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BOTTOM LINE: Overall, last week's market performance was neutral considering weaker economic data and rising long-term interest rates. The advance/decline line fell, most sectors declined and volume was slightly above average on the week. Measures of investor anxiety were lower. The AAII % Bulls rose for the week and is now at above-average levels. The average 30-year mortgage rate rose to 5.74%, but is still only 53 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 15 basis points on the week as investors seem to be factoring in the possibility of stagflation. This also boosted the US dollar and Gold. While Hurricane Katrina may result in a few more weeks of weaker economic data and higher inflation readings, I strongly disagree that inflation or stagflation will be a problem over the intermediate-term. Finally, most commodity prices fell again as more evidence of slowing global demand was evident. Unleaded Gas futures have now plunged almost 40% since their peak during the immediate aftermath of Katrina.
*5-day % Change
