Click here for the Weekly Wrap by Briefing.com.
BOTTOM LINE: Overall, last week's market performance was negative considering the substantial fall in energy prices, better-than-expected economic data and stable long-term rates. The advance/decline line fell, almost every sector declined and volume was above average on the week. Measures of investor anxiety were mostly higher. However, the AAII % Bulls rose sharply for the week and is now slightly above average levels. In my opinion, while measures of investor fear are elevated from an intermediate-term standpoint, they are still registering too much complacency in the short-term for a sustainable rally to occur. While stocks may have put in a bottom this week, another short period of weakness is likely which should set the stage for a strong year-end rally. The average 30-year mortgage rate rose to 5.98%, but is still only 77 basis points above all-time lows set in June 2003 and down from 2005 highs of 6.04% set in April. The benchmark 10-year T-note yield rose 2 basis points on the week as economic data surprised on the upside and multiple Fed members spoke of the need to stop inflation before it becomes a problem. In my opinion, it is very reckless for the Fed to speak incessantly about inflation considering it is only near average levels by historic standards and a large component of inflation is expectations. The US dollar fell after European central bankers spoke of the need to raise rates for the first time this cycle. Gold rose on strong demand from China, a weaker dollar and inflation worries. Unleaded Gas futures have now plunged almost 40% since September highs even as refinery utilization remains at only 69.8%. Moreover, natural gas saw another inventory build this week even as 64% of daily Gulf of Mexico production remains shut-in. I continue to believe global energy demand destruction, which began a number of months ago, has accelerated meaningfully over the last few weeks and will send energy prices substantially lower over the intermediate-term.
*5-day % Change
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