Dow Falls, Street Climbs

Friday the Dow closed down 122 points, while Wall Street posted its first 2 week climb for over a year, however small. This is on the wake of the Fed’s announcement on Wednesday to buy over a trillion dollars in debt securities in an attempt to spur lending and spending. The market jumped up on Wednesday after Bernanke’s Beneficent Buying was announced, then investors began considering the long-term inflation that could arise from the Fed printing all its own money, and there were losses on Thursday and Friday. Decliners win versus Advancers by three to one.

Overall, for the week ending Friday, March 13, the Dow was up 0.8 percent for the entire week. This was the second week in a row the Dow gained a net advance, and the first time since May of 2008 this has happened. The dollar fell at least five percent against the euro, while oil prices shot up to more than $51 a barrel, the highest crude has been so far this year.

Experts on the Street warn about the fall-back or retrenchment for which many stocks were due. If you get a great run like on Wednesday after the Fed’s decision, then you are going to see a pullback.

Other stock indicators were losers for the week as well. The S&P 500 index fell about two percent, and the Nasdaq almost as much, but the Russell 2000 closed just over four hundred for a loss of over three percent, on Friday.

The stock market began a rally run up from 10 year lows about two weeks ago when confidence returned to banks reporting profits for the beginning of 2009. Fund managers are pointing to the overall move as a signal that the economic crises could be hitting bottom and shouldn’t be hard to sustain growth. Financials have transitioned from over sold to slightly over bought. The 10 year Treasury note yield on the three month bond rose from .18 percent to .019 percent.

Wall Street veterans express a healthy skepticism about the market sustaining the rally, however they are placated by the modest gains following larger ones. Many analysts point to weak knees and high unemployment as a reason the recovery may be too soon to be sustained. So far the rallies have been emotional and news driven some experts claim. The rallies have bounced near the bottom so hard it sucks in investors afraid to miss the rally ready to believe in recovery. Take the mutual funds that have gained a net investment of more than $12 billion as reported by TrimTabs Investment Research.

For the week’s end the Dow closed up more than half a percent. Small companies had net gains in the Russell 500 index of almost two percent. Elsewhere in the world, Britain’s FTSE 100 index rose three fourths of a percent. In Germany the DAX index gained more than a half of a percent.