Bull’s still in charge despite Greek’s tragedy
As the old expression goes; what goes up must come down. During the final minutes of trading, the Dow Jones Industrial Average trimmed its gains, falling 89.23 points, or 0.7%, locking in a weekly loss of 0.5%. For the day, only one of the Dow’s 30 components rose. The broad-based S&P 500 fared similarly, retreating 9.31 points, or 0.7%, for a loss of 0.2% for the week, while the tech heavy Nasdaq declined 23.35 points, or 0.8%, ending the week down 0.1%.
In an action reminiscent of 2011, worries about stalling efforts to keep Greece from defaulting sparked this pre-weekend decline. As stocks fell, the Chicago Board Options Exchange (CBOE) Volatility Index (VIX) jumped above 20 for the first time in nearly two weeks, rising more than 11%. While we don’t view this as a major cause for alarm, it is a reminder that all is not yet well with our European counterparts. After a week dominated by both hopes and fears about a nation at the center of Europe’s debt crisis, stocks finally snapped their five-week winning streak as negotiations faltered.
Equity markets have been red-hot this year, and frankly, last week’s pullback should come as little surprise. If stocks continued their ascent at the same fiery pace we’ve seen so far in 2012, the S&P would end the year up over 60%! Such remarkable gains are completely unrealistic to expect, and would be totally unsustainable. Healthy markets move up and down on a daily basis. While it is generally accepted that the stock market will grow in value over time, short-term movements can happen for a variety of reasons too numerous to list. It’s just the nature of the stock market.
It may be easier said than done, but we encourage you not to let unpredictable short-term moves in the market overly influence your investment decisions. In the long run, we believe Europe is going to muddle through this, though there are bound to be bumps along the way.
ECONOMIC CALENDAR:
Tuesday – NFIB Small Business Optimism Index, Retail Sales, Import and Export Prices, Business Inventories
Wednesday – Empire State Manufacturing Survey, Treasury International Capital, Industrial Production, Housing Market Index, EIA Petroleum Status Report, FOMC Minutes
Thursday – Housing Starts, Jobless Claims, Producer Price Index, Ben Bernanke Speaks at 9:00 AM ET, Philadelphia Fed Survey
Friday – Consumer Price Index, Leading Indicators
Data as of 2/10/2012 1-Week Since 1/1/2012 1-Year 5-Year 10-Year
Standard & Poor's 500 -0.17% 6.76% 1.57% -1.33% 2.25%
DOW -0.47% 4.78% 4.68% 0.35% 3.14%
NASDAQ -0.06% 11.47% 4.06% 3.61% 5.97%
MSCI EAFE -1.17% 7.55% -9.60% -3.78% 3.56%
10-year Treasury Note (Yield Only) 1.95% N/A 3.71% 4.78% 4.88%
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:
Apple's stock soared to new heights on Thursday, pushing the company's market capitalization to $456 billion, a number that is greater than the values of rivals Google and Microsoft combined.
Gold fell on Friday, following losses in the euro and U.S. equities, as uncertainty over negotiations on a bailout package for Greece prompted investors to sell the metal and hoard cash.
Photography giant Kodak has said it will stop making digital cameras in the next six months, a media report said on Thursday. The 130-year-old Eastman Kodak Company, which invented the digital camera in 1975, has now said it will try to license its brand to other camera manufacturers. Kodak has filed for bankruptcy protection, having lost almost 90% of its market value in 2011.
Greek lawmakers looked set to endorse a new austerity deal on Sunday to secure a multi-billion-euro bailout and avert what Prime Minister Lucas Papademos warned would be "economic chaos."
QUOTE OF THE WEEK:
‘Having a plan for success isn’t necessarily unhealthy, but falling in love with the plan might be, don’t let your plan become bigger than you are’. Dr Wayne Dyer
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
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Slowly but Surely for U.S Markets
As investors increasingly put aside fears of economic calamity and focused again on fundamentals, the Dow Jones Industrial Average broke through to its highest close since May 2008, back before the Lehman Brothers collapse and ensuing economic meltdown. The combination of strong job growth, a three-year low in unemployment, and other positive developments, propelled the Dow ahead 156.82 points, or 1.23%, on Friday. At this point, the blue-chip index would have to rise just 10% to reach its record close of 14164.53, hit Oct. 9, 2007.
The biggest economic news last week surrounded Friday’s Employment report from the Bureau of Labor Statistics (BLS), though the results are being heavily debated. According to the report, total nonfarm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3%. The report added “job growth was widespread in the private sector, with large employment gains in professional and business services, leisure and hospitality, and manufacturing.” Sounds good, right?
Skeptics argue the reason the employment numbers look so good is because 1.2 million Americans dropped out of the workforce in January; they gave up looking for work. In simple English, if less people are looking for work, it looks like less people need jobs. Also last week, the Congressional Budget Office released its projected employment outlook for the next few years, in which they predicted the unemployment rate will be at 8.9% during the last quarter of 2012 and rise to 9.2% for the last quarter of 2013. Those numbers aren’t so good. So what’s the real story? Frankly, it probably exists somewhere in the middle.
Employment reports, like most other economic reports, are based on estimates. Like a thermometer, these reports can be used to take the temperature of the recovery, not to diagnose it. They only tell us a little bit about one symptom. If we rely too much on one report, we set ourselves up for disappointment.
It is much more effective to look at trends. What trend are we seeing? To quote a recent commentary from First Trust, “Private sector jobs have increased for 23 consecutive months, total cash earnings are up 4.6% in the past year, and previous months’ data are being revised upwardly, not downwardly. The bottom-line is that the economy is getting better.”
Like a patient recovering from traumatic injuries, our economy is still going to have good days and bad days. It may not be completely well, but it is healing. Slowly, but surely.
ECONOMIC CALENDAR:
Tuesday: Ben Bernanke Speaks at 10:00 AM ET, Consumer Credit
Wednesday: EIA Petroleum Status Report
Thursday: BOE Announcement, ECB Announcement, Jobless Claims, Wholesale Trade
Friday: International Trade, Consumer Credit, Ben Bernanke Speaks at 12:30 PM ET, Treasury Budget
Data as of 2/3/2012 1-Week Since 1/1/2012 1-Year 5-Year 10-Year
Standard & Poor's 500 2.17% 6.94% 2.89% -1.43% 1.98%
DOW 1.59% 5.28% 6.63% 0.33% 2.98%
NASDAQ 3.16% 11.54% 5.51% 3.47% 5.20%
MSCI EAFE 2.69% 8.82% -8.55% -3.60% 3.44%
10-year Treasury Note (Yield Only) 1.90% N/A 3.54% 4.83% 5.03%
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:
The New York Giants defeated the New England Patriots at Super Bowl XLVI for the second time in the Super Bowl in recent years. New York managed to survive a valiant effort on a Hail Mary attempt from Tom Brady in the last seconds, and held on for a 21-17 win. As a long-time Giants fan, I may not have a voice for the remainder of the week!
Greek Prime Minister Lucas Papademos struck a tentative deal with political parties on austerity measures demanded by international creditors. They agreed in a five-hour meeting Sunday to make additional reductions this year equal to 1.5% of gross domestic product. With the country’s stability at stake, the accord marked another step forward.
The European Union's total government debt rose slightly to 82.2% of economic output in the third quarter of 2011, the EU's statistics agency said on Monday, lower than the United States but still a burden that could take decades to pay down.
New York Attorney General Eric Schneiderman sued banking’s Big Three – JP Morgan Chase, Bank of America, and Wells Fargo – on Friday in New York State Supreme Court over their use of an electronic mortgage database that played a key role in financing the nation’s historic housing bubble. "Our action demonstrates that there is one set of rules for all -- no matter how big or powerful the institution may be -- and that those rules will be enforced vigorously," said Schneiderman in a statement.
QUOTE OF THE WEEK:
"All our dreams can come true - if we have the courage to pursue them." – Walt Disney
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
By clicking on these links, you will leave our server as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.
Eyes on the U.S. Economy
With only a couple trading days left in January, stocks are positioned to lock in four straight months of gains and finish with their best performance since 1997. Unfortunately, some momentum was lost last week after the government said the U.S. economy expanded at a slower-than-expected pace in the fourth quarter. For the week, the Dow Jones Industrial Average fell 0.5%, while the S&P 500 and Nasdaq notched modest gains.
Because the figures reported by the Commerce Department were lower than expected and stocks pulled back, should that lead us to conclude that economic growth was poor? Not at all. Gross domestic product, the broadest measure of the nation's economic health, grew at a 2.8% annual rate during the last three months of the year, which is a major improvement from the 1.8% we saw during the third quarter, and is the fastest growth we’ve experienced since the second quarter of 2010.
On the other hand, when you look closely at the numbers, there are some important points to note. One is that the majority of the growth came from one area – business inventories. Private businesses increased inventories $56.0 billion in the fourth quarter, following a decrease of $2.0 billion in the third. Of course that sounds wonderful, but it can also be a double-edged sword. While it shows that businesses are optimistic about the health of the economy and feel confident they can sell their goods, if sales fall short of expectations, it can create a financial burden for them in the future. Only time will tell how this works out.
Another important point is that “real final sales of domestic product” – GDP less the change in private inventories – only increased 0.8% in the fourth quarter, compared with an increase of 3.2% in the third. So while GDP as a whole picked up in the fourth quarter, real sales slowed down. This is likely one of the reasons why the Federal Reserve lowered its outlook for the economy in 2012, announcing that they expect it to grow between 2.2% and 2.7% this year.
What’s next? The week ahead is a heavy one for economic data that includes personal income, consumer confidence, auto sales, manufacturing, construction, and the key nonfarm payrolls figure at the end of the week. In addition to the economic news, nearly 100 companies in the S&P 500 will report quarterly earnings.
Why are all these numbers important? For months, U.S. economic indicators have taken a back seat to headlines out of Europe, but as confidence grows that the Eurozone will survive, focus should gradually shift back to the health of the U.S. economy. We’ll be watching this data and sharing our thoughts with you along the way.
ECONOMIC CALENDAR:
Monday – Personal Income and Outlays
Tuesday – Employment Cost Index, Redbook, S&P Case-Shiller HPI, Chicago PMI, Consumer Confidence
Wednesday – Motor Vehicle Sales, ADP Employment Report, ISM Manufacturing Index, Construction Spending, EIA Petroleum Status Report
Thursday – Jobless Claims, Productivity and Costs
Friday – Monster Employment Index, Employment Situation, Factory Orders, ISM Non-Manufacturing Index
Data as of 1/27/2012 1-Week Since 1/1/2012 1-Year 5-Year 10-Year
Standard & Poor's 500 0.07% 4.67% 1.29% -1.49% 1.62%
DOW -0.47% 3.63% 5.59% 0.28% 2.87%
NASDAQ 1.07% 8.11% 2.22% 3.13% 4.54%
MSCI EAFE 1.08% 5.98% -10.15% -3.74% 3.09%
10-year Treasury Note (Yield Only) 2.03% N/A 3.38% 4.88% 5.07%
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:
On Friday, the Obama administration said it was expanding eligibility for its Home Affordable Modification Program, known as HAMP, to borrowers with higher debt loads and tripling the incentives it pays banks that reduce principal on loans. While the new changes could greatly expand the number of homeowners that receive help from HAMP, subsidizing real estate investors with taxpayer money could also create controversy.
The leaders of Denmark and Finland said China is “willing” to contribute to International Monetary Fund efforts to bail out debt-ridden southern Europe, within limits. Speaking at the World Economic Forum annual meeting in Davos, Helle Thorning-Schmidt, prime minister of Denmark, and Finnish Prime Minister Jyrki Tapani Katainen stressed the need for China and the European Union to cooperate on some form of bailout from the IMF.
A U.N. nuclear team arrived in Tehran, Iran early Sunday for a mission expected to focus on Iran's alleged attempt to develop nuclear weapons.
Facebook may finally be ready to go public. The company is planning to file IPO registration papers with the Securities and Exchange Commission next Wednesday, according to the Wall Street Journal. Few additional details are available so far.
The January Effect
There’s an old adage you may have heard recently which says: “As goes January, so goes the year.” What is this January barometer all about? According to the Stock Traders Almanac, the month of January tends to predict the direction of the market with an 88.5% accuracy ratio, with only seven major errors recorded since 1950. Those aren’t bad numbers.
What causes the “January effect”? Most sources attribute it to a calendar-related anomaly in the financial markets where security prices increase in the month of January because investors sell losing positions in December and reposition themselves after the first of the year, or vice-versa. While this is certainly not exact science, and it is far too early to know if January will accurately predict the rest of the year, it is interesting to note.
So far, the Bulls are really showing off. With seven trading days left to go in January, the benchmark indexes are all up between 4% and 7%. The S&P 500’s 4.5% YTD gain marks its best start since 1987! So does this bull have legs? Skeptics will tell you it doesn’t and idealists will tell you it does. We’d like to tell you that we don’t know. We’re not clairvoyant. (Sorry, we know you wish we were.) What we do know is that markets don’t move up or down in a straight line, and we won’t be surprised if we experience a pullback in the weeks ahead. This is not something we fear; it’s just the nature of the stock market.
There are both positive and negative factors at work right now, and we are monitoring many of them. Europe is still on the map, and our economy is growing at a slower-than-average rate that leaves it somewhat vulnerable to external shocks. At the same time, we see the strengthening in various sectors such as financials, basic materials, durable goods, and technology as reasons to sustain our optimism that both the stock market and the economy may fare well in 2012.
ECONOMIC CALENDAR:
Tuesday – Redbook
Wednesday – Pending Home Sales Index, EIA Petroleum Status Report, FOMC Meeting Announcement
Thursday – Durable Goods Orders, Jobless Claims, New Home Sales, Leading Indicators
Friday – GDP, Consumer Sentiment
Data as of 1/20/2012 1-Week Since 1/1/2012 1-Year 5-Year 10-Year
Standard & Poor's 500 2.04% 4.59% 2.74% -1.61% 1.67%
DOW 2.40% 4.12% 7.59% 0.25% 3.02%
NASDAQ 2.80% 6.97% 3.05% 2.74% 4.44%
MSCI EAFE 4.70% 4.85% -9.07% -3.98% 2.80%
10-year Treasury Note (Yield Only) 1.85% N/A 3.46% 4.77% 4.89%
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:
The economy probably grew at its fastest pace in a year and a half during the fourth quarter; a key U.S. report is expected to show. The current MarketWatch forecast of economists predicts 3.0% growth in the fourth quarter, well above the third-quarter level of 1.8%. That would be the fastest pace of growth in a year and a half.
Amid heightened tensions with Iran, an American aircraft carrier has sailed through the Strait of Hormuz into the Persian Gulf. The Navy says it's a routine maneuver. Iran recently suggested it might use military force to close the Strait in retaliation for new international economic sanctions.
The average price for regular gasoline at U.S. filling stations rose 3.48 cents to $3.3944 a gallon last week, according to Lundberg Survey Inc.
Postage rates jumped Sunday for the first time in two and a half years as the U.S. Postal Service hopes to generate more revenue amid historic losses. First-class postage stamps now cost 45 cents each; a price jump that officials anticipate will generate an additional $888 million in annual revenue.
QUOTE OF THE WEEK:
“The glow of one warm thought is to me worth more than money.” – Thomas Jefferson
European debt concerns carry over to 2012
We know you’re probably tired of hearing about Europe’s debt crisis, and frankly, we don’t blame you. At risk of sounding insensitive to the struggles of our European neighbors, we’re tired of it too. While there are benefits to globalization, there are also drawbacks as evidenced by the unprecedented level of negative influence Europe’s financial issues have had on us in recent years.
As we look at last week’s activity, we can see the affect Europe is having yet again. While all three indexes ended the week in positive territory, recent gains came at lower-than-normal trading volumes as wary investors dipped their toes in the water, but were afraid to dive in.
Stocks finished in the red Friday on expectations that nine Eurozone nations would be downgraded by S&P (and they were shortly after trading hours), including AAA-rated France and Austria. Italy was lowered two notches to BBB+, dangerously close to junk bond levels that could make it even more difficult for the government to raise money. Here’s the report card :
France – AAA to AA+
Austria – AAA to AA+
Slovenia – AA- to A+
Slovakia – A+ to A
Spain – AA- to A
Malta – A to A-
Italy – A to BBB+
Cyprus – BBB to BB+
Portugal – BBB- to BB
While investors have been expecting this downgrade since S&P issued a warning last month, the news is still a harsh reminder that Europe is not out of the woods. It is not yet clear how hard the downgrades will hit markets, but it is likely that we will continue to feel Europe’s influence until this situation is resolved. On the bright side, leaders from Germany, Italy, and France have been sounding upbeat about proposed solutions. We hope their optimism will promptly translate into concrete actions.
When any set of circumstances has the potential to affect your financial situation, we are committed to monitoring it closely and to keeping you informed. Please rest assured that the European debt crisis is no exception.
ECONOMIC CALENDAR:
Monday – U.S. Holiday: Martin Luther King Jr. Day
Tuesday – Empire State Manufacturing Survey
Wednesday – Producer Price Index, Industrial Production, Treasury International Capital, Industrial Production, Housing Market Index
Thursday – Consumer Price Index, Housing Starts, Jobless Claims, Philadelphia Fed Survey
Friday – Existing Home Sales
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:
The average price for a gallon of regular unleaded gasoline in the United States on Monday was $3.39, according to motorist group AAA. That's nearly 30 cents higher than a year ago. The national average reached a peak of $4.114 in July 2008.
Saudi Arabia can make up for any loss of crude oil production if sanctions are placed on Iran, the country's oil minister told CNN in an exclusive interview set to air Monday. "I believe we can easily get up to 11.4, 11.8 (million barrels a day) almost immediately, in a few days, because all we need is to turn valves," Saudi Oil Minister Ali al-Naimi told CNN's John Defterios. "Now to get to the next 700 or so, we probably need about 90 days."
Consumer sentiment this month hit the highest level since May, with both current and future economic conditions seen as improving, according to data released Friday by the University of Michigan and Thomson Reuters. The consumer-sentiment index reached 74 in the preliminary reading for January, compared with 69.9 in December.
U.S. defense leaders are increasingly concerned that Israel is preparing to take military action against Iran, over U.S. objections, and have stepped up contingency planning to safeguard U.S. facilities in the region in case of a conflict.
QUOTE OF THE WEEK:
“never forget that doing what you love is the cornerstone of having success in your life” Dr . Wayne Dyer
Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
By clicking on these links, you will leave our server as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.
2012 off to a good start for US Stocks
Are you getting used to writing 2012 on your checks yet? The first nine days of the new year have sure flown by! After all the hustle and bustle of the holiday season, we hope you’re settling back into a normal routine, and that your first week of 2012 has been a good one.
We’re happy to report that it was a good week both for stocks and positive U.S. economic news. Stocks kicked off the year on a high note as the Dow Jones industrial average added 1.2%, the S&P 500 gained 1.6%, and the Nasdaq led with a 2.7% rise. As far as the economy is concerned, employment figures and purchasing manager surveys released last week suggest the U.S. experienced healthy growth in December.
Despite positive news, the tone on Wall Street has remained cautious and trading volumes have been low. Many investors, it seems, are still torn between rising hopes for the U.S. economy, and the ever-evolving European debt saga. And there is still considerable debate over whether stronger jobs and manufacturing numbers should be attributed to a seasonal holiday binge, or something more permanent. Ultimately, only time will tell.
The week ahead promises to be a busy one as the unofficial start of corporate earnings season kicks off. We’ll wait to see what corporate leaders have to share, but overall, it is expected to be a strong season. The companies in the S&P 500 are forecast to be up 7.5% in the final three months of 2011, versus the same period one year ago, and sales are predicted to have risen 8.6% for the quarter, according to research from S&P Capital IQ. While the European debt situation will probably weigh most heavily in the headlines, it will have to share the spotlight with corporate earnings.
With one week down and 51 to go, we’re off to the races, as the old saying goes. Whatever this year brings, we look forward to running alongside you every step of the way!
ECONOMIC CALENDAR:
Monday – Consumer Credit
Tuesday – Redbook, Wholesale Trade
Wednesday – EIA Petroleum Status Report, Beige Book
Thursday – Jobless Claims, Retail Sales, Business Inventories, Treasury Budget
Friday – International Trade, Import and Export Prices, Consumer Sentiment
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:
All three U.S. automakers are on track to be profitable in 2011 when they report results in the coming weeks. That's something that hasn't happened since 2004.
Gas prices in the United States increased by more than a dime over the past three weeks, the first increase seen since mid-October, according to a survey published Sunday. The average price of a gallon of regular gasoline was $3.35 as of Friday, the Lundberg Survey found. That's an increase of 12 cents from the last survey of 2011, conducted December 16.
The U.S. added 200,000 jobs in December and the unemployment rate fell to the lowest level in nearly three years in a fresh sign the economy is picking up and businesses are more willing to hire. The increase in jobs last month was the fourth biggest gain of 2011.
The Federal Reserve has decided to share the likely path of interest rates, according to minutes of its December 13 meeting released Tuesday. Starting in January, the Fed will release the range of Federal Open Market Committee member forecasts of the appropriate level on the target federal funds rate in the fourth quarter of the current year and the next few years.
QUOTE OF THE WEEK:
“Most people are searching for happiness outside of themselves. That’s a fundamental mistake. Happiness is something you are, and it comes from the way you think. Dr. Wayne Dyer
Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!
If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
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2011 – A Year in Review, 2012 going forward
As we close the books on 2011, many will associate the year with Europe’s debt crisis, Congress’ political gridlock, and the stock market’s volatility. And to some extent, they’ll be right. We did face a number of significant challenges during the course of the year. At the same time though, 2011 was a year of growth and healing for the United States.
Americans are spending again, as evidenced by a record-breaking holiday shopping season. Factories are producing more. Companies are generating impressive profits. The housing market is showing signs of life. And with the unemployment rate at its lowest level in nearly three years , even the job market is improving. While blind optimism can be a dangerous thing, focusing on the negative can be equally risky. So without amplifying the problems of the past or minimizing the challenges of the future, let’s take a look back at some of the key events that made 2011 what it was.
Japan Quake Shakes Markets (March)
The devastating earthquake and consequent tsunamis that hit Japan in March riled global markets. The Japan earthquake sent the Nikkei Index on a downward spiral, and the U.S. stock market soon followed. The auto industry lost ground as Japanese manufactures were forced to halt production due to power outages.
Budget Problems Almost Result in Shutdown (April)
Well into April, the 2011 budget had still not been approved by Congress. Instead, lawmakers passed six short-term spending bills through March. The final extension was set to expire on April 8th, forcing Congress to come to a budget agreement or face a shutdown. Had a shutdown occurred, Americans would have faced grievous consequences, and nervous investors felt the pressure.
Osama Bin Laden’s Death Rallies Markets (May)
Following the death of Osama Bin Laden at the hands of U.S. forces in Abbottabad, the stock market opened significantly higher. President Obama called Bin Laden’s death “the most significant achievement to date in our nation’s effort to defeat al Qaeda.” The Dow Jones industrial average rose 56 points (0.5%), the S&P 500 climbed 5 points (0.4%), and the Nasdaq Composite gained 8 points (0.3%).
U.S Government Risks Defaulting on Debt (July)
After the U.S. debt ceiling was reached in May, the government was forced to find a solution or risk default on August 2. Though congress had over 11 weeks to come to an agreement, things came down to the wire once again as lawmakers argued over solutions, leaving financial markets on edge.
S&P Downgrades the United State’s Credit Rating (August)
In what was perhaps the most humiliating news of the year, Standard and Poor’s decided to downgrade the U.S. credit rating from AAA to AA+, which marked the first U.S. credit downgrade in history. This downgrade hit stock prices hard, and the long term consequences of S&P’s move are yet to be known.
Occupy Movement Begins (September)
Activists began gathering in New York City’s Financial district on September 17th to protest social and economic inequality, high unemployment, greed, corruption, and the influence of corporations on government. The protests in New York City have sparked similar protests around the world. News surrounding this movement has been a regular feature of recent headlines.
A Note About Equities
U.S. stocks slid on the final trading day of the year, with the S&P 500 surrendering its 2011 gain and settling virtually flat for the year at -0.04%. The Dow Jones industrial average ended the year up 5.5%, its second consecutive yearly rise, and the Nasdaq composite index finished down 1.8% for its first annual loss since 2008. Despite disappointing equity returns in 2011, the last three months of the year were positive, which could bode well for 2012. The S&P 500 rose 11% in the fourth quarter, and the Dow climbed 12% for its largest quarterly point gain in its history. On the bright side, stocks seem to be well-priced. The S&P 500 is trading at 12 times its expected earnings per share versus a more typical 15 times. In other words, stocks appear cheaper than normal right now.
In Conclusion
What is in store for 2012? The answer to that question will depend on who you ask, and where they’re looking. At the end of the day, no one has a crystal ball that can be relied upon, and we should not be so arrogant as to make predictions. The indicators we are watching offer both positive and negative signs and many questions remain to be answered. How will Europe sort out its debt troubles? Will U.S. lawmakers raise the debt ceiling again in 2012? Will they extend the Bush Era tax cuts? How will China’s slowing economy affect the world?
The answers to these questions and more like them have the potential to affect financial markets.
All in all, 2012 is beginning on a more positive note than many investors could have predicted given the challenges of 2011. And while we hope the economy and the stock market maintains its positive momentum, history teaches us that ups and downs are part of life. Whatever we face in the year ahead, rest assured that we will maintain a watchful eye on any factors that have the potential to affect you. May a bright and prosperous 2012 be yours!
ECONOMIC CALENDAR:
Monday – New Year’s Day Observed
Tuesday – ISM Manufacturing Index, Construction Spending, FOMC Minutes
Wednesday – Motor Vehicle Sales, Factory Orders
Thursday – ADP Employment Report, Jobless Claims, ISM Non-Manufacturing Index, EIA Petroleum Status Report
Friday – Employment Situation
Data as of 12/30/2011 1-Week 1-Year 5-Year 10-Year
Standard & Poor's 500 -0.61 -0.04 -2.27 0.83
Dow -0.62 5.53 -0.39 2.05
NASDAQ -0.52 -1.80 1.57 3.11
MSCI EAFE 0.04 -12.2 -4.63 2.03
10-year Treasury Note
(Yield Only) 2.03 3.31 4.71 5.11
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. NA means not available.
QUOTE OF THE WEEK:
"Be always at war with your vices, at peace with your neighbors, and let each new year find you a better person." - Benjamin Franklin
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
By clicking on these links, you will leave our server as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.