I like the summary. For reference only.
Recap of the Previous Week: Weak Consumer Sentiment Report Sparked Plunge
By Joseph Hargett, Senior Equities Analyst
We were about to celebrate the July rally, until the consumer sentiment report arrived on Friday, revealing a continued and deep-seated wariness about the direction of the economy. The week's gains disappeared in the blink of an eye.
Earnings season kicked off on Monday, and anticipation ahead of Alcoa Inc.'s (AA) unofficial start to this quarter's round of reports held Wall Street largely in check. Traders were concerned about poor economic data out of China, but the Dow Jones Industrial Average (DJIA) still managed to end the day in (barely) positive territory, adding 0.18%.
Patient bulls were rewarded on Tuesday, as in-line earnings and a cautiously positive earnings outlook by Alcoa provided the impetus for a triple-digit gain for the Dow. Wall Street was in such a good mood that it even shrugged off news that Moody's downgraded Portugal's sovereign debt ratings. When the dust finally cleared, the DJIA had added 146 points, or 1.44%, to close above the 10,300 level for the first time since June 21.
On Wednesday, the blue-chip barometer extended its winning streak to seven sessions in a row, but only by the skin of its teeth, advancing 3.7 points, or a tiny 0.04%, on the session. Weak June retail data set an early tone, as the Commerce Department reported that sales at U.S. retailers declined 0.5% in June. Furthermore, minutes from the latest meeting of the Federal Open Market Committee revealed the Fed's lowered outlook for U.S. economic growth, including the group's "need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably." Eek.
The Fed's worries about the slow recovery, along with weak manufacturing data out of the New York and Philadelphia areas, weighed heavily on the market on Thursday. JPMorgan Chase & Co. (JPM), the first of the big banks to report earnings, offered up a report that exceeded expectations, but CEO Jamie Dimon was less than upbeat in his comments about the economy's health. The Dow spent much of the day as much as 100 points or more in the red. However, last-minute rumors -- later confirmed -- that Goldman Sachs (GS) reached a settlement with the Securities and Exchange Commission reinvigorated the bulls, and stocks pared most of their losses by the close. The Dow ended its seven-session winning streak, but closed down only 0.07%.
The Goldman settlement, and the news Thursday that BP plc (BP) had finally managed to cap the Gulf oil leak, might ordinarily have provided a jumpstart to trading on Friday. But consumer sentiment fell off a cliff in July, reaching its lowest level since August 2009. The consumer sentiment index, which is a survey conducted by Reuters and the University of Michigan, fell to 66.5 in early July from 76 in late June. Analysts had expected a much smaller drop-off. Traders were also clearly disappointed by earnings in the financial sector, particularly by Bank of America (BAC) and Citigroup (C.) The Dow responded by sinking like stone. By the close, the Dow had dropped 261.41 points, or 2.52%, wiping out the week's gains and then some. The Dow lost about 1% on the week, while the S&P 500 Index slipped 1.2%, and the Nasdaq Composite fell 0.8%.
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