After spending most of the day in the red, the markets closed up today in a last minute rally. The reason? Rumors that Italy is having talks with China about helping with its debt. Mind you, Greece has been the looming concern for investors as it edges closer and closer to default, but the markets' turnaround today shows its hair-trigger concern about the European situation. Veering from pessimism about a Greek default to optimism that such an event might not create a domino effect—because Italy might be huddling with China—just shows the extreme nervousness of investors or their appetite for good news.
Further evidence of investors' concern is the 10-year Treasury note, whose yield dropped to a new low of 1.9% last week, after being 2.3% just a couple weeks ago. Imagine tying your money up for 10 years at 1.9% a year!
Nor does the domestic economy offer much in the way of comfort. Last week the ISM non-manufacturing report showed a glimmer of improvement, coming in slightly above the prior month and consensus; and our trade gap narrowed by about $8 billion. But these were offset by increased jobless claims (414K) and rising wholesale inventories (from 0.6% to 0.8%).
The President's jobs proposal last week seemed like a positive step, but as usual, the devil is in the details. An even bigger devil is whether Congress can get anything passed. We'll give it an unenthusiastic "maybe."
This week we get a deluge of economic reports that might or might not relieve investor concerns. All the inflation-related reports are up this week, including, PPI, CPI, and export/import prices. And retail sales, industrial production, the Philly Fed report, and the Michigan Sentiment Index will give us a lot more to chew on. Hopefully, they will taste good. The Treasury budget, which comes out Tuesday, will likely make our taste buds shrivel.
Market Stats.The market was down again last week, with the S&P 500 Index falling 1.7%. This makes six down weeks out of the past seven. Since late July, the S&P 500 has been "chattering" between a low of 1120 and a high of 1220, hitting the upper and lower ends of the range about six times each. Even with the end-of-day rally today, we're now closer to the bottom of that range.
Style-cap really didn't matter last week, with the best performer Mid-cap Growth (down -1.23%) barely better than the worst performer, Large-cap Value (down -1.69%).
Here are the market stats.
Surprisingly, the sectors were led by Technology, down less than -1%, probably due to acquisition activity and the fact that there are some very attractive valuations in that sector. As you might expect, the absolute worst sectors were Finance, Capital Goods, and Consumer Durables, each down well over 3%.