-By Joseph Gomez

Stocks ended sharply lower Friday, as bad news out of Europe kept piling up. The sell-off triggered the sixth weekly decline in seven weeks for the Dow and S&P 500.  The euro slid to a nearly 7-month low against the dollar, trading at around $1.36. The greenback, a traditional safe haven, also gained strength against the Japanese yen and British pound.  One chart that really stands out this week, the US Dollar, which has broken out above a summer-long consolidation pattern. This new trend, if sustainable, can result in a rebalancing effect among financial assets. When the dollar is strengthening, it causes disruptions in the revenues amongst large-cap multinationals and favors smaller-cap (domestic) companies. A stronger dollar will also make U.S. investments more attractive to foreigners and will greatly impact commodity prices. We shall continue to monitor it closely.

Germany is preparing to shore up its banks to protect them against a Greek default. If Greece’s bonds become worthless, that can trigger capital-requirement problems, and a lot of major banks could go under. This week, I came across a YouTube video of Nigel Farage, leader of the UK’s Independent Party. He is equally despised by the European political establishment, but I find him to be honest, intelligent and an excellent speaker. He has been a very outspoken critic of the Euro.  You can view an edited version here, but please hit the back button for the rest of this post.

Investors digested President Obama’s stimulus plan, in which he promises to boost hiring and provide a jolt to the stalled economy, if it becomes law. Mixing $253 billion in tax cuts and $194 billion in new spending, the total bill for the plan is $447 billion. Some have balked at the President’s proposal to extend unemployment benefits to 3 years.

1140-1143 is a key support level for S&P 500. A break below and we’ll likely head to new lows in short order. However, please note that a series of higher highs and higher lows is developing in the short-term. Earlier this week, I also commented on gold’s trading behavior relative to the S&P 500.

Finally, I end with a picture of the World Trade Center. While living in Weehawken, NJ, my wife and I both frequented the WTC on our commutes to New York City and profoundly felt the effect of the worst terrorist attack on the United States.  It will never be the same. I have also included a chart from Bespoke which depicts how the major asset classes have performed since 9/11.

 

 

 

 

 

Key Rates from Bloomberg.com
CURRENT 1 MO PRIOR 3 MO PRIOR 6 MO PRIOR 1 YR PRIOR
Fed Funds Rate 0.12 0.12 0.10 0.16 0.13
Fed Reserve Target Rate 0.25 0.25 0.25 0.25 0.25
Prime Rate 3.25 3.25 3.25 3.25 3.25
US Unemployment Rate 9.10 9.10 9.10 8.90 9.60
1-Month Libor 0.23 0.21 0.19 0.26 0.26
3-Month Libor 0.34 0.28 0.25 0.31 0.29

Mortgage* (National Average)

provided by Bankrate.com
CURRENT 1 MO PRIOR 3 MO PRIOR 6 MO PRIOR 1 YR PRIOR
30-Year Fixed 4.16 4.33 4.46 4.85 4.36
15-Year Fixed 3.37 3.49 3.64 4.11 3.85
5/1-Year ARM 2.96 2.93 3.03 3.52 3.38
1-Year ARM 2.96 2.96 3.14 3.03 3.66
30-Year Fixed Jumbo 4.76 4.92 4.98 5.44 5.34
15-Year Fixed Jumbo 4.07 4.28 4.35 4.72 4.88
5/1-Year ARM Jumbo 3.18 3.35 3.36 3.84 3.96

 

Next week’s economic calendar by Econoday.com

 

Monday Sep 12 Tuesday Sep 13 Wednesday Sep 14 Thursday Sep 15 Friday Sep 16

Richard Fisher Speaks
5:00 PM ET

Redbook
[Bullet
8:55 AM ET
Treasury Budget
[Report][djStar]
2:00 PM ET
Retail Sales
[Report][Star]
8:30 AM ET
Weekly Bill Settlement3-Yr Note Settlement10-Yr Note Settlement30-Yr Bond Settlement

Jobless Claims
[Report][Star]
8:30 AM ET
Current Account
[Bullet
8:30 AM ET
Money Supply
[Bullet
4:30 PM ET
Quadruple Witching

 

Asset-class performance from Bespoke Investment Group

 

 

 

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