Market News: October 29, 2013

October 28th, 2013

The Markets

Domestic equities continued to recover from their Washington-induced slump. Once again, the week saw fresh records for the S&P 500 and the small-cap Russell 2000; the S&P has now risen more than 6% since its October 8 shutdown low. The Dow saw the week’s biggest gains for a change.

Market/Index

2012 Close

Prior Week

As of 10/25

Week Change

YTD Change

DJIA

13104.14

15399.65

15570.28

1.11%

18.82%

Nasdaq

3019.51

3914.28

3943.36

.74%

30.60%

S&P 500

1426.19

1744.50

1759.77

.88%

23.39%

Russell 2000

849.35

1114.77

1118.34

.32%

31.67%

Global Dow

1995.96

2407.63

2414.28

.28%

20.96%

Fed. Funds

.25%

.25%

.25%

0 bps

0 bps

10-year Treasuries

1.78%

2.60%

2.53%

-7 bps

75 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

· The unemployment rate continued to inch downward, hitting 7.2% in September, according to the Bureau of Labor Statistics. That’s the lowest unemployment rate since November 2008. However, the 148,000 jobs added during the month was lower than the monthly average for the past year, and including underemployed and discouraged workers would put the unemployment rate at 13.6%, slightly lower than August’s 13.7%.

· Sales of existing homes slid almost 2% in September, the National Association of Realtors® said, but were still 10.7% above September 2012. The NAR attributed the slump to the fact that according to mortgage lender Freddie Mac, the 30-year fixed rate hit almost 4.5%, its highest level since July 2011 and more than a full percent higher than in September 2012. The median sales price of $199,200 represented the 10th straight double-digit year-over-year increase.

· Durable goods orders were up 3.7% in September, but according to the Commerce Department, a 57.5% increase in orders for aircraft was responsible for almost all of that. Non-transportation orders were down 0.1%, though business spending on capital equipment rose almost 7%.

· JPMorgan Chase & Co. reportedly has negotiated a $13 billion settlement of federal civil lawsuits over mortgage securities sales leading up to the 2008 financial crisis. Earlier in the month, JPMorgan had reported a loss for Q3 caused largely by increasing to $23 billion the reserve it has set aside to cover legal expenses. Also, a jury found Bank of America Corp. liable for defrauding Fannie Mae and Freddie Mac through bad mortgages sold by Countrywide Financial, which BofA acquired in mid-2008. A judge will decide the bank’s penalty later.

Eye on the Week Ahead

Investors will find out Wednesday whether the impact of the government shutdown was enough to postpone any Fed tapering. Earnings season also continues, while release of the initial estimate of Q3 economic growth has been postponed until November 7.

Key dates and data releases: home prices, retail sales (10/29); Federal Open Market Committee monetary policy announcement (10/30).

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

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Market News: October 23, 2013

October 22nd, 2013

The Markets

Near-debt experience: The ceasefire in Washington that put federal employees back to work and averted a debt ceiling disaster also brought relief on Wall Street. One-month Treasury yields had skyrocketed in October as investors abandoned them; that sell-off reversed after a deal was announced, cutting the yield in half overnight and to one basis point by week’s end. Long-term debt saw less impact, but equities rallied strongly. The S&P 500 built on a 1.4% gain on the day of the announcement by hitting a new all-time closing record on Friday. The small caps of the Russell 2000 also set a fresh record, and along with the Nasdaq gained roughly 3% over the three post-announcement closes. However, the Dow was hampered by disappointing earnings reports from a couple of its key components.

Market/Index

2012 Close

Prior Week

As of 10/18

Week Change

YTD Change

DJIA

13104.14

15237.11

15399.65

1.07%

17.52%

Nasdaq

3019.51

3791.87

3914.28

3.23%

29.63%

S&P 500

1426.19

1703.20

1744.50

2.42%

22.32%

Russell 2000

849.35

1084.31

1114.77

2.81%

31.25%

Global Dow

1995.96

2350.14

2407.63

2.45%

20.63%

Fed. Funds

.25%

.25%

.25%

0 bps

0 bps

10-year Treasuries

1.78%

2.70%

2.60%

-10 bps

82 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

· After 16 days of partial government shutdown and debt ceiling gridlock, a last-minute agreement broke the impasse the day before the Treasury was scheduled to begin running out of cash to pay the nation’s bills. The legislation suspends the debt ceiling until February 7 and provides funding to reopen the government through January 15. The deal to end the stalemate also established a congressional budget conference that must report by December 13 on ways to address longer-term budget issues.

· Growth in the world’s second-largest economy accelerated in the third quarter, according to China’s National Bureau of Statistics. The 2.2% increase from Q2 on an annualized basis would represent a 9.1% annual growth rate, higher than the actual 7.8% increase seen over the past year. The increase was attributed to the effects of massive lending in the first two quarters as well as government spending on urban infrastructure in an attempt to counteract a slowdown earlier in the year.

· Manufacturing reports from the Federal Reserve’s Philadelphia and Empire State regions were mixed. The Philly Fed index edged down to 19.8 in October from September’s 22.3, and the Empire State’s outlook on general business conditions fell 5 points to 1.5. However, new orders were up in both regions.

· The Federal Reserve’s beige book report, based on data collected before October 7, showed “modest to moderate” expansion. Businesses were said to be cautiously optimistic about future activity, but the report registered an increase in uncertainty because of the government shutdown and debt ceiling debate. Several of the Fed’s 12 districts noted caution about expanding payrolls because of uncertainty about implementation of the Affordable Care Act and fiscal policy in general, but demand for skilled labor remained high in many districts.

· The lack of government data meant that the Conference Board’s index of leading economic indicators and the Federal Reserve’s industrial production numbers for October were not available.

Eye on the Week Ahead

With the debt debacle temporarily resolved, investors are free to turn their attention to an onslaught of earnings reports and begin speculating about whether the shutdown’s economic impact, estimated by Standard & Poor’s at $24 billion, will delay any Fed tapering. October’s delayed unemployment report for September is now scheduled for release on Tuesday; concerns about the anticipated impact of the shutdown could amplify any disappointment with September’s numbers.

Key dates and data releases: new home sales (10/24); durable goods orders (10/25).*

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

*Some data releases postponed by the government shutdown are being rescheduled and may not be available.

Market Week: October 17, 2013

October 16th, 2013

The Markets

Deal or no deal: If there was any doubt about whether Washington has been driving equities lately, it vanished on Thursday when a glimmer of hope for an end to the fiscal stalemate emerged. After stocks started the week with a swoon, the two-day rally that followed let the Dow reclaim 15,000 and the S&P 500 edge above 1,700. Meanwhile, the Nasdaq, which had demonstrated some resilience the week before, couldn’t quite manage to turn positive.

Market/Index

2012 Close

Prior Week

As of 10/11

Week Change

YTD Change

DJIA

13104.14

15072.58

15237.11

1.09%

16.28%

Nasdaq

3019.51

3807.75

3791.87

-.42%

25.58%

S&P 500

1426.19

1690.50

1703.20

.75%

19.42%

Russell 2000

849.35

1078.25

1084.31

.56%

27.66%

Global Dow

1995.96

2325.73

2350.14

1.05%

17.74%

Fed. Funds

.25%

.25%

.25%

0 bps

0 bps

10-year Treasuries

1.78%

2.66%

2.70%

4 bps

92 bps

Equities data reflect price changes, not total return.

Last Week’s Headlines

· Global growth this year is expected to be more sluggish than previously thought, according to the International Monetary Fund’s latest report. The new 2.9% figure for 2013 is lower than the 3.2% forecast in July and would be the slowest growth in four years. The IMF cited as key threats the potential impact of reduced Federal Reserve quantitative easing, slowing growth in China, high global debt, and the continuing eurozone credit problem. The IMF’s growth forecast for 2014 is 3.6%, with most of that acceleration coming from advanced economies rather than emerging markets. However, the IMF said its forecasts assume a short-lived U.S. government shutdown and timely resolution of the debt ceiling conflict.

· President Obama nominated Federal Reserve vice chairman Janet Yellen to replace Ben Bernanke when the Fed chairman’s term expires January 31. Her confirmation hearings could provide clues to Fed sentiment about future tapering of economic support. Minutes of the Fed monetary policy committee’s September meeting showed that most committee members continue to favor a start to tapering sometime before the end of the year. However, with one exception, they voted not do so in September because of concerns that it could bring on “unwarranted tightening of financial market conditions.”

· Data on the U.S. balance of trade, wholesale inflation, and retail sales were unavailable because of the federal government shutdown.

Key Events

With government data nonexistent and the clock ticking down toward Thursday, when the Treasury says it will start running out of cash to pay all its bills, very little outside Washington is likely to matter to financial markets (unless the debt debacle prompts another U.S. credit rating downgrade, which would get plenty of attention). Options expiring at week’s end could prompt a scramble to adjust portfolios.

Key data this week: Empire State manufacturing survey (10/15); consumer inflation, Fed “beige book” report, international capital flows (10/16); housing starts, industrial production, Philly Fed manufacturing survey (10/17); leading economic indicators (10/18).*

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

*Because of the government shutdown, some data releases may not be available.

Send Them Packing!

October 11th, 2013

It doesn’t matter where your political allegiances lie; you almost certainly agree that right now our Congress is harming the American people. More than half the federal government is shut down, yet Congress remains unable to break the stalemate while continuing to be paid. Investors are obviously nervous, I’m angry and frustrated, and I’m sure you are, too.

It’s not as if all this came as a surprise to our 435 Congressmen and Congresswomen. The date when the US fiscal year ends is no secret, and the Treasury Department has been telling us for months that they would hit the debt ceiling by mid-October. Yet somehow Congress managed to drag out the process past the deadline and furlough over 1 million federal employees while curtailing hundreds of essential services. Even the European Union, with its multiple languages and cultures, doesn’t seem this dysfunctional.

The good news is that this will eventually end. Congress will come to some sort of arrangement, blame will continue to be passed around, and the federal government will reopen. If past shutdowns are any indication, the stock market will probably do well in the subsequent year, as the S&P 500 rose an average of +11% in the year following the 12 previous government shutdowns since 1976. There are obviously no guarantees, but this should be somewhat comforting to investors.

Debt and More Debt

The debt ceiling is actually the more worrisome issue, as there is no precedent for a US debt default. Congress has authorized increases in the debt ceiling dozens of times in the past, sometimes at the last minute as in 2011. If you recall what happened then, markets fell quite significantly around the world, with the MSCI All-Country World index plummeting nearly -18% in just a couple of weeks. This time, investors haven’t panicked (yet), with the All-Country index off only -3.0% from its recent high as I write this.

But there are still 2 weeks until the debt limit is reached, and a lot can happen between now and then. There’s no way to know how close Congress will bring us to the brink and how markets will react to each bit of news out of DC. The temptation to sell now may be strong, but perhaps a greater risk than a big drop is a sudden surge in stock prices once this is all behind us. As stubborn as Congress seems, I just don’t see how 435 men and women would let themselves be blamed for another financial crisis. In the end, politicians want to keep their jobs.

Pressure seems to be building on the House in particular to do something to end the current standoff. Whether they are capable of doing so quickly, and whether or not the upcoming debt ceiling confrontation will lead to another round of brinksmanship, remains to be seen. But as Winston Churchill is incorrectly claimed to have said, “The United States can always be relied upon to do the right thing—having first exhausted all possible alternatives.” Hopefully Congress has heard this quote.

How about some good news?

Not all the news is bad. Yes, our political “leaders” are doing anything but. Yet the private sector continues to thrive. Here are few tidbits to help offset the circus inside the Beltway:

U.S. Is Poised to Overtake Russia as Largest Oil- and-Gas Producer.” You read this correctly. By the end of 2013, the US will be the world’s largest producer of fossil energy. Saudi Arabia produces the most oil, but when you add in natural gas, the U.S. is second after Russia, and about to become number one. You can thank fracking for pushing us over the top. Now if we could only make sure that fracking was environmentally safe. Eventually, it will be, thanks to a combination of technology and government regulation. (Yes, Mr. Boehner, government still has an important role in domestic affairs.)

Chicago Index Increases in Sign U.S. Manufacturing Improving. Business activity in the U.S. expanded more than forecast in September, reaching a four-month high and adding to signs of a rebound in manufacturing that will help underpin the world’s biggest economy.” This is just one of several recent economic reports that have beaten expectations. We’re seeing the same pattern in countries like China. Despite all the turmoil in DC, Rome and elsewhere, the private sector continues to grow at a gradually increasing clip. The death of the current expansion has been greatly exaggerated, to paraphrase Mark Twain.

“Euro-zone bond investors have learned a valuable lesson from the financial crisis: Betting on countries seen as too big to fail is a sound strategy. The common currency’s biggest, most systemically important countries have been big winners for sovereign-debt investors. That streak is likely to continue. Bonds of countries such as Spain and even Italy—notwithstanding its current political crisis—have delivered solid returns relative to their peers.” Ditto: the death of Europe has been greatly exaggerated.

And last but not least: “A Wave of Sewing Jobs as Orders Pile Up at U.S. Factories. The American textile and apparel industries, like manufacturing as a whole, are experiencing a nascent turnaround as apparel and textile companies demand higher quality, more reliable scheduling and fewer safety problems than they encounter overseas.… [M]anufacturers are now scrambling to find workers to fill the specialized jobs that have not been taken over by machines…. Wages for cut-and-sew jobs, the core of the apparel industry’s remaining work force, have been rising fast.” When there’s a shortage of people who can work sewing machines, you just know the labor market has turned around.

Why am I taking on all this risk?

I hear this frequently from clients and others: “Can you find me a ‘safe’ and/or ‘conservative’ investment that earns me enough to retire?” Well, sometimes I can. But this is only for people who already have enough saved to retire or are socking sufficient funds away to create a meaningful spending cushion.

For most of us, however, we need to earn more than the “risk-free rate” on our investments in order to build a comfortable nest egg. One of the fundamental rules of finance is that there is no free lunch: in order to earn a higher return over time, you must take on more risk. No risk, no reward.

But what, exactly, is risk? Many laypeople assume that risk means your investment could lose value. That’s true, but far from the whole story. Finance geeks like to equate risk with volatility, or how much the value of an investment varies over time. This is useful mathematically but isn’t terribly practical. I like to characterize risk as uncertainty. With a risk-free investment, you know exactly what it will be worth tomorrow, next week, or next year. But with all risky investments, their future value is unknown to a greater or lesser degree. And it’s this very uncertainty that makes people uncomfortable.

Greater Risk = Greater Reward

In general, the more risk you take, the greater your reward. But this only works over longer periods of time (a decade or three). Many of us believe that we don’t have that long to wait, and for some of us (or some part of our assets) this is true. But most people, including those already retired, have investment time frames of 30 years or more. For example, the joint life expectancy of a 61-year old couple (the average age of retirement in the US) is 31 years, meaning that there’s at least an even chance that one of them will live to age 92. Over this length of time, the risk/reward tradeoff works out nearly 100% of the time.

There are other uncertainties besides the future value of your investments. These include the future value of your dollar. Inflation erodes the purchasing power of money at varying rates over time, but one thing is quite certain: your dollar will buy less in 31 years than it does today, probably a lot less. At the average rate of inflation over the past century (3.2%), your dollar is worth only 36 cents after 31 years. Thus, you need to put your money in investments that can stay ahead of inflation in order to prevent a rather constant decline in your standard of living.

Inflation-resistant investments include stocks, real estate, commodities and a handful of inflation-indexed bonds. I mix these with conventional bonds to diversify (which reduces risk) and to increase current income. Determining the optimum ratio among these asset types is the first step in developing a customized portfolio. The next is to choose the individual investments within each class of assets.

Dr. Ken Waltzer MD, MPH, AIF®, CFA, CFP®
Founder and President – Kenfield Capital Strategies (KCS)

Kenfield Capital Strategies℠ (KCS) is a registered investment adviser. Our services include discretionary management of individual and institutional investment accounts, along with comprehensive financial, estate and tax planning services.

Market Update: October 11, 2013

October 11th, 2013

The Markets

The Washington impasse continued to take its toll on the Dow industrials, which fell for the second straight week. However, the S&P 500 ended the week essentially flat despite some volatility, while the Nasdaq and small caps of the Russell 2000 managed to eke out slender gains. After hitting its lowest point in two months, gold rebounded roughly $34 before falling back slightly to $1,310 an ounce.

Market/Index

2012 Close

Prior Week

As of 10/4

Week Change

YTD Change

DJIA

13104.14

15258.24

15072.58

-1.22%

15.02%

Nasdaq

3019.51

3781.59

3807.75

.69%

26.10%

S&P 500

1426.19

1691.75

1690.50

-.07%

18.53%

Russell 2000

849.35

1074.19

1078.25

.38%

26.95%

Global Dow

1995.96

2331.75

2325.73

-.26%

16.52%

Fed. Funds

.25%

.25%

.25%

0 bps

0 bps

10-year Treasuries

1.78%

2.64%

2.66%

2 bps

88 bps

Equities data reflect price changes, not total return.

Last Week’s Headlines

· The government shutdown left investors with more question marks than usual about the state of the economy, since reports from the Commerce Department, Census Bureau, and Bureau of Labor Statistics–all of which supply data on economic activity–weren’t available. Worries about the economic impact of the shutdown began to merge with worries about whether an agreement on the debt ceiling would be reached in time to avert default on the nation’s bills. A Treasury report warned that a default after October 17 could not only weaken the dollar and lead to a credit freeze as well as higher interest rates, but also could be worse than the 2008 financial crisis.

· With government unemployment statistics unavailable, the Automatic Data Processing, Inc. jobs report (which covers only the private sector, not government jobs) assumed greater importance. According to the ADP survey, companies added 166,000 jobs in September. That’s slightly better than the 159,000 jobs added in August or the 162,000 monthly average for the last three months, but much weaker than the 220,000 new jobs seen by ADP in January. Employment indices compiled by the Institute for Supply Management (ISM) for the manufacturing and services sectors also rose (see next item).

· Growth in U.S. manufacturing activity accelerated in September as the ISM’s manufacturing index hit 56.2%–the highest reading of the year and slightly better than August’s 55.7%. However, the ISM’s gauge of the services sector grew more slowly during the month. Though the index was at 54.4% and represented the 45th straight month of growth, that was lower than August’s 58.6%. The ISM’s index of manufacturing employment hit its highest level year-to-date, increasing to 55.4% from August’s 53.3%, while growth in services employment slowed from 57% in August to 52.7% in September.

· The European Central Bank kept its key interest rate at 0.5%, saying that lending in Europe remains relatively weak. ECB President Mario Draghi also warned that a protracted U.S. government shutdown could undercut global growth.

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

*Because of the government shutdown, some data releases may not be available.

Market News: October 4, 2013

October 4th, 2013

The Markets

The focus of investor attention remained in Washington but shifted from the Federal Reserve to Congress’s budget battles. The Nasdaq and the small caps of the Russell 2000 hung on to positive territory for the week–barely–while the Dow and S&P 500 each lost more than a percentage point. Meanwhile, despite the potential threat of default after October 17, the benchmark 10-year Treasury note benefitted from the uncertainty.

Market/Index

2012 Close

Prior Week

As of 9/27

Week Change

YTD Change

DJIA

13104.14

15451.09

15258.24

-1.25%

16.44%

Nasdaq

3019.51

3774.73

3781.59

.18%

25.24%

S&P 500

1426.19

1709.91

1691.75

-1.06%

18.62%

Russell 2000

849.35

1072.83

1074.19

.13%

26.47%

Global Dow

1995.96

2349.36

2331.75

-..75%

16.82%

Fed. Funds

.25%

.25%

.25%

0 bps

0 bps

10-year Treasuries

1..78%

2..75%

2..64 bps

-11 bps

86 bps

Equities data reflect price changes, not total return.

Last Week’s Headlines

· Continuing irresolution: A partial shutdown of the federal government on Tuesday seemed likely as Congress divided over a bill that would eliminate some funding for the Affordable Care Act and delay implementation for a year. A second impending deadline arrives October 17, when Treasury Secretary Jack Lew said the Treasury will essentially run out of money to pay its bills unless Congress raises the nation’s debt ceiling.

· Sales of new homes came back in August, according to the Commerce Department. After falling more than 14% in July, sales were up almost 7.9% in August. Also, July home prices in the cities measured by the S&P/Case-Shiller 20-City Composite Index rose 1.8%, and were up 12.4% over the last 12 months. However, the rate of increase in both new home sales and prices has slowed since the beginning of the year.

· The Commerce Department’s final estimate of overall Q2 economic growth remained at an annualized 2.5%–better than both the initial estimate of 1.7% and Q1’s 1.1% growth. Businesses spent more on buildings and equipment than previously thought; state and local government spending also increased slightly from previous estimates, while the 1.6% drop in federal spending and the 1.8% increase in consumer spending remained unchanged.

· Led by a 0.7% increase in transportation equipment (primarily autos and auto parts), durable goods orders were up 0.1% in August. The Commerce Department said the figure would have been stronger if not for a decline in orders for aircraft and military equipment. Business spending on capital goods was down 0.2%.

· August’s 0.4% increase in personal incomes was the biggest increase in six months. It even exceeded the 0.3% rise in consumer spending, which was boosted by purchases of autos and back-to-school supplies. The Commerce Department said the increase helped workers save a little more; the personal savings rate rose to 4.6% of income from 4.5%.

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.