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Week in Review: August 17, 2007


A look back at the week that was...


Market Recap

The "Four Sisters" were under attack early in the week as retail sales hurt sentiment, highlighted by Wal-Mart's (WMT) 5% dip on Tuesday. Credit turmoil intensified after mortgage giant Countrywide Financial (CFC) had to dig into its pockets to fund its daily operations. As credit markets worsened the yen rallied sharply as hedge funds liquidated their carry trade positions. Assets which have been elevated in recent years as a function of the carry trade fell hard led by metals, energy, emerging markets, and high beta stocks. Yields plunged as investors began to fear the worst.

With the SPX in the red for '07 and world markets throwing up excess liquidity, markets rallied late Thursday led by short covering on the financials and again Friday after Helicopter Ben lowered the discount rate ½ point while conceding "downside risks to growth have increased appreciably." The Four Sisters were thrown a life jacket on Friday, but the question still remains if we are now entering the "eye of the storm."

The Four Sisters Performance

ETF Watch

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Top Headlines

Retail Sales rose 0.3% for the month of July, 0.4% excluding autos. This marked a significant turnaround from an overall decline of 0.2% in June. (8/13)

This week Goldman Sachs (GS) announced they would inject $3 billion into its Global Equity Opportunities hedge fund which has lost nearly 30% of its value in the last week. Goldman insists that this is not a bailout but rather an opportunity to capitalize on "exciting market conditions". (8/14)

The Consumer Price Index (CPI) for July saw a 0.1% increase, with a 0.2% increase in core CPI. This marks the slowest inflation rate in eight months, with falling energy prices helping offset rising medical and apparel costs. (8/15)

The Japanese yen traded to a 13-month high against the USD in early hours on Thursday as traders cut risk by buying back yen instead of investing it in higher yield investments such as securities. This buyback was triggered by continued worries in the sub-prime market. (8/16)

Countrywide Financial (CFC) shares plummeted this week after reports that the lender drew from an $11.5 billion credit facility in efforts to boost liquidity. (8/16)

Earnings Snapshot

Home Depot (HD) reported earnings of $1.52 bln for the quarter, down from $1.7 bln a year ago. The company credits a weak housing and home improvement market for the decline. (8/14)

Wal-Mart (WMT) reported a 49% rise in second quarter income before the opening bell on Tuesday. Despite these strong reports, the retail giant lowered its fiscal-year earnings forecast by 10 cents to $3.05 to $3.13 per share, causing share prices to fall. (8/14)

Deere & Company (DE) beat third quarter estimates this week despite declining sales. A 30% increase in overseas sales and a weak U.S. dollar allowed the company to beat last year's report by $100 million. (8/15)

Hewlett-Packard (HPQ) reported a 29% rise in third quarter profits. Recent strength in PC sales accompanied with a decline in component parts contributed to the strong performance. (8/16)

Market Movers: Winners and Sinners

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No positions in stocks mentioned.

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