Market Report – October 3, 2011

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In the Rear View Mirror:Last week got off to a decent start for global stock markets; internationals held their own in mid-week and improved a bit at the end… US markets were mixed with the Dow showing a 1.32% gain and NASDAQ losing 2.73%. Friday saw the end of the quarter and a turning of the page on the month of September. Traders were pleased with some of the volume swings despite the fact that things have been tough over the last 60 to 90 days… and there seems to be no indication of a lull in the near future.
The European crisis was big news all week. Greece’s new property tax proposal was accepted, and EU-IMF-ECB inspectors were back. There will be an emergency meeting after the inspectors complete their review. The concern was that Greece will run out of money in the middle of October and default on its loans.On Thursday, the German Parliament voted to increase the European Financial Stability Facility (EFSF). The stories coming out of Europe were typically varied. Nobody was quite sure if there would be a leveraged EFSF, whether there would be mandatory bank recapitalization, or if the EFST would be developed using an alternative method.So what, you ask…for one, the European drama is playing havoc with the US markets; the bearish attitude is continuing to spread and the “herd’ seems intent on throwing in the towel. Don’t be surprised if you see a market reversal in the very near future, but don’t bet the ranch on it either.
The Markets @ 9/30/2011
Index Close Weekly
Net Change
% Change YTD
Change
YTD%
DJIA 10,913.38 +141.90 +1.32% -664.13 -5.74%
NASDAQ 2415.40 -67.83 -2.73% -237.47 -8.95%
S&P500 1131.42 -5.01 -0.44% -126.22 -10.04%
NYSE Comp 6791.65 +20.92 +0.31% -1172.37 -14.72%
NYSE Amex 2050.48 -12.88 -0.62% -157.90 -7.15%
Russell 2000 644.16 -8.27 -1.27% -139.49 -17.80%
Vanguard Int’l 12.92 +0.16 +1.25% -2.84 -18.02%
Market ReportMarket sentiment gained strength after financial leaders from the G20 nations promised a strong response to the problems challenging the global economy. However, on Friday the dollar fell against the euro and by closing, the pair had joined at 1.3496, dropping 1.42% during the course of the week. Risk appetite also recovered after the promise made by G20 leaders during talks in Washington.
The euro fell abruptly at the beginning of the week due to doubts over the debt crisis and concerns over slowing global growth.

The Federal Reserve made a statement on Wednesday claiming that there were ‘significant downside risks’ facing the United States. The central bank revealed a strategy called ‘Operation Twist.’ The aim of this so called operation is to trade short-term bonds for long-term bonds in order to improve the economy by driving long-term interest rates down. We’ll just have to wait and see what the brain trust does.

Bottom Line

Progress is continuing for the Eurozone. Merkel succeeded in gathering her coalition and passing new legislation to expand the EFSF’s resources from 250 to 440 billion euros. It seems that Eurozone officials were united in passing the appropriate improvements to remove concerns about decreasing political will.

The job market is doing a lot better than predicted. A look at unadjusted claims reveals that there’s nothing to imply an increase in firings or deteriorations. In fact, the job market is a little stronger than expected.

Business investment rose for the month of September, which shows that private spending is actually up. Although there were drops in the auto and defense industries, they aren’t sound gauges of future trends. What’s more, the Chicago PMI index gained strength during the month of September, which indicates the manufacturing sector is tougher than many people think and able to withstand a few blows.

Research and Editorial Staff
MicroCap MarkePlace