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Another week, another record.
The news flow has become predictable. Each week brings some variation on these items:
- 1) a huge M&A announcement (or three)
- 2) a new Dow record
- 3) worsening housing data
- 4) more craziness in the Asian markets
- 5) a major company going private
As is noted below, the Dow industrials posted its 46th record high since last October. And its 1.7% gain on the week marked its seventh straight winning week. The
added 1.1%, putting it within 5 points of an all-time high. The Wilshire 5000 also logged a record close. Not surprisingly, the laggards have been the tech-laden
and the small-cap Russell 2000. The Nazz dropped for a second week, giving up 0.1%, while the Russell fell 0.7%.
One worry spot: market breadth.
"... as the Dow eked out another intradayhigh Thursday, market breadth -- or the ratio of advancing stocks to declining ones at the New York Stock Exchange -- had turned negative. It was a sign of flagging momentum and had already occurred four times in the past month. Yet such combinations of a Dow record and flailing breadth tended to be rare historically and were seen just five other times since 1940. In four of those five prior examples, the Dow had declined by an average 2% a month later, notes Jason Goepfert ofwww.sentimentrader.com."
With earnings season over, Friday's options expiration behind us and the three-day Memorial Day weekend coming up (with summer not too far behind), trading volumes are likely to slip. How this will impact breadth has yet to be determined.
No matter. Loosen up your wrists, it's about that time! Here's the full roundup of what went down this past week:
INVESTING & TRADING¿ The Dow Hits Its 46th High Since October: "The Dow Jones Industrial Average has hit 46 new records since early October, including one on Friday following a 79.81-point rally. ... The string of new Dow highs since October has left many Wall Street pros and investors wondering whether the market is due for a slump. For now, theworst-case scenario most analysts envision is a temporary setback." (free in The Wall Street Journal) ¿ Is there a "stealth correction" going on? It sure doesn't appear that way. ¿ S&P 500 companies' profit up 8.3%: "Wall Street analysts are calling it the first-quarter surprise -- and wonder if it's a harbinger of even better times to come." ( Associated Press) ¿ The alchemists of finance: The Economist has a huge, broad review of investment banking, trading and markets thatis quite fascinating. (It's free if you sit through a flash advert.) ¿ Closing the Door: Going Private Offers Rewards: "Private-equity firms, which draw billions from rich folks and institutions and supplement it with gobs of borrowing, have plenty of money to spend. They have shown investors very fat returns, largely because they bought companies cheap in 2002 and 2003." (free in The Wall Street Journal) ¿ Top 10 Water Stocks to Quench a Thirst. ( TheStreet.com) ¿ What Companies Stand to Benefit from the Subprime Implosion? "In our eyes, firms that maintain a strong balance sheet with plenty of liquidity and a diversified business are the way to go. Three names pop into our head almost immediately..." (Morningstar.com) ¿ 1st-Time Investors Buy Up Chinese Stocks: "After watching Chinese stock prices gallop upward for months, Ding Xiurui wanted a piece of the action. The 45-year-old office worker stood in line at a bustling brokerage Friday to open her first trading account. She brought her sister, who opened an account too. They joined millions of other novice investors who are jumping into a market that has soared to dizzying heights, with prices up nearly 50 percent this year." ( Associated Press) ¿ Why is the market so sanguine in the face of deteriorating collateral values in the CDO mortgage market? One possible answer: conflict of interest at the credit rating agencies. ¿ HEAVY METAL: Camaro's value laps Dow: "Tom duPont thinks classic cars make better investments than stocks, because even if you lose your shirt, at least you'll enjoy driving one around. 'You can make money with either the right car or the right stock, but cars are more fun on weekends,' said duPont, whose magazine The duPont Registry recently found that classic cars sometimes outperform stocks." ( Boston Herald) The Wall of Worry continues to build:¿ Why the cost of living in retirement keeps going up and up: "Expenses in later life are proving to be bigger and more unpredictable than many retirees anticipated." ¿ The problem with inflation indices "The first time I ever began to doubt my country's cost of living index was in 2002 when euro banknotes and coins were introduced. In Germany, where I was living at the time, the prices charged by many hotels, restaurants and dry cleaners effectively doubled. If you spent a lot of time travelling, as I did at the time, the personal inflation shock was severe. I estimated my personal inflation rate in 2002 to be approximately 10 per cent. The central bankers were in denial because the official inflation index did not register any significant movements." ( FT) See also:Want to Measure Actual Inflation? See the Core/Headline CPI Spread. ¿ Fun with Housing Charts!¿ Housing glut: From bad to worse. "The number of homes for sale in major markets ballooned in April, according to a new industry report, adding furtherevidence that the U.S. housing slump is still trying to find a bottom." ( CNNMoney.com) ¿ Risk Management and the Biology of Trading Psychology. ¿ Contrarians still smiling: "The sentiment picture continues to be one that contrarians interpret bullishly." ( MarketWatch's Mark Hulbert) ¿ Ceiling Height Can Affect How A Person Thinks, Feels And Acts. ( Science Daily) ¿ Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Reporttakes on the free world:"... there's a shadow hanging over Linux and other free software, and it's being cast by Microsoft. The Redmond behemoth asserts that one reason free software is of such high quality is that it violates more than 200 of Microsoft's patents. And as a mature company facing unfavorable market trends and fearsome competitors like Google, Microsoft is pulling no punches: It wants royalties. If the company gets its way, free software won't be free anymore." ( Fortune) ¿ Google (GOOG) - Get Alphabet Inc. Class C Reportis taking no chances with Universal Search (I, Cringely) ¿ Storage Strategies: "Computer users' hard drives are bursting at the seams thanks to the floods of digital photos, videos and music they regularly consume. Now, numerous new products and services are trying to help manage the deluge." ( The Wall Street Journal) ¿ Weekend Jazz: Metheny/Mehldau. ¿ Dan Gross' book, Pop!: Why Bubbles Are Great For The Economy, gets the full treatment from TPM Cafe.
TECHNOLOGY & SCIENCE
MUSIC BOOKS MOVIES TV FUN!
That's all from the rainy/cloudy-but-blooming Northeast, where the chances are near 90% that someone special will
At the time of publication, Ritholtz had no positions in stocks mentioned, although holdings can change at any time. Barry Ritholtz is the chief market strategist for Ritholtz Research, an independent institutional research firm, specializing in the analysis of macroeconomic trends and the capital markets. The firm's variant perspectives are applied to the fixed income, equity and commodity markets, both domestically and internationally. Other areas of research coverage also include consumer, real estate, geopolitics, technology and digital media. Ritholtz is also president of Ritholtz Capital Partners (RCP), a New York based hedge fund. RCP is driven by the analysis performed by Ritholtz Research. Ritholtz appreciates your feedback;
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