Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (06/30/13) |
Previous Week (09/20/13) |
Current Week (09/27/13) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
13,104.14 |
14,909.60 |
15,451.09 |
15,258.24 |
16.44% |
-1.25% |
|
NASDAQ |
3,019.51 |
3,403.25 |
3,774.73 |
3,781.59 |
25.24% |
0.18% |
|
S&P 500 |
1,426.19 |
1,606.28 |
1,709.91 |
1,691.75 |
18.62% |
-1.06% |
|
Russell 2000 |
849.35 |
977.48 |
1,072.83 |
1,074.19 |
26.47% |
0.13% |
|
Global Dow |
1,995.96 |
2,110.64 |
2,349.36 |
2,331.73 |
16.82% |
-0.75% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
2.48% |
2.73% |
2.63% |
87 bps |
-10 bps |
What if Senator Ted Cruz spoke for almost 22 hours and no one paid attention (except, of course, Mrs. Ted Cruz and maybe Senator Rand Paul)? Apparently, Cruz has so much distain for Obama-care that he needed practically a full day to state his case prior to the Senate vote on budget funding. After the Great Orator made his peace, the Senate voted unanimously to proceed with a bill to fund the gov (without any mention of health care). The House’s measure eliminated Obama-care funding and Congress will have to find some sort of compromise to avoid a government-shutdown in the new fiscal year beginning October 1 (that’s next week, by the way). Additionally, the nation’s “best and brightest” must come to agreement on the debt ceiling before the gov starts defaulting on certain obligations in mid-October. Investors will closely monitor the latest round of partisan bickering for its effect on the markets as well as any reduction in crucial government functions, downgrades by credit rating services, and the emergence of potential prez candidates for 2016. (Does the R party put a 22-hour time limit on speeches at its primary?)
Board rooms were busy during the week as transactions topped the headlines. Blackberry appears to be playing “follow-the-leader” with Dell en route to a $4.7 billion privatization deal with current investor Fairfax Financial. Chinese e-commerce giant Alibaba is heading to the public markets in a deal that could value the company at $70 billion. Chrysler, in a move to force majority owner Fiat to acquire a larger stake at an elevated valuation, may pursue a public offering of the 40% of the shares that are owned by the United Auto Workers. In another sizable global deal, Applied Materials is buying Tokyo Electron for over $9 billion. In other corporate news, Apple iPhone 5s are flying off the shelves at retail outlets to the tune of a record nine million units over three days. A Bloomberg story spooked the consumer word when the news service said that Wal-Mart was stockpiling merchandise and cutting back on orders to meet declining demand, though the huge discounter called the report entirely misleading.
After setting record highs last week, stocks entered a five-day losing streak that saw the Dow Jones plummet over 400 points and the S&P endure its longest slump of the year. Some investors were taking profits from the recent gains and large institutions may have been setting up portfolios for the final quarter and homestretch of 2013. The streak ended late in the week, but uncertainty and caution still rule the day as the Fed continues debating the merits of indefinite bond buying, Congress kowtows to its partisan backers over the budget and debt dilemmas, and global tensions in the Middle East remind investors that sentiment (and oil prices) can shift on a dime. Crude fell to levels not seen since early July as the Syrian conflict moved off the front page (for now) and inventories jumped on lower demand. Bond prices stabilized as the certainty of a Fed taper move suddenly became a little less certain. And somewhere, Ted Cruz is still pontificating (or reading Green Eggs and Ham).
Economic Calendar
|
Date |
Release |
Comments |
|
September 24 |
Consumer Confidence (09/13) |
Slight decline on jobs/income worries |
|
September 25 |
Durable Goods Orders (08/13) |
Slight increase though still reflective of cautious demand |
|
New Home Sales (08/13) |
Rebounded from a slow July |
|
|
September 26 |
Jobless Claims (09/21/13) |
4-week average at lowest level since June 2007 |
|
GDP (2nd qtr (revised) |
Same as last month’s reading |
|
|
September 27 |
Personal Income/Spending (08/13) |
Gains in salaries and wages means more money to spend |
|
The Week Ahead |
||
|
October 1 |
ISM – Manu (09/13) |
|
|
Construction Spending (08/13) |
||
|
October 3 |
Jobless Claims (09/28/13) |
|
|
Factory Orders (08/13) |
||
|
ISM – Services (09/13) |
||
|
October 4 |
Nonfarm Payroll (09/13) |
|
|
Unemployment Rate (09/13) |
“To taper or not to taper?” Again? Still? When the Fed policymakers postponed their decision to begin reducing bond purchases and allow the economy to start functioning without any artificial stimulus, they merely added to the uncertainty that has “haunted” economists for a good while. Many investors have been pleased with the Fed’s actions (or inactions) and the markets have moved to higher levels throughout the year. And then, at the first sign of a policy shift, investors stepped on the brakes and stocks and bonds fell. Just when everyone seemed to accept the fact that the Fed was prepared to act, it didn’t and uncertainty has returned in earnest. This week, Dallas Fed President Fisher announced that he disagreed with the decision and believes the Central Bank has lost credibility. NY Fed Prez Dudley proclaimed that the pace of economic improvement was “insufficient” and the time was simply not right for such action.
The numbers of the week did little to sway anyone’s views on the economy or pace of growth. The latest revised GDP release was not revised at all and the economy grew at a 2.5% pace in the second quarter, a tad slower than expectations. Though durable goods orders advanced in August, the increase was too small to register much enthusiasm for the manufacturing sector. Consumer confidence dropped a tad as uncertainty about income and jobs ruled the day. While weekly jobless claims fell to levels not seen since mid-2007, some analysts fear the data is distorted as computer glitches have impacted the readings in Nevada and California over the past few weeks; many are expecting revisions to reflect a more accurate picture of the labor market. New homes sales recovered in August from a weaker July, though higher mortgage rates and elevated prices threaten to end (or slow) the housing rebound in the months ahead.
Shifting abroad, the euro-zone as a whole received some good news in the form of a better-than-expected purchasing managers’ index, though some countries have been slower to recover than others. Germany is allowing Chancellor Merkel to stay in power, though she will encounter plenty of government opposition as she seeks to form some coalition of rivals. To her delight, Germany’s Ifo biz sentiment index bested forecasts in September, though France’s related index underperformed as neighboring euro powers seem to be enduring very different economic challenges. China’s HSBC manufacturing index jumped to a six-month high, ending some fears that the doldrums from the first half of the year would linger well into the second and beyond. Just months ago, analysts were worried about a dramatic slowdown to the country’s growth rate and some even speculated about stimulus moves.
On the Horizon …The new quarter will be greeted with uncertainty (so what else is new?), much of which is directed at the government. Will Congress and the Administration come together to avoid disaster regarding the budget and debt ceiling? Will the Fed ever have enough confidence in the domestic economy to allow it to stand on its own? A hectic week can set the tone for the homestretch.
© Brounes & Associates
http://www.ronbrounes.com/mtkcom.htm
