Week in Review: Labor Day Edition

The week that was:
The US markets ended last week on a four-session winning streak. If you’re looking for some positivity from the markets, this was the best pre-Labor week in two decades, in terms of market performance!! However, the economic data was very mixed. 
On the positive side: 
• Consumer confidence data for August increased to 53.5 from 51. 
• The August ISM revealed a surprise rebound in the manufacturing sector. 
• The labor department reported on Friday that 54,000 nonfarm jobs were lost in August. This is a much slower decline than anticipated. Unemployment now stands at 9.6%. 
• The Case-Shiller home-price index showed that U.S. home prices rose 4.4% during the 2nd quarter compared with the 1st quarter. 
On the negative side:
• Sales of previously owned homes fell sharply by 27% in July. 
• The Chicago PMI (gauge of business expansion) declined to 56.7 from 62.3 in July. 
• Jobs data was also not favorable as ADP’s employment change report surprised the market with news that private-sector employment dropped by 10,000 jobs in August. This is the first decrease in six months. Economists had predicted that 17,000 jobs would be gained. 

Stocks:
The S&P 500 rose 39.92 points this week, or 3.75%, to 1104.51. The Nasdaq Composite rose 80.12 points, or 3.72%, to 2233.75. The Dow Industrials rose 297.28 points, or 2.93%, to 10447.93. This represents the largest weekly gain for the S&P since the week ended July 9th. 
• Hewlett-Packard (HPQ) appears to have defeated Dell (DELL) in the bidding war over 3Par. HPQ raised its bid for the data-storage company to $33/share. This has created a $2.1 billion windfall for 3Par insiders and investors. $800 million will go to three VC firms who are collectively the company’s biggest shareholders. Almost $100 million will go to 3Par’s CEO, David Scott, who left HP to become 3Par’s CEO in 2001. 
• Sources say that Goldman Sachs (GS) has decided to shutter its principal strategies unit, which does its proprietary trading, in the wake of regulation passed by Congress. JPMorgan Chase also announced a few days ago that it is also working toward ending all proprietary trading. Analysts at Barclays estimate that the Volcker rule may cost JPM as much as $1.4 billion in annual profit.
• Burger King (BKC) accepted a $4 billion buyout offer from 3G Capital, a group backed by Brazilian investors. 3G Capital intends to expand Burger King’s presence in Asia and Latin America. BKC stock rose almost 41% from Tuesday to Thursday of last week.

Bonds:
End of week bond yields:
3 Month yield = 0.10%, down 2 bps from last week.
2 Year yield = 0.51%, down 5 bps from last week.
3 Year yield = 0.79%, down 3 bps from last week.
10 Year yield = 2.70%, up 6 bps from last week.
30 Year yield = 3.78%, up 9 bps from last week.


What to look for next week:
7:30 AM Thursday International Trade
• The trade deficit jumped in June to $49.9 billion from $42 billion in May, its widest point since October 2008. The consensus forecast is that the figure should decline slightly in July.