Jill Schlesinger: The Market Week Ahead

The Wall Street sign is juxtaposed against the sculpture on the facade of the New York Stock Exchange, Friday Oct. 3, 2008. Stocks surged while credit markets remained strained Friday ahead of an expected House vote on the government's $700 billion financial rescue plan and after Wells Fargo Co. agreed to buy Wachovia Corp. in a $15.1 billion deal. (AP Photo/Richard Drew)
AP Photo/Richard Drew
The Wall Street sign is juxtaposed against the sculpture on the facade of the New York Stock Exchange
AP Photo/Richard Drew

Shhh ... the stock market just had 2 consecutive winning weeks (and the 3rd gain in 4)!

The last back-to-back weekly gain of more than 2% for the Dow was the two weeks ended 11/13/09. U.S. Stock indexes, now trading in the middle of their 2010 range, have nudged into positive territory for the year.

Still, there's rampant discussion of a double-dip recession on the horizon. We have to be careful not to confuse growth deceleration with recession or a bear market. The U.S. economy grew by 5.6% in Q4 2009 and probably by about 3% in Q1 (final Q1 GDP this week) — that's not a recession, but a slowdown from the government-juiced levels of Q4. At this point, most economists say this is a classic mid-cycle slowdown, a natural part of the recovery process.

Additionally, while we did correct more than 10% from the recent April highs (13.7%, to be exact), we are not yet in a classic bear market (defined as a 20% retreat). I still think that the cyclical bull market is intact.

Here are the issues that could cause the bear to come out of hibernation:

1) A freefall in the Euro + policy mistakes by European politicians. This would cause the USD to rise and sap the energy out of the recovery.

2) Crisis in the European banking system, which would cause widespread collapse in confidence.

3) Fragile U.S. consumer confidence plunges, putting a halt to spending.

4) Deflation breaks out globally.

5) Something bad happens in China — a housing bubble bursts; the government chokes off growth with bad policy decisions; Chinese consumer and capital spending reverses course.

Factoid of the Week:

Chinese consumers now purchase more cars than U.S. consumers (16 million vs. 11 million).

As of June 18, 2010:

DJIA: 10,450 up 2.35% on week, up 0.22%% YTD

S&P 500: 1117 up 2.37% on week, up 0.22% YTD (up 6.4% since June 7 low)

NASDAQ: 2309 up 2.95% on week, up 1.79% YTD

July Crude Oil: $77.18, up 4.6% on week (up 7.9% over past 2 weeks)

August Gold: $1,257.80, up 2.3% on week

European stocks: up 2.4% on week, 4th straight week of gains

Total bank failures for 2010 = 83 (1 new bank failure over weekend)

In the Week Ahead:

Data on existing and new home sales will help determine whether housing is slowing, or headed for a second leg down; the Fed will meet on Tuesday & Wednesday — IR should remain unchanged for the foreseeable future, probably until 2011; and the final reading on Q1 GDP is expected to show 3% growth.

The BP story continues to dominate headlines — here's the average investor's take-away.

  • Jill Schlesinger On Twitter» On Google+»

    View all articles by Jill Schlesinger on CBS MoneyWatch »
    Jill Schlesinger, CFP®, is the Emmy-nominated, Business Analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and Chief Investment Officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.