[dropcap]S[/dropcap]tocks rallied in the first half of the week and fell in the second half, finishing the week about where they started. Information about the health of the US economy seemed to be the main driver. The first half of the week featured positive news on housing prices, while Friday’s large sell-off (S&P 500 down 2.5%) followed a disappointing jobs report showing American employers added almost no jobs in August.
Treasuries were up sharply for the week, primarily due to the jobs report pointing toward continued slow economic growth. The 10 year Treasury yield fell back near historic lows of 2%.
Monday – Greek stocks, and the global stock market, rally on news that the two largest Greek banks (Alpha Bank and Eurobank) will merge.
Friday – US jobs report disappoints.
It was unfortunate to be welcomed into Labor Day weekend with an awful jobs report. The week was a microcosm of the longer trend of ping-ponging between good and bad signs for the US economy. This report had an opportunity to generate some bullish momentum but clearly did not. We still expect the US will avoid recession, but at this point it is clear that 2011 will not be remembered as a good one for the US or global economy.
Stocks are already pricing very low economic growth, so there could be considerable upside in equities in the coming months, but this week was a good reminder of why it makes sense to have some balance in portfolios.