Week 34: Strange Days Indeed

August 26, 2011 – Week 34 saw the market’s rally as a new series of bleak economic data helped buoy investors that the Federal Reserve will need to react to an economy stuck in low-gear.  On Tuesday, the Federal Reserve Bank of Richmond, Va., reported that its latest survey of local manufacturers points to a downturn in activity.  One the same day, the national Association of realtors reported that sales of newly built homes in July fell to the lowest level since February – further indication that the housing market is nowhere near rebounding.  With such discouraging news some investors have concluded that a new round of stimulus by the Federal Reserve will be required. 

 It was an odd week.  Normally, such negative economic news would depress stock prices, but considering the selloff in last week’s markets, this week’s reaction may be seen as a market less enthusiastic about the future than feeling that maybe last week’s selling was overdone and that a new round of Federal Reserve funding will get the economy buzzing. 

 As the markets end the week on a positive note, there were a series of non-market related events that occurred.  An earthquake hit the North East U.S. on Tuesday causing little-to-no damage while Hurricane Irene came up the coast causing significant damage in North Carolina; however, much to the surprise of everyone, the most severe damage occured in Vermont as rainfall caused intense flooding.  

 Odd events prevailed this week.  Steve Jobs, the founder and creative genius behind Apple, stepped down due to his ongoing fight with pancreatic cancer.  Job’s legacy, perseverance and sheer tenacity sets him apart as one of the, if not the, greatest entrepreneur of this era.  His ability to turn a cold machine that runs on numbers into a simple, enticing device that was cool is unparalleled.  In a world of nerds, he stood alone.   After announcing his resignation, the company’s stock dropped 5%.  In the short run the company has a stable of fantastic products, but Jobs was a wizard and had moxy.  He was a brilliant risk taker that to be honest, corporate America abhors. 

John Lennon once said (and sang) that these are strange days in deed.  He was talking about the early 1970′s; however, the song (Nobody told me) and its lyrics could easily apply to today.   Only time will tell if this week’s reaction was a vote of confidence in the Fed, or simply wishful thinking.  Most peculiar mama!

 

Week 34 Market Data            
             
    Market Close                    % Change
  12/31/2010 8/19/2011 8/26/2011   Weekly YTD
             
DJIA 11,577.51 10,817.65 11,284.54   4.3% -2.5%
S&P 500 1,257.87 1,123.53 1,176.80   4.7% -6.4%
NASDAQ 2,652.87 2,341.84 2,479.85   5.9% -6.5%
Crude Oil ($ per barrel) 91.4       - -
             
             
Sources: Thomson Reuters; WSJ Market Data Group