Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (09/30/13) |
Previous Week (11/08/13) |
Current Week (11/15/13) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
13,104.14 |
15,129.67 |
15,761.78 |
15,961.70 |
21.81% |
1.27% |
|
NASDAQ |
3,019.51 |
3,771.48 |
3,919.23 |
3,985.97 |
32.01% |
1.70% |
|
S&P 500 |
1,426.19 |
1,681.55 |
1,770.61 |
1,798.18 |
26.08% |
1.56% |
|
Russell 2000 |
849.35 |
1,073.79 |
1,099.97 |
1,116.19 |
31.42% |
1.47% |
|
Global Dow |
1,995.96 |
2,310.26 |
2,395.85 |
2,430.08 |
21.75% |
1.43% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
2.61% |
2.75% |
2.71% |
95 bps |
-4 bps |
Welcome back…hopefully the party lasts a bit longer. In the aftermath of the financial debacle and market collapse, many small investors (mom and pops) remained shell-shocked and watched not-so-comfortably from the sidelines as the big boys reaped the rewards of a very strong rally. With major stock indexes well on their way to a fifth straight positive year (can you say 20%+ returns as of now?), individuals are taking notice and making their way back to the party. Equity mutual funds are taking in new cash with Lipper reporting a fifth consecutive week of strong inflows. The contrarians of the bunch are quick to point out that small investor participation is often considered a bearish indicator as Main Street generally arrives just in time for the party to begin winding down (party poopers).
Retailers took their turn in the earnings parade as Macy’s brought optimism to the pre-holiday season banter as sales promotions helped increase revenue and the company issued an optimistic outlook. Wal-Mart then put a damper on the holiday enthusiasm by reporting declining sales for the third consecutive quarter amid continued economic uncertainty; Kohl’s added to the confusing sentiment by posting an 18% earnings decrease and issuing less-than-stellar guidance. Shifting to techs, network equipment maker Cisco Systems missed on its revenue expectations and issues a pessimistic outlook for the season. Still, over 70% of S&P 500 companies have bested Street projections thus far.
In other corporate developments, transaction news topped the headlines with Dublin-based Shire buying ViroPharma for over $4 billion. AMR (American Airlines) and US Airways moved closer to their $16 billion merger as the companies looked to settle a Justice Department antitrust suit involving airport concessions. Jos. A Bank is walking away (for now) from its $2.3 billion unsolicited offer for Men’s Warehouse, and GE has put a game plan into motion that will eventually allow it to split off its financing arm, following an offering next year. In the IPO world, “mom” retailer Zulily became the latest success story, surging over 70% in its initial day of trading. In legal matters, Starbucks was ordered to pay almost $3 billion to Kraft after a grocery distribution partnership went awry.
Perhaps on the shoulders of all the new (old) moms and pops back in the game, stocks continued their climb deeper into record territory as investors liked what they heard from Fed Vice Chair (and potential Bernanke replacement) Janet Yellen who claimed to be on board with current monetary policies. A slow week on the economic calendar gave many a chance to catch their breath after doing double duty, analyzing the plethora of releases that came fast and furious following the government shutdown. Consumers may have more dollars to spend for the holidays as gasoline prices fell to a 33 month low and AAA predicts the national average could drop below $3/gallon by year-end. Meanwhile, oil inventories depicted a larger-than-expected rise and crude prices stand well below the critical $100/barrel level (though international turmoil from the likes of Iran’s nuke ambitions remain just a headline away).
Economic Calendar
|
Date |
Release |
Comments |
|
November 14 |
Jobless Claims (11/09/13) |
5th consecutive weekly drop |
|
Balance of Trade (09/13) |
Largest deficit in 4 months |
|
|
November 15 |
Industrial Production (10/13) |
Auto output pullback expected to be temporary |
|
The Week Ahead |
||
|
November 20 |
Retail Sales (10/13) |
|
|
CPI (10/13) |
||
|
Existing Home Sales (10/13) |
||
|
Fed Policy Meeting Minutes |
||
|
November 21 |
Jobless Claims (11/16/13) |
|
|
PPI (10/13) |
With US government employees taking it easy after a hectic couple of weeks playing catchup on the data releases, all eyes turned abroad to see how the global economy is fairing. The Organization of Economic Cooperation and Development predicted that the global growth rate will weaken in 2013 and 2014 as sluggish emerging countries like India and Brazil offset strength in China and the Eurozone. The recent GDP releases reflect new concerns for Europe as France and Italy both experienced contracting economies and Germany’s growth rate slowed dramatically in the third quarter. The European Central Bank reiterated its plans to add new stimulus if necessary and would even consider some non-traditional tools like negative interest rates and asset purchases. Certain non-euro-zone economies like those in Sweden and Hungary have struggled as of late with low inflation which is stymying their growth potential. By contrast, the UK reported that its jobless rate fell to its lowest level in four years and the Bank of England may raise interest rates by mid-2015, much earlier than anticipated.
Closer to home, jobless claims dropped for the fifth week in a row as the labor market continued to exhibit a nice rebound. At this point, the government shutdown has become a mere blip on the radar screen and furloughed workers are back at the old salt mine. Though industrial production fell slightly in October, much of the decline was the result of a (perceived) temporary decrease in auto output, and the manufacturing component actually climbed last month. Fed taking heads started talking again, but speculation still is running wild about the December meeting and chances for a shift in the bond buying stimulus. Atlanta Fed Prez Lockhart thinks the central bank may reduce or taper as circumstances do not rule out a move in December. Minneapolis Prez Kocherlakota still sees economic challenges-o-plenty and believes that the current talk about a reduction in bond buying may be premature.
Fed Vice Chairperson Janet Yellen took the hot seat for her Congressional confirmation hearings and more than proved up to the task. With her sights set on Bernanke’s job come January, Yellen implied that her Fed would likely not make significant changes to the current policy that she helped craft. While she sees “meaningful progress” in the labor picture, she wants to make sure the pace of growth is strong enough to last should stimulus be tapered, leading some to speculate that the Fed may sit tight for the time being and watch another month (or two) worth of data before enacting any shift in policy. Yellen is expected to be confirmed by the Senate.
On the Horizon …The Fed policy meeting minutes could lend further insight into the thought-process heading into the next get-together in December, though the talking heads have been coming out of the woodwork and Vice Chair Yellen may have already tipped her hand this past week. Retail sales could also serve as a precursor for the holiday shopping season; the more optimistic analysts expect the buying to become hot and heavy as the government shutdown is now history (until next time) and falling gas prices means more disposable dollars to spend in the malls (or online). Home Depot and Target highlight the earnings releases, though many investors have most likely shifted their attention elsewhere by this stage in the season.
© Brounes & Associates
