6.27.08
Friday’s record oil prices were just too much for Wall Street and cast a shadow on positive consumer spending data. In turn, the major indices each closed lower, extending the week's losses. Week-to-date, the S&P 500 lost 2.9%, the Dow Jones Industrials Average lost 4.1%, and the Nasdaq fell 3.8%.
Crude prices rallied all the way to $142.99 per barrel to set a new all-time intraday high. In the end, prices eased as oil closed slightly higher at $140.25 per barrel. Crude prices are up more than 45% year-to-date. For the week, financials lost 6.5%.
The day's primary economic release was largely overlooked. Real personal consumption expenditures (PCE) data for May were up 0.4%. April was revised upward to a 0.2% increase. In turn, the second quarter average of April and May data 0.5% above the first quarter average, which is already a 2% annual rate of growth. Since another gain is likely in June, due to spending resulting from the fiscal stimulus, this puts real PCE on track to post a 2.5% annual rate of growth in the second quarter. Recall, PCE represents approximately 70% of GDP.
In this environment it would be easy to say let’s go short that is the way to make money in this market. The market is so oversold that it is likely to make a break to the upside and you don’t want to get caught on the short side.
For now we are happy to be in Cash and sleeping good.
Till next time
The MTA Staff
