Market Update for Monday, August 3rd, 2009

The equity markets ended a remarkable July on a high note. Even though the sharp increases of the previous two weeks leveled off a bit, the direction was still positive, helped along by some key economic and housing statistics. The Dow saw its best month since October 2002, and the S&P 500 racked up its fifth straight month of gains. The Nasdaq continued to add to its year-to-date lead over other markets.

Major Index Data as of 7/31/2009

Market/Index

2008 Close

Prior Week

As of 7/31/09

Week Change

YTD Change

DJIA

8776.39

9093.24

9171.61

0.86%

4.50%

NASDAQ

1577.03

1965.96

1978.50

0.64%

25.46%

S&P 500

903.25

979.26

987.48

0.84%

9.33%

Russell 2000

499.45

548.46

556.71

1.50%

11.46%

Global Dow

1526.21

1747.64

1773.69

1.49%

16.22%

Fed. Funds

.25%

.25%

.25%

0 bps

0 bps

10-year Treasuries

2.24%

3.67%

3.50%

-17 bps

+126 bps

Last Week's Headlines

  • The nation's plunging gross domestic product (GDP), slowed its descent in the second quarter
    • The initial estimate fell at an annualized rate of 1%.
    • Though that's still a decline, it's a dramatic improvement from prior months--especially considering that estimates for Q1 GDP were revised to -6.4% instead of the earlier -5.5%.
    • Slower declines in exports and business spending accounted for much of the improvement.
    • Core PCE (personal consumption expenditures not counting food and energy, which the Federal Reserve monitors as an inflation gauge) rose 2%.
  • 11% jump in June sales of new homes
    • It was the biggest monthly increase in eight years,
    • It was still 21.3% below last year's figure.
    • At the current sales rate, it would take 8.8 months to sell all the new homes currently on the market. (That's better than last June, when the new-home inventory would have taken 10.7 months to sell out and sales fell 0.6% from the month before.)
  • May home prices in 20 major cities were up by 0.5% from April
    • This was the first monthly gain in the Case-Shiller index since July 2006.
    • The index was still down 17.1% from May 2008, though that decline is the best year-over-year comparison in the last nine months.
  • June orders for durable goods fell 2.5%
    • Orders were hampered by auto factory shutdowns and lower defense spending
    • This was the first decline in three months for the notoriously volatile figure.
    • However, not counting autos and airplanes, the number actually rose by 1.1% from May.
  • Consumer confidence was down from the previous month; the Conference Board's measure dropped from 49.3 to 46.6
  • New York Attorney General Andrew Cuomo's Office reported $33 billion in bonuses were paid last year to financial companies that received TARP funds

Eye on the Week Ahead

Unemployment figures for July will be watched to see whether they follow through on last month's disappointing numbers or improve on them.

Investors will keep an eye on the S&P 500 to see whether it can capture and hang on to the nice round 1,000 level, which it last saw on Oct. 6.

Key data releases: ISM manufacturing, construction spending, auto sales (8/3); personal income/spending, pending home sales (8/4); factory orders, oil inventories, ISM services (8/5); unemployment, consumer credit (8/7).

Source of Data

Data source: This blog post 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.

Eddie Patel