Friends
What a change a week makes. Stocks ended the 2nd quarter with a four-day flurry which saw the Dow rise over 152 points to close the quarter at 12,413. Whether it was end of quarter “window dressing” or simply investors deciding that the soft economy was only temporary, stocks enjoyed their best 4 day gain in over a year. The S&P 500 has blown out of the 1250 to 1300 trading range and closed the day above 1320 . What was looking like a 5% to 6% decline for stocks in the second quarter ends up being only a fractional decline for the S&P 500. The Dow Jones Industrial Average actually finished the quarter slightly in the positive. Did we mention that the markets seem to have amnesia day to day? Just an amazing change of sentiment from week to week.
The Chicago PMI number was actually much better than expected today and that coupled with Greece finally getting off our TV screens seems to have caused traders to decide that they needed to own more stocks and less bonds (the selling of bonds made rates on the 10-year Treasury note rise from about 2.88% to 3.17%) as the quarter comes to a close. What does all this mean for the second half of the year? Well, we still have QE2 ending today and plenty of headwinds in terms of the economy. But price is reality, and stocks have certainly had a wonderful week.
Our 3rd quarter investment outlook will be available early next week. In it, we will discuss the prospects for the economy in the second half of the year, as well as our view on the markets and what awaits us as the summer unfolds. We will be watching, beginning tomorrow, to see if the correction has ended and is behind us or if this week’s move is simply a bounce in an unfolding downtrend. Earnings season, which begins the second full week of July is likely to set the tone for the remainder of the summer.
Stay tuned and look for the 3rd Quarter Outlook coming next week.
