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Bumpy ride ahead

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by Peter Switzer

My Saturday morning was either going to be made or broken by two big news stories out of the US. The first was the second quarter GDP for the Yanks and the second was what the Fed Chairman, Ben Bernanke had to say at Jackson Hole, Wyoming, to a mob of central bankers.

It turned out to be a nice start to the weekend but we have a dramatic data week ahead and I would dearly love a better Saturday morning this week!

The Dow ended up nearly 164.84 points or 1.65 per cent to 10150.65 and the S&P 500 added 1.66 per cent to wind up at 1064.59, which was all and good, as well as better than expected, but this week will be another test with the indexes having trouble breaking through key resistance levels.

Good news needed

The GDP number and Bernanke’s promise to keep adding to the money supply to KO any chance of a double dip were well received but for the markets to break out into a sustainable rally, some really good economic news is needed. And the best news would be jobs.

In slightly better news, the University of Michigan and Reuters consumer sentiment reading sneaked up from 67.8 to 68.9 but was slightly less than economists predicted. But you still have to count this as a plus — US consumers are still gaining in confidence.

Then economic growth for the March quarter came in at 1.6 per cent, which beat the 1.3 per cent prediction by economists but it was down from earlier projections of 2.4 per cent.

However, this could say more about the predictive qualities of the economists who made those projections than it says about the US economy.

Clearly, the US economists got ahead of themselves but the economy looks capable of defying the double dip fear mongers.

Looking to other barometers of an economic comeback, I like the Tiffany & Co. reports of a positive outlook for the high-end jeweller and gift business.

Also oil continues to rise, which has been a sign I have noted all last week. This can be a pointer to demand from manufacturers and transporters.

Market movers this week

This week, we will see some big potential market moving data out of the States.

Monday brings personal spending and income while on Tuesday we will see the S&P/Case-Shiller home price index and consumer confidence.

Wednesday brings auto sales, the important ADP employment report, the ISM manufacturing index and construction spending.

On Thursday, there are chain store sales, factory orders and pending home sales but the daddy of all data comes out on Friday with the August jobs report. There is also the important ISM services index but jobs will be the real market mover.

This week will help us understand what will happen in the third quarter, which we are now two-thirds of the way through, so put on your seat belts for another bumpy ride on stock markets this week.

For advice you can trust, contact Switzer Financial Services.

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Published on: Monday, August 30, 2010