Weekly Market CallInvestors received a load of economic data and continued earnings reports and the market did indeed go through some gyrations. In spite of hitting records during the week, the major averages finished down with the Russell 2000 turning in by far the worst performance and slumping 2.3%. Economic news ended up providing no major surprises, coming in fairly close to expectations. The market was driven primarily by earnings (decent, so far, with a few misses by high profile companies roiling the market) and continued bad news related to sub-prime CDO downgrades. In the ensuing flight to quality, many investors turned to bonds, driving the interest rate on the 10-year Treasury note down below 5% for the first time in weeks. For this week, we can expect more of the same. In terms of our market indicators below, we could see weakness earlier in the week and the averages moving up by end of week.
Upcoming economic news of note: Existing home sales and Fed Beige Book on Wednesday. Jobless claims, Durable Goods orders and New Home Sales on Thursday. Gross Domestic Product and Consumer Sentiment on Friday.
The following companies, among others, will be reporting earnings: American Express (AXP), Boeing (BA), DuPont (DD), McDonald's (MCD), 3M (MMM), Merck (MRK), AT&T (T), Texas Instruments (TXN), United Parcel Services (UPS), US Steel (X), Amazon.com (AMZN), Corning (GLW), Xerox (XRX), Apple (AAPL), Pulte Homes (PHM), TradeRadar stock pick Qualcomm (QCOM), Dow Chemicals (DOW), Anheuser-Busch (BUD) and Amgen (AMGN).
ETF CommentsIndexes: the ETFs that track the major indexes stumbed toward the end of the week except for IWM which stumbled mid-week as well as at the end of the week. The weakest of the bunch, IWM is sitting on its 50-day moving average having already fallen below the 20-day. Still, like the others (DIA, SPY and QQQQ), it is sitting well above its 200-day MA and is no danger yet of generating a TradeRadar sell signal.
Real Estate: REITs got slammed this week even as interest rates fell to the lowest level in over a month. As more sub-prime mortgage-backed bonds get downgraded by rating agencies the more turmoil we see in the real estate sector. The iShares US Real Estate ETF (IYR) moved down a couple of points and is once again below its 20, 50 and 200-day moving averages. This is not a good sign. The SPDR S&P Homebuilders ETF (XHB) is in the same boat. The news continues to be unremittingly bad from the residential real estate sector and XHB was not being looked at as a bargain this week.
Financials: last week I wrote that financials were trying to establish a bottom. This week the bottom fell out. The Financial Select Sector SPDR (XLF) is the lowest it has been in months and the high volume on Friday's down day leads me to believe we will see more weakness. This in spite of good earnings reported by some of the major money-center banks/brokerages. The KBW Bank ETF (KBE) is back down to where it was a week ago. Both of these ETFs are below their 20, 50 and 200-day moving averages and it looks like the bottom has not yet been seen.