Tag: global perspective

The Markets

Grinches were few and far between on Wall Street last week as the Dow industrials topped 18,000 for the first time and the S&P 500 also set yet another new record. Even the small caps of the Russell 2000 participated in the merriment, turning in the best performance of the week. The price of the benchmark 10-year Treasury slipped a bit as the yield rose.

Market/Index	2013 Close	Prior Week	As of 12/26	Weekly Change	YTD Change
DJIA	16576.66	17804.80	18053.71	1.40%	8.91%
Nasdaq	4176.59	4765.38	4806.86	.87%	15.09%
S&P 500	1848.36	2070.65	2088.77	.88%	13.01%
Russell 2000	1163.64	1195.96	1215.21	1.61%	4.43%
Global Dow	2484.10	2508.43	2529.85	.85%	1.84%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.17%	2.25%	8 bps	-79 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 its fastest pace in 11 years during the third quarter. The Bureau of Economic Analysis said the 5% annualized growth of gross domestic product outpaced Q2’s 4.6% and represented the strongest growth since Q3 2003’s 6.9%. Health care and business investment in buildings and equipment were a large part of the increase. After-tax corporate profits also were up, rising 2.8% from Q2.
• Personal income rose 0.4% in November, but consumer spending rose even more. According to the Commerce Department, consumer expenditures were up 0.6% as falling gas prices left consumers with more money to spend. Meanwhile, disposable income was up 0.5% after adjusting for taxes and inflation.
• Existing home sales slowed a bit in November as the number of homes available for sale fell almost 7%. The National Association of Realtors^® said total sales were down 6.1% for the month, but were 2.1% higher than the previous November. The Commerce Department said new sales of single-family homes also fell 1.6% during the month, and were down 1.6% from a year ago.
• An 8.1% drop in military spending helped cut orders for durable goods 0.7% in November, according to the Commerce Department. It was the third straight month of declines in orders for goods intended to last three years or more. Also, business spending on equipment was basically flat.

Eye on the Week Ahead

As the year winds down in yet another abbreviated week of trading, volumes are likely to continue to be light. A few economic reports are due out, but many traders will be off toasting 2014’s string of record highs and hoping 2015 will bring more of them.

The Markets

Patience is a virtue: The Federal Reserve’s announcement that it would be “patient” with interest rate hikes was Santa’s cue to drop off gifts a little early. Equities regained much of what they had lost the week before. The Dow industrials’ 288-point gain on Wednesday was its best day of 2014–that is, until Thursday’s eye-popping 421-point increase left it in the dust. The Russell 2000 had its best week of the year, and the S&P is less than 5 points from the all-time high set two weeks earlier. Meanwhile, oil prices continued to fall, ending the week at roughly $57 a barrel.

Market/Index	2013 Close	Prior Week	As of 12/19	Weekly Change	YTD Change
DJIA	16576.66	17280.83	17804.80	3.03%	7.41%
Nasdaq	4176.59	4653.60	4765.38	2.40%	14.10%
S&P 500	1848.36	2002.33	2070.65	3.41%	12.03%
Russell 2000	1163.64	1152.45	1195.96	3.78%	2.78%
Global Dow	2484.10	2459.30	2508.43	2.00%	.98%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.10%	2.17%	7 bps	-87 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 Federal Reserve’s monetary policy committee replaced its promise to wait “a considerable time” before raising interest rates with a promise to be “patient” before doing so. Almost all committee members expect higher rates to hit in 2015, but investors paid more attention to members’ belief that rates may rise more slowly than previously thought. The committee’s median forecast for the fed funds rate at the end of 2015 is now 1.125%, while the median expectation for December 2016 is now 2.5%.
• The Russian ruble plunged 20% on Tuesday, prompting the country’s Central Bank to hike its key interest rate from 10.5% to 17% to try to support the currency. Concerns about the currency accelerated after bonds issued by Russia’s largest oil company received favorable treatment from the Central Bank; that raised questions about whether the action was essentially a government bailout of the company, which has been hard-hit by both economic sanctions and lower oil prices.
• Plummeting oil prices were good news for U.S. consumers in November. The 0.3% drop in the Consumer Price Index was fueled largely by the 6.6% decline in gas prices, which the Bureau of Labor Statistics called the sharpest decline since December 2008. Lower energy costs more than offset the 0.2% increase in food and 0.3% rise in housing, and helped cut the inflation rate for the previous 12 months to 1.3% from 1.7% a month earlier. Meanwhile, November’s 0.6% increase in inflation-adjusted hourly wages accounted for almost all of the 0.8% increase in wages over the last 12 months.
• President Obama announced that the United States will move to re-establish diplomatic relations with Cuba, which were cut off in 1961. However, congressional action would be needed to lift the decades-old trade embargo against Cuba.
• Both housing starts and building permits slipped in November, by 1.6% and 5.2% respectively. According to the Commerce Department, single-family housing was responsible for most of the decline in housing starts, while multi-unit buildings caused most of the decline in permits.
• U.S. industrial production rose 1.3% in November, helped by cold weather that pushed up heating demand and thus output from utilities. The Federal Reserve also said that industrial output from June through October was stronger than previously reported, and usage of the nation’s industrial capacity finally reached its long-term average of 80.1%. However, manufacturing growth measured by the Philly Fed survey slipped slightly, while the Empire State survey showed its first negative reading in nearly two years.

Eye on the Week Ahead

With a holiday-shortened week ahead, it might be difficult for equities to match last week’s blockbuster performance. The final Q3 GDP number and data on housing as well as consumer income and spending are on tap.

The Markets

Concerns about the global economic impact of the ongoing turmoil in oil helped prompt a sharp drop in equities. The decline in oil prices, which accelerated last week, has left crude down more than 45% from its mid-June high. After seven straight weeks of gains in the S&P 500, equities investors took some money off the table, handing both the S&P 500 and Dow industrials their worst weekly point losses since 2011 and dragging the Russell 2000 small caps back into negative year-to-date territory. The Global Dow also suffered because of lower oil prices’ potential ramifications for emerging markets and their currencies. The turbulence renewed demand for the security of the benchmark 10-year U.S. Treasury note; its yield plunged as prices rose.

Market/Index	2013 Close	Prior Week	As of 12/12	Weekly Change	YTD Change
DJIA	16576.66	17958.79	17280.83	-3.78%	4.25%
Nasdaq	4176.59	4780.76	4653.60	-2.66%	11.42%
S&P 500	1848.36	2075.36	2002.33	-3.52%	8.33%
Russell 2000	1163.64	1182.43	1152.45	-2.54%	-.96%
Global Dow	2484.10	2565.63	2459.30	-4.14%	-1.00%
Fed. Funds	.25%	.25%	.25%	0%	0%
10-year Treasuries	3.04%	2.31%	2.10%	-21 bps	-94 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 International Energy Agency forecast that increased oil supplies and continued weak global growth would mean higher oil inventories during the first half of next year. Coupled with an announcement that Saudi production levels will remain at current levels, that helped cut oil prices to less than $60 a barrel; as recently as mid-June it was roughly $107. Those losses in turn prompted Russia and Norway to take measures to support their respective oil-dependent economies. Russia’s central bank raised its key interest rate to try to support the ruble while Norway’s central bank cut rates to try to stimulate domestic growth.
• Despite a lackluster Black Friday weekend, retail sales shot up 0.7% in November, and the Commerce Department said they were 5.1% higher than in November 2013. Auto sales were almost 10% higher than a year earlier, and nonstore retail sales rose 8.7% in the same time.
• Wholesale prices fell an average of 0.2% in November; a 3% drop in energy costs during the month was responsible for most of the decline. November’s lower prices left the annual inflation rate at 1.4% for the last 12 months; according to Bureau of Labor Statistics records, that’s the lowest annual rate since February. Even aside from the volatile food and energy sectors, producer prices were down 0.1% for the month.
• The U.S. Congress passed a spending bill for the next fiscal year, eliminating the threat of a government shutdown. Conflicts over the bill’s rollback of some Dodd-Frank banking regulations, higher limits on donations to political parties, and funding for the Homeland Security Department threatened to derail the legislation, which the White House has said the president will sign.
• Japanese Prime Minister Shinzo Abe received a vote of confidence for his so-called “Abenomics” fiscal policies; despite Japan’s recent slide into recession, voters once again gave Abe’s Liberal Democratic Party a majority in the country’s parliament.

Eye on the Week Ahead

Investors are likely to focus on crude and “considerable time”: whether oil prices are likely to stabilize, even temporarily, and whether the Federal Reserve will drop its “considerable time” estimate of how long it might preserve current interest rates. And as the end of 2014 draws closer, year-end tax-related profit-taking and/or tax-loss harvesting also could play an increasing role in market movements.

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.