THE MARKET’S BIGGEST WINNER last week just might have been General Motors, if only because the auto maker finally made it back to Wall Street after a searing trip through bankruptcy court. GM (ticker: GM), which parked a Camaro in front of the New York Stock Exchange to herald its return, priced 475 million common shares at $33 apiece. The stock opened above 35 but ended the week at 34.26, endowing the new GM with a market value of more than $50 billion. The government was a lesser winner, pocketing only about $14 billion of the $49.5 billion it had ponied up last year to save the struggling company.

Including GM, new stock issues and secondary offerings totaled $24.6 billion last week, the second-heaviest week for stock issuance since Dec. 18, 2009. While a more receptive market is a good sign for investors, JPMorgan says the fresh supply of stock likely weighed on the market, especially as actively managed U.S. investment accounts have seen $1.6 billion of outflows in the past four weeks.

As for the broad market, there was lots of activity but little change in prices. The Dow Jones Industrial Average closed up just 0.1%, to 11,203.55 for the five trading sessions, after tumbling about 1.6% Tuesday and regaining the same percentage Thursday. The Nasdaq Composite rose 0.7% at 2518.12.

“It was a weird week,” says Michael Purves, chief equity strategist and head of derivatives research at BGC Financial in New York. “Thursday was a test, arguably a trap for bulls who may regret it next week. There may be forces of continued selling into any rally. Investors want to lock in gains if they are up for the year and reconnoiter after things settle down.”

Thomas J. Lee, equity strategist at JPMorgan, says the week that just past amounted to a “healthy but harrowing” pause. Lee thinks economic data is showing strong cyclical momentum, from jobless claims of 439,000 reported last week, in line with expectations, to retail sales rising 0.4% in October (excluding autos and gas), double the Street’s forecast.

THE WORLD’S POLICY MAKERS NO LONGER are pulling their oars in the same direction. The market’s mid-week setback owed in part to fears of a looming sovereign-debt crisis in Ireland and talk of China’s plans to tighten credit, even as the Federal Reserve is adding to the U.S. money supply. The Fed even stole a minute from all its quantitative easing to order a second round of bank stress tests early next year, just to prove that the nation’s largest bank-holding companies can withstand “adverse economic conditions.”

Investors didn’t take the news well; the Keefe, Bruyette & Woods bank-stock index slumped 2.3% on the week.

For good measure, the Federal Deposit Insurance Corporation highlighted 50 criminal investigations into former bank employees. And two more of associates of Bernard Madoff were arrested (Source: Barrons Online).

U.S. Stocks, Foreign Stocks, and Bonds were little changed last week.  During the last 12 months, U.S. STOCKS outperformed BONDS.



Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Assumes dividends are not reinvested.

The economy continues to give us mixed signals. Here is a succinct list of what happened last week:

Positives
1) University of Michigan confidence rises to 5 month high
2) Initial Jobless Claims “4 week average” falls to lowest since Sept ’08
3) NFIB small business optimism index rises almost 3 pts to best since May
4) Wholesale Inventories jump more than expected, good for GDP
5) Global criticism of Fed’s Quantitative Easy II

Negatives
1) Consumer 1 yr inflation expectations rise to 3%, most since June
2) 30 yr bond auction very weak, yield rises to 5 month high, 10 yr yield at two month high, average 30 yr mortgage rate rises to one month high.
3) Chinese stocks slammed on inflation and rate hike fears
4) Interest rates on PIG (Portugal, Ireland, Greece) jump. Spain and Italy also see rise in yields, pressure for Ireland to tap EFSF grows
5) Wholesale Inventories rising, unwanted inventory?
6) Cisco’s earnings report disappoints Wall Street- company specific or not?

This year for the first time ever, China is investing more overseas in assets like iron, oil, and copper than it invests in U.S. Government bonds.

Valley National provides year-end tax planning services designed to save clients taxes while the tax year is still open.  One example is reviewing investment portfolios for loss positions on stocks or mutual funds – up to $3,000 of losses will be offset against regular income on your 1040.

“There is only one way to succeed at anything and that is to give everything.”

Vince Lombardi

1. Computer Chip in a Pill May Be Approved in 2012 – The chip is activated by stomach acid and transmits information to a patch attached to the patient’s skin, which then sends it on to a doctor via the Internet or a smartphone. The first application of the chip-in-a-pill — or as it is officially known, the Ingestible Event Marker (IEM) — is expected to be for transplant patients, to help avoid organ rejection. Source PHYSORG.com





2. Home Security Robots Hit the Market – a modified version of the Rovio from WowWee, has a camera, microphone and speakers atop a three-wheeled platform. From anywhere with a WiFi Net connection, you can send your robot zipping around the house, returning a video signal along the way. As creepy as it sounds, you could even talk to the guy and say, “Get out of there. There’s nothing valuable. I’m calling the police. “For all its power and ability, the Rovio is usually found in a store’s toy section for about $170. Other robots from toy makers, like Meccano, are there as well. Outfitting a house with a fleet of robot guards is no longer just for the very wealthy. Source: MercuryNews.com

      vs.      

My wife Jo Anne volunteered to work for me this weekend.  She agreed to drive around the Lehigh Valley, visit the shopping malls, walk through various sections of the mall, stop in several of her favorite stores, and observe shoppers buying habits.   (This was a very expensive assignment!).

Her report:  “You can’t tell me there is a recession out there.  The malls were jammed.  I had trouble finding a parking spot.  The stores were packed.  The checkout lines-too long.  And, the selection (inventory) was limited.”

There we have it. 

STOCKS HEADED SOUTH last week, ending a five-week winning streak and posting their biggest weekly drop in three months. You can blame fears of a slowdown in China, which swept through the market Friday, but it was a lackluster profit outlook from tech titan Cisco Systems (ticker: CSCO) that really got things moving in the wrong direction, for both the major indexes and the company’s shares.

Technology and financial stocks took the brunt of the selling, which saw the Dow Jones Industrial Average close down 2.2%, to 11,192.58, for the five trading sessions. The Nasdaq Composite gave up 2.36%, to 2518.21.

Cisco, a maker of networking gear, stunned Wall Street after Wednesday’s close by forecasting lower revenue growth in its current quarter and for all of fiscal 2011, ending next July. The company cited budget cutbacks by governments in the U.S. and abroad, as its shares fell 17%, to 20.15 on the week. Another tech bellwether, Intel (INTC), announced a 15% dividend increase Friday, calling 2010 its “best year ever,” but the news did little to reverse negative market sentiment. Intel ended the session up 1.5%, at 21.53.
Louise Yamada, a technical analyst based in New York, said technology remains one of her favorite sectors, but the names that have advanced “are due for a well-deserved rest.”
CHINA’S SHANGHAI COMPOSITE INDEX had its worst week since early July, falling 4.6% on fears that the Chinese government could further tighten monetary policy. Consumer prices in China rose a higher-than-expected 4.4% in October.

Any slowdown in China’s growth, and that of other emerging markets, would curtail demand for raw materials. Perhaps in anticipation, oil fell more than 3% Friday, and the December contract knocked off $1.97 a barrel, to near $85, on the week, securing its fourth decline in five weeks.

Yet, there’s talk on the Street that the price could spike to $100 per barrel in the next 12 months. JPMorgan raised its oil-price estimate last week, and now expects crude to average $90 a barrel in 2011, about $5 above the consensus.

Natural-gas prices fell 3.5% for the week, closing at $3.79 per million British thermal units. Weak gas prices didn’t seem to help Chevron (CVX), however, which agreed to acquire Atlas Energy, one of the early explorers in Pennsylvania’s gas-rich Marcellus shale. The deal, for $3.2 billion in cash and $1 billion in debt, was announced after Pennsylvania Republicans scored electoral victories, which eased worries about regulatory restrictions on fracking, the messy process of forcing gas out of underground shale rock (Source: Barrons Online).

In an unusual week, U.S. Stocks, Foreign Stocks, and Bonds all declined – one week after they all advanced. During the last 12 months, U.S. STOCKS outperformed BONDS.