Weekly Wrap: Can the Fed Save Investors?
"Maybe Uncle Ben will come to the rescue now..." -- that's what everyone was chattering about after one of the worst weeks for US stocks since September 2008. Timing is everything - it just so happens that the Federal Open Market Committee will convene on Tuesday. Will Uncle Ben Bernanke signal that QE3 is on the way? Is there some other option to stimulate the moribund economy? Remember that stocks cratered 16 percent last year, before the Fed announced that it would step in and take action.
In case you were under a rock, in a week where DC lawmakers finally reached a deal on the debt ceiling, investors finally realized that two bigger problems exist for global markets: (1) growth has slowed down and doesn't seem poised to pick up any time soon and (2) the European debt crisis is far from solved, as the malignancy appears to be spreading to Italy and Spain.
Notice that I didn't add the Standard & Poor's downgrade of US debt from AAA to AA+ on this list of big problems. The reason is that investors told us last week just how much they still believe in the good ol' US of A. When chaos and panic were spreading across global markets, investors were piling into US government bonds, clamoring to lend the government money for ten years for an interest rate of less than 2.5 percent! S&P might have downgraded US debt, but investors still rate Uncle Sam with Triple-A. Once again, the ratings agency that missed the entire subprime crisis is deemed irrelevant by the market. For it's part, the White House accused S&P of using flawed calculations-not even Tim Geithner (he who could not manage to complete his tax returns), could let a $2 trillion error go unnoticed.
Over the last two weeks, stocks have plunged by over 10 percent-correction anyone?
- DJIA: 11,444, down 5.7% on week, down 1.1% YTD (Largest weekly percentage drop since the week ended March 6, 2009 when it fell 6.17%)
- S&P 500: 1199, down 7.1% on week, down 4.6% YTD (Largest weekly percentage drop since the week ended November 21, 2008 when it fell 8.39%)
- NASDAQ: 2532, down 8.1% on week, down 4.5 % YTD (Largest weekly percentage drop since the week ended November 21, 2008 when it fell 8.74%)
- September Crude Oil:$86.88, down 9.2% on week (down 13% in two weeks)
- December Gold: $1653.50, up 1.2% on the week (up 11.2% over the five weeks)
Total bank failures for 2011 = 63 (2 new bank failures over weekend)
FACTOIDS OF THE WEEK: Employment Edition
With all of the noise around the stock market and debt deal, you might have missed the July jobs report, which was better, though still lousy.
- July Jobs: +117,000 (June revised +46,000 from +18,000, May revised to +53,000 from +25,000)
- July Private Sector Jobs: +154,000 (June revised higher to +80,000 from +57,000)
- July Unemployment Rate: 9.1 percent (from 9.2 percent in June...partly due to 193,000 people dropping out of the labor force)
- Under-Employment Rate (marginally-attached, part-time): 16.1 percent (from 16.2 percent in June)
- Part-timers (hours cut for economic reasons): 8.4 million (from 8.6 million)
- Total Number of Unemployed: 13.9 million (from 14.1 million)
- Long-term unemployed (jobless for 27 weeks and over): 6.2 million, from 6.3 million in June, which represents 44.4 percent of the total unemployed
- Average Hourly Earnings: up $0.10 to $23.1 (earnings are up 2.3 percent over past year)
- Government: -37K (ninth consecutive month of job losses. Over 500,000 total government jobs lost since peak in September 2008)
- Health Care: +31,000
- Retail: +26,000
- Manufacturing: +24,000
- Construction: +8,000
IN THE WEEK AHEAD: The Federal Reserve will conduct its policy meeting Tuesday-investors will parse the statement for any hint at future Fed action to boost the economy. Later in the week, retail sales are likely to rise, though sentiment is expected to drop.
Mon 8/8:
Tues 8/9
8:30 Productivity and Costs
2:15 FOMC Announcement
Weds 8/10:
10:00 Wholesale Trade
Thurs 8/11:
8:30 Weekly Claims
8:30 International Trade
Fri 8/12:
8:30 Retail Sales
9:55 Consumer Sentiment
10:00 Business Inventories
