Week In Review

The week that was:

U.S. stocks ended 2010 with strong gains, advancing for the second year in a row, as stimulus measures from the Fed and recent signs of economic improvement encouraged investors.  Corporate and economic newsflow were very slow in the last week of 2010.  Initial unemployment claims fell by 34,000 to the lowest levels since July 2008.  The decline is much greater than the 2,000 decrease expected by economists and provides further evidence that the job market is slowly thawing.  However, the news item failed to stimulate the market ahead of the new year.

The People’s Bank of China announced last weekend that it increased its main one-year lending and deposit rates by 25 basis points to 5.81%.  The interest-rate increase sent stocks downward in most markets worldwide as it seems Beijing has lost faith in other measures to rein in the rapid credit growth fueling housing and food inflation and is now resorting to increasing the price of credit.

Stocks:

The S&P 500 rose 0.87 points this week, or 0.07%, to 1257.64.  The Nasdaq Composite fell 12.73 points, or 0.48%, to 2652.87.  The Dow Industrials rose 4.02 points, or 0.03%, to 11577.51. 

For the year, the S&P 500 was up 12.78%, the Nasdaq was up 16.91%, and the Dow was up 11.02%.

• Shares of IMAX (IMAX) jumped almost 12% on Friday after rumors surfaced that Sony (SNE) and Disney (DIS) may be preparing to make a bid at a price of at least $40 per share for the company.
• Amazon.com (AMZN) reported that sales on Cyber Monday following Thanksgiving increased by 44% from the same day in 2009, with orders coming in at 13.7 million compared with 9.5 million items last year.  Amazon’s third-generation Kindle e-reader product is now the best-selling item in the company’s history.  AMZN shares are up 62% over the trailing six months.

Bonds:

End of week bond yields:

2 Year yield = 0.59%, down 6 bps from last week.

3 Year yield = 0.97%, down 11 bps from last week.

5 Year yield = 2.00%, down 4 bps from last week.

10 Year yield = 3.28%, down 10 bps from last week.

30 Year yield = 4.33%, down 13 bps from last week.

• Muni bond mutual fund outflows have reached $9.5 billion in December alone.  The fund redemptions have caused forced selling by fund managers while many individual investors have been selling to due to fear driven by headline including Meredith Whitney’s 60 minutes interview.  This action in the muni market may present a buying opportunity for investors that find themselves in a high tax bracket.

What to look for next week:

9:00 AM          Monday           ISM Manufacturing Index

7:30 AM          Thursday         Jobless Claims

7:30 AM          Friday              Employment Situation