A Year After Lehman Collapse & Business As Usual on Wall Street

A five day rally on Wall Street was brought to an abrupt end on Friday, with the Dow Jones industrial average losing 21 points, the Standard & Poor’s 500 index losing 1 point and the Nasdaq composite falling three points. The Dow and S&P had ended Thursday session at their highest levels since 6 October 2008, while the Nasdaq had ended Thursday at its highest point since 26 September. Wall Street’s so-called “fear gauge” the VIX, which typically moves in the opposite direction of stocks, closed at its lowest point since 8 September 2008 on Friday.

Tuesday 15 September marks the first anniversary of the Lehman Brothers collapse, an event that is seen as the flashpoint triggering the US economic crisis. With many being of the opinion that the wheels of the Obama-administration have been turning painfully slowly in putting the US economy back on track, investors will no doubt be interested in the US President’s speech scheduled for Monday, in which he will outline the steps that have been taken in this regard, as well as steps being taken to ensure that a collapse of that magnitude never happens again. Despite criticism from many quarters, it is generally agreed that it was thanks to unprecedented measures taken by the US government, as well as authorities around the world, that the crisis was prevented from escalating into a second Great Depression.

While last week’s rally was encouraging, investors are well aware that it has only returned major indexes to the level they were at a few weeks following Lehman’s collapse last year this time. Also, Wall Street’s trading volume has been light, with investors who have cashed out, or have been engaging in some fence-sitting, possibly waiting for the next round of economic news, including consumer related statistics, to provide some clarity with regard to where the US economy stands on the road to recovery.

The week starts off with President Obama speaking in New York, as mentioned previously. Tuesday sees the release of August retail sales by the Commerce Department. Economists anticipate sales to have risen 1.9 percent, in sharp contrast to the 0.1 percent decline in July. Other reports on Tuesday include the Producer Price Index (PPI), measuring wholesale inflation, which is expected to have increased by 0.8 percent in August following July’s drop of 0.9 percent, as well as the core PPI measurement excluding food and energy costs. The Consumer Price Index (CPI) will be available on Wednesday morning, with a rise of 0.3 percent anticipated for August, following no movement in July. Thursday sees the release of building permit and housing starts statistics from the Commerce Department. Having dipped in July, investors are hopeful for signs of stabilization in the numbers for August. Also on Thursday, the Labor Department will release weekly jobless claims numbers, which is expected to have risen to 555,000 from the previous week’s 550,000. Continuing claims is expected to have climbed to 6.114 million from the previous week’s 6.088 million. State-by-state employment reports for August will be made known by the Fed on Friday. Certainly there is plenty for investors to ponder over in the week ahead.