US Market Week Wrap Up

Markets were jittery again this week, as more negative economic data and rumors kept the tone downbeat. Credit markets continued to show distress as bad news surfaced around the globe. A report in the Financial Times on Wednesday indicated that KKR Financial has delayed payment of billions of dollars of commercial paper for the second time, while in the UK Alliance Leicester declined after it said its previous EPS guidance was no longer appropriate and added it sees lower new customer lending volumes in 2008. France's Credit Agricole dipped on reports the bank was likely to announce further write downs.

The CPI data came in a tenth of a percent above expectation on the headline and core numbers, and the Philly Fed index came in at a very disappointing -24 (vs. -10e) midweek, which reinforced the cautious tone for equities. Indices hit weekly highs on Thursday morning and then commenced a pronounced downward trend on further credit market fears. One bright spot was Wal-Mart's earnings on Tuesday; the company reported solid results, helping the retail sector minimize losses for the week.

In the bond market, 2-year notes had their first weekly drop this year, after nine straight weeks of gains, and the difference between the 2-year and 10-year notes' rate narrowed for the first time in two months. Despite market jitters, expectations for a larger Fed rate cut declined during the week; by the end of the week Fed funds futures no longer showed any expectation of a 75 basis point cut.

In commodities crude oil popped above $100 again early in the week, but prices eased off after legendary oil trader Boone Pickens stated he is currently short the oil market. US indices were higher on Tuesday's open, driven by gains in commodity stocks. Over the weekend Brazil's Vale had confirmed agreements to raise ore prices 65% for shipments to Japanese and Korean steelmakers. The news has spurred a rally for a wide range of mining and metals stocks. Futures prices continue to surge across all the metals led by another new all-time high in platinum and multi-month highs for front month copper. Spot gold was up about 4% on the week, closing at $945.53, and the April gold futures contract rose as high as $958.40.

The rumor mill was in full swing as chatter about more writedowns at major banks and brokers circulated, though none actually came to light. The impending ratings action from Moody's on the monoline insurers also added to negative sentiment (Moody's has said it will make an announcement by the end of the month), but equity markets came roaring back late in the session on Friday after a CNBC report suggested a bail out for troubled bond insurer Ambac is likely to be announced early next week. For the week, the DJIA rose 0.25%, the S&P500 rose 0.22%, and Nasdaq was down 0.8%

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