Eddie Patel, Inc.

Market Summary

After a few head fakes in both directions over the course of the week, the equity markets settled down a bit--literally--after four straight weeks of gains. The S&P 500 ended the week still clinging to the 1000 mark, but the Nasdaq reversed last week's push above 2000. The Global Dow remained in positive territory (barely), aided by reports of higher than expected growth in Germany and France. Though corporate spreads widened slightly, the bond markets were generally heartened by benign inflation data and strong demand at auctions of $75 billion of Treasuries.

Last Week's Headlines

• The cost of food, energy, and shelter fell in July, but prices for practically everything else rose enough to keep inflation flat for the month, putting the annual inflation rate at 3.4%. That's 2.1% lower than this time last year, largely because of lower energy costs, and the steepest yearly decline since 1950.
• The late-July launch of the "cash for clunkers" program couldn't prevent July retail sales from falling 0.1% (without it, the decline would have been 0.6%). That's 8.3% lower than last July, and a disappointment given June's 0.8% increase.
• The Fed plans to wind down its purchases of Treasury bonds gradually before completing them by the end of October. However, it will continue to buy mortgage-backed and agency debt to support the housing market. Saying the economy is beginning to level off, it nevertheless feels conditions warrant leaving interest rates at "exceptionally low" levels.
• The U.S. trade deficit widened by $1 billion in June to $27 billion, though that's still less than half the level of this time last year. Exports were up, but imports rose even more.
• Business productivity rose by an unexpectedly high annualized rate of 6.4% in the second quarter, assisted by labor costs that fell at an annual rate of 5.8%. The productivity gain was the highest in almost six years. Industrial production also rose by 0.5% in July, the first increase in nine months, helped by GM and Chrysler emerging from bankruptcy and revving up manufacturing.
• July foreclosures rose by 7%, according to RealtyTrac; that's up 32% from last year, and is the third record high in five months. Filings in California, Florida, Arizona, and Nevada accounted for almost 57% of the total.
• Consumer sentiment as measured by the Reuters/University of Michigan index fell to 63.2 in July, the second decline in a row and its lowest level since March.

Eye on the Week Ahead

With economic data light, investors should have little to react to other than earnings reports during the winding down of earnings season. However, options expirations at week's end could bring some increased volatility.

Key data releases: Housing starts, wholesale prices (8/18); oil inventories (8/19); leading indicators (8/20); existing home sales (8/21).

Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.