U.S. markets waver following Labor Day

U.S. markets fell, then rose tentatively over Sept 7-10. The week started with further remarks from the Federal Reserve about slowing economic activity and fears European banks may be in worse shape than indicated by recent financial stress tests. In its September Beige Book the Fed noted “widespread signs of a deceleration”, including falling home and commercial real estate sales.

But by the middle of the week things started to turn around, buoyed by President Barack Obama’s US$350-billion jobs recovery plan. The plan includes US$200 billion in tax breaks for businesses investing in new equipment, a US$100-billion extension of the business tax credit for research and development, and US$50 billion over ten years to improve roads, rails, and infrastructure. In addition the Labor Department said initial jobless claims fell more than expected and the Commerce Department said the U.S. Trade deficit dropped to US$42.8 billion in July, down from US$49.8 billion in June.

By the end of the four-day week the Dow Jones industrial average was up 15 points at 10,463 and the S&P-500 had gained 5 points to end at 1,109. Trading volumes were very low: the markets were closed Monday for Labor Day and trading was light Thursday and Friday because of Rosh Hashanah. Gold gained to start the week then slipped, ending the week down 10¢ at US$1,246.70. Similarly, the Philadelphia Gold and Silver index fell 1.28 points to 185.2.

Heavy volume in Alcoa shares only lifted the aluminum producer’s share price US38¢ to US$11.17. In fact, most of the week’s volume leaders lost share price ground: Barrick Gold was down US58¢ to US$44.72, Kinross Gold lost US57¢ to close at US$16.86, and Goldcorp fell US$1.39 to US$41.45. Freeport McMoRan Copper & Gold as well as BHP Billiton bucked the trend, both posting small gains.

And potash producers enjoyed the week. Mosaic climbed US$1.25 to US$59.35 while Agrium added US$1.05 to its share price to reach US$73.59.

On the energy side, shares of BP gained 2% over the week to reach US$38.22 after Fitch upgraded the company’s rating three notches, noting “an end to the threat of further leaks from the Macondo well”. On the other side Pacific Gas & Electric tumbled 8% on Friday after a gas pipeline in California ruptured and exploded.