Investors are hoping for a 4th quarter rally
The S&P 500 has produced a positive total return in the 4th quarter (i.e., October-November-December) in 16 of the last 20 years (i.e., 1991-2010), including a +10.7% gain last year. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).
The Bureau of Labor Statistics released its monthly Employment Situation Summary on Friday, and the data conclusively proves that the U.S. is not in a recession. To many the data would seem to indicate that it also shows that the odds of entering into one are much lower than some reports in the media might suggest.
Nonfarm payroll employment edged up by 103,000 in September, and increased by 202,000 if you include upward revisions for July and August. This significantly outpaced consensus expectations of a mere 60,000 gain. And while the report reflected the return of about 45,000 Verizon workers who had been on strike in August, the increases are still significant. Also striking is the fact that the number of weekly hours per worker increased from 34.2 to 34.3. While that may not seem like much of a jump, it is actually the equivalent of adding 320,000 jobs!
If you take a look at the jobs numbers over the past year, you will see that private sector payrolls have grown by 1.8 million, the workweek has lengthened, and hourly wages are up 1.9%. And while we acknowledge that the labor market is still far from operating at an optimal level, we are definitely seeing improvement!
As we hope this positive trend in hiring will continue, only time will tell if it can be more than a momentary bright spot. In the weeks ahead, investors will be looking for signs on the health of the economy from corporate earnings and what is still the biggest elephant in the room: Europe’s debt crisis. We will continue to monitor developments in these and other areas and will work diligently to keep you informed.
ECONOMIC CALENDAR: Monday – U.S. Holiday: Columbus Day
Tuesday – FOMC Minutes
Thursday – International Trade, Jobless Claims, EIA Petroleum Status Report, Treasury Budget
Friday – Retail Sales, Import and Export Prices, Consumer Sentiment, Business Inventories
Data as of 10/07/2011 1-Week YTD 1-Year 5-Year 10-Year
Standard & Poor's 500 2.12 -8.12 -0.22 -2.88 0.78
Dow 1.74 -4.10 1.41 -1.26 2.17
NASDAQ 2.65 -6.54 4.01 1.56 5.44
MSCI EAFE 2.51 -14.2 -10.8 -3.51 2.32
10-year Treasury Note (Yield Only) 1.92 N/A 2.40 4.70 4.50
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not available.
HEADLINES:
Steve Jobs, the co-founder and board chairman of one of the world’s greatest companies, will long be remembered as a remarkable man. We have truly lost a great visionary who enriched the lives of millions by means of technology. Born in 1955 to a world of rotary phones and room-sized computers, he left behind a world where over 100 million people carry a small device called an iPhone – which is both a phone and a computer – in their pockets. Steve Jobs is a man who will unquestionably be missed.
Business-jet sales may increase worldwide starting in 2012 as emerging-market demand picks up. Purchase expectations are growing in Asia, followed by the Middle East and Africa, while the free-fall in developed markets like North America following 2008’s recession has stabilized, according to an annual survey of 1,500 companies by Honeywell International Inc., a New Jersey-based avionics and cockpit-instruments maker.
Consumers cut their borrowing in August by the most in 16 months. Fewer people used their credit cards. And a measure of demand for auto and student loans fell. Total borrowing dropped $9.5 billion in August, the Federal Reserve said last week. In July, borrowing increased $11.9 billion.
While the nation added jobs last month, public schools lost 24,400 positions – the most of any category. Local government in total shed 35,000 jobs. Teachers continue to get pummeled as state and local governments digest budget cuts for fiscal 2012, which began in July in most states.
QUOTE OF THE WEEK:
