home price index, the Conference Board’s consumer confidence reading, and the Chicago Purchasing Manager’s Index. The economic calendar, however, will ramp back up significantly in the following week as month-end numbers start to hit the wires.
Earnings news next week will be practically non-existent, and we should expect the same for the following week. But the lull won’t last long as Alcoa is scheduled to report its fourth quarter and year end earnings on January 11th, officially kicking off the fourth quarter earnings season.
As I noted last week, we will likely see a very slow couple of weeks as investors head out for the holiday season and 2009 wraps up. The market won’t slumber long, though, as the beginning of the year will bring scrutiny of December holiday sales, year end earnings reports, and plenty of speculation about the year ahead.
