Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (09/30/13) |
Previous Week (10/04/13) |
Current Week (10/11/13) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
13,104.14 |
15,129.67 |
15,072.58 |
15,237.11 |
16.28% |
1.09% |
|
NASDAQ |
3,019.51 |
3,771.48 |
3,807.76 |
3,791.87 |
25.58% |
-0.42% |
|
S&P 500 |
1,426.19 |
1,681.55 |
1,690.50 |
1,703.20 |
19.42% |
0.75% |
|
Russell 2000 |
849.35 |
1,073.79 |
1,078.25 |
1,084.32 |
27.66% |
0.56% |
|
Global Dow |
1,995.96 |
2,310.26 |
2,325.73 |
2,349.42 |
17.71% |
1.02% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
2.61% |
2.65% |
2.68% |
92 bps |
3 bps |
So who are the big “winners” in the ongoing war of words between Congressional Republicans and the Administration? While the often mindless rhetoric has attempted to convince the American people that one side is reasonable and the other villainous, the results are far from favorable. In the latest Associated Press approval poll, 83% of the public actually disapproves of the job that Congress is doing and only 5% seem pleased. While those numbers are dismal, the officials can take comfort in the fact that Congress’ disapproval rating was lower (87%) in 2011 when its inaction almost resulted in a government shutdown and contributed to S&P ’s debt downgrade. The Prez fared much better than his legislative counterparts, though still over half of the respondents (53%) disapprove of the way he is running the country.
As the week neared a close and the October 17 debt ceiling deadline approached, a Band-aid emerged as Republicans offered a temporary six-week increase without (many) preconditions, a move that O. previously said he would be willing to accept. Meanwhile, Treasury Secretary Lew warned of “perilous” conditions on the horizon and claimed that the gov would only have $30 billion to pay its bills come October 17 and that amount would last maybe one or two weeks. Winners? Not the American people.
In case anyone noticed, 3rd quarter earnings season kicked off as Alcoa posted a slight profit, despite weak sales and low commodity prices. For the first time in over 50 years, Alcoa is no longer a component of the Dow Jones Industrial Average. In transaction news, Men’s Warehouse turned down a $2.3 billion overture from Jos. A Bank; defense contractor CACI is acquiring Six3 Systems and enhancing its role in gov national security; Carl Icahn turned his attention to Talisman Energy as he now owns a larger than 5% share in the Canadian oil and gas firm. Alcatel-Lucent continued its restructuring ways by announcing a 15k job reduction. Companies seem to be changing the way they advertise as a recent study showed that mobile ad spending soared over 50% (to $3 billion) in the first half of the year and they are no longer as concerned about technological glitches or often confusing measurement statistics. Same store sales in September were lower-than-expected as back-to-school activity disappointed and consumers remained worried about the uncertainty of the government shutdown.
Though investors never entered panic mode as the shutdown moved well into week two, activity was lackluster at best and most seemed unwilling to add new positions and instead continued to take profits from earlier gains. By later in the week, however, the political rhetoric turned to potential compromise (too strong?), or at least a temporary game of “kick the can” without any mention of Obamacare. Stocks surged (over 300 points in one day on the Dow) on the newfound optimism that a deal could be reached before the October 17 debt ceiling deadline. Oil prices fell to a 14-week low on the highest inventory levels in three months, but rebounded a bit on the potential compromise (still too strong?) news. And as far as winner and losers, the losers are still clearly in the lead.
Economic Calendar
|
Date |
Release |
Comments |
|
October 7 |
Consumer Credit (08/13) |
Expanded by more than expected in August |
|
October 9 |
Fed Policy Meeting Minutes |
Hoping to end bond buying by year-end |
|
October 10 |
Jobless Claims (10/05/13) |
Largest gain since last November (Superstorm Sandy) |
|
October 11 |
Retail Sales (09/13) |
DELAYED DUE TO GOV SHUTDOWN |
|
PPI (09/13) |
DELAYED DUE TO GOV SHUTDOWN |
|
|
The Week Ahead |
||
|
October 16 |
CPI (09/13) |
|
|
Fed Beige Book |
||
|
October 17 |
Jobless Claims (10/12/13) |
|
|
Housing Starts (09/13) |
||
|
Industrial Production (09/13) |
||
|
October 18 |
Leading Indicators (09/13) |
So what kind of impact will the gov shutdown have on the global economy? (Pretty hard to measure with the agencies closed for biz.) This week, the IMF slashed its growth forecast for by 0.3% for 2013 and another 0.2% next year, while urging emerging markets to get their acts together. (Is the US considered an emerging market?) Europe suffered a setback this week as manufacturing in the euro-zone fell for the second consecutive month. Industrial production in the UK declined in August, though Germany was the savings grace by besting expectations in its output release. China’s purchasing managers’ index also dropped in August, though still remained (ever-so-slightly) in expansion mode.
The Fed released minutes from its last policy meeting and noted disagreement that would make Republicans and Dems proud. Some policymakers wanted to keep the bond buying program firmly intact and worried that long-term rates would surge and investors would perceive the move as an official ending to the easy-money policies. Others felt that lack of action after so much debate would hinder the Fed’s credibility and future “forward guidance” will no longer mean much to analysts and investors. At the end of the day (meeting), the vote was a “relatively close call,” and the “do nothing” faction won the day (for now). Perhaps the potential for a government shutdown (now a reality) and the debt ceiling deadline (soon a reality?) entered into the thought-process and helped sway the vote. Most expect the Fed to taper the bond buying stimulus before the end of the year (assuming the politicos can get their acts together soon without much damage to the economy). In other Fed news, Prez Obama tapped Janet Yellen as the next Chair of the Federal Reserve (Bernanke’s term ends in January), though she will come under much scrutiny in her confirmation hearings. (Certainly someone is bound to ask her just how she feels about Obamacare?)
In domestic economic news, though jobless claims was reported this week, the numbers were an aberration at best and incredibly negative as worst. After several weeks of false readings due to a tech conversion in California, the weekly data showed an increase of 66k claims, the largest since November 2012 when SuperStorm Sandy disrupted the northeast. Of that sizable gains in claims, about 15,000 were related to non-government employees who lost their jobs because of the shutdown. With much of the gov closed for biz, the data that is released will remain incomplete and confusing for the time being (and that will make the Fed’s job that much harder, right Janet?).
On the Horizon… With the politicos at least talking now and the debt ceiling on the verge of a six-week reprieve, the shenanigans in Washington will remain atop the headlines for the foreseeable future. At least earnings season may give investors something else to focus on and next week, they will have plenty of opportunities to dissect the numbers. Citigroup, Bank of America and Goldman Sachs lead the financial charge, while Intel and IBM lend insight into the world of technology. Hopefully some positive reports will prove a nice distraction from work (or lack thereof) in the nation’s capital.
© Brounes & Associates
http://www.ronbrounes.com/mtkcom.htm
