October 19th, 2011 9:47 AM by Mel Samick
The Market seems to be feeding its own optimism and forgiving all the doomsday talk of the past. European policymakers "coming soon" bailout package has worked as a straw for the drowning market, but subsequent optimism lifted the market beyond any forecast. Stronger retail sales, surging profits from Google and the upcoming earnings season sent stocks higher, until last Friday. The Dow Jones Industrial Average turned positive for the year and closed at 11,644 on Friday and had its best week in more than two years. The Dow average of 30 large companies has shot up 9.3 percent after hitting 10,655 on Oct. 3, its lowest level of the year. Interest rates climbed as a result and the 10-year Treasury yield reached 2.26 percent on last Friday from a low of 1.72 percent touched not so long back, on Oct 4th.
Last week started with optimism from Europe, for a change, as German Chancellor Angela Merkel and French President Nicolas Sarkozy promised to stabilize Europe's banks. They said a broad package of measures to stabilize the banking sector will be presented at a Group of 20 meeting in November. European policymakers have now set Sunday, Oct. 23 as the deadline to announce a comprehensive plan to stabilize the region's finances and contain the sovereign-debt crisis, setting the stage for one of the most critical weeks of the block's nearly two-year-old debt crisis. If the plan finalized this week turns out to be too vague, a market backlash could follow, according to The Wall Street Journal. Let’s hope the underground reality of the situation does not deflate this new optimism so soon.
At least the market seems to be justified in its optimism for Apple Inc. Steve Jobs may not be here but he ensured that his magic legacy continues as Apple Inc. sold more than 4 million iPhone 4S devices in the first three days after it was introduced, setting a record as customers lined up at stores across the globe to be among the first with the new touch-screen handset. This smart phone seems to be packaged with a smart secretary named "Siri." This voice activated personal assistant has apparently been a great exercise for Apple engineers, one that has allowed them to dabble in their creative and humorous sides while designing an application, which could be considered smart-phone artificial intelligence. Since the debut of the iPhone 4S this past Friday, various blogs have been flooded with updates showcasing some of Siri's creative answers to the absurd questions it's been asked by its owners. And this, in turn, has propelled Siri to the status of minor internet celebrity. Many iPhone users are posting their conversations with Siri. When an iPhone owner mentioned that he is drunk, Siri replied, "I found a number of cabs fairly close to you." Another owner asked "Who's your daddy?" "You are," Siri answered, in the voice of an authoritative man. Maybe one day Siri can understand moods better and can guide us on changing market moods and maybe even the moods of our significant others.
"Occupy Wall Street" demonstrations spontaneously started by many groups across the world is snowballing into a larger than expected phenomenon. The protesters are mainly protesting against social and economic inequality, corporate greed, and the influence of corporate money and lobbyists for the government. It sounds like beating a "wounded" horse.
There was a thin set of new economic data out last week, and a few surprises. Retail Sales remain a bright spot as showcased by the increase of1.1% in September, helped in part by strong vehicle sales. However, sales growth was also firm outside of autos. Consumers can spend a few dollars more and provide some additional cushion to the economy with the decline in gasoline prices over the past few weeks. Also holding flat were new claims for unemployment benefits. During the week ending October 8th, 404,000 new applications were filed, down just 1,000 from the prior week and about the same as we have seen over the past couple of weeks. If the pattern holds, we might expect perhaps 80,000 to 110,000 new jobs to be created by the time the October employment report is released in a few weeks. However, extremely low mortgage rates have so far failed to nudge the MBA's mortgage purchase applications index from the depressed range it's been stuck in since the middle of last year.
The week ahead is filled with important data on PPI and CPI reports to be released on Tuesday and Wednesday respectively, while Jobless Claims and Existing Home Sales are due on Thursday. Markets will be eagerly awaiting earnings releases and updates from Europe to justify their optimism.
Information Provided by NYCB Capital Markets