Almost half way through the year..What’s next for the markets?


After the sustained selloff in previous trading sessions, the markets rallied Friday to claim a strong gain for the week. The S&P and Dow both booked a 0.8% gain, while the Nasdaq rose 1.0%.[i] With the choppy market performance and gloomy economic sentiment we’ve seen in the past weeks, we wanted to spend some time discussing recent trends and what they might mean for the future.


In short, many of the problems that plagued the markets in 2010 and 2011 - a serious European debt crisis and recession, a slowing Chinese economy, slow domestic growth, and the looming expiration of Bush-era tax cuts - are still with us in 2012. The uncertainty around these issues has dealt investor sentiment a major blow and spurred an exodus from equities into bonds and other "safe haven" investments, pushing Treasury yields to record lows similar to levels seen in the 2008 crisis. There’s a real current of fear underlying these moves that the global economy is slipping back into recession. Whether this fear is realized depends largely on how the credit crisis in Europe develops. Things may be looking up (at least temporarily) as Eurozone leaders have pledged to lend Spain up to 100 billion euros (approx. $125 billion) to recapitalize its banks, pending an audit this month. By pumping more liquidity into the economy, policymakers have bought themselves a bit more time to find a solution.[ii] We hope that markets will react positively to the news this week.


Domestically, many people are worrying about whether 2012 will be a repeat of the last two years, where an initially promising start fizzled out in the spring. Economic data has been patchy at best, and employment growth seems to have lost steam over the past few months, with not nearly enough jobs created to sustain continued growth. At this point, we can't be sure if this is just a temporary slowdown or a sign of continued economic contraction. Based on a number of factors, we currently suspect that this is a temporary, cyclical slowdown and that job growth will pick up in the latter half of the year. Supporting this belief, the Fed’s most recent Beige Book report stated that U.S. economic growth picked up over the last two months, and hiring showed signs of a "modest increase," indicating that the situation is not as grim as many originally feared.[iii]


With respect to equity markets, we know that historically, the market suffers one 10% (or greater) market correction each year. The S&P briefly touched an intraday correction of 10%, so does that mean we can expect solid growth going forward? It’s impossible to know for sure, but it’s rare to see the kind of persistent selling pressure that we’ve seen for the last month, where, for example, the Dow experienced 17 losses in 22 trading sessions. This lingering weakness has resulted in very pessimistic investor sentiment that may set markets up for a positive rebound. Additionally, we’re also under the effect of typical Presidential Election year trends, which historically have called for a peak in April and a decline on June, a script the markets have followed closely this year. If the cyclical trend continues, we can expect a new burst of energy in the second half of the year.

HEADLINES:


Wholesale businesses restocked faster in April, indicating strong sales could push economic growth higher in the second quarter. The Commerce Department report says wholesale stock grew by 0.6% in April, nearly double the March growth. Wholesale sales grew by 1.1% in April, almost triple March sales growth.[iv]



Chinese exports jumped 15.3% in May from May 2011, compared to April’s 4.9% growth. Imports also increased 12.1% compared with March’s insipid 0.3%. Although the positive numbers may ease fears that China’s economy is slowing, the Chinese government will likely take further measures to boost their economy.[v]



Fed survey found that U.S. economy grew moderately in most regions of the country this spring. The report shows growth in each of its 12 bank districts from April 3 through May 25, indicating that despite a poor jobs showing, the economy is still chugging along.[vi]



Unemployment claims dropped by 12,000, according to the latest Labor Department report. Although a one week decline does not indicate a trend, a recent Labor Department report indicates that worker productivity is low, meaning employers will have to hire again if business picks up.[vii]



QUOTE OF THE WEEK:



“The only thing we have to fear is fear itself.” - Franklin D. Roosevelt,


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When will the markets start to stabilize?

 Gloomy economic data disturbed markets last week and set off alarm bells that the U.S. economy may be following Europe and Asia into a slowdown. Friday’s grim jobs report showed that the economy added just 69,000 new jobs in May, far below consensus estimates, and the unemployment rate rose to 8.2% from April’s 8.1%

. Equity markets tumbled on the news, and the Dow showed its worst performance of the year, dropping 2.70%, while the S&P and Nasdaq lost 3.07% and 3.17%, respectively. The Dow Jones Industrial Average has now slipped into negative territory for the first time in 2012, exactly one month after closing at a multi-year high. Meanwhile, the S&P 500 is still up 1.6% year-to-date, and the Nasdaq Composite is up 5.5%.

 Earlier in the week, the first quarter GDP growth estimate was revised downward to 1.9%, from the 2.2% originally reported. Although analysts had initially expected GDP growth of at least 2% in 2012, that number is beginning to look overly optimistic. Revisions to reported estimates are worth paying attention to because they can serve as leading indicators of which direction the economy is going next. The jobs data is troubling and has potential to further stall the economic recovery. Rationalizations that a warm winter artificially shifted job growth earlier in the year appear increasingly thin. The job market is simply not growing enough to ignite a robust recovery. Thankfully, the economy is still resilient in some areas.

 Inflation remains reasonably low, auto sales have continued to grow, and falling energy prices are easing the strain on consumer pocketbooks, opening the door to increased consumer spending. Even so, some analysts believe that we are falling into a familiar pattern where the economy gains traction early in the year only to falter in the second quarter.

 With both perspectives in mind, it would be premature to predict which way things will move next. Interestingly, in 2011, the Dow's first close in negative territory for the year was on August 4th, but the year still ended with a 5.5% gain. While it’s hard to dredge up the fortitude to stay invested when faced with such a slate of bad news, we haven’t yet seen the effects of lowered gas prices on consumer spending, and the U.S. is still much better off than Europe.

We live in a dynamic economic system; when one asset class goes down, another comes up. We can’t predict the future, but we should always continue looking for opportunities!

 ECONOMIC CALENDAR: Monday: Factory Orders Tuesday: ISM Non-Mfg Index Wednesday: Productivity and Costs, EIA Petroleum Status Report, Beige Book Thursday: Jobless Claims, Ben Bernanke Speaks 10:00 AM ET Friday: International Trade .

 HEADLINES: Factory activity growth slows in May. The Institute for Supply’s monthly report indicated that U.S. manufacturing grew at a slower rate in May, pushed lower by weaker hiring and declining production. However, positive new orders data suggest that manufacturing will pick up in June.

 Falling gas prices provide reprieve for consumers. A lengthy plunge in oil prices has pushed gas to prices as low as $2.99 in some areas, while the national average has dropped 30 cents since April to $3.61. The drop could give consumer confidence a much-needed boost as Americans have more discretionary income to spend.

Consumer spending rises 0.3% in April. Although consumer spending edged up from March’s 0.2%, the growth was the slowest in five months, indicating that Americans may have trouble sustaining future spending. Spanish P.M. opens door to unified European fiscal authority.

 In a speech, the Spanish prime minister reiterated a commitment to sticking with austerity plans to usher Spain out of a looming crisis and indicated support for the creation of a single fiscal body to maintain the integrity of the euro.

QUOTE OF THE WEEK: “It is hard to fail, but it is worse never to have tried to succeed.” - Theodore Roosevelt 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. Diversification does not guarantee profit nor is it guaranteed to protect assets 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 Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI. The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index. The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index. 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.

How much longer will Europe dominate our headlines? Markets started off last week with a bang and managed to hold their gains long enough to snap a three week losing streak. The S&P gained 1.74%, the Dow rose 0.69%, and the Nasdaq notched up 2.11%. Most of the action was driven by bargain-hunting traders striving to snap up deals in advance of potential rallies. Perhaps most impressive about the week’s performance is that it came in the face of continued gloom from Europe. The few economic reports released last week were generally lukewarm, with unemployment flat, and home sales slightly up. Worries about Europe weren’t helped by the announcement by a former Greek prime minister announcing that Greece may be considering exiting the Euro. However, European leaders are due to meet next week to discuss plans for promoting growth and preventing the recession that grips half the region from dragging down the global economy. Results of the meeting could mean a larger role for the European Central Bank or the use of controversial Eurobonds (guaranteed by the Eurozone as a whole) to bail out ailing economies. It’ll be difficult to get a clear picture of what the next few months will bring in Europe until Greek elections on June 17 – which will define how the new government will abide (or not) by austerity agreements. As a result, the slew of U.S. economic indicators being released next week will probably feature heavily in trading. If headlines reveal that the economy is still chugging along, it should divert attention away from Europe and provide investors with incentive to jump back into equities. On the other hand, bad economic news could indicate that the Eurozone contagion is spreading and cause further declines. As always, only time will tell the story. On a side note, one silver lining in the Europe situation is the strengthening of the U.S. dollar, which could cause more money to be poured into dollar-denominated assets as investors flee a threatened euro. With the markets poised to jump whichever way the headlines blow, we strongly believe it is best for long-term investors to stick to their strategy while maintaining enough flexibility to adjust course if the situation calls for it. We pledge to keep monitoring world events as they unfold, and to keep you informed. ECONOMIC CALENDAR: Tuesday: S&P Case-Shiller HPI, Consumer Confidence, Dallas Fed Mfg Survey Wednesday: Pending Home Sales Index Thursday: ADP Employment Report, GDP, Jobless Claims, Chicago PMI, EIA Petroleum Status Report Friday: Motor Vehicle Sales, Employment Situation, Personal Income and Outlays, ISM Mfg Index, Construction Spending HEADLINES: Durable goods orders rose 0.2% in April after a 3.7% decline the previous month. According to the Commerce Department report, gains in commercial aircraft orders and more demand for autos and parts drove the modest increase. Oil dropped below $90/barrel for the first in time seven months in trading on Wednesday as U.S. supplies continue to grow. Gasoline prices have followed the decline and dropped 26 cents since peaking in late April. Consumer sentiment rose in May to the highest level in four years. The Thomson Reuters/University of Michigan's report claimed that higher wages and optimism about the job market helped push consumer sentiment to its highest point since October 2007. Investors sue Facebook over pricing and trades. The commotion surrounding the tech giant’s IPO should serve as a warning to investors about chasing the latest fad or hot stock. QUOTE OF THE WEEK: “Go on a rampage of appreciation, rather than discussing the evils of the world, and offer joyful commentary whenever possible”. Dr. Wayne Dyer

How long will Europe’s problems continue to affect our markets? Concerns about Europe and the global economy set a negative tone last week and markets closed out at a loss. The S&P lost 1.15%, while the Dow lost 1.67%, and the Nasdaq 0.76%. On a positive note, the U.S. economy continues to slowly improve as evidenced by a surprisingly positive consumer sentiment report, showing that American consumers are still upbeat about the economy. Jobless claims held steady for the week and some analysts speculate that the unusually high unemployment claims seen in the first weeks of April were the result of seasonal adjustment and not actual job losses. Earnings season is winding down, but a few key players such as Disney, Macy’s, and Kohl’s posted better-than-expected earnings. (These opinions are not to be construed as investment advice) Eurozone troubles were at the core of investor concerns last week as realization dawned that in order to keep the European Union (EU) together, the European Central Bank (ECB) will have to pump trillions of euros into the monetary system. Germany is likely to face high inflation rates for the next few years as it struggles to help the economies of its partner countries. Still haunted by the hyperinflation of the early 1920s, German voters may balk at the spending required to keep the euro afloat, pressuring politicians to balance needs with voter concerns – something that is never easy to do. The recent European elections may also make it difficult for Europe to make headway against its debt troubles. Hollande, the new Socialist president in France, has promised voters not to continue with strict austerity measures. While this is appealing to the masses, it could lead to additional downgrades on French debt, thus making problems worse. In Greece, the majority parties won less than 35% of the votes, giving significant headway to fringe parties. This development, combined with popular sentiment so opposed to necessary austerity measures, has made it increasingly likely that Greece will leave the Eurozone. While the EU can probably survive the exit of Greece, in order to preserve its integrity, it will be critical for the ECB to prevent the default (and exit) of Spain or any of the larger economies. The ECB is the only entity in Europe with the power to save Spain from default – however, the only way to do so is by printing a ton of money, and risking inflation and currency devaluation. What all this means for U.S. investors is this: The crisis in Europe is far from over, and we should not be surprised by volatility and uncertainty right now. If European politicians, nervous about losing elections, refuse to make hard budget decisions, Europe’s crisis may deepen and threaten the stability of the euro. It is impossible to know what the future holds for Europe, but with every downside usually comes an upside somewhere else. We work hard to identify those upsides, and to adjust our clients’ investment strategies where necessary. Thank you for the trust you’ve placed in us. ECONOMIC CALENDAR: Tuesday: Consumer Price Index, Retail Sales, Empire State Mfg. Survey, Treasury International Capital, Business Inventories, Housing Market Index Wednesday: Housing Starts, Industrial Production, EIA Petroleum Status Report, FOMC Minutes Thursday: Jobless Claims, Philadelphia Fed Survey HEADLINES: Falling gas prices cause wholesale prices to drop in April. Wholesale gas prices tumbled to an average of $3.74 last week, nearly 20 cents cheaper than a month ago. With falling energy costs, consumers will have more money to spend on other purchases, which usually boosts the economy. Chinese industrial production slowed to 9.3% in April, down from 11.9% in March, signaling that the Asian giant may be in trouble. Analysts had predicted a jump to 12.2%. JP Morgan Chase reports $2 billion loss in derivatives portfolios. The bank, the largest in the U.S. by assets, incurred the trading loss by mishandling a portfolio of complex financial derivatives. Additional losses may occur as the bank unwinds its positions. (These opinions are not to be construed as investment advice) U.S. records first monthly budget surplus since 2008. The federal government recorded a $59 billion surplus as tax receipts were greater than expenditures. Though this is certainly welcome news, it is unlikely to be the start of a trend. QUOTE OF THE WEEK: “The best way to predict the future is to create it.” - Abraham Lincoln 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 Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI. The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index. The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index. 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. 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Will the weak job’s report ‘frighten’ investors? Last week was a rough one for U.S. stocks. The markets started off the week positive, pushed upward by positive corporate earnings, but retreated the last three days to close at a low point, hammered by a disappointing jobs report and renewed fears about a stuttering economic recovery. The S&P lost 2.44% - its worst weekly performance this year, while the Dow lost 1.44% and the Nasdaq fell 3.68%. The week’s sell off began on Wednesday when the latest ADP Employment Report – usually released before the official Labor Department report - suggested that employment had improved by less than expected.

The news was confirmed on Friday when the official numbers showed that employers had added just 115,000 jobs in April, falling well short of the expected 170,000 new jobs. Although the unemployment rate dropped to 8.1%, we can’t get excited about it because the fall is primarily due to job-seekers giving up their job search. If we see continued slowness in the job market, it is possible that the Federal Reserve will step up efforts to boost the economy again. Since inflation is still well below the danger zone, the Fed still has room to take action. Solid corporate earnings have provided a breath of fresh air, showing that business is still humming along.

 First-quarter earnings among companies in the S&P 500 are currently at 7.8%, well ahead of expectations. However, companies are forecasting a much slower second quarter, a sign that executives are bracing for declining sales. Analysts believe that a warm March and an early Easter may have shifted sales to March, cutting into second quarter revenues. Please also keep in mind that companies often sandbag their forecasts in order to artificially beat expectations when the official earnings are posted. Last week's poor market performance and disappointing jobs report reminds us that our economy and investors nerves are still "recovering.” Just as an injured person who undergoes a major surgery will have good days and bad days while recovering, so our healing economy will experience ups and downs

HEADLINES:

I'll Have Another beat Bodemeister at the 138th Kentucky Derby. I’ll Have Another chased down Bodemeister in the stretch to capture the win with a finish time of 2:01.83, while pre-race favorite Union Rags finished seventh.

Gas prices fall for 18 straight days and oil drops below $100/barrel.

The precipitous drop in gas prices will likely continue as global demand weakens, providing much-needed relief during peak summer driving months. Nationally, gas averaged $3.80 a gallon, nearly 20 cents below 2011’s $3.99 a gallon.

 April retail sales fall short of predictions, but retail analysts say it is not necessarily a sign of weakened consumer spending.

 Same-stores sales grew just 0.8%, missing a predicted increase of 1.5%, according to Retail Metrics, Inc. Mortgage rates fall to near-60 year lows. 30-year mortgage rates fell to 3.84% this week, potentially spurring a round of refinancing and encouraging housing purchases.

 However, with mortgage standards remaining tight, it may be difficult for some buyers to qualify for ultra-low rates.

QUOTE OF THE WEEK: "There is no scarcity of opportunity to make a living at what you love." – Dr. Wayne Dyer

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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. The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI. The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index. The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index. 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.

Can stocks gain strength with only a 2.2% GDP for the 1st quarter? The trading week started off slowly as investors absorbed further troubling news about the state of the global economy: Disappointing manufacturing reports from China, France, and Germany, plus news that the Netherlands might be heading for its own fiscal crisis. Things turned around later in the week though, as domestic equities closed higher on positive news surrounding U.S. corporate earnings. The Dow managed to recoup all its April losses, closing up 1.53% for the week, while the S&P rose 1.80%, and the Nasdaq gained 2.29%. For the moment, corporate earnings are providing a positive counterpoint to lackluster economic news. The state of our nation’s economy was also in the spotlight last week. Gross Domestic Product (GDP) grew by 2.2% in the first quarter, down from 3.0% in the fourth quarter of 2011. The biggest factors in the slowdown were slower inventory-building by private companies and less defense spending by the federal government. Thankfully, consumer spending – the largest contributor to GDP – is still strengthening, which should lead to ongoing improvement in our overall economic picture. In keeping with its upbeat tone, the Fed added 20 basis points to its 2012 GDP forecast, increasing predicted growth to between 2.4%-2.9% this year. The Fed also agreed to keep interest rates between 0.00%-0.25%, and expects inflation to remain below 2.0% for the next two years. During the follow-up press conference, Chairman Ben Bernanke stated that the Fed was still prepared to take an active role in the recovery. Unemployment claims continue to remain near a three-month high, indicating that employers have stepped-up layoffs and are reluctant to increase hiring. However, economists believe that the mild winter distorted first-quarter hiring, making it appear unusually strong. Overall, the economy has continued to add jobs and unemployment is falling well ahead of estimates. Regardless of what happens with short-term market movements and news from abroad, we are grateful to see that the U.S. economy is recovering from the financial crisis better than any other economy in the world right now. This is likely a major reason why we have seen domestic equities performing so well lately – when compared with the rest of the world, U.S. companies are the prettiest girl at the dance. While there are sure to be bumps in the road ahead, corporate balance sheets are strong, the job market is slowly improving, consumers are still spending, and our economy is chugging along. ECONOMIC CALENDAR: Monday: Personal Income and Outlays, Chicago PMI, Dallas Fed Mfg. Survey Tuesday: Motor Vehicle Sales, ISM Mfg. Index, Construction Spending Wednesday: ADP Employment Report, Factory Orders, EIA Petroleum Status Report Thursday: Jobless Claims, Productivity and Costs, ISM Non-Mfg. Index Friday: Employment Situation HEADLINES: U.S. Gas prices are lower now than they were a year ago. After falling for most of the month of April on slowing global demand, gas prices are lower in most of the U.S. than they were last year. This should give consumer confidence a boost as we move into the peak summer driving season. Spain’s economic crisis worsens as unemployment rises. A recent report shows that Spain’s overall unemployment rate hit 24.2% while the unemployment rate for youths under 25 reached a staggering 52%. Underscoring the bad news, the S&P downgraded Spain’s debt rating to BBB+. Home sales jumped by 4.1% in March to reach the highest level since April 2010, indicating that the battered housing market is recovering. In a separate report, mortgage buyer Freddie Mac says that the average rate on 30-year loans averaged 3.88%, very close to the historic low reached in the 1950s, keeping home financing affordable. Heavy debt may be depressing consumer spending. The housing bust may have burdened households with high debt levels, preventing them from spending more. Record student-loan debt and poor job prospects may be prompting younger workers to put off marriage and live at home longer, reducing household formation and furniture purchases. QUOTE OF THE WEEK: “In virtually every area of your life, the more you give away, the more you get back.” – 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 Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI. The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index. The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index. 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.