Monday, January 6, 2014

Market Week: January 6, 2014

The Markets

Equities rang in the new year by taking a bit of a breather. As investors decided to take some of the profits that the Santa Claus rally had left in their stockings, the Dow lost 135 points on 2014's first trading day, though it regained much of that the following day. The other three domestic indices fared slightly worse, though not as badly as the Global Dow. Meanwhile, gold showed signs of new life after its disastrous 2013, jumping nearly 3% in the first two days of the year.

Last Week's Headlines

Home prices rose 0.2% in October, putting them 13.6% higher than 12 months earlier. The year-over-year gain in the S&P/Case-Shiller 20-City Composite Index was the strongest since February 2006, and October's monthly increase represents the 17th straight month of gains. However, S&P warned that the monthly increases were showing signs of slowing.
Construction spending was up 1% in November, according to the Commerce Department, and was almost 6% higher than the previous November. Strength in both residential and nonresidential private construction fueled the growth as spending on public works projects fell 1.8% during the month.

Eye on the Week Ahead

Last week's light trading volumes should be back to normal this week, and those who believe that the first five trading days of January indicate something about equities' subsequent direction during the coming year will have a better basis for making that assessment. Friday's jobs numbers will be of interest, as always, as will the minutes of the meeting at which the Fed's monetary policy committee decided to start tapering.

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.goldprices.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.

Monday, December 2, 2013

Market Week: December 2, 2013

The Markets

The Dow industrials and the S&P 500 continued to set all-time records with an eighth consecutive week of gains for both. And though the Nasdaq remained far from its all-time high, it finally managed to surpass the 4,000 threshold last seen more than 13 years ago. Meanwhile, the benchmark 10-year Treasury yield remained stable.

Last Week's Headlines

Building permits rose 6.2% in October, according to the Commerce Department, and were almost 14% higher than in October 2012. Data on September and October housing starts, which was delayed by the federal government shutdown, will be available along with November figures on December 18.
Home prices were up 3.2% in Q3 in the 20 cities measured by the S&P/Case-Shiller 20-City Composite Index. September's 0.7% gain represented a 13.3% increase from a year earlier, the highest annual growth since February 2006.
Durable goods orders fell 2% in October. The decline was fueled in part by a nearly 16% drop in new orders for aircraft and parts, the same factor responsible for the previous two months' worth of increases. However, orders for computers and capital goods also fell, leaving nontransportation orders down 0.1% for the month.

Eye on the Week Ahead

Friday's unemployment rate--the last before the Fed's monetary policy committee's last meeting of the year--and preliminary sales results from the expanded Black Friday retail holiday weekend will likely dominate the week. However, reports from a range of economic sectors, including housing, manufacturing, services, and consumer spending, also will suggest the state of the economy.

Key dates and data releases: U.S. manufacturing, construction spending (12/2); auto sales (12/3); new home sales, balance of trade, Fed "beige book" report, U.S. services sector (12/4); revised Q3 GDP estimate, factory orders (12/5); unemployment/payrolls, personal income/outlays (12/6).

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.

Monday, November 25, 2013

Market Week: November 25, 2013

The Markets

Another week, another record: The Dow's seventh consecutive week of gains ended with a close above the psychologically significant 16,000 level for the first time ever, while the S&P 500 surpassed 1,800 for the first time. Meanwhile, the price of the benchmark 10-year Treasury note fell midweek after minutes of the Fed's most recent monetary policy meeting were released, but managed to regain some strength by the end of the week.

Last Week's Headlines

A nearly 3% decline in gas prices cut consumer inflation by 0.1% in October, according to the Bureau of Labor Statistics. That put the annual inflation rate for the last 12 months at 1%. Gas prices also were largely responsible for a 0.2% drop in the wholesale inflation rate during October, leaving the increase in wholesale prices over the last 12 months at a mere 0.3%.
Retail spending by U.S. consumers rose 0.4% in October, and retail sales were 3.9% higher than a year earlier. The Commerce Department said sales of autos, electronics/appliances, and clothing saw the strongest monthly gains. Auto sales were up almost 12% from last October, and sales at nonstore retailers rose more than 8% during the same time.
Minutes of the Federal Reserve's most recent monetary policy committee meeting suggested that tapering of the Fed's economic support is still likely to happen sometime over the course of the committee's next few meetings. Members also suggested that once the Fed begins to cut back on its bond purchases, it may attempt to provide more guidance on the future of interest rates.
Two key gauges of U.S. manufacturing activity showed signs of slowing growth in October. The Philly Fed survey fell to 6.5% from October's 19.8%, while the Empire State survey declined 2.2%, its first negative reading since May.
Sales of existing homes were down for the second month in a row, according to the National Association of Realtors®, though sales were 6% higher than the same time last year. October's 3.2% decline was attributed to the relatively low number of homes for sale as well as double-digit year-over-year price increases for the last 11 months.
Recurring uncertainty about the U.S. debt ceiling and budget battles, as well as the anticipated impact of future Federal Reserve policy, threaten global recovery even more than financial conditions in the eurozone and Japan, according to the Organisation for Economic Co-operation and Development. The OECD's semiannual forecast for global growth fell roughly half a percent to 2.7% for 2013 and 3.6% for 2014, with the United States seeing growth at 1.7% and 2.9% over the same time frames.

Eye on the Week Ahead

Housing is likely to be the focus of the holiday-shortened week as two months' worth of data on housing starts and building permits, as well as the most recent data on home prices, will be released. Estimates of Q3 economic growth will undergo revision.

Key dates and data releases: housing starts for September and October, home prices, second estimate of Q3 GDP (11/26); durable goods orders, personal income/spending (11/27).