Markets
Mixed Over Tapering Fears
Markets ended
the week mixed, showing an upward trend after the previous week’s losses, but
still subject to investor nerves. For the week, the S&P 500 gained 0.46%,
the Dow lost 0.47%, and the Nasdaq gained 1.53%.[i]
Uncertainty
around the Fed’s tapering schedule drove much of market activity last week.
While many Fed speakers have suggested that tapering may begin after the
September FOMC meeting, they have cautioned that the Fed’s plans remain data
dependent. Mixed housing data, unconvincing jobs growth, and low inflation may
argue for a delay in tapering, but policy direction is under heavy debate
within the Fed and it’s hard to know which date the Fed will choose.[ii]
What we do know, based on FOMC minutes and Fed speeches, is that unwinding will
be gradual and policy changes will be slow, giving markets time to adapt to the
new environment. As the days tick down to the September 17 FOMC meeting, we can
expect additional market volatility. However, investors have had significant
time to digest the eventual end of quantitative easing, and we can hope that
any negative market reactions will be short-lived.
On
the jobs front, though weekly claims edged upward, the fewest workers in five
years applied for unemployment benefits for the month ending August 17,
indicating that the labor market slowly continues to improve. However, regional
data shows a mixed picture, with the jobless rate still climbing in 28 states
and major employers announcing job cuts. [iii]
Fed watchers have indicated that the August jobs report will be a major factor
in any decisions made at the September FOMC meeting.[iv]
A
technical glitch caused the Nasdaq to shut down for three hours on Thursday,
halting trading in thousands of stocks. The shutdown was the longest in recent
history, and exchange officials are investigating the origins of the technical
fault. Despite rattled trading desks, investors shrugged off the shutdown and
the Nasdaq still closed up for the week.[v]
Looking
at the week ahead, investors will be closely watching the release of important
housing, consumer, and manufacturing reports as well as additional speeches by
the St. Louis Fed President James Bullard. Fed watchers will also be analyzing
several reports as they wait for the much-anticipated August jobs report, which
will be released on September 6. The jobs plentiful/jobs hard-to-get component
of Tuesday’s consumer confidence report and the employment component of the
Chicago PMI will hopefully give clues about general job trends this month.[vi]
ECONOMIC CALENDAR:
Monday: Durable Goods Orders, Dallas
Tuesday: S&P Case-Shiller HPI, Consumer
Confidence
Wednesday: Pending Home Sales Index, EIA
Petroleum Status Report
Thursday: GDP, Jobless Claims
Friday: Personal Income and Outlays, Chicago
HEADLINES:
Existing home sales up, but new home sales down. Sales of new single-family homes
dropped in July to their lowest level in nine months. This is a sharp contrast
to existing home sales, which rose to their highest level in three years in
July. A possible explanation is the flood of private equity investors that are
buying up old foreclosures.[vii]
Oil spikes on refinery closure. Oil prices rose last week, settling
above $106 per barrel following a major unit shutdown at a Canadian refinery.
The unit is responsible for producing 70,000 barrels per day and will be closed
for a week for repairs.[viii]
Consumer spending probably rose in July. A preview of the official GDP report
showed that improvements to the labor and housing markets underpinned an
increase in the largest segment of the economy. The official GDP report will be
released on August 29 and may show an upward revision in second-quarter
economic activity.[x]
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The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
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the leading measures of
[i]
http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-august-19-2013.htm
[ii]
http://www.reuters.com/article/2013/08/24/us-usa-fed-lockhart-idUSBRE97M0H720130824
[iii]
http://www.bloomberg.com/news/2013-08-22/jobless-claims-in-u-s-decrease-to-five-year-low-over-past-month.html
[iv]
http://www.businessinsider.com/fed-tapering-depends-on-august-jobs-data-2013-8
[v]
http://www.reuters.com/article/2013/08/22/us-nasdaq-halt-tapec-idUSBRE97L0V420130822
[vi]
http://www.businessinsider.com/three-datapoints-to-watch-this-week-as-we-wait-for-the-crucial-august-jobs-report-2013-8
[vii]
http://www.cnbc.com/id/100983583
[viii]
http://www.cnbc.com/id/100982718
[ix]
http://www.cnbc.com/id/100980411
[x]
http://www.bloomberg.com/news/2013-08-25/consumer-spending-probably-climbed-in-july-u-s-economy-preview.html
