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Courtesy of David Brown, Chief Market Strategist, Sabrient
After last week’s stellar performance, the markets dropped into negative territory today, as investors realized that Greece might actually be allowed to default.
Last week saw the markets’ best performance since June and only its second positive week in the past eight. The gains seem to have been based on the mere hope that the potential default of the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) could be resolved. Brazil, Russia, India, and China—a group known as the BRICs—were said to be contemplating a possible rescue effort, and the EU finance ministers agreed that something needed to be done. The problem is, of course, that nothing has actually been done. Many now believe that Greece most likely will default, and the looming issue now is how to prevent the domino effect to the other PIIGS and to the entire European zone.
President Obama’s speech this morning was received positively by fellow Democrats, but there seems to be significant resistance from the Boehner camp. No surprise there. The Buffet tax concept seems sensible, I think, to those who are not politicians, but there is little faith that this Congress can accomplish something important. The concept, named for billionaire investor Warren Buffett, would require Americans earning more than $1 million a year to pay at least the same tax rate as middle-class households, no matter how they structure their wealth.
Our economic indicators continue to reflect the worrisome nature of our economy. There were seriously negative reports on the manufacturing sector from the Philly Fed and the Empire State Manufacturing Index. Retails sales were flat, and initial jobless claims rose yet again. The only positive numbers came from industrial production and the Michigan Consumer Sentiment Report, and they were just barely positive.
This week we will learn a lot about the housing market with housing starts and new permits on Tuesday and existing home sales on Wednesday. The initial jobless claims will be watched closely on Thursday, and then on Friday, we’ll see the leading indicators.
Market stats. Leading the market’s performance last week by a small margin was Small-cap Growth, rising +6.2%, but all style-caps did well. The worst performer was Mid-cap Value, which was up + 5%. It’s probably more important to point out…
