By Rick Glaze

While last Friday’s market action saw little change for the broad averages, the week ended down for the major indexes.

The Nasdaq ended its third straight down week off 1 percent. It is 3.8 percent off its recent yearly high reached Aug. 3. Meanwhile the S&P 500 and the Dow Jones Industrial Average lost for the week 0.9 percent and 0.4 percent, respectively. The small cap S&P 600 index is off about 4.7 percent from its early August peak and lost 1.4 percent for the week. The smaller stocks lead the spring/summer rally and have been leaders since the market’s resurgence in 2003.

Retail companies may be gearing up for slower sales as surging gas prices cut into buying power. High-octane gas is nearly $3 per gallon in the Bay Area. Many retailers are beginning to talk of lower earnings for the rest of the year. This guidance is a change from earlier in the year when actual earnings numbers exceeded forecasts for many retailers. Remember, when all is said and done, earnings growth is what moves stocks higher. This is why these announcements are concerning Wall Street investors.

The bond market continues to show little fear of inflation by its flat yield curve. This occurs when short-term yields are close to long-term yields. The 5-year Treasury bond is paying 4.07 percent and the 10-year is paying 4.22 percent at the present. This is considered a fairly tight spread. Longer maturity bonds usually will be higher yielding to compensate for future inflation when it is present or perceived to be imminent.

Rick Glaze is the president of Glaze Capital Management Inc. of Los Altos and is a registered representative offering securities through First Allied Securities Inc.