Weekly Wrap Things slowed down in the marketplace this week. A rally on Tuesday, however, helped the major averages close higher for a second straight week. That pushed them back into positive territory for the year. The S&P 500 gained 2.4%.Whether the slower action is the result of market participants taking a breather following the volatile activity over the last two months or the beginning of a summer lull remains to be seen.
Tuesday's rally was impressive. U.S. equity markets opened higher, having rallied premarket along with European markets and the euro. They then trended higher throughout the session, closing at their best levels.
The euro joined the pound last week in attempting to rebound, hitting a multi-year low of 1.1877 on June 7 before advancing. It continued that effort this week, particularly on Monday and Tuesday when it moved from 1.21 to over 1.23 against the dollar.
Positive headlines out of Europe helped the cause. First, it rallied on Monday despite Moody's downgrade of Greece -- the ratings agency was merely catching up with S&P and Fitch. Despite a very poor ZEW sentiment survey out of Germany on Tuesday, the euro rallied that day following successful debt offerings from Spain and Ireland.
It managed to hold those gains on Wednesday despite rumors that a credit line was being worked out for Spain -- the spread between the country's 10-year note and the German bund hit a record that day. Finally, it inched higher on Thursday as the Spanish fears ebbed following another successful debt offering.
U.S. equity markets, however, did not benefit Wednesday-Friday, trading in a tight range. There were few catalysts. For instance, positive industrial production data on Wednesday offset weak housing starts, while inflation remained subdued.Instead, the focus remained on the Energy sector, particularly BP (BP) and the ongoing oil spill in the Gulf of Mexico. Following more volatility, shares of BP fell 6.5% after the company suspended its dividend for the remainder of the year, set up a $20 bln escrow fund to pay for damages and its CEO was grilled before a House subcommittee.
Things could pick up next week as the market will get the next round of Treasury auctions, existing/new home sales and durable goods data, and a FOMC meeting. The Fed is expected to keep its policy directive largely intact, however.
Index | Started Week | Ended Week | Change | % Change | YTD % |
DJIA | 10211.07 | 10450.64 | 239.57 | 2.3 | 0.2 |
Nasdaq | 2243.60 | 2309.80 | 66.20 | 3.0 | 1.8 |
S&P 500 | 1091.60 | 1117.51 | 25.91 | 2.4 | 0.2 |
Russell 2000 | 649.00 | 666.92 | 17.92 | 2.8 | 6.6 |
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