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Courtesy of David Brown, Chief Market Strategist, Sabrient
After the worst weekly performance since 2008, the market headed into a new week on an upswing in hopes that the European debt situation is stabilizing. There’s still no concrete action, as of this writing, just talk of plans, but that was enough to reassure the skittish markets. On this hope, and maybe a prayer or two, the S&P 500 and the Dow gained more than +2% today with the Nasdaq moving up +1.3%.
Banks and financial institutions led today’s advance. Oil was up solidly, and the dollar was down, the latter fueling the markets’ rise as usual. The VIX (the “fear index” that measures the implied volatility of the S&P 500) was near 40 again, reflecting investors’ nagging fears. (As recently as August 3 the VIX was below 25).
Until the euro zone actually takes action to stabilize Europe’s deteriorating financial system, we’ll go right back to the uncertainty that cratered the markets last week when the S&P 500 fell -6.5% and the Russell 2000 dropped almost -9%. The market abhors uncertainty, but that’s what it has had to deal with both at home and in Europe. At home, the uncertainty centers on the moribund economy and whether or not Congress will pass any of the Obama jobs bill.
As for the economy, the housing market is still mixed. New home sales were a tad better than expected though still worse than last month. Existing home sales, which don’t directly help the economy, were up+7% over the previous month. Housing permits—which do have a direct effect on the economy, especially if positive—were better than expected and well above last month. At 0.571M, housing starts were flat, and lower than the expected 0.592M. New home sales are at a 9-month low (295,000), down 7,000 from last month. Initial jobless claims improved slightly last week, although stubbornly staying above the 400K level, at 423,000.
Upcoming economic reports include consumer confidence and S&P Case-Shiller Home Price Index (Tuesday); durable goods (Wednesday); initial jobless claims, pending home sales, and the National Association of Realtors’ pending home sales index (Thursday); and the consumer sentiment index, Chicago PMI, and personal income and outlays (Friday).
Market stats. Last week, the style/caps were all down…
