The market started this week in a volatile fashion only to see it finish even more so. The Dow was down more than 250 points at one point and was briefly in the positive territory at another. At close, it was somewhere in the middle by losing 128 points. The S&P 500 fared similarly and posted a loss of 1.1% for the session. As for the week, the Dow was off by 180 points while the S&P 500 lost almost 2%. The news on the economic front was mixed. Certainly few investors paid attention to them today as the market was driven purely by volatility. But we will recap it here anyway. Start with monthly trade figure. The trade deficit came at $59.8 billion, actually better than $62.5 billion expected despite a record $31.2 billion spent on foreign crude oil. Excluding the impact of inflation, the trade deficit was $43.6 billion, the lowest since October 2002. As the real trade deficit is used in calculating GDP, it is quite likely we will see economists revise up Q2 GDP figure in the next few weeks. In a separate report, prices of imported goods rose 2.6% in June from the previous month. On a year-over-year basis, prices have increased 20.5%. Finally, the preliminary reading on Michigan consumer sentiment survey came at 56.6 vs. 55.5 expected.
Financials and consumer cyclicals were among the worst performers in today’s session. The former was heavily influenced by activities in two GSEs, which losted as much as 50% before recovering most of their losses by close. Basic materials and energies fared relatively better. The CRB commodity index finished the session modestly higher. Crude price earlier touched a new high. Treasuries didn’t have a typical flight to quality day as bond traders were afraid that the US government might issue more debt to rescue the two GSEs. And that would mean more supply to the debt market. The US dollar was lower against most major currencies but was off its worst level. The VIX index jumped almost 2 points. And new lows on NYSE and Nasdaq exceeded 1200 issues.

The market was struggling to find a direction on this Thursday. The Dow was up more than 100 points at one point then gave it all back in the next hour. At close, all three major indices were modestly higher. On economic news front, we had most chain retailers reporting same-store sales figure for June. The overall numbers were on average slightly better than consensus with discounters leading the way. In a separate report, weekly initial claims unexpectedly dropped 58K to 346K while economists were looking for a reading close to 400K. But the weekly figure could be distorted by holiday in that week. The continuing claims, on the other hand, increased 91K to 3.202 million, the highest since December 2003. We should see a big jump in initial claims filing next week.
Basic materials and energies were among the biggest winners for the session. Both sectors suffered big losses in the past two weeks so a rebound should not come as a surprise. However, we need to see prices move to new highs before confirming that the bull trend is intact. The CRB commodity index advanced more than 2% led by energies and metals. Crude price jumped almost $5 during the half hour of today’s trading mainly due to technical trading. The US dollar moved lower against most major currencies. Treasuries continued to rally. The VIX index ended the session modestly higher while the market breath was slightly positive.  

Yesterday’s rally turned out to be a one-day event. All three major indices not only gave back all the gains from the previous session, but added a few more. The result is that by the close of today’s trading, all three indices are in the bear market territory, which is defined as a drop of more than 20% from the previous highs. The S&P 500 was the last among the big three to enter the bear territory. It was a light day in terms of economic news. Crude price should not be blamed for today’s sharp sell off as it moved little after plunging more than 5% in the past two days. But deepening concerns over the financial sector outweighed any positive developments in the commodity market.
Utilities were the only major sector that finished the session in green. Typical defensive sectors such as healthcare and consumer staple were faring relatively well compared with the broad market. On the losers’ list, we had names like financials and technologies. It was quite a rare event that the financial sector gained more than 5% on one day then gave pretty much all that gain back the next day. The CRB commodity index recovered modestly from the previous two days’ sell off. The US dollar was lower against most major currencies. Treasuries rallied as typical flight to quality. The VIX index jumped more than 2 points but remained below where it was closed two days ago. The market breath was decisively negative.

The market rebounded sharply on this Tuesday. In fact, the S&P 500 rose more than 40 points or 3% from its pre-market lows and closed near the top by close. The Nasdaq was the best performer among the big three and advanced 50 points or 2.3%. The Dow, which was down as much as 60 points earlier, finished the session higher by 152 points. In today’s economic news, the pending home sales for May fell 4.7%, worse than a drop of 2.8% expected. April’s figure was revised higher to a gain of 7.1% from an initial estimation of 6.3%. For the second day in a row, crude price dropped sharply and provided much needed support to today’s rally.
Basic materials and energies were among the few sectors that ended the session lower. It was quite clear by now that money has been flowing out from the previous hot sectors since the end of the second quarter. But the 6-trillion dollar question now is which place money will move into next. On today’s winners’ list, we had names like financials and transportations. The CRB commodity index continued to slide and ended the session lower by 2.4%. The index has lost 5% in the past two sessions. The US dollar was higher against most major currencies. Treasuries were mixed with the yield curve flattened compared to yesterday. The VIX index tumbled more than 10% and closed barely above 23. The market breath was positive.

The market started the new week in a volatile fashion. The Dow, up 110 points at its best and down 160 points at its worst, closed the session modestly lower. The S&P 500 had a similar volatile session before ending the day at the gate of the bear market territory. The closing price for that index is the lowest since July 2006. There is little economic news. A 2% pullback in crude price and some M&A activities failed to boost the stock market.
Financials and energies were among the biggest losers for the session. The former was battered by concerns that financial institutions especially Freddie Mac and Fannie Mae may need to raise more capitals, which could be a difficult task under the current market condition. The CRB commodity index tumbled 2.7%, the biggest since mid-March. Weakness was widespread across energies and agricultures. The US dollar was mixed against most major currencies. Earlier, it was traded higher on speculation that there may be some joint statement regarding the dollar out of the G-8 summit. Treasuries rallied as typical flight to quality. The VIX index jumped 4% and closed at 25.78. The new lows on NYSE and Nasdaq exceeded 1000 issues.