Weekly Market Recap: The Dow Rallies, but Oil, Gold and Tech Flop

Dow 10,913 S&P500 1,131 Nasdaq 2,415 Gold 1,624 Oil 78

The Dow (NYSE:DIA) and S&P (NYSE:SPY) rallied back this week, but the Nasdaq (NASDAQ:QQQ) continued to decline after a weak showing for tech. On the commodities front, Oil (NYSE:USO) dropped nearly $2 on more acceptance of the economic slowdown. Gold (NYSE:GLD) also lost some more luster.

Hot Feature: Will A China Slowdown Affect Gold?

Now, for our analysis of the 15 reasons markets moved this week:

Monday

1) Europe. Plans for an ambitious new euro-zone rescue package are coming together, according to the International Monetary Fund, and are expected to increase the size of the euro-zone bailout fund, the European Financial Stability Facility, from 440 billion euros to 2 trillion euros. European governments hope to have the new plan in place within five to six weeks. The IMF assured investors that Europe’s leaders were doing everything they could to combat Greece’s sovereign debt crisis and stop it from spreading, giving the markets a bit of relief. Investors were also heartened to hear that the European Central Bank might choose to cut interest rates at its next policy meeting on October 8. Of course, until any new measures are actually implemented, investors remain cautious, though slightly more optimistic.

2) Libya. Libya has resumed oil production, tapping 15 wells and producing some 31,900 barrels a day, according to Italian oil giant Eni S.p.A. (NYSE:E). Eni reported Monday that production had resumed at the Abu-Attifel fields, roughly 300 kilometers south of the city of Benghazi. Others wells are expected to be reactivated soon. The news had major oil stocks trading up today, including BP (NYSE:BP), Chevron (NYSE:CVX), Exxon Mobil (NYSE:XOM), ConocoPhillips (NYSE:COP), Marathon (NYSE:MRO), and of course, Eni. Many oil stocks were outperforming the markets. 

3) Banks. The financial sector was today’s best-performing sector, with Barclays (NYSE:BCS) leading the way with an over 8% climb, followed by Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and Royal Bank of Scotland (NYSE:RBS), all of which outperformed the Dow, S&P 500, and the Nasdaq.

Tuesday

1) Europe. Markets got a boost today on hopes that European leaders were nearing solid and lasting resolutions to combat the sovereign debt crisis, with the European Financial Stability Facility poised to receive more funding, Greece voting on austerity measures that will ensure it receive its next 8 billion-euro tranche of aid and avoid default, and European Central Bank looking as though it will act more aggressively in the future. However, all that is still just speculation and rumor — no concrete plans have been announced, and Greece’s parliament has yet to approve a very unpopular measure that would raise property taxes and cut public jobs.

2) Banks. As was the case yesterday, banks continued to perform well today, as hope that the sovereign debt crisis in Europe, which would leave many banks exposed to the kind of financial crisis witnessed in 2008, might soon be managed. Shares of JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), and Citigroup (NYSE:C) were all trading higher today, joined by many European banks as well, including France’s Crédit Agricole, Société Générale, and BNP Paribas, all of which jumped over 13% today. 

3) Tech. With Apple (NASDAQ:AAPL) preparing to launch the iPhone 5 next week, Carl Icahn looking as though he’ll step in to save Research in Motion (NASDAQ:RIMM), Amazon (NASDAQ:AMZN) set to introduce its new tablet, said to be the iPad’s biggest competition to date, and a host of other big tech news, it’s no wonder the technology sector was one of the day’s biggest gainers.

Wednesday

1) Europe. Though markets were up the last couple days because of positive news coming out of Europe, investors are now losing faith in European leaders’ ability act quickly and effectively to remedy the sovereign debt crisis and economic downturn abroad. So far, only eight of the seventeen euro-zone nations have ratified a measure that would increase funds to the European Financial Stability Facility, while EU and IMF officials won’t even announce whether Greece will receive its next tranche of aid until next week, at the soonest. Until there is a clear course of action with Greece and with Europe, markets will be prone to continued volatility.

2) Durable goods. The U.S. Census Bureau released its Advance Report on August Durable Goods this morning, showing that new orders for manufactured durable goods fell $0.2 billion, or 0.1%, in August to $201.8 billion. Last month’s decline was the second in the last three months — durable goods orders rose 4.1% in July. Primary metals declined last month after climbing for five consecutive months, and had the largest decline, falling 0.8% to $24.2 billion.

3) Materials. Some of today’s biggest decliners were materials stocks. Alcoa (NYSE:AA) fell 4.4%, making it the Dow’s worst performer, as the prices of some commodities faltered. Alpha Natural Resources (NYSE:ANR) and Cliffs Natural Resources (NYSE:CLF) were two of the worst performers on the S&P 500, falling 9.3% and 8.6% respectively. The basic materials sector declined 3.74%, more than any other sector by far.

Thursday

1) Commerce Department. The U.S. economy grew at a rate of 1.3% during the second quarter, faster than originally estimated last month, as exports and spending on services helped boost gross domestic product. The Commerce Department’s earlier figures had GDP gaining 1% during the April-June period. Unfortunately, the revised report comes just as the third quarter of the fiscal year nears its close, so investors will await the Commerce Department’s GDP report for the July-September period, giving second-quarter growth less weight.

2) Jobless claims. Seasonally adjusted initial claims fell to 391,000 last week, a decrease of 37,000 from the previous week’s revised figure of 428,000. The 4-week moving average was 417,000, a decrease of 5,250 from the previous week’s revised average of 422,250. However, the data don’t distinguish between Americans who stop receiving benefits because they find jobs and those who fall off the unemployment rolls because their benefits expire, so a decrease in jobless benefits claims isn’t necessarily the result of higher employment. Still, it might just be that the previous week’s claims were pushed high by Hurricane Irene, and today’s report is a more accurate reflection of employment trends in the U.S.

3) Tech. Technology stocks were the biggest drag on the markets today, with Netflix (NASDAQ:NFLX) leading the way, declining more than 12% as investors continue to drop the stock following its price hike and the decision to split the company’s DVD-by-mail and streaming-video services. In fact, Netflix shares have declined nearly 50% over the last month. Still, Netflix wasn’t the only laggard today, as technology was today’s worst-performing sector, by far. Even Apple (NASDAQ:AAPL), which is expected to launch the much-hyped iPhone 5 next week, saw its shares fall more than 2% today. Baidu (NASDAQ:BIDU) and Sina (NASDAQ:SINA) were also hit hard by news that the Department of Justice is investigating the two Chinese Internet companies for accounting fraud. Altogether, the tech sector was down 1.54% today.

Friday

1) Europe. The debt crisis in Europe is “all that anybody cares about,” said Dan Greenhaus, chief global strategist at brokerage firm BTIG. As the quarter comes to a close, there are still a number of potential pitfalls ahead, including a decision about Greece’s next tranche of aid from euro-zone finance ministers, who will meet on October 3 to decide whether to release the next 8 billion-euro installment in Greece’s bailout package. Also, only nine of the seventeen nations in the euro zone have ratified measures to increase the European Financial Stability Facility’s rescue fund, a measure many consider necessary to stave off future disaster and economic collapse as the result of the region’s debt crises.

2) Consumer spending. The Commerce Department released its report on consumer spending in August today, which had purchases rising a measly 0.2% as incomes declined for the first time in nearly two years. As a result of stagnating wages, underemployment, and the plunging stock markets, consumer confidence is down, hurting sales at retailers like Target (NYSE:TGT) and Best Buy (NYSE:BBY). Earlier this month, the Commerce Department reported that retail sales, an earlier gauge of household spending, stagnated in August.

3) Banks. It’s been a miserable quarter for banks, and today was no different. Bank of America (NYSE:BAC) shares have declined over 43% in the last three months, making the bank the biggest contributor to the sector’s 17.51% decline. Morgan Stanley (NYSE:MS) came in a close second, with shares declining over 40%, followed by Citigroup (NYSE:C) with a 37.5% decline, Goldman Sachs (NYSE:GS) with a 28.5% decline, JPMorgan (NYSE:JPM) declining 25.5%, and Wells Fargo (NYSE:WFC) bringing up the rear with a 13% decline. While it might not have been a great quarter for tech, the sector declined a slightly less impressive 14%. The sovereign debt crisis has ruled markets all summer, and as a result, banks have been hardest hit, since they are the most exposed to European bond markets.

BONUS: Amazon Cheat Sheet: All the New Kindle Products Making Waves.

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