Markets Still Shaky

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With employment picture still dismal at best, the equity markets continued to struggle before the Labor Day holiday and as we enter the historical weak month of September. When it was reported that no new jobs were created in the month of August this past Friday, stocks took a tumble and finished the week out lower. Economists, which had been prepared for a low ball figure of roughly 75,000, were greeted with a big, far zero. Who would ever have guessed that three years into an economic collapse that has had trillions of dollars funneled into it by the government, notch a month with absolutely no new jobs and unemployment stuck at 9.1 %? In addition to the angst about the steady deterioration or our U.S. economy, market observers are also in a state of high anxiety over the ongoing European sovereign debt saga. European stocks were under extreme pressure this past Friday before the U.S. Labor Day holiday, and were hammered on Monday to the tune of four percent.

As the wild and crazy volatility continued last week, it was a moral victory that the major domestic indexes ended the last week of summer basically flat. The Dow Jones Industrial Average experienced its fifth loss in the past six weeks as it gave up 44 points, or 0.4%, to finish out the week at 11,240. The Standard & Poor’s 500 ended the week down a mere three points, or 0.2%, and now sits at the 1,174 level. The Nasdaq Composite Index eked out a half-point gain to reach 2,480, while the Russell 2000 fell 8 points, or 1.2%, to 683.

Treasury securities continued to put up record low yields, as the Treasury’s benchmark 10year note ended the week below the 2% mark for the first time, as it closed out the summer at a yield of 1.99%. Meanwhile the two-year Treasury yield moved up to 0.21 % last Friday, as bond traders begin to anticipate what the Federal Reserve would do to combat this sluggish economy.

Right now there appears to be only dark clouds on the horizon, much like the weather we just experienced with tropical storm Lee. With zero job growth three years into a recession, investors and the general public are getting antsy to say the least. If things stay bad through 2012, American voters might just vote all the members of Congress out as well as the President. Right now the current uncertainty is pushing investors to pull out of any so-called risky investments -such as stocks, particularly financial ones, the euro and emerging market currencies and pile into safe havens such as U.S. Treasuries, the dollar, the Japanese yen and gold. The current mess has put tremendous pressure on the Federal Reserve and Ben Bemanke in particular, especially since voters are beginning to ask hard questions as to why the Fed actions of the past few years have done apparently nothing to improve the economy. The frustration and anxiety levels are high out there, and now the big question becomes just how patient investors will be, and whether we can find some support in the equity markets.

Looking ahead to economic news this week, it will be a relatively quiet one to say the least. We do have Fed Chairman Ben Bemanke speaking on Thursday about the economic outlook, in addition to President Obama addressing Congress on a new plan for job growth and hopefully a solution for our lingering debt issues. There will also be numerous earnings reports including the following from the more recognizable names: Pep Boys, Casey’s General Stores, Men’s Wearhouse, National Semiconductor, Kroger, John Wiley & Son, and Smithfield Foods.

Looking ahead, now that the end of the month of August is nigh, it’s helpful to keep in mind that September has significantly underperformed the average month over the last 80 years. Like all seasonality plays, this historical measure is by no means a sure thing and doesn’t guarantee another horrible month. However, all of us at Money Management Services, Inc. will be keeping our eyes and ear wide open to conduct any necessary moves to get us through these topsy and turbulent times. We can only hope that you had an enjoyable and relaxing Labor Day weekend. As we venture forward, please do not hesitate to contact us with any questions or concerns. Until next week, take care!

Sources: Barron’s, Wall StreetJournal, Associated Press, Bconodt!J, Gorilla Trading, Dow Jones & Company, Briefing.com

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