Monday, January 28, 2013

Market Week: January 28, 2013

The Markets

Domestic equities had yet another good week (as long as they weren't Apple). The Dow was less than 2% away from its October 2007 all-time closing high of 14,164, and the S&P 500 was just under 4% away from a similar milestone. However, the Nasdaq struggled against the headwind created by Apple's post-earnings drop.

Last Week's Headlines

Global economic growth will continue to be sluggish during the coming year if the International Monetary Fund's latest forecast proves correct. The IMF's latest report sees a 3.4% global growth rate; that's better than the 3.2% expected for 2012 but slightly lower than last October's forecast. The IMF also predicts a 2% growth rate in the United States and sees Europe slipping back into a 0.2% contraction, though the report also said a European recovery could help push global growth to 4.1% in 2014.
Sales of new homes fell 7.3% in December, according to the Department of Commerce, but they were still 8.8% higher than the previous December. The median price of homes sold was up 1.3% for the month and 13.9% ahead of a year ago.
Despite a 1% drop in December, existing home sales were still at their second highest level in more than three years, according to the National Association of Realtors.® The median home price was up 6.3% from a year ago--the biggest year-over-year increase in seven years--and the 4.4 months' worth of unsold homes was the lowest since the spring of 2005.
Exxon Mobil reclaimed its status as the company with the world's largest capitalization when Apple capped off a months-long slide by plummeting below $450 a share after its Q4 earnings report disappointed analysts.
As Timothy Geithner spent his last day as Treasury Secretary, President Obama nominated Mary Jo White to head the Securities and Exchange Commission. As a U.S. attorney, White prosecuted mobster John Gotti and terrorists responsible for the 1993 World Trade Center bombing. Obama also re-nominated Richard Cordray, who has been heading the Consumer Financial Protection Bureau on an interim basis since January 2012.
The Bank of Japan increased its target level of inflation to 2%; the country has been battling deflation in recent years. The Japanese central bank also will maintain its key interest rate at near zero and extend its purchases of financial assets (similar to the Federal Reserve's quantitative easing program).

Eye on the Week Ahead

Unemployment and the Fed's first meeting of the new year are on tap, and earnings reports from several key tech bellwethers could help remind investors that Apple isn't the only Nasdaq company.
Key dates and data releases: durable goods orders (1/28); home prices (1/29); FOMC announcement, initial estimate of gross domestic product for Q4 2012 (1/30); personal income/spending (1/31); unemployment/payrolls, U.S. manufacturing, construction spending (2/1).

Data sources: 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.
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.

Monday, January 21, 2013

Market Week: January 21, 2013

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Monday, January 14, 2013

Market Week: January 14, 2013

The Markets

Equities didn't match the prior week's fireworks, but they still posted gains in the new year's second week. The S&P 500 hit a five-year high for the second week in a row. However, the Global Dow soundly beat all four domestic indices for the week, in part because of encouraging retail sales in Europe.

Last Week's Headlines

President Obama nominated White House chief of staff Jacob Lew to replace Timothy Geithner as Secretary of the Treasury.
Increased imports of consumer goods such as smart phones were a key factor in widening the trade deficit in November. Exports also rose, but not by as much, according to the Commerce Department. As a result, the trade deficit rose 16% to $48.7 billion.
Ten mortgage servicers agreed to pay $8.5 billion to help resolve mortgage foreclosures that have been under review for faulty processing. The agreement, which will provide $5.2 billion in mortgage assistance and $3.3 billion in direct payments to borrowers, will bring to an end the case-by-case review of faulty foreclosures. In addition to participating in the settlement, Bank of America agreed to pay $10 billion to Fannie Mae to resolve allegations of faulty processing.
Eurozone unemployment hit a new record of 11.8% in November as 113,000 workers lost their jobs. However, European retail sales were up for the first time since July.
The Federal Reserve turned over to the U.S. Treasury almost $77 billion in profits from its 2012 quantitative easing efforts. The interest on Treasury bonds and mortgage-backed securities provided the Treasury's second highest windfall from the Fed, behind only 2010's $79 billion.
After its deliberations were made public, insurer American International Group (AIG) decided not to join a $25 billion lawsuit filed by former CEO Maurice Greenberg and other shareholders against the U.S. Treasury. That suit claims that the terms of the Treasury's $182 billion bailout of AIG, which has since been repaid, were too onerous.

Eye on the Week Ahead

Earnings reports, particularly those from key financial institutions, will join inflation, retail, and housing data as grist for investor decisions.

Key dates and data releases: wholesale inflation, retail sales, business inventories, Empire State manufacturing survey (1/15); consumer inflation, industrial production, Fed "beige book" report, international capital flows (1/16); housing starts, Philly Fed manufacturing survey (1/17).

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.

Monday, January 7, 2013

Market Week: January 7, 2012

The Markets

Better late than never: Equities soared as investors wiped their collective brow when lawmakers reached a deal that averted a full-scale immediate plunge off the fiscal cliff. Despite the holiday-shortened week, the S&P gained more than 4% to hit a level not seen since 2007's last trading day, while the Nasdaq and Russell 2000 fared even better. Meanwhile, bond prices took a hit after the Fed suggested it might start easing out of quantitative easing later in the year.

Last Week's Headlines

In the midnight hour (and beyond): A bargain on the scheduled tax increases and spending cuts scheduled to begin in 2013 was reached just hours into the new year. The American Tax Relief Act of 2012 permanently extends existing tax rates for most Americans but adds a new 39.6% rate for individuals making more than $400,000 a year ($450,000 for married couples filing jointly). Existing capital gains rates also were made permanent, except that individuals in the new 39.6% tax bracket will be subject to a maximum 20% capital gains rate. The legislation temporarily postponed implementation of spending cuts, which will doubtless be part of the debate during coming months over increasing the debt ceiling. Additional provisions affecting the alternative minimum tax, estate tax, gift tax, personal/dependency exemptions, and itemized deductions were extended permanently; other provisions were extended temporarily.
The U.S. economy created 155,000 new jobs in December--roughly the same as its average for the last year. That put the unemployment rate at 7.8%, the same as the previous month's rate (after the Bureau of Labor Statistics' annual adjustment).
U.S. manufacturing bounced back from a November contraction, reaching 50.7% on the Institute for Supply Management's December index (any number above 50 represents growth). Meanwhile, the ISM's gauge of the services sector showed a reading of 56.1%. That represented a substantially faster rate than the 54.7% November reading and was the 36th straight month of growth.
Minutes of the latest Federal Open Market Committee meeting suggested that the Fed's $85 billion a month worth of bond purchases could end as early as mid-2013, though some members favored continuing purchases through the end of the year.

Eye on the Week Ahead

In a week with minimal economic data, Alcoa's earnings report on Tuesday will mark the unofficial start of the Q4 earnings season. The U.S. Treasury will auction 3-year, 10-year, and 30-year debt, and the Bank of England and the European Central Bank will announce interest rate decisions.

Key dates and data releases: international trade (1/11).