Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (09/30/13) |
Previous Week (10/11/13) |
Current Week (10/18/13) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
13,104.14 |
15,129.67 |
15,237.11 |
15399.65 |
17.52% |
1.07% |
|
NASDAQ |
3,019.51 |
3,771.48 |
3,791.87 |
3914.28 |
29.63% |
3.23% |
|
S&P 500 |
1,426.19 |
1,681.55 |
1,703.20 |
1744.50 |
22.32% |
2.42% |
|
Russell 2000 |
849.35 |
1,073.79 |
1,084.32 |
1114.77 |
31.25% |
2.81% |
|
Global Dow |
1,995.96 |
2,310.26 |
2,349.42 |
2407.78 |
20.63% |
2.48% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
2.61% |
2.68% |
2.59% |
83 bps |
-9 bps |
Investors’ vocabularies have expanded over the past few weeks (months, years). Terms like sequester, fiscal cliff, debt ceiling, government shutdown, Constitution, and, of course, Obamacare (as well as a few of the four-letter variety) have all become critical investment jargon, able to move markets with a single utterance by politicos. Despite more failed maneuvering by House Republicans and others (sorry Ted), the Senate agreed to a compromise deal to restart the gov and raise the debt limit (at least temporarily) and the Prez signed it shortly thereafter. After Fitch Ratings placed the US treasury under review for downgrade, the nation’s “best and brightest” finally came to their senses, put defunding Obamacare on the backburner (for a day or two), and initiated a new game of “kick the can” by pushing major budget decisions off until early 2014. Dems proclaimed victory and gloated (just a tad); Reps vowed to keep fighting the “good fight” for the American people; investors welcomed the news and returned to buying mode; furloughed workers trudged back to the old grind; national parks reopened; and agencies started calculating “outdated” economic data. Back to work (for now). So what are the odds that these shenanigans resurface come January?
Earnings season plugged along (anyone notice?), but most investors seemed indifferent given the state of the gov, the Fed’s ongoing indecisiveness, and other pressing matters. Financials took center stage as Citigroup missed expectations on weaker fixed income revenue (from rising rates); Bank of America and Morgan Stanley each experienced nice quarters on solid wealth management activity; and Goldman Sachs suffered a large profit decline (that put their many Veeps’ expected lofty bonuses in question). Shifting to tech, Intel offered a pessimistic sales forecast; IBM felt a significant drop in hardware sales; and Google reaped benefits from successful campaigns to take advantage of users conducting more commerce on mobile devices. In transaction news , Blackberry may have found a new suitor in the form of Chinese computer maker Lenova.Netflix has entered discussions to make its online video services available through pay television providers. SAC Capital is on track to settle criminal claims with the Feds for over $1 billion, the largest such settlement ever in an insider trading case.
Before the debt deal was signed, sealed, and delivered, investors continued to shun short-term treasuries for fear that they would suffer mightily if the gov truly did default on its debt. By weeks end, they were no longer considered “untouchable.” Stocks remained volatile during much of the week as the on-again, off-again, on-again deal stayed atop the headlines and finally came to fruition. The S&P 500 moved back into record territory on the “compromise” (a dirty word in DC these days), and investors were once again able to focus on earnings news and the upcoming economic data releases that had been delayed due to the shutdown. Oil plunged to a three-and-a-half month low (back down toward $100/barrel) as rising inventories implied shrinking demand. And, once again, it became business as usual (at least for another three months) across what politicos remind us daily is the Greatest Country and Economic Superpower.
Economic Calendar
|
Date |
Release |
Comments |
|
October 16 |
CPI (09/13) |
DELAYED DUE TO GOV SHUTDOWN |
|
Fed Beige Book |
Growth at "modest to moderate" pace with fiscal uncertainty |
|
|
October 17 |
Jobless Claims (10/12/13) |
Distorted by gov shutdown |
|
Housing Starts (09/13) |
DELAYED DUE TO GOV SHUTDOWN |
|
|
Industrial Production (09/13) |
DELAYED DUE TO GOV SHUTDOWN |
|
|
October 18 |
Leading Indicators (09/13) |
DELAYED DUE TO GOV SHUTDOWN |
|
The Week Ahead |
||
|
October 21 |
Existing Home Sales (09/13) |
|
|
October 24 |
Jobless Claims (10/19/13) |
|
|
New Home Sales (09/13) |
||
|
October 25 |
Durable Goods Orders (09/13) |
With limited domestic economic data to digest, some analysts turned their attention abroad to the other economic superpower known as China. Earlier in the year, some feared that China was on the verge of a sizable slowdown as challenges across the globe were negatively impacting its economy. China has long been reliant on global trade, often with certain developed and emerging countries still fighting their ways through recovery, and it remains seemingly incapable of producing significant internal growth to compensate for diminished activity with its trading partners. Well, in the third quarter, China’s economy grew at a 7.8% pace, putting it back on track to meet (or even exceed) its desired target for 2013. Though consumer inflation rose as well last month, most analysts do not seem overly concerned about the lasting impact of price pressures on the economy as a whole. Meanwhile, Germany, Europe’s one economic (somewhat-)superpower, saw its ZEW economic expectations index jump in October beyond most forecasts, another sign that the Eurozone is continuing to progress nicely.
The gov shutdown meant many missed releases, a phenomenon that has made it difficult for economists, investors, and especially the Fed to gauge the true direction of the domestic economy. Over the past few week, the gov failed to report the inflation indexes, retail sales, industrial production, and key housing data. Many of the numbers will be released over the next two week, but may be distorted and offer little insight. For example, this week’s jobless claims report showed that 15k fewer workers filed for unemployment in the latest week, generally considered a favorable reading. However, that data comes in the aftermath of a rather substantial increase in claims to 373k in the prior week that was significantly skewed because of the shutdown. It may take several weeks of data (and revisions) until the true picture is revealed (and, by then the talks about another gov shutdown may have resurfaced).
The Fed’s Beige Book report depicted an economy expanding at a “modest to moderate” pace, but with plenty of uncertainty resulting from the political bickering and the repercussions of the shutdown. Consumer and biz spending increased in most regions and employment growth remained modest last month. The data seemed to imply that the economy was ready to go at it alone (or at least with a scaled back version of bond buying), but given the ongoing uncertainties, many Fed watchers expect the policymakers to sit on their hands again at the next open market committee meeting.
On the Horizon …The economic releases that passed will start trickling out (just in advance of next month’s releases) so analysts will have their hands full digesting the data and determining just how skewed the number may be. The Fed meets at the end of the month so rumors should pick up in full force about any potential moves and certain comments by policymakers may lend some clues. Earnings season replaces the drama in DC atop the headlines and bellwethers Caterpillar and UPS report as do tech giant Microsoft and e-commerce retailer Amazon.com. So what will Ted Cruz do now with so much time on his hands?
© Brounes & Associates
