Wednesday, September 30, 2009

The Market in a Minute

Presented By Alan Favre, CFP
Authoreed By Patrick Adams, CFA
September 28, 2009

The S&P 500 was down over 2% last week. The question is, is this the start of something bigger or is the market going to follow the pattern it has for the past several months? A small correction like we just experienced, and then a push higher? Generally around quarter end markets perform well. So I would not read much into the strength that may come today thru Wednesday. There is a lot of news coming later this week that could move the markets.
Last week, both the Housing and Durable Goods reports were worse than expected. This is why in our opinion the market fell. If the economy is truly growing, these are areas that we should be seeing oversized growth at this point in the recovery. We are concerned that we are going to see a significant slow down in GDP growth, either in the fourth quarter or in the first quarter of 2010, relative to the third quarter. The fact that Durable Goods fell is disturbing. This is an area that should be strong. Housing may be headed for another dip, as there are 1.4 million more homes that are moving into foreclosure.

The market actually started to fall last week, on the realization the Fed did not say anything positive after they convened their meeting. The fact the Fed pushed out their purchases of Mortgages and Agency debt until the end of the first quarter is not a positive. We believe it is a sign the Fed is running out of ways to stimulate the economy.

The ISM Index, which measures manufacturing activity, is reported on Thursday. We expect a strong report, but then the coming months will likely be lower. The most important economic report this week will be the Employment report on Friday. The consensus is for a loss of 180,000 jobs in August, and the Unemployment Rate to rise to 9.8%.

The support levels for the S&P 500 include a minor support at 1035 and then 995 if the market does roll over.

Index Performance / Index-Price-Last Week-YTD

Dow Jones 30 9707 -0.8% 10.6%
S&P 500 1051 -1.4% 16.3%
NASDAQ 2108 -0.9% 33.6%
Russell 2000 602 -2.2% 20.5%
Russell 2000 Growth 1993 -1.7% 27.6%
Russell 2000 Value 3049 -2.7% 14.0%
Russell 1000 Growth 462 -1.1% 24.4%
Russell 1000 Value 544 -2.0% 11.6%
Source: Baseline, Returns are appreciation only.

S&P Sector Performance / Index-Price-Last Week-YTD

Information Technology 334 -0.4% 44.1%
Consumer Disc. 214 -1.8% 26.3%
Consumer Staples 261 0.5% 5.8%
Health Care 331 -1.2% 7.1%
Financials 199 -2.6% 17.7%
Industrials 233 -2.0% 12.5%
Energy 407 -2.8% 5.4%
Telecommunications 108 2.3% -3.3%
Utilities 149 -0.8% 0.8%
Materials 186 -3.7% 35.3%
Source: Baseline, Returns are appreciation only.

Interest Rates

Fed Fund 0.25 5-Year 2.34
3-Month 0.09 10-Year 3.29
6-Month 0.18 30-Year 4.04
2-Year 0.98

Economic Events This Week / Date-Event-Forecast-Previous

29-Sep Consumer Confidence 57.0 54.1
30-Sep GDP-Final -1.2% -1.0%
30-Sep Chicago PMI 52.0 50.0
1-Oct Personal Income 0.1% 0.0%
1-Oct Personal Spending 1.1% 0.2%
1-Oct Initial Claims 535K 530K
1-Oct Construction Spending -0.2% -0.2%
1-Oct ISM Index 54.0 52.9
2-Oct Nonfarm Payrolls -180K -216K
2-Oct Unemployment Rate 9.8% 9.7%
2-Oct Factory Orders 0.5% 1.3%

Economic Events Last Week / Date-Event

21-Sep The Leading Indicators for Aug. came in at 0.6% vs. forecasts of 0.7%
23-Sep The FOMC decided to leave the short-term interest rates unchanged at 0.25%
24-Sep Initial Claims for the week of 9/19 came in at 530K, slightly better than estimates of 55K
24-Sep Existing home sales came in at 5.1M homes vs. expectations of 5.35M
25-Sep Durable Orders for Aug. dropped -2.4% vs. forecasts of 0.3%
25-Sep The Michigan Sentiment for Sept. was 73.5 vs. consensus estimates of 70.5
25-Sep New Home Sales for Aug came in at 429K, slightly lower the forecasts of 440K

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