The Great Recession in the review mirror
Three years ago Friday, the Dow Jones Industrial Average saw one of its darkest days. Closing at its Great Recession low of 6,547, investors cringed to see how far stocks had fallen from their October 2007 high of 14,164. Since that day, we’ve experienced one of the greatest three-year runs in the history of the stock market, superseded only by the dot-com craze of the late nineties and the recovery from the Great Depression.
Stocks have returned with remarkable resilience. Between the “flash crash” of May 2010, the European financial crisis, the downgrade of the U.S. credit rating by Standard and Poor’s, fear of default by the U.S. government, high gas prices, and supply disruptions surrounding the Japanese tsunami, it’s amazing we’ve made it to where we are.
When you look at both the climb we’ve seen and the challenges we’re facing, it’s not surprising that many analysts are calling for a pullback in the near future. Even so, stocks managed to hold their own last week. After a couple of rough days, Wall Street logged three winning sessions on the back of a better-than-expected employment report. The S&P eked out a gain of 0.1% for the week, while the Dow dropped 0.4%, and the Nasdaq gained 0.4%.
While Friday’s jobs report was hotly anticipated, the market’s reaction to it was surprisingly muted. The Labor Department reported that 227,000 new jobs were created while the unemployment rate remained the same as February’s at 8.3%. If so many new jobs were created, why is the unemployment rate the same? Well, while new jobs were created, the total number of job-seekers increased as more people began actively looking for work. When the job market improves, people who had previously dropped out of the hunt start applying for jobs again, affecting the unemployment rate. Clearly, while the employment situation is actively improving, we still have a long way to go.
Also supporting market performance last week was news that Greece succeeded in convincing bondholders to swap their old bonds for new ones valued at much less. In accomplishing this, Greece cleared a major hurdle to avoiding a disorderly default.
We are living during one of the most interesting times in history. Each week, as we analyze the stock market and the economy, we find both positive and negative factors to weigh when making investment decisions. We strive to do this with diligence and skill. All things considered, we trust that the same resilience that brought us to Friday will carry us into the future; even though there are sure to be bumps along the way.
ECONOMIC CALENDAR:
Monday: Treasury Budget
Tuesday: Retail Sales, Business Inventories, FOMC Meeting Announcement 2:15 PM EST
Wednesday: Import and Export Prices, EIA Petroleum Status Report
Thursday: Jobless Claims, Producer Price Index, Empire State Mfg. Survey, Treasury International Capital, Philadelphia Fed Survey
Friday: Consumer Price Index, Industrial Production, Consumer Sentiment
HEADLINES:
China has approved a $2.9 billion investment by 23 foreign institutions in its capital markets. As the Chinese economy shows signs of slowing, central bankers look to foreign investors to pick up the slack. China now has a total of $24.6 billion by 129 foreign institutional investors invested in its capital markets.
Crude oil futures rose past $108 a barrel Friday, buoyed by a good U.S. jobs report and positive news from Greece. Crude has risen from $75 a barrel in October and $96 a barrel last month on the back of rising tensions with Iran and positive economic news.
States that were hardest hit by the real estate collapse are now leading the U.S. labor market growth. Arizona, California, Florida, and Nevada accounted for 28% of the increase in U.S. employment between August and December 2011, according to Labor Department figures.
Credit Suisse is bullish on homebuilder stocks, behind the outlook is improved buyer traffic, record affordability, and improved buyer confidence, leading to increased activity in the housing market.
QUOTE OF THE WEEK:
“Determine what you believe is impossible, and then change your beliefs” 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.
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.
Stocks, Fuel, and Tax Deductions
The S&P 500 and the Nasdaq have been up for eight of the last nine weeks, though mixed economic data caused a minor decline on Friday. The S&P gained 0.28% and the Nasdaq rose 0.44%, but the Dow lost 0.04% for the week. Stocks have been the strongest positive indicator in a slew of mixed information coming at us during the last few weeks. The five-month stock rally has been built on steadily improving economic news and strong underlying fundamentals, though some strategists are calling for a pullback since indexes are hitting new landmarks and the fourth-quarter reporting period is winding to a close.
Exerting some negative pressure on both stocks and the economy, gas prices continued their march higher this week, reaching a national average of $3.74, according to AAA. Gas prices have risen more than 8% this year, influenced by ongoing Middle East tensions and a stronger U.S. economy. However, on a positive note, crude oil prices dropped Friday for the first time in days, on news that the U.S. won’t preemptively attack Iran and disrupt oil supplies. While sustained high gas prices are not something we want to see, economists continue to stress that $4 gas is not enough to derail the economic recovery. Interestingly, higher gas prices haven’t dampened American enthusiasm for cars. Automakers reported strong sales for February, especially among smaller cars as buyers try to offset increased fuel expenses. Although all makers have not reported February results, analysts expect strong sales of 1.1 million cars and trucks for the month.
Federal Reserve Chair Ben Bernanke had both encouragement and words of warning for the Senate Banking Committee this week. While expressing that the recovery is not over and that the Fed expects continued growth of 2.2% to 2.7% this year, he also urged politicians to act on key issues. Bernanke expressed that the expiration of the Bush tax cuts, payroll tax increases, and massive federal budget cuts – all coming at the same time in January 2013 – is a “fiscal cliff” that could threaten the economic recovery. We agree that these lingering political issues could have significant negative consequences if they are not addressed properly. We sincerely hope that the leaders of this nation will act for the common good, and that they will not allow political bickering to get in the way of our ongoing recovery.
ECONOMIC CALENDAR:
Monday: Factory Orders, ISM Non-Mfg. Index
Wednesday: ADP Employment Report, Productivity and Costs, EIA Petroleum Status Report
Thursday: Jobless Claims
Friday: Employment Situation, International Trade
HEADLINES:
Traders pushed up the price of Treasury debt after economic data from Europe brought back fears of a global economic slowdown. Demand for “safe haven” investments like Treasury bills often goes up on the back of poor economic news.
The Institute for Supply Management's manufacturing index fell in February to 52.4 from 54.1, a decline well below expectations. All four of the component indexes also posted declines; however, ISM’s survey chief believes that the declines are part of a generally positive trend of moderate growth.
New orders for durable goods declined a surprising 4% in January. Orders for long-lasting goods like machinery, airplanes, furniture, and appliances dropped after a special business tax treatment expired. While the news could be a sign of weakening manufacturing activity, the durable goods report is notoriously volatile and it is likely one-time factors had a significant impact.
The Conference Board Consumer Confidence Index rose in February, a significant improvement over January’s performance, and is now close to February 2011 levels. Consumers are more confident about current economic conditions than they were in January, and despite rising gas prices, they are more optimistic about the economic recovery.
5 Overlooked Tax Deductions for 2011
As you start getting your tax information together, don’t forget to look for tax deductions.
1. Charitable Mileage
Many people are aware that their charitable contributions can be deducted if they itemize their taxes. However, you can also deduct the mileage that you travel in the service of your favorite charity.
When you travel to and from the charity location, or if you are running errands on behalf of the charity, you can deduct 14 cents per mile. You also get to deduct what you pay for parking and tolls. And, if you take public transport, you can deduct those costs as well.
Just make sure you keep good records.
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2. Tax Preparation Fees
When someone else prepares your taxes, or even if you prepare them yourself using paid software, you can get a deduction for the cost. Deduct the cost of your accountant, your TurboTax software, and even convenience fees that you might be charged.
It’s worth noting, too, that financial planning fees, and fees paid for financial management, can also be deducted from your income.
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3. Property Losses
If you had a property loss, due to destruction or theft, you can deduct some of what you paid for repairs, and even for the decrease in value to your home.
You do have to follow the rules, though.
No deduction for amounts covered by your insurance company, and you have to have paid more than $100, since the first $100 you pay isn’t tax deductible.
You may have had losses due to Hurricane Irene
4. CD Withdrawal Penalties
When you withdraw money early from a certificate of deposit, it comes with a penalty. This can cut into your earnings from the CD, as well as offer annoyance. You can recoup some of that cost when you deduct the penalty on your taxes.
So, if you ended up with such a fee, make sure to remember to deduct it.
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5. Medicare Premiums
Your Medicare Part B and Medicare Part D premiums might be tax deductible as medical expenses. This can be a great help if your premiums have been on the rise.
On top of that, those who aren’t eligible for Social Security, and enroll in Medicare Part A, can deduct those premiums.
Disclaimer: Ken Mahoney is neither a tax nor legal professional. Material contained within this piece is intended for general informational purposes only and is not intended as professional counsel or investment advice, and is not to be used as such. No statement or expression is an offer or solicitation to buy or sell any products or services mentioned. Information contained herein has been obtained from sources believed to be reliable; its accuracy and completeness cannot be guaranteed. Investors are advised to contact their appropriate professional for all personal, including but not limited to retirement and estate planning, tax planning and/or corporate planning.
QUOTE OF THE WEEK:
“The magnificent Universe provides abundantly when you’re in a state of gratitude’
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.
Dow closing in on 13,000 with better than expected economic news
After a week of mixed performance, major indexes locked in weekly gains on Friday, buoyed by positive economic data. The S&P 500 closed at its highest level since 2008, having gained 8% so far this year. The Dow increased about 0.3% this week and flirted with its highest close since May 2008, while the Nasdaq added 0.4% to close at its highest level since December 2000!
Positive economic numbers released this week included an unexpected boost in consumer confidence in February as Americans continue to be optimistic about economic growth. The Thomson Reuters/University of Michigan final index of consumer sentiment rose to 75.3 from 75 in January, sustained by gains in the job market. Optimistic consumers tend to spend more and invest more – two things that are very good for economic growth.
Additional positive news came out of the housing market as sales of existing U.S. homes rose 4.3% in January, sustained by record-low interest rates and bargain prices. At the same time though, sales of new homes fell in January after four straight months of gains as more Americans purchased previously-owned homes. According to the Commerce Department, new-home sales dropped 0.9% from December, falling short of forecasted growth. However, since hiring is on the rise and existing homes are selling briskly, we expect to see continued improvements in the overall housing market as stockpiles are depleted and consumers keep taking advantage of low mortgage rates.
Unfortunately, gas prices continued their rise this week, increasing 2.7 cents to a nationwide average of $3.67 a gallon on Saturday. Tensions with Iran and Syria caused crude oil to hit $109.77 at Friday’s close; however, consumers are still responding relatively well. In related news, St Louis Federal Reserve President James Bullard made a statement Friday expressing confidence that since Americans adjusted to high gas prices in 2008, the rising prices we now see are unlikely to derail the recovery. We hope he is correct in this assumption.
Overall, despite some midweek market turbulence fueled by concerns over Europe and high gas prices, the week ended well, with positive economic news boosting confidence that the recovery will continue. Although a sustained rise in gas prices could put a damper on future growth, most economists remain cautiously optimistic, and so do we.
ECONOMIC CALENDAR:
Monday: Pending Home Sales Index, Dallas Fed Manufacturing Survey
Tuesday: Durable Goods Orders, S&P Case-Shiller HPI, Consumer Confidence
Wednesday: GDP, Chicago PMI, Ben Bernanke Speaks at 10:00 AM ET, EIA Petroleum Status Report, Beige Book
Thursday: Motor Vehicle Sales, Jobless Claims, Personal Income and Outlays, ISM Manufacturing Index, Construction Spending
Data as of 2/24/2012 1-Week Since 1/1/2012 1-Year 5-Year 10-Year
Standard & Poor's 500 0.33% 8.60% 4.57% -1.18% 2.53%
DOW 0.26% 6.26% 7.58% 0.53% 3.02%
NASDAQ 0.41% 13.77% 8.25% 3.57% 7.19%
MSCI EAFE 1.16% 11.35% -5.61% -3.65% 3.86%
10-year Treasury Note (Yield Only) 2.01% N/A 3.44% 4.68% 4.83%
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 Federal government could open the Strategic Petroleum Reserve to curb rising oil prices. Tapping the SPR often comes up when gas prices soar and politicians feel pressured into action. Opening the reserve would quickly lower prices; however, doing so might leave the country open to future shocks, meaning that it is unlikely to be opened unless a severe supply disruption occurs.
Greece launched a sovereign debt swap worth €107 billion- designed to restructure its debt load and stave off default. The swap will allow investors to take a 53.5% loss on the face value of their government bonds – which is much less than the actual loss, estimated at between 73-74%. It is hoped that the debt swap will lower Greece’s overall debt from 160% of GDP to 120% by 2020, paving the way for a return to solvency.
The Federal Reserve bought $1.9 billion in long-dated bonds as part of a bond-buying program designed to support the economy by keeping long-term interest rates low. The Fed plans to purchase a wider variety of bond maturities next week.
A prominent economist is bearish on the economy. Despite the positive economic indicators, Lakshman Achuthan believes the economy is headed for a new recession. However, Achuthan's views are not widely accepted; a December CNNMoney poll of economists cut the double-dip recession risk down to 20%, citing job growth, increased retail spending, and higher consumer confidence.
QUOTE OF THE WEEK:
‘The truth is, if one of us succeeds, we all do’ 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.
The Reuters/University of Michigan Surveys of Consumers is an index based on a survey of a nationally representative of U.S. households designed to gauge how consumers feel the economic environment will change. Survey responses are correlated and weighted to create single index value.
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.
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
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.
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.
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
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.
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.
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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