Schoolchildren and ski-lift operators may get summer breaks, but markets don't.
This summer was interrupted by an auction-rate-securities crackdown, worries about Lehman Brothers Holdings and a reshuffling at American International Group. Some of the season's biggest stories will have repercussions for the rest of the year. Here are five:
Credit: The credit squeeze that began in the dog days of 2007 celebrated its birthday with a full head of steam. The yield spread between high-yield corporate bonds and Treasurys has widened to 8.29 percentage points, from 6.7 points on Memorial Day. Spreads on investment-grade debt, mortgages and other credit products have swollen, as well, as banks tighten lending standards.
A government resolution of the problems at mortgage buyers Fannie Mae and Freddie Mac could help. But today's tight credit will likely hurt the economy for months to come, creating more credit problems. The cycle may not break until home prices stabilize.
Government: Maybe it was coincidence, but when the Securities and Exchange Commission announced in mid-July it would temporarily make life tougher for short-sellers of certain financial stocks, financials rallied, pulling up the broader market.
Investors took the message that some markets are free to move only in one direction. Falling stocks, say, or rising oil will inspire Uncle Sam to meddle. Along with the Federal Reserve's emergency interest-rate cut in January and the shotgun wedding of Bear Stearns, Wall Street has the notion the government won't let things get too, too bad. That could set the stage for disappointment.
Dollar: The dollar took investors by surprise with an abrupt shift in fortune, in a rally that picked up speed early this month on bad economic news out of Europe.
Is this move real or a temporary surge? The answer may come down to a battle of the bad economies. Some investors maintain that the dollar's health ultimately depends on improvement in U.S. fundamentals. But so far, its spurt is on the back of economic weakness elsewhere. If that pain persists, the dollar could continue to benefit.
Commodities: Also helping stocks briefly rebound this summer was an abrupt commodities pratfall. Signs of global economic weakness were mainly behind the decline. What comes next depends on how long those slowdowns last, along with China's growth trajectory after the Olympics. Some analysts believe the commodity-hungry nation is due for a typical post-Games hangover, but the reverse could happen, as China ramps up economic activity temporarily shut down to improve air quality in Beijing.
M&A: InBev's $52 billion purchase of Anheuser-Busch was a headline deal amid what continues to be dreary M&A environment. Deal volume fell off a cliff last August, and this August fell further.
Among deals, InBev-Anheuser typifies what's been happening and what might come next. InBev made an unsolicited offer with the threat to go hostile. Such contentiousness will likely continue, as depressed shares fuel battles over price.
Mark Gongloff
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