Tag: global perspective

The Markets

An unexpectedly strong jobs report on top of generally positive U.S. housing and manufacturing numbers helped nudge the Dow and S&P to new records yet again at the end of the week. However, the report also may have helped bring on a dip in the price of the benchmark 10-year Treasury by raising questions about whether the employment gains would bolster the case for a Federal Reserve rate hike in the first half of 2015.

Market/Index	2013 Close	Prior Week	As of 12/5	Weekly Change	YTD Change
DJIA	16576.66	17828.24	17958.79	.73%	8.34%
Nasdaq	4176.59	4791.63	4780.76	-.23%	14.47%
S&P 500	1848.36	2067.56	2075.36	.38%	12.28%
Russell 2000	1163.64	1173.23	1182.43	.78%	1.61%
Global Dow	2484.10	2571.40	2565.63	-.22%	3.28%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.18%	2.31%	13 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

• The U.S. economy created 321,000 new jobs in November, and the Bureau of Labor Statistics said the prior two months’ gains were higher than previously thought. November’s gains also surpassed the 241,000 monthly average so far this year. Job increases were widespread, led by professional/business services, retail, health care, and manufacturing. However, the unemployment rate remained at 5.8%. Hourly wages were up 0.4% during the month and have grown 2.1% over the last year.
• Accelerated promotions may have lured shoppers out early and cut into Black Friday retail sales. The National Retail Federation said sales over the Thanksgiving weekend were down 11% from 2013, but the trade group said it still anticipates total holiday sales to be up more than 4% by the end of the year.
• The latest data from the International Monetary Fund showed that China is expected to be the world’s largest economy as of this year. The country’s anticipated $17.6 trillion in real GDP edged out the United States’ $17.4 trillion.
• A 1.8% increase in construction of single-family homes in October helped send total construction spending up 1.1% for the month, according to the Commerce Department. However, total spending was up just 1.9% over the last 12 months.
• The Institute for Supply Management’s gauge of activity in the U.S. services sector showed growth accelerating in November. The 59.3% reading was 2.2% higher than in October. However, the Commerce Department said orders at U.S. manufacturers slid 0.7% in October and would have been worse if not for a 21.2% jump in orders for military equipment, especially aircraft.
• The U.S. trade deficit saw little change in October, edging downward to $43.4 billion from $43.6 billion in September as exports increased more than imports.
• European Central Bank President Mario Draghi said the ECB expects Europe’s slow growth to slump even further next year and that opposition from some of the eurozone’s stronger members (i.e., Germany) would not keep the ECB from adopting supportive measures.

Eye on the Week Ahead

In a data-light week, the Commerce Department’s retail sales report could help clarify interpretations of last week’s Black Friday sales data. The results of an upcoming auction of loans to European banks could influence whether the ECB eventually adds corporate and sovereign bond purchases to its current bond-buying activities.

The Markets

Equities generally continued to push upward in November. The small caps of the Russell 2000 were the exception; they ended the month flat and were up less than 1% for the year. However, the S&P 500 and the Dow industrials once again hit new record levels, while the Nasdaq increased its year-to-date lead. Meanwhile, the Global Dow had its best month since February.

Oil prices already on the decline continued to fall, especially after members of the Organization of the Petroleum Exporting Countries (OPEC) decided not to cut oil production levels, sending the price plummeting to roughly $66 a barrel. The price of gold continued its year-long downward trend despite a partial rebound from a dip in early November; it ended the month down roughly 4% at approximately $1,175 an ounce. Meanwhile, low yields overseas continued to lure investors to U.S. Treasuries, sending yields down as prices rose despite the prospect of an eventual Fed rate hike.

 

Market/Index	2013 Close	Prior Month	As of 11/28	Month Change	YTD Change
DJIA	16576.66	17390.52	17828.24	2.52%	7.55%
Nasdaq	4176.59	4630.74	4791.63	3.47%	14.73%
S&P 500	1848.36	2018.05	2067.56	2.45%	11.86%
Russell 2000	1163.64	1173.51	1173.23	-.02%	.82%
Global Dow	2484.10	2527.85	2571.40	1.72%	3.51%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.04%	2.35%	2.18%	-17 bps	-86 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.

The Month in Review

• U.S. gross domestic product grew during the third quarter at a slightly faster rate than the Bureau of Economic Analysis had previously estimated. However, the 3.9% increase in GDP was less than Q2’s 4.6%.
• The U.S. unemployment rate edged down 0.1% to 5.8%, according to the Bureau of Labor Statistics. The economy added 214,000 jobs, most of them in restaurants, retail, and health care. The new jobs figure was slightly lower than the 222,000 monthly average so far this year. Meanwhile, a 3-cent increase during the month brought the average hourly wage to $24.57; that average is up just under 2% over the last 12 months.
• Members of OPEC decided to maintain current production levels to try to maintain market share in the face of U.S. competition. The decision hurt oil prices around the world and raised concerns about whether oil companies would curtail investments in future energy development projects.
• In domestic politics, midterm elections gave Republicans control of both houses of Congress. Also, President Obama announced a program that will temporarily 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.
• Despite growth in some of the eurozone’s weakest members, the region as a whole was hampered by sluggishness in the larger economies, such as Germany and Italy. The eurozone grew 0.2% during the third quarter, according to the European Union’s statistical agency. The European Central Bank continued to say it is ready to adopt additional stimulus measures if necessary to fight the twin threats of low inflation and stagnant growth.
• China’s central bank unexpectedly cut two key interest rates to try to stimulate domestic consumption. China and the United States also announced an agreement to take steps to combat climate change by controlling greenhouse gases.
• After a second quarter of contraction, Japan officially fell into recession as gross domestic product fell at an annualized rate of 1.6% during the third quarter. That put pressure on Prime Minister Shinzo Abe, who postponed for 18 months a planned second round of sales tax increases and called for a new parliamentary election.
• U.S. home prices in cities measured by the S&P/Case-Shiller 20-City Composite Index were flat in September. Also, the year-over-year increase continued to show a downward trend; September’s 4.9% annual gain was lower than the 5.6% seen a month earlier. Also, the Commerce Department said housing starts slipped 2.8% in October. However, sales of new homes were up 0.7% during the month, and the National Association of Realtors^® said home resales rose 1.5%.
• U.S. inflation was low enough to prompt the Fed’s monetary policy committee to say it will keep an eye out for signs of falling inflation, which could potentially delay any rate increase. Lower gas prices helped offset increases in housing costs; that left the Consumer Price Index unchanged for the month and the annual rate at 1.7%, while the Bureau of Labor Statistics said the 1.5% annualized wholesale inflation rate was the lowest since February.
• Manufacturing data was mixed. Though U.S. manufacturers saw a 0.4% increase in durable goods orders, according to the Commerce Department, the Federal Reserve said industrial production slumped 0.1% because of strong declines in mining and utilities. However, both the Empire State and Philly Fed manufacturing surveys showed business activity accelerating.

Eye on the Month Ahead

As a strong year for equities draws to a close, some investors may begin assessing whether to take some profits off the table or harvest any losses to offset realized capital gains. And all economic data is likely to be viewed through the prism of how it might affect Fed thinking about potential rate increases next year.

The Markets

The Nasdaq had a good week, but other equity indices saw little change, though the Dow and S&P 500 remained in record territory. The biggest news came from falling oil prices in the wake of a decision by the Organization of the Petroleum Exporting Countries (OPEC) to keep its oil supplies at current levels, which cut the price of oil to roughly $66 a barrel.

Market/Index	2013 Close	Prior Week	As of 11/28	Weekly Change	YTD Change
DJIA	16576.66	17810.06	17828.24	.10%	7.55%
Nasdaq	4176.59	4712.97	4791.63	1.67%	14.73%
S&P 500	1848.36	2063.50	2067.56	.20%	11.86%
Russell 2000	1163.64	1172.42	1173.23	.07%	.82%
Global Dow	2484.10	2559.75	2571.40	.46%	3.51%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.31%	2.18%	-13 bps	-86 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

• U.S. gross domestic product grew during the third quarter at a slightly faster rate than the Bureau of Economic Analysis had previously estimated. However, the 3.9% increase in GDP was less than Q2’s 4.6%.
• Led by Saudi Arabia, the Organization of the Petroleum Exporting Countries (OPEC) decided to maintain current production levels to try to maintain market share in the face of U.S. competition. The decision hurt not only oil prices around the world but the currencies of countries that depend on oil exports. It also raised concerns about whether falling prices would lead oil companies to curtail investments in future exploration and development.
• Home prices in cities measured by the S&P/Case-Shiller 20-City Composite Index were flat in September. Though there was a 4.9% year-over-year increase, that figure continued to show an overall downward trend; that 4.9% gain was lower than the 5.6% annual increase seen a month earlier.
• S. manufacturers saw a 0.4% increase in orders for durable goods in October, according to the Commerce Department. However, a 3.4% gain in the typically volatile aircraft sector was responsible for most of that; excluding transportation, new orders were down 0.9%.
• Sales of new homes were up 0.7% in October; according to the Commerce Department, that put them 1.8% higher than a year earlier.
• Both personal income and personal consumption were up 0.2% in October, according to the Commerce Department.

Eye on the Week Ahead

With traders back at their desks and the end of 2015 on the horizon, reports from last week’s retail battlefields will be of special interest for what they suggest about how the U.S. economy might fare through the end of the year. Given the freefall in oil prices last week, investors will be assessing the implications for the global economy and the energy sector. And as always, Friday’s unemployment figures will be of interest for what they might mean for Fed action in 2015.

 

The Markets

Though trading remained within a relatively narrow range, especially compared with recent weeks, the S&P 500 nevertheless managed to hit a new record high, while the Nasdaq’s weekly gain kept it in the lead year-to-date. A fresh drop in oil prices brought the price of West Texas Intermediate crude to roughly $75 a barrel.

Market/Index	2013 Close	Prior Week	As of 11/14	Weekly Change	YTD Change
DJIA	16576.66	17573.93	17634.74	.35%	6.38%
Nasdaq	4176.59	4632.53	4688.54	1.21%	12.26%
S&P 500	1848.36	2031.89	2039.82	.39%	10.36%
Russell 2000	1163.64	1173.32	1173.80	.04%	.87%
Global Dow	2484.10	2516.73	2529.28	.50%	1.82%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.32%	2.32%	0 bps	-72 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

– The United States and China agreed to take steps to combat climate change. For the first time, China agreed to cap its output of greenhouse gases no later than 2030 and increase its reliance on zero-emission energy sources to 20% by the same deadline. The United States will cut emissions by 17% by 2020 and by 28% by 2025, which would double the current pace at which it is reducing carbon emissions.

– Despite growth in some of the eurozone’s weakest members, the region as a whole was hampered by sluggishness in the larger economies. The eurozone as a whole grew 0.2% during the third quarter, according to the European Union’s statistical agency. Germany expanded just 0.1%, while Italy’s economy contracted for the 11th time in the last 13 quarters. However, Spain’s GDP was up 0.5% and Greece’s increased by 0.7%–the eurozone’s highest Q3 growth rate.

– President Obama urged the Federal Communications Commission to regulate the Internet as a public utility and adopt rules supporting so-called “net neutrality,” which would prevent broadband companies from manipulating transmission speeds or offering a so-called “fast lane” for customers willing to pay more.

– A dispute in the publishing world between Amazon and publisher Hachette ended a months-long dispute over who would set prices for books sold through Amazon. The agreement reportedly would allow Hachette to control the price of its books but give the publisher an incentive to keep prices low.

– Lower gas prices may have helped U.S. retail sales rise 0.3% in September. According to the Commerce Department, sales were up 4.1% from a year ago.

– The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey showed that the number of both new hires and people quitting their jobs increased in September. The number of new hires hit its highest level since December 2007 and the quits rate seen as an indicator of workers’ confidence in their ability to get another job was higher than it’s been since April 2008.

Eye on the Week Ahead

In the wake of the end of quantitative easing, minutes of the most recent Federal Open Market Committee meeting will be of interest, especially if there are any clues to committee members’ thinking about future interest rate increases. Also on tap are data on the manufacturing sector and inflation.

The Markets

In the wake of the midterm election results that gave Republicans control of both houses of Congress, domestic equities took a break from their recent volatility. Though the S&P 500’s increase was relatively modest, it still managed to regain the 2,000 level and go on to set three fresh record highs in the process. The Dow industrials not only set their own new record but also had the week’s biggest gain, while the Nasdaq and Russell 2000 ended the week basically flat. Declines in oil prices continued to make headlines as the price of West Texas Intermediate crude fell below $80 a barrel.

Market/Index	2013 Close	Prior Week	As of 11/7	Weekly Change	YTD Change
DJIA	16576.66	17390.52	17573.93	1.05%	6.02%
Nasdaq	4176.59	4630.74	4632.53	.04%	10.92%
S&P 500	1848.36	2018.05	2031.89	.69%	9.93%
Russell 2000	1163.64	1173.51	1173.32	-.02%	.83%
Global Dow	2484.10	2527.85	2516.73	-.44%	1.31%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.35%	2.32%	-3 bps	-72 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

• The U.S. unemployment rate edged down 0.1% to 5.8% in October, according to the Bureau of Labor Statistics. The economy added 214,000 jobs, most of them in restaurants, retail, and health care. The new jobs figure was slightly lower than the 222,000 monthly average so far this year. Meanwhile, October’s 3-cent increase brought the average hourly wage to $24.57; that average is up just under 2% over the last 12 months.
• Saudi Arabia announced it would cut its price for oil sold to U.S. customers and raise prices for Asian customers. On top of increased Alaskan oil production during October, that caused the price of crude oil to drop to its lowest level in more than two years. The Organization of the Petroleum Exporting Countries said it expects demand for OPEC crude oil to fall nearly 2 million barrels a day to 28.2 million barrels a day by the end of 2017.
• Lower than expected growth in Germany, France, and Italy led the European Commission to cut its growth forecast for next year. The commission said it now sees the eurozone’s 2014 GDP increasing by 0.8% rather than the 1.2% forecast last spring, while the 28-member EU as a whole is now expected to grow 1.3%. The forecast for 2015 is 1.1% growth for the eurozone and 1.5% for the EU. Eurozone inflation is seen stalling at 0.5% this year and 0.8% next year–far below the European Central Bank’s target 2%. Nevertheless, the European Central Bank left its key interest rate unchanged, though ECB President Mario Draghi once again said fresh stimulus measures will be adopted if necessary.
• A sluggish global economy also affected the U.S. trade deficit, according to the Bureau of Economic Analysis. A 1.5% decline in exports to the rest of the world was a major reason for September’s nearly 7% increase in the trade gap.
• S. manufacturing activity declined 0.6% in September, according to the Commerce Department. However, the Institute for Supply Management’s manufacturing index suggested a course reversal in October; the index rose 2.4%, and the 59% reading represented the 65th straight month of expansion.
• S. construction spending was down 0.4% in September as private and public construction fell 0.1% and 1.3% respectively. The Commerce Department said it was the fourth straight monthly decline in private construction spending.

Eye on the Week Ahead

Data from the retail sector will dominate what little economic information is on tap next week. The Job Openings and Labor Turnover Survey report also may get extra attention for its implications for the employment picture.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. 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 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

The Markets

A robust U.S. GDP reading coupled with the prospect of greater economic stimulus in Japan and additional positive corporate earnings reports helped drive both the Dow industrials and the S&P 500 to new record highs. The small caps of the Russell 2000 saw their third straight week of solid gains, which gave the index a positive year-to-date return once again.

Gold tumbled nearly $60 an ounce, hurt in part by the promise of additional monetary stimulus by the Bank of Japan. And the benchmark 10-year Treasury retreated as investors regained an appetite for equities risk.

Market/Index	2013 Close	Prior Week	As of 10/31	Weekly Change	YTD Change
DJIA	16576.66	16805.41	17390.52	3.48%	4.91%
Nasdaq	4176.59	4483.72	4630.74	3.28%	10.87%
S&P 500	1848.36	1964.58	2018.05	2.72%	9.18%
Russell 2000	1163.64	1118.82	1173.51	4.89%	.85%
Global Dow	2484.10	2470.50	2527.85	2.32%	1.76%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.29%	2.35%	6 bps	-69 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

• The U.S. economy grew at an annualized rate of 3.5% during the third quarter, according to the initial estimate by the Bureau of Economic Analysis. That was slightly less than Q2’s 4.6%, but still much stronger than during 2014’s first quarter.
• As expected, the Federal Reserve’s monetary policy committee finally called a halt to new bond purchases, which have helped support the economy for the last six years by making credit easier to get. The statement said that despite improvements in the labor market and general economy, the committee sees inflation being held in check by lower energy prices. Therefore, it still anticipates the Fed funds interest rate will remain at its current level for “a considerable time.” However, that timetable could be accelerated by unanticipated upticks in inflation and/or employment (or pushed back if either declines).
• As Fed bond purchases came to an end, the Bank of Japan went in the opposite direction, unexpectedly announcing it will expand its securities purchases. The move is designed to try to reduce the potential for deflation (Japan’s 1% annual inflation rate is far below the central bank’s 2% target). The added buying could make Japanese exports cheaper and help the country’s economy recover from the effects of a sales tax increase in the spring.
• Durable goods orders fell 1.3% in September, according to the Commerce Department. However, much of that was due to a 3.7% decline in the typically volatile transportation sector; excluding transportation, new orders were down 0.2%.
• Home prices rose in August, but the annual growth rate was the slowest in almost two years. The 0.2% increase in the S&P/Case-Shiller 20-City Composite Index represented a 5.6% annual increase from the previous August, down from July’s 6.7%.
• Despite a 0.2% increase in personal income in the United States during September, personal consumption fell by an equal amount, according to the Bureau of Economic Analysis. The drop in personal consumption was the first monthly decline since January.

Eye on the Week Ahead

With quantitative easing officially at an end, what’s left of the Q3 corporate earnings season could receive more attention. And as the Fed watches the labor market closely to determine the timing of rate increases, investors will do the same with Friday’s jobs report. The results of Tuesday’s midterm elections also could influence the mood of the markets.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. 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 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

The Markets

October lived up to its reputation for volatility as triple-digit intraday swings in the Dow became almost commonplace. Despite being spooked for much of the month–at one point the S&P 500 was down almost 8% from its most recent high–both the S&P and the Dow industrials rallied strongly to end the month at fresh all-time records. Generally encouraging corporate earnings from U.S. companies, a strong Q3 GDP, and increased central bank support overseas helped equities markets overcome fears about the end of the Federal Reserve’s quantitative easing and global concerns about slowing growth and the threat of Ebola.

Increased U.S. energy resources and reduced global demand meant that oil prices continued to drop, ending the month at roughly $80 a barrel. The dollar maintained its September gains against a basket of six foreign currencies; since oil is traded in dollars, a stronger dollar also helped keep oil prices in check. Meanwhile, after a bounce at mid-month, the price of gold plummeted to roughly $1,170 an ounce. Not surprisingly, the volatility in equities caused the yield on the benchmark 10-year Treasury to fall briefly to its lowest level since June 2013 as investors sought the relative safety of Treasury securities.

Market/Index	2013 Close	Prior Month	As of 10/31	Month Change	YTD Change
DJIA	16576.66	17042.90	17390.52	2.04%	4.91%
Nasdaq	4176.59	4493.39	4630.74	3.06%	10.87%
S&P 500	1848.36	1972.29	2018.05	2.32%	9.18%
Russell 2000	1163.64	1101.68	1173.51	6.52%	.85%
Global Dow	2484.10	2534.47	2527.85	-.26%	1.76%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.04%	2.52%	2.35%	-17 bps	-69 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.

The Month in Review

• The U.S. economy grew at an annualized rate of 3.5% during the third quarter, according to the initial estimate by the Bureau of Economic Analysis. That was slightly less than Q2’s 4.6%, but still much stronger than during 2014’s first quarter.
• The 248,000 new jobs created in September helped cut the U.S. unemployment rate from 6.1% to 5.9%; it’s the first time since July 2008 that joblessness has been below 6%. Also, the Bureau of Labor Statistics said hiring during the prior two months was stronger than previously thought. However, at least some of the decline in the unemployment rate resulted from 97,000 people, such as retiring baby boomers, dropping out of the labor force. That brought the percentage of people in the workforce to 62.7%–the lowest participation rate since 1978.
• As expected, the Federal Reserve’s monetary policy committee halted new bond purchases, which have helped support the economy for the last six years by making credit easier to get. The statement said that despite improvements in the labor market and the overall economy, the committee sees inflation being held in check by lower energy prices. Therefore, it still anticipates the Fed funds interest rate will remain at its current level for “a considerable time.” However, that timetable could be accelerated by unanticipated upticks in inflation and/or employment (or pushed back if either declines).
• As Fed bond purchases came to an end, the Bank of Japan went in the opposite direction, announcing it will expand its securities purchases. The move is designed to prevent potential deflation (Japan’s 1% annual inflation rate is far below the central bank’s 2% target). The added buying could help make Japanese exports cheaper.
• Eurozone manufacturing output saw its largest monthly decline since late 2008 in August, according to the European Union’s statistical agency. The 4.3% decline in German industrial production was especially unsettling, and September’s 0.3% annual inflation rate in the eurozone–the lowest level in five years–raised concerns about the possibility of deflation. To help combat that weakness, the European Central Bank will expand its bond purchases to include asset-backed securities and certain bank bonds, but declined to lower its key interest rate, at least for the time being.
• China’s growth rate, while still robust compared to the rest of the world, slowed to 7.3% during the third quarter, according to the National Bureau of Statistics–below the 7.5% official target for annual growth. Real estate prices and sales continued to be a soft spot. To try to jump-start lending, China’s central bank plans to inject roughly $33 billion into its banking system.
• Data on the U.S. housing market was generally encouraging. September’s 2.4% increase in existing-home sales represented the fastest growth of 2014, according to the National Association of Realtors®. New home sales also were up 0.2%, which put them 17% higher than in September 2013, and the Commerce Department said both housing starts and building permits were up for the month. However, home prices were a different story. The 0.2% increase in the S&P/Case-Shiller 20-City Composite Index in August represented the slowest annual growth rate in almost two years.
• U.S. inflation continued to be well-contained. Consumer prices rose 0.1% in September, which left the Consumer Price Index up 1.7% for the last 12 months. The Bureau of Labor Statistics said increases in food and housing outweighed a 0.7% drop in energy costs. Meanwhile, wholesale prices fell 0.1% in September, largely because of declines in both food and energy costs, though wholesale prices overall are 1.6% higher than in September 2013.
• Retail sales in the United States slipped 0.3% in September, though the Commerce Department said they were 4.3% ahead of a year earlier. The biggest declines were seen in building and garden supplies, clothing, and nonstore retailers, all of which were down more than 1% during the month.
• U.S. durable goods orders fell 1.3% in September, according to the Commerce Department. However, much of that was due to a 3.7% decline in the typically volatile transportation sector; excluding transportation, new orders were down 0.2%.

Eye on the Month Ahead

With the Fed’s quantitative easing officially at an end and monetary policy meetings on hold until December, equities markets may begin to focus on what’s left of earnings season as well as the jobs and inflation data that will affect future Fed actions. The results of Tuesday’s midterm elections also could influence the mood of the markets.

The Markets

Relief at last: Investors finally regained some appetite for risk as equities got a break from the recent wave of selling. After four straight weeks of losses, the S&P 500 saw a strong bounce. However, the Nasdaq’s rebound was even bigger and the small caps of the Russell 2000 saw their second consecutive week of robust gains. Though the Dow industrials lagged the other three domestic indices, the rally brought the Dow back into positive territory for the year. The Global Dow also recovered from its slump, nearly managing to break even for the year.

The strong showing in equities helped send the benchmark 10-year Treasury yield up as prices fell. Meanwhile, the price of oil stabilized in the low $80s

Market/Index	2013 Close	Prior Week	As of 10/24	Weekly Change	YTD Change
DJIA	16576.66	16380.41	16805.41	2.59%	1.38%
Nasdaq	4176.59	4258.44	4483.72	5.29%	7.35%
S&P 500	1848.36	1886.76	1964.58	4.12%	6.29%
Russell 2000	1163.64	1082.33	1118.82	3.37%	-3.85%
Global Dow	2484.10	2409.20	2470.50	2.54%	-.55%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.22%	2.29%	7 bps	-75 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

• Sales of existing homes jumped 2.4% during September, according to the National Association of Realtors®. That’s the highest pace of 2014, though the number of sales was 1.7% lower than in the previous September. The $209,700 median sale price was 5.6% higher than a year earlier.
• Meanwhile, new home sales were up 0.2% in September; the Commerce Department said that put them 17% higher than in September 2013.
• Consumer prices rose 0.1% in September. The Bureau of Labor Statistics said that left the Consumer Price Index up 1.7% for the last 12 months–a level that might give the Federal Reserve some leeway to keep interest rates low. Increases in food and housing outweighed a 0.7% drop in energy costs.
• China’s growth rate, while still robust compared to the rest of the world, slowed during the third quarter, according to the National Bureau of Statistics. The 7.3% increase in the country’s gross domestic product was slightly lower than Q2’s 7.5% and below the official target for annual growth (also 7.5%). Real estate prices and sales continued to be a soft spot in the Chinese economy.
• After subjecting 150 European banks to annual stress tests, the European Central Bank and the European Banking Authority said only 12 of them needed to raise additional capital as protection against a worst-case scenario. Italy had the most problem banks, with Greece and Cyprus tied for second.
• Similar stress tests for U.S. banks to be conducted by the Federal Reserve next year will measure how well they would withstand a sharp deterioration in the corporate bond market, especially high-yield bonds issued by highly indebted companies. As in previous years, the tests also will gauge exposure to threats from a variety of factors that include sharp declines in the job market and economic growth, a jump in oil prices to $110 a barrel, and a 60% drop in the stock market. Banks that fail the test could be restricted in their ability to pay dividends or buy back stocks until they address the deficiencies.

Eye on the Week Ahead

Once again, all eyes will be on the Fed as quantitative easing is expected to come to an end. And with recent volatility in the equities markets suggesting investor uncertainty, the first estimate of Q3 gross domestic product is likely to be significant. Also, the release of stress tests conducted on European banks could affect investor perception of the financial system there.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. 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 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

The Markets

Concerns about signs of weaker growth abroad seemed to outweigh domestic corporate earnings reports last week as volatility went extreme. The Dow industrials saw triple-digit swings four days in a row that wiped out all of the index’s year-to-date gains, and both the Dow and the S&P 500 had their worst weeks since May 2012. By the end of the week, the S&P was down 5% from its most recent high (a 10% drop is considered a correction). Meanwhile, the Russell 2000 fell solidly into correction territory, ending the week down almost 13% from its most recent high in March. The Global Dow also turned negative year-to-date.

The volatility sent investors once again seeking the relative security of U.S. Treasuries. As the price of the benchmark 10-year note has risen, the decline in its yield has accelerated in each of the last four weeks; the 10-year yield ended last week at its lowest level since June 2013.

Market/Index	2013 Close	Prior Week	As of 10/10	Weekly Change	YTD Change
DJIA	16576.66	17009.69	16544.10	-2.74%	-.20%
Nasdaq	4176.59	4475.62	4276.24	-4.45%	2.39%
S&P 500	1848.36	1967.90	1906.13	-3.14%	3.13%
Russell 2000	1163.64	1104.74	1053.32	-4.65%	-9.48%
Global Dow	2484.10	2493.99	2430.85	-2.53%	-2.14%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.45%	2.31%	-14 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

• Minutes of the most recent meeting of the Federal Reserve’s monetary policy committee showed that members are worried about slowing global growth. The potential domestic impact of dollar strength, which could become more problematic when interest rates increase, also was a concern, as a stronger dollar could make U.S. exports more expensive and weigh on the domestic economy. Members also wrestled with how to communicate any shift in the committee’s expectations about when a rate increase might occur.
• European Central Bank President Mario Draghi said that the already sluggish European economy seems to be slowing further. Coupled with discouraging economic reports out of Germany–exports fell 5.8% in August, and manufacturing output and new orders also were down–Draghi’s statement raised concerns about the financial health of Europe as a whole. To add to the gloom, the International Monetary Fund also lowered its outlook for global growth next year, though its U.S. forecast was more optimistic.

Eye on the Week Ahead

The question of the week will be whether last week’s volatility exhausted negative sentiment or there’s more to come. If domestic Q3 earnings reports and corporate guidance are robust, they might help provide some counterbalance to global pessimism. However, many large U.S. corporations earn a large percentage of their profits overseas; if forward guidance tends to be negative, that could have the opposite effect. Options expiration at week’s end also could affect volatility.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. 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 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

The Markets

For the second straight week, a Friday rally after encouraging employment numbers couldn’t outweigh equities’ losses earlier in the week. However, it did manage to rescue the Russell 2000 from a brief dip into correction territory (a correction is generally considered to be 10% down from the most recent high). Once again, the Dow industrials and the S&P 500 outpaced the small caps, while equities’ recent slump translated into gains for the price of the benchmark 20-year Treasury.

Market/Index	2013 Close	Prior Week	As of 10/3	Weekly Change	YTD Change
DJIA	16576.66	17113.15	17009.69	-.60%	2.61%
Nasdaq	4176.59	4512.19	4475.62	-.81%	7.16%
S&P 500	1848.36	1982.85	1967.90	-.75%	6.47%
Russell 2000	1163.64	1119.33	1104.74	-1.30%	-5.06%
Global Dow	2484.10	2551.32	2493.99	-2.25%	.40%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.54%	2.45%	-9 bps	-59 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

• The 248,000 new jobs created in September helped cut the U.S. unemployment rate from 6.1% to 5.9%; it’s the first time since July 2008 that joblessness has been below 6%. Also, the Bureau of Labor Statistics said hiring during the prior two months was stronger than previously thought. However, at least some of the decline in the unemployment rate resulted from 97,000 people dropping out of the labor force (for example, retiring baby boomers). That brought the percentage of people in the workforce to 62.7%–the lowest participation rate since 1978.
• Though home prices measured by the S&P/Case-Shiller 20-City Composite Index continued to rise in July, the pace slowed significantly. Year-over-year gains were down in 19 of the 20 cities, and monthly increases were smaller in 17 cities. Nevertheless, the index was 6.7% ahead of a year earlier, and prices rose 0.6% during the month.
• The European Central Bank declined to make any further cuts to interest rates until it sees the impact of bond purchases scheduled to begin this month, including sovereign bonds from Greece and Cyprus. However, President Mario Draghi reiterated that the ECB stands ready to adopt further stimulus measures if necessary.
• Both personal income and consumption were up in August, according to the Bureau of Economic Analysis. The increase in private wages and salaries was almost double that of July, pushing personal income up 0.3%. Personal consumption–one of the Fed’s favorite measures of inflationary pressure–rose 0.5%. That increased consumption helped cut the savings rate from 5.6% to 5.4%.
• The failure of China’s manufacturing sector to rebound in September from the previous month’s low level fanned concerns about global growth. HSBC Corp.’s Purchasing Managers’ Index remained at 50.2–barely above the level that would represent contraction.
• The U.S. services sector continued to grow in September, but at a slightly slower pace. The Institute for Supply Management’s non-manufacturing purchasing managers’ index nudged downward one point from August’s record level to 58.6.

Eye on the Week Ahead

The Q3 earnings season will have its unofficial kickoff when Alcoa reports its results after Wednesday’s market close. Discussions of what should happen after the anticipated end of quantitative easing will be scrutinized when minutes of the most recent Federal Open Market Committee meeting are released on Wednesday.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. 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 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.