After weeks of continual sliding, the market finally took off like a shot, posting its biggest weekly increase in months. This may not signal the start of a rebound for the market and the economy, but it could indicate a bottom, which is good. Bottoms show stabilization – that the contraction is slowing or has been stopped in some areas. Experts are saying things may go up and down on the way back up, but only time will tell if we’re now at the bottom of this recession – and bear market.
Positive economic indicators for the week included a better-than-expected retail sales number for February. It was down just 0.1% overall, but taking out auto sales, retail was UP 0.7%, following a 1.7% GAIN in January. Consumer sentiment also came in a tick up for the month. Fear seems to be abating. On Friday, White House economic advisor Larry Summers said it was indeed encouraging to see signs of a rise in consumer spending.
Best of all was the encouraging financial news. Citigroup said it had a profit the first two months of the year and won’t need more TARP money. JPMorgan was also profitable in January and February. Some economists see this as early evidence that monetary policy is having some traction. In Washington, Barney Frank, who chairs House Financial Services, said he thinks the SEC will soon reinstate the uptick rule, which would make it harder to short financial stocks.His committee also held its hearing on mark-to-market accounting and seems to favor temporarily suspending the rules. They gave SEC and FASB accountants three weeks to come back with a plan. This is positive news because many experts feel adjusting mark-to-market is vital to fixing the banking system. It should ease capital concerns at banks, giving them increased capacity to lend, which is central to the recovery.
The Dow zoomed UP for the week 9.0%, to 7223.98; the S&P 500 went UP 10.7%, to 756.55; and the NASDAQ almost matched it, going UP 10.6%, to 1431.50.
With stocks enjoying a great week, you’d expect bonds to get hammered, but things weren’t so bad. In spite of China’s reservations about Treasuries, the price of the benchmark 10-year Treasury dropped just a tad. So its yield, which runs counter to price, only inched up to 2.890%, still comfortably under the 3% threshold. This bodes well for mortgage rates continuing at attractive levels.
