What I’m Watching This Week – 28 October 2013

The Markets
Domestic equities continued to recover from their Washington-induced slump. Once again, the week saw fresh records for the S&P 500 and the small-cap Russell 2000; the S&P has now risen more than 6% since its October 8 shutdown low. The Dow saw the week’s biggest gains for a change.

Last Week’s Headlines

• The unemployment rate continued to inch downward, hitting 7.2% in September, according to the Bureau of Labor Statistics. That’s the lowest unemployment rate since November 2008. However, the 148,000 jobs added during the month was lower than the monthly average for the past year, and including underemployed and discouraged workers would put the unemployment rate at 13.6%, slightly lower than August’s 13.7%.
• Sales of existing homes slid almost 2% in September, the National Association of Realtors® said, but were still 10.7% above September 2012. The NAR attributed the slump to the fact that according to mortgage lender Freddie Mac, the 30-year fixed rate hit almost 4.5%, its highest level since July 2011 and more than a full percent higher than in September 2012. The median sales price of $199,200 represented the 10th straight double-digit year-over-year increase.
• Durable goods orders were up 3.7% in September, but according to the Commerce Department, a 57.5% increase in orders for aircraft was responsible for almost all of that. Non-transportation orders were down 0.1%, though business spending on capital equipment rose almost 7%.
• JPMorgan Chase & Co. reportedly has negotiated a $13 billion settlement of federal civil lawsuits over mortgage securities sales leading up to the 2008 financial crisis. Earlier in the month, JPMorgan had reported a loss for Q3 caused largely by increasing to $23 billion the reserve it has set aside to cover legal expenses. Also, a jury found Bank of America Corp. liable for defrauding Fannie Mae and Freddie Mac through bad mortgages sold by Countrywide Financial, which BofA acquired in mid-2008. A judge will decide the bank’s penalty later.

Eye on the Week Ahead
Investors will find out Wednesday whether the impact of the government shutdown was enough to postpone any Fed tapering. Earnings season also continues, while release of the initial estimate of Q3 economic growth has been postponed until November 7.

Key dates and data releases: home prices, retail sales (10/29); Federal Open Market Committee monetary policy announcement (10/30).

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); http://www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

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