Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (09/30/13) |
Previous Week (10/18/13) |
Current Week (10/25/13) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
13,104.14 |
15,129.67 |
15,399.65 |
15,570.28 |
18.82% |
1.11% |
|
NASDAQ |
3,019.51 |
3,771.48 |
3,914.28 |
3,943.36 |
30.60% |
0.74% |
|
S&P 500 |
1,426.19 |
1,681.55 |
1,744.50 |
1,759.77 |
23.39% |
0.88% |
|
Russell 2000 |
849.35 |
1,073.79 |
1,114.77 |
1,118.34 |
31.67% |
0.32% |
|
Global Dow |
1,995.96 |
2,310.26 |
2,407.78 |
2,414.28 |
20.96% |
0.27% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
2.61% |
2.59% |
2.52% |
76 bps |
-7 bps |
With the budget battles “safely” on the backburner for now (until January), investors could once again focus on the pressing biz issues of the day. Earnings season had largely gone unnoticed with the DC shenanigans topping the headlines day after day after day (and many nights too). For now, S&P 500 companies are on pace for earnings growth of 1.6%, far below expectations of 3% predicted prior to the beginning of the season. Some analysts point out that the surprising loss by JP Morgan Chase will dramatically impact the overall earnings picture and once the large financial company’s numbers are factored out of the equation, third quarter growth will project at just over 4%. (Of course, unfortunately JP Morgan cannot actually be factored out of the equation.)
On the positive side, Netflix continued rolling along as its profits quadrupled in size amid significant growth in subscribership. Ford experienced a record-setting quarter as global sales among automakers remained strong. Microsoft overcame continued weakness in PC activity as solid software sales prompted a strong quarterly showing. On the downside, though McDonalds enjoyed a decent quarter and bested expectations, the fast food giant warned of weaker sales in the months to come. Similarly, Caterpillar reduced its forecast for the year on lower demand of heavy equipment. In the “mixed” category, Amazon continued its heavy R&D spending and infrastructure enhancements with its ambitious plot to capture e-sales of groceries, mobile devices, and even streaming movie content as the company reported a quarterly loss (again), even though it posted a nice spike in revenues.
In other biz news, Uncle Carl (Icahn) is now playing the Apple game as he increased his holdings to a roughly $2.5 billion stake and is now using his newfound pull to demand a large stock repurchase. Twitter is becoming the next Facebook (is that a good thing?) as it moves toward the public markets and announced an anticipated offering price that would value the social media behemoth at over $11 billion. JP Morgan (of weak earnings fame) is still trying to put a number of its mortgage-related lawsuits in the rearview mirror to the tune of $13 billion. Bank of America is entering a cost-cutting mode and plans to eliminate 3,000 jobs tied to the mortgage sector.
Investors welcomed a week without major politico news and reacted favorably (for the most part) to the earnings news and positive growth signs out of China. While the delayed jobs report depicted fewer additions, many took the news in stride and now believe that the Fed will not shift policy (taper bond buying) for the foreseeable future. The S&P 500 closed at a new record high. Crude tumbled to its lowest level in about four months as data showed that oil supplies were on the rise and demand was dismal at best. Treasuries also benefited from the Fed news (or lack thereof) as a continuation of its current (bond buying) program seems more of a certainty with each passing day. It’s nice to actually talk biz in these commentaries and not focus entirely on politics. (Sadly, January isn’t that far away.)
Economic Calendar
|
Date |
Release |
Comments |
|
October 21 |
Existing Home Sales (09/13) |
Declined as mortgage rates rose during the summer |
|
October 22 |
Unemployment Rate (09/13) |
Fell due to folks leaving work force |
|
Nonfarm Payroll (09/13) |
Labor market stumbled heading into latest budget battles |
|
|
October 24 |
Jobless Claims (10/19/13) |
Limited layoffs during budget battles |
|
Balance of Trade (08/13) |
Little change in trade picture |
|
|
October 25 |
Durable Goods Orders (09/13) |
Bested expectations, but mainly on aircraft purchases |
|
The Week Ahead |
||
|
October 29 |
PPI (09/13) |
|
|
Consumer Confidence (10/13) |
||
|
October 30 |
GDP (3rd qtr) |
|
|
CPI (09/13) |
||
|
Fed Meeting Decision |
||
|
October 31 |
Jobless Claims (10/26/13) |
|
|
Personal Spending/Income (09/13) |
||
|
November 1 |
ISM – Manu (10/13) |
|
|
Construction Spending (09/13) |
With the domestic data situation still in disarray following the gov shutdown, investors focused on the global picture and some positive news out of China. The Chinese purchasing managers’ index climbed to its highest level in seven months in October and analysts now believe that the superpower will achieve its targeted annual growth rate of 7.5%, a feat that seemed virtually impossible just a few months ago. Across the pond, a UK sentiment index showed enhanced optimism for the country’s financial affairs. Next month, the European Central Bank will begin embarking on a review process of about 130 banks to detect which ones can survive the likes of another financial debacle. (How would JP Morgan fare?)
The September jobs report highlighted the domestic news of the week (several weeks delayed) and the economy created a mere 148k jobs and has been adding far fewer nonfarm positions than it had been in the first half of the year. While the average monthly jobs growth stands at 185k for the year, the last quarter only averaged 129k additions, a statistic that will not be lost on Bernanke and friends at next week’s policy meeting. While the unemployment rates trickled down again to 7.2%, many analysts believe the decline is due more to individuals leaving the workforce than to increased hiring. Jobless claims dropped for a second consecutive week and now stand at 350,000, above the lows, but still a favorable showing and a sign that the gov shutdown did not have a material impact on labor. Still, some believe that the data of the next few weeks (even months) may prove difficult to analyze and some aberrations will be depicted throughout. By January, the data gathering and analysis should be back on track, just in time for the next gov shutdown.
The Fed gets together next week, though the pre-meeting buzz has been less “spirited” than normal. Most watchers expect the policymakers to leave the $85 billion a month bond buying program intact as they dissect the data and determine the lasting (if any) effect of the budget showdown. Labor has been a key determining factor in setting policy and the current uncertainties and recently exhibited weakness (slowdown) should buy Bernanke and Co a tad more time. (Ready for action, Ms. Yellen?)
On the Horizon… Will the Fed offer any surprises this time around? While most expected them to act last meeting to taper the program, barely anyone anticipates such action at the upcoming session. The economic numbers also come fast and furious as the gov plays catch-up and releases everything from the inflation gauges to GDP. Big Oil steps up in earnings season as Exxon Mobil, ConocoPhillip, and Chevron offer reports as does all-everything Apple. (How’s that iPhone 15 coming along?)
© Brounes & Associates
http://www.ronbrounes.com/mtkcom.htm
