DAYTRADING YAHOO!

[PowerPole]

Weekly Recap - Week ending 22-Dec-06

The market sagged this past week. The S&P 500 lost all of the gains from the previous week, and the Nasdaq lost even more.

There were no major reasons for the decline and no sharp moves. The recent momentum simply gave way as the S&P 500 index lost 5 points on three seperate days, 2 points on one, and managed a single up day of just 3 points.

The news this week was mixed. The economic reports brought good news on the inflation front, but there were soft economic reports. On Tuesday, it was reported that November PPI had surged 2.0%. That followed a 1.6% drop the prior month, however, and the big jump represented a rebound in a number of key categories, not any underlying price pressures. The core rate followed a very similar pattern of jumping 1.3% in November after a 0.9% October drop.

More significant was the flat November core PCE deflator reported on Friday. That mirrored the previously reported 0.0% for the core November CPI. The year-over-year change in the core PCE deflator dipped to 2.2%. This is the Fed's favorite inflation measure, and the year-over-year rate is sinking back towards the Fed's comfort zone.

The economic news was less bullish. November housing starts bounced 6.7% and appear to be bottoming. That is definitely good news. But there were signs of weakening trends in manufacturing and business investment. November durable goods orders jumped 1.9%, but excluding transportation the change was a weaker than expected -1.1%. The underlying trends in orders are weak, and the year-over-year increase in total orders is now just 0.3%.

The December Philadelphia Fed index reflected a declining manufacturing sector. It was -4.3 from 5.1 in November. This is just one regional monthly survey, but was taken as a signal of an overall weakening trend.

Also released this past week, but of little significance, was a slight downward revision to third quarter real GDP growth to a 2.0% annual rate from a previous 2.2% rate, a weekly unemployment claims level near recent trends of 315,000, and November personal income and spending increases in line with expectations.

The corporate news was slightly bullish. Morgan Stanley, FedEx, Accenture, Nike, General Mills, Micron, and Walgreen all had good earnings reports. Earnings warnings were light for this time of the quarter. Qualcomm and Palm were about the only noteworthy ones. None of the above had broad impact.

More significant was the fact that Oracle stock took a plunge on Tuesday after their earnings report on Monday afternoon. Revenue and profit were in line with expectations, but the company fell a tad short on a key line for new license revenue. The (over)reaction suggests some fragility in tech stocks. This, along with a sharp decline in Google stock, helps explain why the Nasdaq underperformed this week.

The soft trend this week hasn't done much to dissuade traders that a classic "Santa Claus rally" is likely. The market tends to rise in the final days of the year and the first couple of days in the new year. There are concerns, however, that a consolidation of some degree might hit in January.

Oil prices ended the week at $62.41 a barrel, which is still in a acceptable range for stocks. The 10-year note yield ended at 4.62%, little changed from 4.60% a week prior.

 
 Index      Started Week   Ended Week   Change   %Change   YTD  
 DJIA         12445.52      12343.22   -102.30    -0.8%   15.2%  
 Nasdaq        2457.20       2401.18    -56.02    -2.3%    8.9%  
 S&P 500       1427.09       1410.76    -16.33    -1.1%   13.0%  
 Russell2K      792.71        780.82    -11.89    -1.5%   16.0%