Greetings!
This weeks's commentary is a bit longer than normal, so bear with me.
The King is Dead, Long Live the King! Chrysler is now officially a bankrupt company. A sign of the times we now live in.
Let's make sure we understand what issues are driving the current market environment. First and foremost are concerns over the Stimulus Package and its ability to solve the damages caused by the Subprime Mortgage disaster. This, coupled with the devasted economic state of the nation's financial institutions, puts downside pressure on the Market.
Next is the confidence level of the "Big Money" players like large Institutional Investors, Pension Funds, Private Foundations, Mutual Funds and the like. This too is holding the Market down because the companies and advisors in charge are still cautiously skeptical, or cautiously optimistic, that the Stimulus Package will work. When you add all this up you get what we have been seeing in the Market for the last few weeks; namely a market that is most certainly heading up, allbeit sporadically with a fair mixture of down days.
This week was a tale of two halves; the week started down on low volume, but ended markedly up and gave strong signals of more to come. Monday and Tuesday were engulfed with concerns over the Swine Flu, anticipation of Tuesday's Federal Open Market Committee (FOMC) meeting, and dealing with reports that Bank of America and Citigroup will require additional capital, and that Regions Financial Corp., First Third Bancorp, and Wells Fargo may also require infusion of capital since they hold large commercial real-estate portfolios.
But then the second half of the week started on late Wednesday after the FOMC statement came out. Wednesday began strong but waned after the obligatory FOMC official statement declaring we were nearing a bottom. The market later turned up before the close with financial stocks leading the way.
Thursday we saw a major move up! Stocks sprinted early and clung to most of their gains. Smaller stocks again led the way with small-cap and mid-cap stocks galloping to 3% plus gains. Consumer spending jumped 2.2% in the First Quarter, the best gain in two years. The FED kept interest rates unchanged while noting the
"pace of contraction appears to be somewhat slower."
The week ended amidst a backdrop of mixed earninigs and economic data reports. Buyers came in late on Friday to bring the major index into positive territory, allbeit on light volume. We took advantage of the second half of the week with some purchases as outlined below.
Have a great weekend, and stay dry.
