Click here for the Weekly Wrap by Briefing.com.
BOTTOM LINE: Overall, last week's market performance was neutral considering less hawkish Fed comments, healthy retail sales data, decelerating inflation readings, lower long-term interest rates, increasing deal activity, falling energy prices and decent news from the homebuilders. The advance/decline line rose slightly, sector performance was mixed and volume was slightly above average on the week. Measures of investor anxiety were mixed. However, the AAII % Bulls fell again to 46.15%. This reading is now back near average levels, which is a big positive considering most major averages are at least above 4-year highs. The average 30-year mortgage rate fell to 6.30% which is 109 basis points above all-time lows set in June 2003. I continue to believe mortgage rates will head modestly lower over the intermediate-term as measures of inflation decelerate and economic growth slows to average rates. Moreover, the benchmark 10-year T-note yield fell 9 basis points on the week after the Fed made less hawkish comments in their policy statement, foreign demand for US assets hit another record and measures of inflation decelerated.
Small-cap and Nasdaq shares underperformed on profit-taking, option expiration and index rebalancing. Gold fell substantially on the week and appears to have made an intermediate-term top. Unleaded Gas futures were down again and are 46% below September highs even as refinery utilization still remains below normal as a result of the hurricanes. Natural gas supplies decreased more-than-expected this week, however they are still above the 5-year average for this time of year even as over 20% of daily Gulf of Mexico production remains shut-in. It now appears very likely that natural gas has joined oil and peaked for the intermediate-term. As I said last week, prices for many commodities have been driven by fear and record capital inflows into commodity funds, rather than fundamentals. I still expect global energy demand destruction and a significant increase in supplies into 2006 to push energy prices substantially lower from current levels. The S&P 500 is still within striking distance of my mid-year prediction of a double-digit annual gain. The index is currently up 6.44% for the year with 9 trading days remaining.
*5-day % Change
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