Friday, July 31, 2009

Market Reflections 7/30/2009

Investors looked past a jump in initial jobless claims, reacting instead to company news including strong earnings from handset maker Motorola and Goodyear. The S&P 500, which is approaching 1,000, rose 1.2 percent to end just over 985. The week's big push to curb speculation now includes proposed legislation that would regulate over-the-counter derivatives including credit default swaps, which many have blamed for adding to volatility during the post-Lehman meltdown. Financial reform efforts have also been aimed at separating credit units from industrial conglomerates, but the efforts don't appear to threaten GE Capital. Key lawmaker Barney Frank said it would be a mistake for GE to spin off the unit, comments that improved confidence in the unit and in GE itself which jumped nearly 10 percent on the news and which helped to feed the day's rally.
Clarification from Chinese officials that the government is not seeking to limit loans fed a big rally in commodities including copper which rose 3 percent to end at $2.54/lb. Volatility in oil continues with WTI jumping 6 percent to $66.50. Gold ended slightly firmer at $936. Treasuries rallied on the day following a very strong 7-year auction that capped a giant week of new supply and followed weak auctions earlier in the week. The 7-year yield fell 5 basis points on the day to end at 3.24 percent.

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