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What’s Happening On Wall Street.

US Stock Market Report for the Period July 25 – August 1, 2011
Over the last week, the continuing debt discussions have had a major impact not only on US stocks, but also at the international level as well. Stock markets activities were cautious at best as the world waited on a debt deal to be finalized. The month ended with news that a deal had been reached which resulted in stocks rising in the US and international markets. The immediate increases following the deal were tempered by cautious selling as the full impact of the deal is not yet known.

At the start of business on August 1, traders were cautiously optimistic. Figures for the main markets started higher than Friday, but began showing slight decreases later in the day. The Dow Jones Industrial average was down to 12,063.77, a fall of 79.47 points, while Standard & Poor dropped 10.70 points to 1,281.58. The Nasdaq also fell a bit by 16.75 points to 2,739.63.
The week of August 1 to 6 will no doubt be an important one as it relates to the global as well as US stock market. This period will see the real reaction to the debt deal as markets adjust to the perceived impact for the immediate future. By the end of the week hopefully the Senate and the House of Representatives would have signed off on the package.

Impact of GDP on Stock Market Performance
As if the threat of the US losing its triple A rating was not enough, the stock market also took a hit due to poor GDP (gross domestic product) data. The projected increase for the 2nd quarter was a modest 1.6 percent, but in actuality there was only a 1.3 percent increase according to figures from the Commerce Department. This modest figure has dampened projections since GDP is used to track economic growth.

Moody’s Reports Cash Hoarding
There have been reports of cash hoarding among some companies in response to the instability in the market. Moody’s has revealed that between 2009 to the end of 2010, there was an 11 percent increase in cash held by companies. The report indicates that as much as $1.24 trillion dollars is being held. Over a half of this money is invested or banked in foreign countries to be used for various purposes.
Senior vice president of Moody’s, Steve Oman stated that among the reasons for these holdings are investments in operations the companies have overseas, acquiring overseas interest and to benefit from overseas tax breaks, which they then repatriate to the US. Overall, the combination of the poor GDP figures and the debt ceiling crisis has placed the US stock market in the worst position it has been in for over a year.

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Stock Market – 1st Week of July 2011

The week ending July 1, saw the US stock market showing its best performance over the last two years. In fact, the DOW rose to a fairly decent 648 points. The showing for last week was partly attributed to steps by Greece to deal with the country’s financial crisis. Some industry experts also believe that the slight flickers of hope from the US manufacturing sector also helped. So far, this week seems to be maintaining the momentum, with reports that the DOW Jones and S&P have had a 5-day winning streak.

The DOW overcame slight hiccups earlier in the week to end on a rising note, registering 12,626.02 or a 56.12 point rise at the end of trading on Wednesday, July 6. There were increases on the other main indicators as well, with the Nasdaq rising by 8.25 points moving to 2, 834.02 and the S&P advancing by 1.34 to 1,339.22.
The weak service sector job market is partially responsible for the slower market this week. Interestingly, while showing slower than anticipated job growth, the service sector also registered 19 straight months of job growth in the sector.

US Stock Futures Continue to Fall
The activity of the leading international markets continues to have a negative impact on US stock market futures. The downgrading of Portugal’s debt rating to ‘junk status’ by Moody’s lead to lower European stock markets. The continuing financial tremors in Europe are having a less than desirable effect on other stock markets globally. The downgrading of Portugal’s debt rating resulted in Asian markets closing the day with mixed trading.

With China set to increase its interest rates by a quarter point there will be a negative impact on the market. There are expectations that the hike which is due to the country’s high inflation rate, is expected to happen by the end of the week at least.

With trading taking a day off due to the 4th of July celebrations, the reduced activities also helped to lower the stock market futures. Reports indicate that the DOW Industrial Average futures dropped 54 points, the Nasdaq 100 was down by 8.75 points and Standard & Poor’s 500 also fell 8 points. Investors the world over are being cautious as they watch to see what will happen in the Eurozone as well as in China.

Slowing Stock Market Derailing Takeovers
The continuing snail’s pace of activity in the global stock market is negatively impacting takeovers. Between May and the end of June 2011, there was a 22 percent fall in the value of takeovers according to Bloomberg.

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