Market Review of the Week

After a poor start on Monday, the stock market bounced back strongly on Thursday and Friday and closed up for the week. On Thurday in particular, there was a strong short squeeze.

The key headlines from last week were somewhat conflicted:

  • Falling retail sales
  • Increased jobless claims
  • Improving consumer sentiment
  • Fed chairman Bernanke wants the private sector to recover before the stimulus money and census jobs run out. He said there will be a slow recovery, but no double dip. Time will tell.
  • No big news out of Europe last week which was a positive for the markets. The Euro may be forming a bottom around 1.20.
  • Bullish news from China- rapid economic growth and some evidence that the Chinese government may be able to navigate a soft landing from its overheated real estate markets.
  • Treasury bonds and equities were inversely correlated during the week. Generally the T-Bonds were up when stocks were down and vice versa.
  • Treasury secretary Tim Geithner wants China to inflate the value of the yuan to make it easier for American companies to compete. Tim, be careful what you wish for. This could have the undesired side effect of causing sharp price inflation in Chinese made goods.
  • Corporations are holding growing stockpiles of cash. Expect increasing share buybacks if the market heads lower.

Looking ahead to next week- Jobless claims, housing starts could be big market movers.

I track the Fidelity sector funds. Except for the gold fund, all of the other Fidelity sector funds have moved at or below the 125-day moving average. The last time this happened was in 2008.

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