Markets Weather The Storm, Show Recovery

The major U.S. Indexes all posted significant gains from the previous week’s close. Some Asian markets also advanced, but the Shanghai Composite and Hang Seng both closed with losses. European indexes still faltered, but were up from the previous week. The end of the week saw the stocks of certain luxury purveyors like Tiffany and Co. and Coach posting healthy gains. Even after dramatic losses and unpredictable volatility, history shows us that the market will usually right itself within a few weeks or months.

Warren Buffet delivered a much-needed vote of confidence in Bank of America by announcing that his company, Berkshire Hathaway, would make a 5 billion dollar investment in Bank of America in exchange for preferred shares paying a 6% per annum dividend for the next ten years. Buffet also received the option to purchase as many as 700 million shares in BofA at just over $7.00 per share until 2021. Bank of America has been working to raise capital in the face of falling stock prices and nervous investors. A slew of litigation prompted by the mortgage crisis has been dragging down the bank’s stability.

On Monday, gold again reached a new record of over $1900 USD per ounce in after-hours trading, but declined as the week went on. Thursday was the low for precious metals, with gold sinking as low as $1,702.44, its lowest in two weeks. Silver and platinum also traded lower on Thursday. Currently gold is at $1,823.40, and silver is at $41.24. Brent oil barrell prices are down slightly, but U.S. crude prices have increased by 2%. Stocks in oil companies have been recovering conservatively in the past week. The national gas price still stands at $3.61 per gallon.

JOBS-LESS RATE INCREASES AT APPLE

Steve Jobs’ resignation from Apple shook the markets on Wednesday. Jobs said that he was no longer able to perform his duties. Jobs, who received a liver transplant in 2009, had been on medical leave since January of this year. Apple Chief Operating Officer Tim Cook will assume his position, as recommended by Jobs. Shares of Apple, considered one of the strongest U.S. blue chip stocks, dipped more than 5% to $355.70 during after hours trading on Wednesday. Apple’s losses dragged the Nasdaq down with it. However, Apple had already recovered most of its lost value by Thursday afternoon. Currently, Apple shares are trading at $383.16.

GO WEST, CHAIRMAN

Tucked away in Wyoming’s Grand Teton mountain range, Federal Reserve leaders, central bank executives, and leading economists from around the world met last week to discuss the world economic situation and plans for the future. The theme was: “Achieving Maximum Long-Run Growth.” Fed Chairman Ben Bernanke’s remarks from Jackson Hole indicated the Fed would not be implementing more stimulus measures very soon. Bernanke, under pressure to deliver results, was expected by some to introduce another round of quantitative easing. But all this monetary monkeying threatens to dilute the dollar further, and Bernanke is so far holding off on making any more adjustments. The Fed can only do so much, and Bernanke seems to be at the bottom of his bag of tricks. Bernanke called upon Congress and the Obama administration to implement policies that will support recovery. But Bernanke hasn’t closed the door completely – he said the Fed would consider more measures during its September meetings.

Late in the trading day on Friday, The Euro, Pound and Yen all closed higher. The U.S dollar recovered about half of its losses from early Friday, and the Canadian dollar dipped slightly.

On Sunday, much of the deserted financial district was flooded from the effects of Tropical Storm Irene. U.S. markets will open for business as usual tomorrow in spite of the storm, which did not cause significant damage to the financial district. Storm damage, not including flooding, is expected to top $1 billion dollars nationwide.

Market Positions on Friday, August 26: