This Week in Stocks: 9/15 - 9/21/07

[fedgolfer]

technical level hit -- 20 dma crossing over the 50 dma in the S&P, to many, this is seen as confirmation of a bull rally and a buy signal.

 

[Birchtree]

Short covering will provide fuel the entire month of October - they really out did themselves with their panic levels of negativism. And I don't plan to let them cover with any of my stocks. They'll have to pay up to play to get out. Then they'll be buyers - get me back in at any price. We could see enough volatility today to register a new all-time high on the Dow. I'd really sleep good over the weekend knowing many bears still have their foot caught in this bear trap.

 

[Show-me]

Weekly Wrap

Last Update: 21-Sep-07 16:40 ET

Despite their sluggish start, the major averages finished the week higher thanks to the Federal Reserve's decision to lower interest rates to help shield the economy from the housing slowdown and turmoil in the financial markets.

U.S. stocks began the week lower, led by declines in the financial sector, as growing problems at Britain's Northern Rock exacerbated fears that problems in the credit market are spreading. According to a report last Friday, the Bank of England had provided emergency funding to the beleaguered mortgage lender, which prompted a rush of customers to withdraw their deposits.

Stocks bounced back strongly on Tuesday, however, after the FOMC lowered its key fed funds rate by 50 basis points to 4.75% in a unanimous decision to help boost economic growth and allay growing fears about a possible recession. The Fed also cut its discount rate by the same amount to 5.25%.

August PPI, meanwhile, fell 1.4% on a large decline in oil prices. Core-PPI rose a modest 0.2%. The overall drop was larger than expected, but the core was in line with expectations. The data did not have much market impact, though, given the focus on the Fed's policy announcement.

Also lending some support to the market was a better than expected report from Lehman Brothers (LEH) – the first investment bank to report third quarter results and to provide a look into the extent of the damage from the fallout in the subprime mortgage market and credit tightening.

Stocks, which were still gleaming from the Fed's policy move, extended their rally on Wednesday. Interest rate-sensitive areas such as housing and financials were some of the biggest gainers, despite a lackluster report from Morgan Stanley (MS). The investment bank reported quarterly earnings well below analysts' estimate, as significant trading losses in quant strategies and fixed income sales and trading weighed on overall results.

Meanwhile, a muted reading on consumer prices also supported the market's gain, and offset poor data on New Home Starts and Building Permits, which fell to their lowest level in 12 years in August.

Ending two days of gains, stocks reversed course on Thursday due partly to higher oil prices and a mixed batch of earnings reports.

Goldman Sachs (GS) exceeded expectations with broad-based revenue strength, while Bear Stearns (BSC) reported a significant miss due to challenges in the credit markets. FedEx Corp. (FDX) posted better than expected results, but provided a bleak outlook for the full year due to a tepid economic environment.

A rise in oil prices to more than $83 per barrel kindled concerns about inflationary pressures and also contributed to the market's pullback.

Strong earnings from software maker Oracle Corp. (ORCL) and footwear company Nike (NKE) after the close Thursday provided the market some support going into Friday and helped further the week's gains. The earnings reports were seen as an encouraging sign that many companies are still doing well, despite the recent problems in the financial markets and a more challenging consumer environment.

--Richard Jahnke, Briefing.com