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Week in Review


A look back at the week that was...


Market Recap

Sub-prime and carry-trade jitters carried over into the new week as the "Four Sisters" were under pressure and undercut their late February lows mid week. Stocks were able to shrug off hot PPI numbers on Thursday as the Yen fell against the Dollar, but the rally was short lived after Friday's CPI data which saw the dollar weaken against its major counterparts. Bonds strengthened early in the week as investors sought a flight to quality amid global liquidity concerns, but changed their course after the inflationary data. It appears the markets now have to discount the fact that the Fed will not be able to cut rates in the coming weeks. To simply say the Fed is in a precarious situation would be a drastic understatement of the systemic risk which currently resides in the markets.

I have been saying for some time that given the technical deterioration of the "Four Sisters," probabilities are high that the equity markets test their 200 dma – 1350 on the SPX. The next level of interest which is outlined in this week's Morning Cup of 'Jo, is 1320 on the SPX. 1320 is critical support and a breach of this level "would call into question a change in LONG term trend."

Four Sisters Performance

ETF Watch

Top Headlines

CDO's (Collateralized Debt Obligations), one of the leading contributors to the mortgage boom may now have a detrimental effect by limiting the supply of liquidity to the mortgage market. Leverage is a double-edged sword. (Tues 13)

The sub-prime lending saga continued as delinquencies and foreclosures set a record high leading many to believe a recession is possible. However many economists believe the housing meltdown is fairly contained and the economy is in fact humming along. (Tues 13)

The Trade Deficit hit a record for the fifth straight year, along with a first time deficit on investment income. (Wed 14)

Higher PPI (Producer Price Index) data led to inflation expectations throwing a curve ball to investors hoping for the Greenspan Put (interest rate relief). (Thur 15)

ICE proposed a merger with CBOT, projecting that the platform would provide substantial cost savings to the two exchanges. (Thur 15)

OPEC concluded Thursdays meeting with the decision to keep supplies unchanged, but stated worries of volatile financial markets. (Fri 16)

CPI (Consumer Price Index) data came in hot Friday morning causing treasuries to lose strength as investors require higher yields during inflationary periods. But a flight to quality stabilized the bond market as liquidity concerns continue to manifest. (Fri 16)

Earnings Snapshot

General Motors (GM) dropped as the well known automaker's financing division is taking a beating in the sub-prime lending arena. The concerns over sub-prime combined with a weak domestic sales forecast sent shares down almost 8%. (Wed 14)

Lehman Brothers (LEH), Bear Stearns (BSC), and Goldman Sachs (MS) posted solid results, but investors still remain cautious. For now, these three giants have managed to curb their exposure to sub-prime and continue to deliver impressive bottom-line growth. (Thur 15)

Market Movers: Winners and Sinners

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No positions in stocks mentioned.

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