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Money Watch: Weekly Wrap

"Buy the rumor, sell the fact," is the old Wall Street chestnut that describes the action over the past few months. As rumors swirled that the Fed would buy $600B worth of bonds (QE2), almost every asset class went up-stocks, bonds, commodities-you name it. Once the Fed announcement was fact, there seemed to be a massive order that was disseminated: sell everything.

The "reason" that many cited for the sell-off last week was China's spiking inflation rate and the likely tightening response by the People's Bank Of China (PBOC)-I don't buy it. China's growth and rising inflation has been known for some time, so where's the breaking news?

Nope, this feels like the classic momentum trade, where big money pours into the same "ideas" on the way up and bails out once everyone has made a tidy sum. It probably doesn't hurt that with seven weeks to go before the end of the year, there's a need to lock-in gains.

No need to get too nuts about the week's sell-off in stocks (the worst point and percent loss since the week ended August 13). The bad five-day performance follows a near-18 percent rally from the summer lows. Gold has come off a 21 percent rally and 10-year Treasury yields have dropped from nearly 4 percent to less than 2.4 percent during the same time. Those spikes were all about cheap money from the Fed-the rest of the year will depend more on market fundamentals.

Oh, almost forgot about the G-20's the run down: nothing happened.

  • DJIA: 11,192, down 2.2% on week, up 7.3% YTD
  • S&P 500: 1199, down 2.2% on week, up 7.5% YTD
  • NASDAQ: 2518, down 2.4% on week, up 10.9% YTD
  • December Crude Oil: $84.88, down 2.3% on week
  • December Gold: $1368.30, down 2.3% on week
Total bank failures for 2010 = 146 (3 new bank failures over weekend)

When the Deficit Panel's plan was released, there was something for everyone to hate! Some quick deficit facts:

  1. The deficit is the difference between the money the government takes in (taxes) and what the Government spends (SS, Medicare, etc.). CBO says deficit is about $1.3 trillion this year.
  2. The government borrows money to finance the deficit by selling Treasury securities like government bonds, to the public. Those IOU's then become part of the total debt, which currently stands at $13.7 Trillion
  3. US debt = 95% of GDP, which is the highest ratio of debt to GDP since WW II, when it was 120%. Compare that to the 1990s, when the ratio was down in the mid-60% range.
IN THE WEEK AHEAD: Retail sales and inflation data are the headline reports due in the coming week. Earnings reports from Wal-Mart, Home Depot, Nordstrom, Lowe's, Target, Gap and Sears should provide investors with the retail outlook for the all-important holiday season.

Mon 11/15:
8:30 Retail Sales (expected to rise 0.7%, 0.4% ex-autos)

10:00 Business Inventories

Tues 11/16:
8:30 Producer Price Index (expected to rise 0.8%)

9:15 Industrial Production

10:00 NAHB Housing Market Index

Weds 11/17:
8:30 Consumer Price Index (expected to rise 0.4%)

8:30 Housing Starts

Thurs 11/18:
8:30 Weekly Jobless Claims

10:00 Leading Indicators

Fri 11/19:

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