The Markets

Unexpected changes in monetary policy in China and support for additional stimulus in Europe helped propel the Dow industrials and S&P 500 to fresh record highs on Friday. Large caps, many of which earn a substantial portion of their revenues overseas, benefitted most, while the Nasdaq and Russell 2000 small caps ended with little changed.

Market/Index	2013 Close	Prior Week	As of 11/21	Weekly Change	YTD Change
DJIA	16576.66	17634.74	17810.06	.99%	7.44%
Nasdaq	4176.59	4688.54	4712.97	.52%	12.84%
S&P 500	1848.36	2039.82	2063.50	1.16%	11.64%
Russell 2000	1163.64	1173.80	1172.42	-.12%	.75%
Global Dow	2484.10	2529.28	2559.75	1.20%	3.05%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.32%	2.31%	-1 bps	-73 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

• Tacitly acknowledging signs of slowing growth, China’s central bank unexpectedly cut two key interest rates to try to stimulate domestic consumption. Meanwhile, European Central Bank President Mario Draghi once again said the ECB is ready to adopt additional stimulus measures if necessary to fight the threat of low inflation.
• President Obama announced a program that will defer deportation for undocumented immigrants and allow them to receive work permits if they have been in the country for at least five years, have no criminal record, and/or have children who are American citizens. The program would not grant permanent resident status or provide for coverage under the Affordable Care Act. However, those affected would receive Social Security cards and would have to pass background checks and pay taxes. Republican congressional leaders criticized the action and said they plan to address immigration policy in 2015. House Republicans also filed suit against the Obama administration, seeking to overturn two provisions of the Affordable Care Act.
• After a second quarter of contraction, Japan is now officially in recession. The country’s Cabinet Office announced that gross domestic product fell at an annualized rate of 1.6% in the third quarter. Though that was better than Q2’s annualized 7.3% decline, it put pressure on Prime Minister Shinzo Abe to consider postponing a second round of sales tax increases scheduled for October. The higher taxes were designed to attack Japan’s high sovereign debt.
• Minutes of the Federal Reserve’s monetary policy committee’s most recent meeting showed that last month’s end to bond-buying efforts came about despite concerns about the potential impact of slowing growth overseas on the U.S. economy. The committee also will watch for signs of falling inflation, which could potentially delay any rate increase.
• After a strong increase in September, industrial production slumped 0.1% in October. The Federal Reserve Board said that though manufacturing output was up, strong declines in mining and utilities offset it. Meanwhile, both the Empire State and Philly Fed manufacturing surveys showed business activity accelerating in November.
• Falling gas prices helped offset increases in housing costs, leaving the Consumer Price Index relatively unchanged in October. That put the inflation rate for the last 12 months at 1.7%, according to the Bureau of Labor Statistics. Meanwhile, wholesale prices rose 0.2% during the month, putting the wholesale inflation rate for the last 12 months at 1.5%–the lowest annualized rate since February.
• Housing starts slipped 2.8% during October. However, the Commerce Department said they were 7.8% higher than the previous October, and building permits were up 4.8% for the month. Meanwhile, existing home sales were not only up 1.5% in October, but the year-over-year gain was at its highest level since October 2013. The National Association of Realtors^® said the median home-resale price–$208,300–is 5.5% higher than it was in October 2013.

Eye on the Week Ahead

With many traders heading out for the Thanksgiving holiday, light trading volumes could exaggerate any market movements during the holiday-shortened week ahead, which includes revisions to U.S. GDP.