The market got back on track last week as the majority of the major averages posted new recovery highs. Of the eight indexes that we track, only the AMEX and the Dow Jones Utility Index failed to score new highs. The Dow Jones Industrial Average, which recorded two 100-point gains during the week, jumped 173 points (+1.83%) and closed at 9644, it’s highest close in 15 months. The NASDAQ, which crossed over 1900 to its highest level since March of 2002 added 50 points (+2.70%) for the week and closed at 1905.
The percentage of bullish investment advisors rose once again to a bearish 56.1%, up a touch from last week’s neutral 54.1% reading. For the week ending September 17th, U.S. equity mutual funds had solid inflows of $2.2 billion compared to inflows of $94 million the previous week.
This week will get off to a bumpy start as currency exchange issues and overbought conditions intertwine with the upcoming earnings preannouncement season. Over the weekend, the G-7 ministers issued statements calling for greater flexibility in currency trading (read: China and Japan aren’t playing fairly). The result in the early going is a much weaker dollar, a 4% loss in Japan’s major stock exchange, lower stock prices in the U.S. and higher interest rates, a nasty combination but not one that requires action as of yet.
THE COMPASS PORTFOLIOS
No changes to our models again this week. As evidenced by last week’s solid gains, the trend higher is still in place, although our market data does indicate that all market segments are ahead of themselves at the current time. This condition sets the state for a bit of profit-taking by more active traders, but as long as the scope and duration remains in check, it may well attract additional dollars to the markets.
U.S. Treasury Secretary John Snow said Friday the United States was doing all it could to boost growth, but other leading economies needed to do more. “The United States is trying to step up to the plate…We are concerned about many parts of the rest of the world in terms of their growth rates,” Snow told a luncheon hosted by Pakistan’s Finance Minister Shaukat Aziz. Snow said private sector forecasts suggested U.S. economic growth would reach an annual rate of four percent or greater for the rest of this year and top four percent in 2004.
As evidence of Snow’s optimism, a key gauge for predicting economic activity released last Thursday rose for the fourth straight month in August, pointing to a further pickup in growth in the second half of the year, a business group said Thursday. The index of leading indicators rose 0.4 percent to 113.3 last month, the Conference Board said, in line with economists’ forecasts. The August reading followed a revised 0.6 percent increase in July. The board said the 2.5 percent increase in the leading index since its low in March has already been followed by stronger economic growth in the second quarter. But the improved outlook was tempered somewhat as a reading of the current business climate showed weakness.
And lastly, as the challenging business climate has resulted in dramatic job losses, lower bonuses, and pay and benefit freezes, less than half of all Americans say they are satisfied with their jobs. According to a survey by the Conference Board, only 20 percent of respondents said they are satisfied with their promotions and bonus plans, and only about a third said they are content with wages. Workers aged 45 to 54 expressed the least amount of satisfaction, at 46 percent of respondents. The biggest decline, however, came from those aged 35 to 44. Levels of satisfaction for that group fell to 47.2 percent of respondents, from 60.9 percent in 1995. Is anybody happy? Most respondents, it seems, were satisfied with their commutes and most like their co-workers. And — not surprisingly — the most satisfied households were those with earnings of more than $50,000. Even within that group, however, satisfaction declined markedly, to 53.4 percent of respondents, from 66.5 percent in 1995.