It was a rocky week on Wall Street, ultimately resulting in the worst performance since January. At the close on Friday, the Dow fell by 1.8% to just above the 11,000 level, the S&P dropped 2.5%, and the Nasdaq lost 2.7%. Friday also marked the end of the month, with the Dow 1.4% higher, the S&P gained 1.5%, and the Nasdaq rose 2.6% during April.
Source: MSN Moneycentral
On Tuesday, the Dow dropped over 100 points as the financial problems of
Goldman Sachs remained in the headlines this week as the CEO and other directors were grilled by members of Congress on the alleged improper disclosure of a financial deal. Friday, it was announced that the SEC will be pursuing criminal charges in the matter. We don’t believe that the case has any merit and will likely be settled out of court; however, it was enough to shake investor’s confidence. The Dow lost 160 points Friday as investors decided to take some gains off the table after the news.
On a positive note, this week we got a positive reading on consumer confidence, household purchases rose, and GDP increased by 3.2%. Corporate earnings continued to come in positive this week, though not all met analyst expectations. Nonetheless, it shows that conditions are improving for US businesses.
Next Week
Next week we continue to receive corporate earnings. Several economic reports are forecasted for release, including personal income and spending, manufacturing sector statistics, and productivity numbers. The big report will come on Friday with the release in the April unemployment numbers. Rates are expected to remain unchanged.
Next week also marks one of our favorite times of the year. As many of you know, our office is located at the entrance to the TPC Sawgrass, home of the Players Championship. Practice rounds begin on Monday and we will be attending several of the days. However, we will be in the office every day next week, though our hours will vary from day-to-day. We will continue to monitor the market, even though we may not be in the office, and any phone calls not immediately answered will be returned that same day. We try to minimize any inconvenience for our clients during this exciting time of the year and hope you understand.
Where are we investing now?
It has been quite some time since we had the indices close lower for the week, and frankly, we have been looking for a pullback for longer than we would like. It is a healthy function of the markets, especially since it has risen in a virtual straight line upwards since early February. We will be closely watching the behavior of the market next week. If we see strength returning, we might buy into it. Still, we remain cautious and understand that the market was due for a correction.
We are optimistic through the end of 2010, however, and believe the easy money and stimulative measures currently in place will help push the markets higher. Higher interest rates, higher taxes, increasing government involvement in the private sector, and a still-high unemployment rate have us worried for the longer term. Additionally, the homebuyer tax credit (finally) expired on Friday, and we are interested to see how the free market will impact home prices.
In equities, we are focusing on higher-quality and multi-national stocks. We continue to avoid banking and insurance sector stocks. Commodities remain a longer term favorite and we believe that government policies will weaken the dollar over time, despite its recent rise. TIPs continue to be important as we expect inflation to increase in the future, though there is little or no inflation at this time.
