Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (09/30/13) |
Previous Week (11/29/13) |
Current Week (12/06/13) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
13,104.14 |
15,129.67 |
16,086.41 |
16,020.20 |
22.25% |
-0.41% |
|
NASDAQ |
3,019.51 |
3,771.48 |
4,059.89 |
4,062.52 |
34.54% |
0.06% |
|
S&P 500 |
1,426.19 |
1,681.55 |
1,805.81 |
1,805.09 |
26.57% |
-0.04% |
|
Russell 2000 |
849.35 |
1,073.79 |
1,142.89 |
1,131.38 |
33.21% |
-1.01% |
|
Global Dow |
1,995.96 |
2,310.26 |
2,450.16 |
2,420.43 |
21.27% |
-1.21% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
2.61% |
2.75% |
2.86% |
110 bps |
11 bps |
Can’t we all just get along? Perhaps politicos are simply in the holiday spirit? Perhaps the passing of Nelson Mandela presented a renewed opportunity for congeniality? This week, DC was filled with a newfound promise of compromise and officials seem to believe a new budget deal could be signed, sealed, and delivered next week. (In reality, such optimism has reigned before only to result in more bickering, gov shutdowns, and temp solutions.) Any compromise would likely be smaller that prior budget deals with annual spending for the next two years just north of the House Republicans desired $967 billion and the Senate Dems hoped-for $1.058 trillion. (What’s a hundred billion between friends?) The House Reps plan to adjourn on December 13 (no one deserves an extended vacation more than them) so a few all-nighters may be in the cards. If not…here we go again in 2014.
Black Friday came and went with mixed results. Many consumers took advantage of shopping with those retailers that opened on Thanksgiving Day itself and the Friday numbers suffered accordingly. For the entire holiday weekend, the National Retail Federation estimates that spending declined 2.7% from 2012’s levels, but still expects sales to grow close to 4% for the entire holiday season. Auto sales jumped in November as Chrysler and GM posted solid double-digit gains as new models on certain cars and trucks were met with nice demand. Apple topped the corporate headlines again this week as the tech-mega-giant looked to profit from the growing Twitter “fad” through the purchase of tweet analyzer Topsy Labs. The company also entered into an arrangement with China Mobile, the world’s largest cellular network with over 700 million mobile subscribers, giving it a huge and immediate footprint into the massive Chinese marketplace. Hilton moved closer to IPO and expects to launch its offering later this month to the tune of $2.37 billion, a tidy windfall for Blackstone.
European regulators were in the news this week as the EU fined six financial behemoths (including JP Morgan, of course) $2.32 billion, the largest penalty ever in a cartel-related case, for their roles in manipulating the LIBOR rate. The EU also warned the major ratings agencies ( Fitch, Moody’s, and Standard & Poor’s ) that it may take action and perhaps even revoke licenses for failed oversight and poor decision-making in downgrading the debt of certain sovereign nations during the financial crises.
Investors used the first few days of the final month to reevaluate and take profits. Stocks fell over five consecutive days before bouncing back nicely at week’s end on better-than-expected labor numbers. Many investors have already come to grips with the “beginning of the end” for the bond buying program, but still have confidence that a Janet Yellen Fed will remain market-friendly in terms of rate policies and other monetary actions. Oil surged to a five-week high on prospects for enhanced demand and declining inventories, though analysts believe the lower gas prices will positively impact consumer spending in time for the holidays. And a collective “Kumbaya” could be heard from the nation’s capital.
Economic Calendar
|
Date |
Release |
Comments |
|
December 2 |
ISM – Manu (11/13) |
Highest level since April 2011 |
|
Construction Spending (10/13) |
Fastest pace in more than 4 years |
|
|
December 4 |
Trade Balance (10/13) |
Trade gap narrowed to $40.64 bln |
|
New Home Sales (11/13) |
Highest level in 6 months |
|
|
ISM – Services (11/13) |
Slowest pace in 5 months |
|
|
Fed Beige Book |
Expansion at a "modest to moderate" pace |
|
|
December 5 |
Jobless Claims (11/30/13) |
dropped in 7 of the last 8 weeks |
|
GDP – 3rd quarter revised |
Substantially faster pace in the third quarter |
|
|
Factory Orders (10/13) |
Dropped on lower aircraft demand |
|
|
December 6 |
Unemployment Rate (11/13) |
Lowest level since November 2008 |
|
Nonfarm Payroll (11/13) |
Better-than-expected additions |
|
|
Personal Income/Spending (10/13) |
Modest improvement implies growing consumer confidence |
|
|
Consumer Credit (10/13) |
Biggest rise in credit card debt in 5 months |
|
|
The Week Ahead |
||
|
December 12 |
Jobless Claims (12/07/13) |
|
|
Retail Sales (11/13) |
||
|
December 13 |
PPI (11/13) |
After a nice relaxing Thanksgiving holiday, investors and traders alike arrived at work bright and early Monday morning eager to start another week. Bring on the numbers. The releases came fast and furious and painted a picture of an economy performing well across various sectors. Manufacturing, as measured by the Institute of Supply Management Index, climbed in November to its best reading since April 2011. Though the related services index declined last month, it remained comfortably in expansion mode. New homes sales proved that housing is “alive and well” as the data depicted its highest level in six months. Consumer sentiment rose to its strongest reading since July in the latest U of Michigan survey. GDP grew at a 3.6% annual rate in the third quarter, its fastest pace since early 2012, though much of the gain was the result of biz stockpiling inventories. Some analysts believe that trend will reverse itself in the fourth quarter and GDP may show only slight growth over the final three months of the year.
Shifting the labor…the November ADP/Moody ’s private unemployment report showed that the economy added 215k jobs last month, the best showing of the year. Likewise, the gov’s nonfarm payroll report reflected additions of 203,000 November jobs and the unemployment rate fell to 7.0%, the lowest level since November 2008. Additionally, the seemingly stellar activity was confirmed as initial jobless claims fell below 300k last week, though some feel that end-of-year numbers are often skewed because of hirings/firing decisions during the holidays.
The Fed undoubtedly watched the plethora of numbers, particularly the labor-related ones, as the policymakers plan to meet mid-month and again debate the bond-buying program. Some Fed watchers expect the “in coming months” language to mean that “tapering” will begin before the end of the year as the labor numbers remain solid. The Beige Book confirmed a domestic economy expanding at a modest or moderate pace with strength in manufacturing and consumer spending. Overseas, the ECB kept its rates unchanged, but claimed to be “ready and able to act” if need be. Inflation, rather deflation, is high on the radar screen in Europe and some fear that declining prices could hinder an already stagnant economy. Retail sales in the Eurozone dropped in October and even Germany reported lower manufacturing orders. On the other hand, China continued to experience strong factory growth as its economy is building momentum during the homestretch of the year.
On the Horizon …While it’s a forgone conclusion that equities will end the year with solid gains, the question remains…just how solid? Some analysts fear a pullback in the final month (and beyond) on profit-taking and adverse reactions to the impending Fed move. Others see an domestic economy on solid ground and expect bigger and better things for the next year. (Let’s go with the latter.)
© Brounes & Associates
