Weekly Update – March 16, 2012

After seven straight positive trading sessions, the Dow lost momentum on Friday, closing the day down 20 points.  For the week, the Dow gained 310 points, or 2.4%, its best weekly gain since mid-December.  For the year, the Dow is now up 8.3%, the index’s best yearly start since 1998.

It was quiet in Europe as Greece and its lenders continued to digest the effects of the debt restructuring completed last week.  Overall, European stocks posted their biggest weekly gain since early February on the easing of tensions related to the sovereign debt crises and positive comments from the US Federal Reserve that the US economy is gaining strength.  Backing the Fed’s comments was a number of generally positive US economic indicators.  February retail sales were up, initial weekly jobless claims again fell week-over-week, and manufacturing data showed improvement.  The consumer price index ticked up slightly in February due to a 6% increase in gas prices, but remains in check.  Perhaps related to the price data, March consumer sentiment fell slightly from February, worth noting as consumer spending accounts for 2/3rds of the US economy.

Oil closed up $1.95 to $107.06 per barrel on Friday, a day after a report that the US and Britain were poised to cooperate on the release of strategic oil reserves quickly dropped the price $3.  The commodity rebounded when the White House commented that no action is imminent, but the price swing showed the sensitivity of oil markets to a release of reserves.

On the strength of the major US Banks passing the Fed’s stress test examination (announced Tuesday), our trust preferred portfolios performed well this week and continue to outperform the Dow, returning over 10% year-to-date through yesterday, Thursday, March 15^th.  Though the passing of the stress test does not guarantee complete safety from a financial crisis, the news was viewed as a positive, and many banks, in a show of strength, announced share buyback plans and increased dividend payments.

Next week, the state of domestic housing dominates the economic agenda as February housing starts, existing home sales and new home sales data are scheduled to be released on Tuesday, Wednesday and Friday, respectively.  Look for housing starts and existing home sales to increase and new home sales to remain flat.

Have a good weekend,

James Skjong