The Markets
Despite some headline-driven mood swings, the Dow industrials managed to set a new record closing high for the 34th time this year, while the other domestic stock indices trailed in their wake. An unemployment report that was stronger than expected renewed fears of Fed tapering, sending the benchmark 10-year Treasury yield up for the second week in a row as prices dropped; the 10-year yield has now risen almost a quarter of a percent in the last two weeks.
Last Week's Headlines
- The U.S. economy added 204,000 new jobs in October, according to the Bureau of Labor Statistics. However, the unemployment rate inched up 0.1% to 7.3%, in part because worker furloughs caused by the federal government shutdown may have distorted the figures. The BLS said the shutdown did not appear to have affected the data on new jobs, which is based on a survey of employers rather than households.
- The U.S. economy grew at an annual rate of 2.8% in the third quarter, according to the Bureau of Economic Analysis. The initial estimate, which is subject to two future revisions, represents an improvement from Q2's 2.5% and matches the pace hit a year earlier.
- After two months of declines, U.S. manufacturers saw a 1.7% increase in new orders in September, according to the Commerce Department. However, a nearly 58% increase in commercial aircraft orders accounted for much of the increase; excluding the notoriously volatile transportation sector, new orders were down 0.2%.
- The eurozone is now forecast to grow just 1.1% next year rather than the 1.2% previously expected by the European Commission. However, that would still be better than the 0.4% contraction anticipated for 2013. The commission also sees 2014 unemployment rising slightly to 12.2%. To try to stimulate growth and combat a 0.7% annual inflation rate that is seen as too low to support economic recovery, the European Central Bank lowered the interest rate at which it lends to member banks to a record low of 0.25%. The move helped cut the euro to roughly $1.33 against the U.S. dollar.
- Despite the government shutdown, growth in the U.S. services sector accelerated in October, rising a full percentage point from September's 54.4%. That represents the 46th straight month of growth for the Institute for Supply Management's index of the sector.
- After more than a decade of investigation, the Securities and Exchange Commission announced that SAC Capital Advisors, one of the country's largest hedge funds, had agreed to plead guilty to five criminal charges of insider trading and to pay a record $1.2 billion penalty. The fund also will no longer be able to accept outside investors.
- Technical problems with obtaining quotations once again led to a halt in trading of certain securities. The Financial Industry Regulatory Authority suspended all trading in over-the-counter stocks--so-called penny stocks--for more than three hours on Thursday because of difficulties with OTC Markets Group's quotation system. The problems followed two outages at Nasdaq the previous week.
Eye on the Week Ahead
Data on eurozone economic growth will be available, as will two Federal Reserve gauges of manufacturing strength. Investors also will pore over the testimony of Federal Reserve Chairman nominee Janet Yellen at her confirmation hearing for any insights into future Fed action.
Key dates and data releases: balance of trade (11/14); industrial production, Empire State manufacturing survey, options expiration (11/15).
Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). 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.
