“You could’ve killed me slugging me in the gut like that. That’s how Houdini died, you know…” -John Candy, Planes, Trains, and Automobiles, 1987

By David B. Armstrong, CFA | Nov 29, 2010 | Weekly Market Commentary

It would not be Thanksgiving without a re-visit of this classic movie portraying Steve Martin and John Candy trying to do everything they can to get home for the holiday.  If the movie were remade today, there is no doubt that there would be a hysterical scene involving full body scans by the TSA.

However, it was not the TSA that provided the punches to the gut last Tuesday and Friday that caused the S&P 500 and Dow Jones Industrial Average sell off last week…

Last week’s poor showing in the equity markets were a function of the Ireland debt bailout and fears that Spain and Portugal are not far behind.  Additionally, 170 rounds of 155mm North Korean artillery shot into South Korea caused even more tension in that already tense area and rippled across the financial markets.  Finally, it’s never a good thing when the FBI gains traction in an investigation of insider trading…

The equity markets we track in this report were mixed for the week.  The Dow Jones Industrial Average (DJIA) lost 1.00% last week to finish at 11,092, the S&P 500 Index lost 0.86% to end at 1,189, but the Nasdaq Composite Index rose 0.65% to finish at 2,535.  The Russell 2000, which measures smaller capitalization stocks, rose 1.16% to finish the week at 732.73.

Tuesday and Friday last week were the toughest days for the DJIA, with losses of 142 points and 95 points respectively offsetting a big day on Wednesday when the Dow surged 151 points.  Hopefully we will find out Friday was a poor day in the markets because everyone was out shopping.

Most of the economic news that was released last week was positive.  Consumer spending for September was released and it showed that spending has surpassed the reading’s last peak set back in 2007 and October’s reading increased as well.  We saw an increase in hours worked and an increase in wages as well – a welcome sign for those worried about deflation.  Q3 GDP was adjusted up from the initial report of 2.0% to 2.5%.  Finally jobless claims fell by 34,000 to a level of 407,000 – this is the lowest number of Americans filing for new unemployment benefits since June of 2008 (pre-Lehman collapse) and much better than most economists were predicting.  Continued reports of around the 400,000 range will signal that hiring (labor markets) may be accelerating

Last year we wrote about the relationship between Black Friday (does anyone really need an explanation of what this is after all the news!?) and the stock market.  Remember, it is the performance of the stock market leading up to the holiday season that has the most impact over retail sales, not the other way around.  The outcome of retails sales from last weekend have little if anything to do with telling us how the market will do through the end of the year.

We are still positive about the equity markets as well as over-allocations to the small and mid cap space and the technology sector.  We are still looking at investments in areas OTHER THAN bonds for fixed income allocations.

Call us for help or if you have any questions.

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**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Precious metal investing is subject to substantial fluctuation and potential for loss.