Dec 5, 201111:51 AMBlog: Alaska's Eye on Wall Street
Week in Review, Dec. 5, 2011
Well that was nice. Just when the month looked dreadful for stocks, major central banks swooped in on November 30 cutting rates across the globe. Stocks soared. The Dow was up almost 500 points last Wednesday, its biggest one day move since March 2009. For the week the S&P 500 jumped +7.4% and was flat for the month of November. Meanwhile, 10 year treasuries sold off as yields rose to 2.05%.
Overseas markets reacted as well. Chinese stocks jumped +6% in one day. The Stoxx 50 index of European stocks gained +11% last week. Japan lagged, up only +5.9% for the week.
BCA opined that the "coordinated move by seven major central banks, including the cut to the reserve requirement ratio by the People's Bank of China, represents a significant step on the road toward global reflation." Well, it can stop markets from seizing up, but I would think it will do little to "solve" Europe's sovereign debt crisis. That's a fiscal/debt thing.
There was a lot of economic data out last week:
• The unemployment rate fell from 9% to 8.6% in November - driven in part by 315,000 people who gave up looking for work and are no longer counted as unemployed. If you add these people back in, the decline in unemployment would be 8.9%. Still, 120,000 new jobs were added last month and upward revisions to the 2 prior months were +72,000. It was a decent report.
• The latest Fed Beige Book report found economic activity growing at a "slow to moderate pace" in 11 of 12 districts surveyed.
• The pace of growth in the U.S. manufacturing sector rose to 52.7 in November, its strongest level since June, according to the Institute for Supply Management.
• Wells Fargo noted that "consumer confidence jumped 15.1 points to 56.0 in November. The jump in confidence is consistent with strong start to the holiday shopping season and is another bit of unexpectedly good economic news."
• Annualized car sales last month, at 13.9 million, were the highest since August 2009 and Q4 is well on its way to be the best quarter this year.
Mean while S&P downgraded 37 big global banks based on a new ratings criteria framework. They confirmed that most of the bank ratings are converging to the single -A range.
The Economist noted: American Airlines filed for bankruptcy. Hitherto, AA was the only big American international airline not to seek bankruptcy protection. It racked up $10 billion in losses over the past decade and has debts of around $30 billion. But with $4 billion in cash on hand, AA pledged to keep flying while it restructures.
Next week is quiet with respect to economic indicators in the U.S. The back and forth over extending last year's payroll tax holiday and emergency unemployment benefits is in full swing in Washington DC. If it's not extended, expect the markets to wobble.
A European Union summit held on Friday December 9 will no doubt flush out more on the evolving debt crisis there.
Jeff Pantages, CFA
Chief Investment Office
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