4.30.10

4.30.10

          After an almost uninterrupted two-month run up, stocks relinquished a portion of their gains this week. Such a retreat was of course to be expected and is not only normal, but ultimately healthy as it removes some of the complacency that has built up in the markets. After hitting new year-highs last Friday, stocks posted modest losses during the week's first session as weakness among financials took its toll. Selling pressure intensified Tuesday following news that Standard & Poor's had downgraded Greece's debt rating to junk status. The main averages consequently fell all day, with the S&P 500 taking its biggest hit since early February to finish 2.3% in the red. The bleeding stopped Wednesday as stocks were able to close higher after the Federal Reserve announced that it was leaving interest rates unchanged. If the Fed's decision was widely expected, the Central Bank also noted that "the labor market is beginning to improve", which helped lift stocks late in the session. With fears over Greece's situation receding once more Thursday on news that European leaders and the IMF were ready to address the situation, optimism returned to the markets and stocks resumed their climb to yield the Nasdaq Composite a 1.6% daily gain.  

     The Commerce Department said Friday morning that the GDP grew at an annualized rate of 3.2% during the first quarter and that personal spending increased 3.6%, a number that was better than expected. The inability of the market to move higher on such positive economic news enticed participants to instead book profits, causing the main indexes to relinquish the prior day's gains. Weakness among financials was especially apparent all day after news broke that Goldman Sachs would face a federal criminal probe over its dealings during the sub-prime crisis. The S&P 500 retreated 1.7% on the day, therefore finishing the month on a sour note.

          Things are starting to look more like they should in the market. A number of companies have announced that they have started hiring again. As volume picks up in the stock market, we need to see it splash over into the up-side. But all in all, we are seeing some good signs.

          Right now the market started to give back some of the excesses. We need to watch it carefully and be ready to move when this correction is finished.

          For now we still remain 100% in CASH.

Till next time

The MTA Staff