Equities round up for last week
Equities fell notably this past week but it would have been much worse without a last day rally. A key background point is that it is August. Many are on vacation—especially in Europe—and markets are thin. And volatility seems to be back with the thin trading. The week started with worries that M&A activity was ignoring macroeconomic undercurrents. That is, bidding was overpriced for the current economy. And that view was abetted by a plunge in existing home sales, released on Tuesday, bumping stocks down sharply again. Adding to equities’ woes for the day, Standard & Poor downgraded Ireland’s sovereign debt rating.
Equities made a sizeable comeback on Wednesday and it was not due to economic news. Durables orders were weaker than expected after discounting the volatile transportation component. And new home sales plunged in July as released mid-week, following the lead of existing home sales. But investors saw equities as oversold as even homebuilder stocks rebounded. Sentiment outweighed economic news on Thursday as initial jobless claims offered some positive karma, dropping significantly. But markets chose to worry more about overall economic conditions and simply chose to be in a down mood.
Stocks rebounded significantly on Friday after a downward revision to second quarter GDP was not as large as feared and Fed Chairman Ben Bernanke emphasized in a speech that the Fed has a number of options to boost the economy if needed. Bernanke stated that the Fed “is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”
Net for the week most indexes were down sizably although small caps actually netted a modest gain.
Equities were mostly down this past week. The Dow was down 0.6 percent; the S&P 500, down 0.7 percent; and the Nasdaq, down 1.2 percent. The Russell 2000 rose 1.0 percent.
For the year-to-date, major indexes are down as follows: the Dow, down 2.7 percent; the S&P 500, down 4.5 percent; the Nasdaq, down 5.1 percent; and the Russell 2000, down 1.4 percent.