It was a divided market to close the week, with the Dow lagging behind the Nasdaq. Concerns about foreclosures weighed on financial stocks. The Nasdaq was a different story. Google fueled a rally in technology stocks after posting strong earnings. On Friday shares of Google hit their highest level since January and closed up 11.4% at 601.45.

•  Fed Chairman Ben Bernanke added to expectations for another round of stimulus. Bernanke said in a speech in Boston that inflation is too low and unemployment is too high.
• A closely-watched reading of consumer confidence was a let-down.  The University of Michigan’s index suggested consumers are less likely this month to purchase big-ticket items like cars.

On Friday, the Dow closed down 31 points at 11,062. NYSE volume totaled over 1.4 billion shares. The S&P 500 finished up 2 points at 1176. The Nasdaq gained 33 points to 2468. Declining issues beat advancers 3-2 on the NYSE and by 13-12 on the Nasdaq. The 10-year Treasury note fell 15/32 to yield 2.56%.

For the week, the Dow was up 56 points, or 0.5%. The S&P 500 gained 11 points, or 1%. The Nasdaq closed up 66 points for the week, or 2.8%.  Gold closed the week up 1.5%. 

The US Dollar continued its slide through Thursday then managed to post a modest comeback Friday.  Commodities tend to move in the inverse of the dollar and we did see them trade higher the first part of the week and then pull back on Friday.

2Q Highlights

Some highlights from our quarterly newsletter.

On gold:

 "We would not advocate buying gold here.  It is a bit extended and as we stated above, getting a lot of media attention.  Those two things tend to produce rather volatile moves.  If gold does pull back as we expect it will, and you find it suited for your portfolio, that is when you should be looking at adding some to your portfolio."

 On fixed income:

"Fixed income right now is an interesting animal.  Interest rates are so low you would think that bonds can’t go any higher (bonds have an inverse relationship between price and yield:  when prices rise, yields, or rates, go down and vice verca), but they are continuing to go up.  There are a couple factors going on, two of which are 1) increased uncertainty and nervousness about the economy and 2) the government has said they are going to continue to buy bonds (which puts money into the economy).  Do we think there is a bubble in bonds – not yet.  If for nothing more than the fact that everyone keeps asking if there is a bubble in bonds.  Remember real estate a few years ago?  No one believed it was a bubble; it was the ‘new normal.’  When everyone is saying that ultra-low rates are the new normal and they will stay that way forever, that’s when I will think it is a bubble.  But not yet."

On equities:

"According to the Stock Trader’s Almanac, the 4^th quarter of a mid-term election year and the 1^st quarter of the following year have historically been quite strong.  (Of course this should be taken with a grain of salt since the month of September was the opposite of what it has been historically.)  Nevertheless, after what may be a small digestion of gains in early October, we are looking for additional upside in the November through March time frame."