The Markets
Like an
early fall flu, investor anxiety continued to spread last week as
uncertainty around the future of interest rates continued to drag down
markets. Even a Friday rally in blue chips spurred by Federal Reserve
Chair Janet Yellen's most recent comments couldn't cure the malaise. All
indexes tracked here posted losses, with the Russell 2000 dropping
nearly 3.5%.
Gold
rose to $1,145.50, compared to $1,139.10 a week earlier, while crude oil
ended the week at $45.34 a barrel. The national average regular
gasoline price declined for the fifth week in a row to $2.327 per gallon
on September 21, down $0.048 from the previous week and $1.285 lower
than a year prior.
Last Week's Headlines
- In a
speech at the University of Massachusetts, Fed Chair Janet Yellen seemed
to quell some uncertainty about the U.S. economy, saying she expects
the Fed to raise interest rates "sometime later this year." Of course,
she qualified the prediction by saying the organization would continue
to rely on economic data.
- In an
announcement that came as a surprise to even some of his closest
congressional colleagues last Friday, John Boehner (R-OH) announced his
resignation as House Speaker and congressman, effective October 30. The
announcement follows long-term criticism by members of his own party
that the Speaker was not strong enough in supporting GOP principles, and
comes amid heated negotiations over a bill that is needed to extend
federal funding beyond September 30.
- The
third estimate for second-quarter gross domestic product (GDP) was
revised upward to 3.9% from the previous estimate of 3.7%, according to
the Bureau of Economic Analysis. The growth is primarily due to
accelerations in consumer spending, exports, nonresidential fixed
investment, and state and local government spending. The upward revision
was largely attributed to positive revisions in consumer spending, and
nonresidential and residential fixed investment, partially offset by a
downward revision in private inventory investment.
- After
three months of gains, total existing home sales fell 4.8% in August to
5.31 million. Moreover, July figures were revised downward to 5.58
million, reported the National Association of Realtors® (NAR). Despite
the drop, sales are 6.2% higher than one year ago, and have risen
year-over-year for 11 consecutive months. The median existing-home price
for August was $228,700, 4.7% higher than in August 2014. Lawrence Yun,
NAR's chief economist, attributed the decrease to tight inventories.
- On
the other hand, sales of new homes continue to be an economic bright
spot, rising 5.7% in August, to 552,000, according to the U.S. Census
Bureau and the U.S. Department of Housing and Urban Development. The
figure is nearly 22% above the August 2014 estimate. The median sales
price of new homes in August was $292,700, while the average was
$353,400.
- The
September reading from the Markit Flash U.S. Manufacturing Purchasing
Managers' Index remained unchanged from its August 22-month low. At
53.0, the reading is one of the slowest rates of overall manufacturing
expansion in nearly two years and is lower than the
post-financial-crisis average of 54.3. While output rose at a faster
pace in September, the increase was offset by a softening in new
business and employment growth.
- After
two months of increases, durable goods orders declined by 2% in August.
Excluding transportation, which fell by 5.8%, orders were virtually
unchanged.
- Jobless
claims rose by 3,000 for the week ended September 19, to close at
267,000. The advance seasonally adjusted insured unemployment rate
remained unchanged at 1.7%.
- The
University of Michigan's final reading on consumer sentiment for
September was 87.2, compared to August's 91.9. Although at its lowest
level in 11 months, the reading is 3% higher than it was a year ago. It
is also higher than the mid-September figure reported earlier this
month. "The decline in optimism continued to narrow in late September as
consumers increasingly concluded that the stock market declines had
more to do with the international conditions than the domestic economy,"
said Surveys of Consumers chief economist Richard Curtin.
Eye on the Week Ahead
Eyes
will be on Washington this week, to see if lawmakers can agree on a
measure to continue funding the federal government through early
December. Investors will monitor whether Boehner's resignation
announcement will affect the negotiation process. Also on tap are more
housing market and manufacturing data, as well as information on
personal income and expenditures and the overall job picture.
Data sources: 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: 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. All investing involves
risk, including the potential loss of principal, and there can be no
guarantee that any investing strategy will be successful.
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.
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