Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (09/30/13) |
Previous Week (11/01/13) |
Current Week (11/08/13) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
13,104.14 |
15,129.67 |
15,615.55 |
15,761.78 |
20.28% |
0.94% |
|
NASDAQ |
3,019.51 |
3,771.48 |
3,922.04 |
3,919.23 |
29.80% |
-0.07% |
|
S&P 500 |
1,426.19 |
1,681.55 |
1,761.64 |
1,770.61 |
24.15% |
0.51% |
|
Russell 2000 |
849.35 |
1,073.79 |
1,095.67 |
1,099.97 |
29.51% |
0.39% |
|
Global Dow |
1,995.96 |
2,310.26 |
2,404.86 |
2,395.85 |
20.03% |
-0.37% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
2.61% |
2.62% |
2.75% |
99 bps |
0 bps |
What government shutdown? (Ask again in about two months.) With the gov back in biz, the economic data has come fast and furious and the results show very little impact from the two-week “vacation” many Federal workers “enjoyed.” While some consumer-related numbers implied uncertainty and caution in the spending area, the manufacturing and labor numbers reveal a strengthening economy, possibly on more solid ground than expected. The Fed will be watching these results closely as the bond buying dilemma has moved center stage now that earnings are winding down and politicos are staying out of the headlines. The policymakers meet one more time before year-end and Bernanke can enjoy another day in the limelight before soon riding off into retirement (with now disgraced Alan Greenspan).
Early in the week, about three-quarters of S&P 500 companies had reported and the results were slightly better-than-expected, though the outlook for future months remains a bit cloudy (thanks to DC’s finest). Teen retailer Abercrombie & Fitch posted a revenue decline on weaker domestic and international sales, and semi-conductor maker, Qualcomm, offered an outlook that left most analysts unsatisfied. Still, on the whole, the season has been encouraging and once factoring JP Morgan ’s surprise from the equation, the numbers have been even better.
Transactions dominated the headlines with Twitter taking its spot next to Facebook as one of the most widely anticipated public offerings. Similar to Facebook, the price range for the IPO kept rising as the date grew closer and ultimately the $26 a share price point (and over a $2 billion market value) proved too low for those enthusiastic investors eager to get a share or two (and Tweet about it) on the first day. The stock surged after it opened trading and closed over 70% above the offering price. (Here’s hoping it doesn’t suffer a similar hangover as Facebook.) In other transaction news, Blackberry successfully secured a $1 billion investment from large shareholder Fairfax Financial (and a few of its friends from Canada and Qatar) and finally moved beyond its previous plan to take the company private. Some believe Blackberry and its new leadership team have one last chance to get it right as it continues to struggle (and lose) in its mobile phone competition with the likes of Apple and Samsung.
Stocks were mixed as investors dissected the plethora of data and tried to weigh a stronger labor picture against prospects that the Fed may feel comfortable enough to “taper” the bond buying program. While the Blue Chips continued to trek deeper into record territory, other indexes traded relatively flat. Bond yields pushed higher as fixed income buyers understand that the Fed stimulus is nearing an end, even if it is not in December and ultimately bond yields will rise on lower demand (from the Fed). Crude fell to a five-month low before bouncing back ever-so-slightly on better-than expected supply news, but prices still remain well below $100/barrel. With one month and counting, investors sit comfortably in solid performance territory (but those dreaded shutdown talks will resume again in the new year).
Economic Calendar
|
Date |
Release |
Comments |
|
November 4 |
Factory Orders (09/13) |
August and September came in slightly below expectations |
|
November 5 |
ISM – Services (10/13) |
Surprisingly strong showing |
|
November 6 |
Leading Economic Indicators |
Better than expected increase |
|
November 7 |
Jobless Claims (11/02/13) |
4th straight weekly decline |
|
GDP (3rd qtr) |
Fastest rate of growth in a year |
|
|
Consumer Credit (09/13) |
Borrowing for car purchases and education climbed |
|
|
November 8 |
Personal Spending/Income (09/13) |
Consumers were cautious prior to shutdown |
|
Nonfarm Payroll (10/13) |
Strong showing and prior upward revisions |
|
|
Unemployment Rate (10/13) |
Slight increase reflects furloughed workers |
|
|
The Week Ahead |
||
|
November 14 |
Jobless Claims (11/09/13) |
|
|
Balance of Trade (09/13) |
||
|
November 15 |
Industrial Production (10/13) |
Though some analysts warn against reading too much into numbers tainted by the gov shutdown, the economic picture looks relatively bright. News from the services sector (ISM) confirmed what manufacturing implied last week as the ISM Services Index surged again in October. Third quarter GDP climbed at a 2.8% pace, better than the 2.5% growth rate in the second quarter, to its best showing in a year. While restocked shelves (inventories) were among the favorable stats inside the numbers, lackluster consumer activity diminished the overall data as folks remained cautious just prior to the gov shutdown. Similarly, personal spending rose less than personal income in September as consumers took a wait-and-see attitude to non-essential purchases. While another shutdown is certainly a possibility in early 2014, some optimists hope that the consumers’ brief hiatus could mean a stronger holiday shopping season as the worst is behind them (for now) and many will have more bucks burning holes in their pocketbooks.
The end of week labor numbers were clearly the most anticipated of the week. Investors and the Fed alike have been closely monitoring these numbers. In October, 204k new jobs were added to the economy, far exceeding the 126k guestimate. Additionally, the nonfarm data of the prior two months was also revised higher. The unemployment rate ticked up slightly to 7.3%, but many wrote off the results as an aberration as it included the countless furloughed employees victimized in the shutdown. Given the solid labor results, some analysts are pushing up their predictions for the Fed tapering. St. Louis Fed Prez Bullard believes that a move at the December 18th meeting is “certainly possible” and Dallas Chief Fisher confirmed his desire to initiate the action sooner-than-later. Still, JP Morgan’s latest forecast calls for a January move (sooner than its prior March timeline) and Barclays worries that the unemployment data is still raw from the shutdown and a March taper remains the most likely scenario.
The European Central Bank surprised virtually everyone by cutting its main rate to a record low of 0.25%, pegging the low level of inflation as a bothersome development. The European Commission slightly cut its 2014 growth forecast for the Eurozone. S&P dropped its rating on France’s debt by one place to AA on fears that gov spending is still too high. The data of the week showed a weaker Eurozone manufacturing index, though it still indicated expansion. China’s services sector was reported as stronger-than-expected, confirming what manufacturing said just a week earlier.
On the Horizon… Wal-Mart tops the earnings calendar though most analysts have moved beyond last quarter and are asking “what have you done for me lately?” Analysts get a break from the vast array of economic numbers that has included two months’ worth of data in many cases. Expect the Fed rumors to begin in earnest as the December meeting moves inside of a month’s time and talks about holiday shopping should dominate the economic dialogue. With the shutdown done (for now) and labor looking strong, hopefully consumers will step up in time for the holidays.
© Brounes & Associates
http://www.ronbrounes.com/mtkcom.htm
