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Week in Review: September 21, 2007


A look back at the week that was...


Market Recap

The Bulls took control this week as the Four Sisters rocketed past their intermediate resistance levels forcing the shorts to run for cover. The market's surge came on the heels of Helicopter Ben aggressively slashing both the discount & fed funds rate. This was an emotional plus and gave renewed hope to the credit markets. Stocks now appear to be setting up for an end of the year run, but the implications of the latest credit turmoil coupled with asset inflation at the expense of the dollar have yet to play out.

Commodity related issues were the leaders as metals, steel, and oil names surged higher. Gold hit a 27 year high as the dollar broke a key support level after the 50bp rate cut. The yellow fellow has strong fundamental underpinnings and should be poised for a run at its all time high of $850. Any pullbacks in gold should be short-lived and met with a strong bid.

The "Four Sisters" Performance

ETF Watch

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Top Headlines

The Fed met this Tuesday for one of their regularly scheduled meetings, in which they lowered both the federal funds rate and discount rate by 0.5%, putting the rates at 4.75% and 5.25% respectively. Stocks rallied after the decision, led by the S&P 500 which gained 2.9% on the day. (9/18)

Gold also rallied after the Fed`s decision this week as it peaked at $735.50 on Tuesday, marking its highest level since 1980. (9/19)

The Producer Price Index fell 1.4% in the month of August with the largest declines coming in food and energy prices. On the other hand core PPI saw an increase of 0.2% led by rising drug and car prices. The consumer price index fell 0.1% in the month of August led by declining energy prices. Excluding food and energy prices core CPI rose 0.2% led by higher medical prices. (9/18 & 9/19)

Chinese markets reached record levels this week as the Shanghai Composite finished at a record 5,421.39 on Monday. These strong results came despite a 0.27 percentage-point increase on deposits and loans due to inflation concerns. (9/18)

Earnings Snapshot

Morgan Stanley (MS) reported a 7% decline in 3Q profits this week. The company cites volatile market conditions for losses in the firm`s credit products and leveraged lending. (9/19)

Goldman Sachs (GS) saw a 79% rise in 3Q income despite volatile market and credit conditions. The investment bank cites client relations, business diversity and talent for the impressive quarter. (9/20)

Nike (NKE) posted a 51% surge in 1Q earnings. The shoe and apparel company saw strong performance in its European and Asian sectors which were able to make up for a slower U.S. market. (9/20)

Oracle (ORCL) 1Q earnings soared as the company reported a 28% rise in EPS. Contributing to this growth was increased revenue in software licenses and sales. (9/20)

Market Movers: Winners & Sinners

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No positions in stocks mentioned.

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