Good Sunday afternoon, and welcome to another edition of Weekend Reading. First, a look back at the week that just finished, then a look forward to the week ahead, and lastly, a summary of articles and research papers worth reading. It was another horrible week for the markets. All major U.S. indices declined significantly, as did most markets around the world. The major U.S. indices all fell more than 4%, taking the Dow and the S&P 500 to 22%-plus losses already for the year.
The culprits are varied, but markets continue to revalue equities. The current downturn is finally being seen for what it is: a contraction on par with the worst economic crises of the past 100 years. Markets are no longer as concerned about systemic financial system collapse, however, as they are about the depth and duration of the downturn. At the same time, equity markets are being hurt by what is happening in Treasuries, where the auctions continue to come fast, big and furious, only to receive uncertain responses. As for next week, it will take little at this point to drive a major market advance. To keep a relief rally from happening, economic and financial data will have to be consistently worse than expected, which, admittedly, is possible. If the data show that things are awful, but not any worse than investors think, you could very well see stocks ride higher, however briefly. The underlying trend remains down, and there is little to change that for now. Turning to economic indicators, next week will be busy, with February nonfarm payrolls, same-store retail sales, plus the Federal Reserve's anecdotal Beige Book report on the economy. There are also speeches scheduled from Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner.