REVIEW OF ECONOMY AND FINANCIAL MARKETS FOR WEEK ENDED JULY 3 2009

 

 

 

 

Market Statistics

 

                 52 week
            Low High
Dow Jones (157.65points) (1.87%) to 8280.74   6,547.05 13,058.20                                             
Nasdaq (41.70 points) (2.27%) to 1796.52   1,268.64 2,549.94
S&P 500 (22.48points) (2.45%) to   896.42      676.53 1,426.63
Crude Oil ($2.43/barrel) (3.51%) to $66.73   $33.87 $145.29
Gold ($10.00/oz) (1.06%) to $930.70   $704.90 $1,001.80
10 Year Tsy +0.042% to 3.547%   2.04% 4.32%
             
             

 

 

                                                                                                      

 

 

 

 

 

 

 

WALL ST JOURNAL

 

 

OVERVIEW:

Markets were closed Friday in celebration of July 4 and that was a welcome pause. There was only one significant driver of the markets last week, which was the darkening news   on unemployment. The  rate went from 9.4% in May to 9.5% in June, which in itself is bad enough, at the highest level since August 1983, but what a number of analysts commented on was a far more serious picture than just this percentage. They focused on what are called the “Underemployed” or “Underutilized” workers-those who have not just lost their jobs ,but also workers who have had their hours cut and are now part time, as well as those who have become discouraged and have stopped looking. While there are differing numbers in the press this week, by adding in those we arrive at a rate of between 16.5%-19.5% of workers in this “Underemployed” or “Underutilized” category ! To further illustrate the seriousness of the problem, since the recession began in December 2007,the economy has lost a net 6.5 million jobs and the average work week has fallen to 33 hours, the lowest on records dating to 1964.

Why have we focused so much on this? Because it has already led to talk that the $787 billion Stimulus plan has been ineffective and that a second stimulus will be needed to revive the economy. Joe Biden was quoted in the Wall St Journal of July 6 as saying that the Obama Administration “misread how bad the economy was” and didn’t foresee unemployment levels nearing double digits. We cannot see the Administration agreeing to this additional Stimulus anytime soon, since they have publicly stated that only about 10% has been spent to date and that the effects will be positively felt as the money filters into the economy over the next 12-18 months .We also do not believe politically they can wait that long, however, since not enough of the Stimulus plan will help job creation as opposed to supporting entitlements as unemployment will continue to rise.

We do not want to be pessimistic about sustained economic revival, but there is not much to be optimistic about. As we have said before we do not believe the Banking sector problems have been adequately addressed in terms of the non performing assets (a nicer way of saying toxic assets) being disposed of; the consumer contribution to economic growth is going to be virtually non existent in the near term and taxes (however they are described) are going to rise. Much has been talked about at the national level and of course California’s problems have been covered, but of the 10 States in 2010 with the biggest budget gaps,6 are some of the most  populous  ie California; Florida; llinois, New Jersey and New York. At local levels it is not just service cuts that are being discussed but local tax increases. Florida for instance raised the State cigarette tax $1 effective July 1,after a 62cent increase at the Federal level 3 months before.

 

STOCK MARKET:

As we have stated, unemployment news drove the markets down this past week. The S&P which we like to use as a broader market indicator, is back to where it closed on May 12 and appears to be stuck in trading ranges reflecting the uncertainty of general market direction. It would be technically significant, but highly unlikely that it can break through its 956 resistance level near term. Volume was sluggish in pre holiday trading, which if we could find any positive news last week, that was it.

 

COMMODITY MARKET:

There was continued civil unrest in Nigeria which limited about 25% of the nations daily  oil production capacity, but that was overshadowed by the mid year International Energy Agency Report which detailed falling demand for oil .

In the general commodity sector this past week, the uncertainty about an economic recovery anytime soon and the market sense that commodity prices had built a recovery and ensuing inflation into them, have now seen a retracement and are likely to remain soft.

 

CREDIT MARKET:

With stocks and commodities being sold last week ,there was a flight to Treasuries as a ‘safe haven’ which kept yields down in the shorter end Treasuries. There is a large supply coming to market this week  ($136 billion), but with the economy not poised for a quick recovery, yields are unlikely to rise much in the weeks to come.

 

We hope our Weekly Review can be more upbeat next time around!

 

 

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2 Responses to “REVIEW OF ECONOMY AND FINANCIAL MARKETS FOR WEEK ENDED JULY 3 2009”

  1. efusjonjcy Says:

    Hello and thanks for the true cold facts. Not always easy to do but necessary. I found myself becoming a part of that reduced time statistic, really stinks too. But, in negative times we manage to find a positive, and that I have thanks to some friends that care. It may take some happy work but that is ok, at least it is enjoyable, fun and exciting and a boost in the morale area. It may not change the stock market yet but could… like the starfish story – one fish at a time. We can’t maybe make a difference overnight in our national economy or in health care, or energy, but we can in individual economy, one person at a time. thanks for the true up to date facts I am sure it will be upbeat, if not, post it anyway! cheers, joe young

    • newerasolutions Says:

      Joe,thanks for taking time to reply.We are trying to tell it as we see it and want to be neither pessimistic or optimistic,just realistic!
      It is going to be a long journey back to sustained recovery,but the people of the USA time and again have shown our ability to get up after being knocked down and will do so again.You are absolutely right,it will work because of the individual.
      Best.

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