As I mentioned at the begining of the month October is historically a down month, and so it turned out. The FTSE finished the month 90 points lower.  On Friday all markets took a hit and the FTSE was 93 points lower on the cash and 112.5 points lower on the December futures.

The week was fairly volatile, one day down, the next up. On  Thursday the markets received a boost as the US GDP came in at a positive 3.5% for the last quarter. This should not have been a surprise though as the government was handing out money hand over fist with cash for clunkers and first home owner grants. Here are some comments from leading economists.  Mish Shedlock said:
“Today the market is cheering over what is actually an ugly report. A misguided Cash-for-Clunkers added a one-time contribution of 1.66 percentage points to GDP. Auto sales have since collapsed so all the program did is move some demand forward. Government spending increased at 7.9 percent in the third quarter which is certainly nothing to cheer about. Personal income decreased $15.5 billion (0.5 percent), while real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent last quarter. Those are horrible numbers. The savings rate is down, which no doubt has misguided economists cheering, but people spending more than they make is one of the things that got us into trouble. The only bright spot I can find is exports. However, even there we must not get too excited as imports rose much more.”

John Williams notes that one-time stimulus or inventory items represented 92% of the reported quarterly growth. The nature of the stimulus-related gains was that they tended to steal business activity from the future. The months ahead are the future. Accordingly, fourth-quarter quarterly GDP change will likely turn negative, again. (The King Report)

And David Rosenberg writes: “Only economists see the recession as being over; the man on the street sees it a little differently, perhaps less enthused by the fact that a lower rate of inventory destocking is arithmetically underpinning GDP growth at this time. Put simply, a Wall Street Journal/NBC News poll just found that 58% of the public believe the economic recession still has a ways to go — and that is up from 52% in September and means that the private investor, unlike the hedge fund manager, is not interested in adding risk to the portfolio even after a 60% surge in the equity market.

Food for thought there. On Friday nine banks hit the wall bringing the total bank failures to 115 for the year to date. Also the report came out that showed that consumer spending contracted during the last month. Raising doubts about the sustainability of the rally.

All eyes will be on the FED this week.  Their comments will be taken apart word by word and analysied every which way for signs that the FED will raise interest rates or reduce the easy money available to banks. Then on Friday we will have the non farm payrolls and the offical unemployment rate, estimated to be 9.9 or 10%. I would pick 9.9% as the administration would not like to see double figures yet.