Friends
The 4th quarter GDP came in at 2.8%, which was a slight disappointment to traders who were hoping for a number north of 3%. Still, that is just about what we expected and quite a bit better than we would have hoped for just six months ago. In the meantime, earnings season has been a little disappointing also, as companies have delivered mixed results mainly due to lukewarm top line revenue numbers. There have been some standouts, but overall companies are struggling to keep up the earnings momentum that we have seen over the past year.
Despite the earnings crush this week, the main story was the Fed and its decision to keep interest rates low for a very long time. Traders were under the impression that things were getting slightly better on the economic front. The dollar had been strengthening and stocks had been rising despite it. Now traders aren’t sure what the Fed is looking at. Do they want the dollar to fall (seems like it), and if so, won’t that start up the commodity train again (did you see the rise in gold this week)? It seemed like we were on the right track, but the Fed’s verbiage put doubt in trader’s minds.
The result was a weak market for the last few days and the first down week in over a month. Thanks Dr. Bernanke. You just couldn’t leave well enough alone. Did I just get opinionated during these politically charged times? For the day the Dow Jones Industrial Average was down 74 points to finish the week at 12,660. The S&P 500 was down 2 points to close at 1316. NASDAQ bucked the trend and was up 11 points for the day. As we mentioned, gold continued to rise adding $11 to trade at $1737. Oil was basically unchanged trading just shy of $100 per barrel WTI.
For the second week in a row the S&P closed above 1308, which is a good sign. 1330 might prove to be a formidable resistance, but if the bulls can take it out, then we might have a shot at 1350 to 1365. Don’t get me wrong, the Fed’s action this week should be good for stocks (remember what we have said since December of 2008- don’t fight the Fed). The only thing that I am concerned about is that we seemed to have begun the process of being weaned off the medicine, and the good Dr. Bernanke wants to give us another dose anyway. When will we suffer from the law of diminishing returns? We will see.
Have a nice weekend everyone.
