The Markets
European battleground: Equities worldwide suffered from concerns that the European Union's willingness to assist with various members' financial problems might be wearing thin. Since the previous week's electoral losses for Germany's ruling party in 6 of the country's 16 states, which could affect future assistance to other eurozone countries, the euro has lost more than 4% versus the dollar. The turmoil helped drop the 10-year Treasury yield to a new low below 2% for the first time in decades as investors sought refuge from the sturm und drang.
Last Week's Headlines
- European unity began to show signs of wear and tear as a German member of the European Central Bank's executive board resigned, raising questions about conflicts over renewed ECB bond-buying and the potential impact on banks. Meanwhile, a widely watched German court ruling said that the country's participation in existing eurozone bailouts was legal, but that parliamentary approval would be needed for future efforts.
- Officials of Switzerland's central bank said it will not allow the Swiss franc, which has been strengthened in recent months by investors seeking refuge from troubled markets, to trade below 1.20 against the euro; the move is designed to help the Swiss economy remain competitive. Meanwhile, the Italian Senate approved an austerity package designed to reduce the country's deficit.
- Calling persistent unemployment a national crisis, President Obama went to Congress to propose expanded Social Security payroll tax cuts, tax breaks for companies hiring new workers, and new public construction projects. Obama said the jobs plan, estimated to cost around $447 billion, would be paid for by deficit-reduction measures to be outlined next week.
- Federal Reserve Chairman Ben Bernanke left those hoping for a QE3 disappointed as he once again failed to specify what tools the Fed might use to assist the economy.
- The Institute for Supply Management's index of the U.S. services sector was up slightly in August, rising to 53.3%. It was the 21st straight month of growth.
- The Commerce Department said the U.S. trade deficit narrowed more than expected in July, falling to $44.8 billion. Higher exports of industrial materials, capital goods, and auto-related products helped fuel the 13% decline.
Eye on the Week Ahead
Europe is likely to continue to attract attention in the wake of last Friday's deadline for bondholders to agree (or not) to accept losses required by Greece's most recent financial aid package. Investors also will be gauging the potential impact on banks as Greece continues to struggle to avoid default. Domestically, new manufacturing, retail sales, and inflation data could shed light on the U.S. economy.Key dates and data releases: wholesale inflation, retail sales (9/14); consumer inflation, industrial production, Philadelphia Fed/Empire State manufacturing surveys, weekly new jobless claims (9/15); options expiration (9/16).
Data source: Includes data provided by Brounes & Associates. 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. Equities data reflect price change, not total return.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
