Goldman Settles and the Week Ahead
Jul 19, 2010
Posted by Jody Eisenman | Filed under Uncategorized
The big news this week on the equity side was the settlement of Goldman Sachs with the Security and Exchange Commission for $550MM, well below most estimates. Their stock reacted favorably as well, with the stock rising over 8 points for the week. The market capitalization of GS (shares outstanding times the price of the stock) rose by over $4BB. In reality, the stock probably would have done better except that the financials took a tumble late in the week. After disappointing earnings from JP Morgan and Bank of America (among others), the financial index led the market lower. By the close on Friday, the Dow lost about 1 pct for the week, but was down about 300 points off its’ high to close at the low. For the year, the Dow is now down a little over 3%.
It is tough for analysts to get a feel for this market. When it rallies like it did between mid-February and early May, sentiment tends to be overwhelmingly positive. When it falls like it did last week, all the nay sayers come out of the woodwork with their doom and gloom. It would seem to me that on a technical basis, S and P 1100 is an important level. I would need to see a solid close above that level to get more positive on the market. We closed Friday at 1065. In the meantime, I expect the market to churn around, driven by earnings and external world events.
Meanwhile, consumer confidence dropped to its’ lowest level in a year, as signs that the recovery is stagnating continue to appear. Two year treasuries dropped below 0.6%. Although very low interest rates tend to lead to stock price increases (as investors figure they can do better in equities as opposed to very low bond yields), the faltering economy is causing great concern everywhere, but especially in Washington. The Obama administration has their work cut out for them.
