EmailWeekly Wrap
Archive
Last Update: 05-Aug-11 17:45 ET
Weekly Wrap for August 1, 2011
Aggressive selling this week took the S&P 500 more than 7% lower for its worst weekly performance in more than two years. The rout was rooted in concerns about the global economy, the lingering threat that the U.S. could lose its coveted AAA credit rating, and tenuous fiscal and financial conditions in Europe.
Efforts by legislative leaders to raise the debt ceiling and institute new fiscal measures were discarded early this week when a disappointing ISM Manufacturing Index reading of 50.9 was released. That was followed by an ISM Services Index reading of 52.7. The consensus among economists polled by Briefing.com had called for respective readings of 54.0 and 53.7.
The latest personal spending figures also disappointed. Spending reportedly slipped 0.2% during June, but had been broadly expected to increase by 0.1%. As a corollary, initial weekly jobless claims for the week ended July 23 failed to crack the 400,000 level. Still, by coming in at 400,000 on the nose, the tally remained below the upper bound (410,000) of the "Recovery Zone" for the second consecutive week.
The ADP Employment Change proved to be a directionally accurate indicator of the nonfarm payrolls report that was released on Friday. The 117,000 positions added to nonfarm payrolls during July exceeds the 84,000 job additions that had been broadly expected. More impressive is that private payrolls spiked by 154,000, which is greater than the consensus call for private payrolls to increase by 100,000.
The surprisingly strong pick up in hiring played a part in the headline unemployment rate's move to 9.1% from 9.2%, which is where it was widely expected to stay, but the dip is actually mostly due to a reduced labor force count.
The better-than-expected jobs data aren't necessarily enough to protect the U.S. from a debt rating downgrade by S&P, though. Even though the other agencies have affirmed their AAA rating on the U.S., S&P, which is the most influential outfit among the agencies, has yet to issue a decision. The threat that S&P could cut its rating on the U.S. was also factored into trade this week.
Fiscal and financial instability in the eurozone periphery not only spurred aggressive selling among the region's bourses, but imbued domestic trade as the threat of contagion exacerbated skittishness. Some of that concern was assuaged by an announcement on Friday that the European Central Bank will provide support to Spanish and Italian bonds if the two countries commit to specific reforms.
That announcement helped stocks rebound from the 2011 lows that were set during trade on Friday. From its early May high to its low on Friday, the S&P 500 was down almost 15%, which more than makes for an official correction. Even though the broad market measure was able to work its way up from the depths of its intraday low, it still suffered a weekly loss of more than 7%. That makes for its poorest weekly performance in since November 2008.
Efforts by legislative leaders to raise the debt ceiling and institute new fiscal measures were discarded early this week when a disappointing ISM Manufacturing Index reading of 50.9 was released. That was followed by an ISM Services Index reading of 52.7. The consensus among economists polled by Briefing.com had called for respective readings of 54.0 and 53.7.
The latest personal spending figures also disappointed. Spending reportedly slipped 0.2% during June, but had been broadly expected to increase by 0.1%. As a corollary, initial weekly jobless claims for the week ended July 23 failed to crack the 400,000 level. Still, by coming in at 400,000 on the nose, the tally remained below the upper bound (410,000) of the "Recovery Zone" for the second consecutive week.
The ADP Employment Change proved to be a directionally accurate indicator of the nonfarm payrolls report that was released on Friday. The 117,000 positions added to nonfarm payrolls during July exceeds the 84,000 job additions that had been broadly expected. More impressive is that private payrolls spiked by 154,000, which is greater than the consensus call for private payrolls to increase by 100,000.
The surprisingly strong pick up in hiring played a part in the headline unemployment rate's move to 9.1% from 9.2%, which is where it was widely expected to stay, but the dip is actually mostly due to a reduced labor force count.
The better-than-expected jobs data aren't necessarily enough to protect the U.S. from a debt rating downgrade by S&P, though. Even though the other agencies have affirmed their AAA rating on the U.S., S&P, which is the most influential outfit among the agencies, has yet to issue a decision. The threat that S&P could cut its rating on the U.S. was also factored into trade this week.
Fiscal and financial instability in the eurozone periphery not only spurred aggressive selling among the region's bourses, but imbued domestic trade as the threat of contagion exacerbated skittishness. Some of that concern was assuaged by an announcement on Friday that the European Central Bank will provide support to Spanish and Italian bonds if the two countries commit to specific reforms.
That announcement helped stocks rebound from the 2011 lows that were set during trade on Friday. From its early May high to its low on Friday, the S&P 500 was down almost 15%, which more than makes for an official correction. Even though the broad market measure was able to work its way up from the depths of its intraday low, it still suffered a weekly loss of more than 7%. That makes for its poorest weekly performance in since November 2008.
| Index | Started Week | Ended Week | Change | % Change | YTD % |
| DJIA | 12143.20 | 11444.61 | -698.59 | -5.8 | -1.1 |
| Nasdaq | 2756.38 | 2532.41 | -223.97 | -8.1 | -4.5 |
| S&P 500 | 1292.28 | 1199.38 | -92.90 | -7.2 | -4.6 |
| Russell 2000 | 797.03 | 714.63 | -82.40 | -10.3 | -8.8 |
