By Rick Glaze
The major market indexes concluded their best weekly performance of the year with the S&P 500 and the Dow Jones Industrial Average both gaining 3 percent last week.
The Nasdaq Composite gained 3.5 percent for the week, its third straight up week in a row. Semiconductor and other technology-related stocks led that index higher.
In a speech last week, Federal Reserve Board Chairman Alan Greenspan calmed market fears by indicating higher oil prices will likely not slow the economy or hike inflation like they did in the mid-1970s. Oil continued to be weak, closing below $47 a barrel. As reported in this column, oil has slid precipitously since its high of $58 in March.
The small-company S&P 600 reversed its poor performance for the year by posting a 5 percent gain for the week. Peet’s Coffee & Tea shot up 6 percent to a new high after it announced it would become part of the S&P 600 index. The Maytag repairman has another career dilemma as the company announced it will be taken private; and separately, America West Airlines and U.S. Airways agreed to merge.
Meanwhile, the Senate appears to be heading toward temporary gridlock as Republicans try to bring judicial nominees to the floor for a vote on confirmation. The federal judiciary has been crippled by the lack of new judges over the past several years.
A topic closer to investors is the move to repeal the Federal estate tax permanently. The tax has been used on and off since 1797, when it was called the stamp tax and was imposed on a limited number of estates. The War of 1812 and the Civil War were both financed by estate taxes. The Great Depression caused the reintroduction of the tax with a rate of up to 70 percent. By 1988 all exemptions for retirement plans were repealed, leaving retirement funds taxable by income and estate taxes. This combined tax could take more than 80 percent of a retirement account. Under a 2001 tax law, the estate tax will phase out by 2010 but must be made permanent or the tax will reappear in 2011.
Rick Glaze is the president of Glaze Capital Management of Los Altos.
