Weekly Update

Market Update for August 27th, 2010

Today, Fed. Reserve Chairman Bernanke said the Fed would do whatever it takes to keep the economy from falling into another recession. While he didn’t say by what means the Fed could prevent a recession, he did mention that “unconventional measures” would be considered. We aren’t exactly sure what policy tools, unconventional or not, the Fed has left – since it lowered interest rates to zero some time ago. No matter, the stock market took comfort in Bernanke’s speech and rallied sharply. The Dow finished up over 160 pts, despite losing a little over one half percent for the week.

The second quarter GDP estimate released today was a modest help. The estimate showed growth 1.6 percent in Q2, which was higher than analysts expected and helped to temper the growing concern about a double dip recession. Even still, economic news was decidedly negative this week. Existing home sales plummeted in July, durable orders were barely positive, consumer confidence was worse than expected, and new home sales also were weak. It’s no surprise, then, that 10-year Treasury yields fell to a 17 month low.

Next week is a busy one for economic data as we head into the Labor Day holiday weekend. With manufacturing data, consumer spending, and the August jobs report all released next week, it could be a volatile week for the market.