Up, Down, Up… What Now?
In its longest winning streak since January, the S&P 500 has rallied for four straight weeks, adding 14% in October alone. According to a Bloomberg article published on Saturday, this puts the index on track for its biggest monthly gain since 1974! The Dow Jones Industrial Average similarly scored an 11% gain this month and just logged its fifth week of gains.
In comparison with the near 20% decline we saw during July and August, it certainly seems like the stock market has a split personality. What‘s causing all these ups and downs? While many factors are at play, the market moved downward over the summer based primarily on two assumptions:
1) That the U.S. was entering another recession.
2) That the Eurozone financial system was on the verge of collapse.
When neither of these things occurred, investors became uncertain – waiting and watching every headline for signs of what would come next. This led to the heightened levels of volatility we experienced in September.
What led to the rally? Frankly, the crisis atmosphere has died down. European Union leaders announced a “deal” on debt crisis measures early Thursday that aims to resolve issues in Greece, instability in the banking sector, and their sorely deficient bailout fund. Equities also climbed after the government announced that the U.S. economy expanded 2.5% in the third quarter; its fastest pace in a year.
So are we out of the woods? Not completely. We are wise to temper our expectations for the moment, as many details about Europe’s plan and how it will be implemented still remain unsettled. Other factors are also worth keeping an eye on. Earnings season is still under way, and 100 more companies are set to report this week. The nation’s highly anticipated jobs report, due Friday, will be in focus. And as the Federal Reserve concludes its two-day meeting on Wednesday, investors will be watching for signals regarding whether a third round of quantitative easing, or QE3 is on the way.
As always, we pledge to monitor the relevant issues, and to keep you informed about any factors that have the potential to shape your financial future.
ECONOMIC CALENDAR:
Monday – Chicago PMI
Tuesday – Motor Vehicle Sales, ISM Manufacturing Index, Construction Spending
Wednesday – ADP Employment Report, FOMC Meeting Announcement
Thursday – Jobless Claims, Productivity and Costs, ECB Announcement, Factory Orders, ISM Non-Manufacturing Index,
Friday – Employment Situation
HEADLINES:
Treasury 30-year bonds dropped for a fifth week, the longest skid in more than two years, as a deal reached by European leaders to tame the region’s debt crisis fueled appetite for higher-yielding assets.
Europe’s appeal for Chinese help has come under fierce criticism for potentially weakening their negotiating position in political and economic disputes with Beijing. On Sunday, Eurogroup chairman Jean-Claude Juncker said it made sense for China to invest its surplus in Europe to help the region overcome its debt crisis, but this would not involve political concessions.
As stimulus funds dry up, cash-strapped states are facing steep rises in Medicaid spending, forcing them to slash services and trim costs. States will have to spend another 28.7% on Medicaid this fiscal year - by far the largest increase ever, according to new data released by the Kaiser Family Foundation Thursday.
Sales of new homes, a benchmark indicator both for the housing market and the overall economy, rose slightly but remained slow in September. Sales reached a 313,000 annual rate in September, 5.7% more sales than the revised estimate for August, according to a monthly report from the Census Bureau released Wednesday. But sales were off 0.9% compared with 12 months earlier.
QUOTE OF THE WEEK:
‘You are never too old to set another goal or to dream a new dream.” Les Brown
To think about:
It’s important to focus on one thing at a time. Even in the Roman times they understood this with their Proverb ‘The man who chase two rabbits catches none.”
RECIPE OF THE WEEK:
From Marcello’s
Penne Vodka e Radicchio
Penne Vodka e Radicchio
Penne with Pink Vodka Sauce and Radicchio, Serves 4
4 tbsp. extra virgin olive oil
2 small shallots, chopped
2 oz. Parmigiano Reggiano or Grana Padano
1/4 stick of butter
4 oz. heavy cream
1 lb. penne pasta
1 lb. radicchio, julienne
1 oz. vodka
2 cups tomato sauce
pinch of Italian red pepper
pinch of fresh parsley
In medium pan, sauté shallots and radicchio in butter and olive oil. Stir for 2-3 minutes. Add red pepper and vodka and flame it.
Gradually add tomato sauce and heavy cream. Cook for 10 minutes over low flame. Cook pasta and cook until al dente. Drain and stir in sauce. Garnish with Parmigiano and parsley.
Wine suggestion: Valpolicella/Amarone or one of Marcello’s favorites: Allegrini Palazzo della Torre
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