Market Week: December 30, 2013

The Markets

Strong economic reports, particularly one that suggested that businesses are confident enough in the future to spend more on equipment, helped drive the Dow and S&P 500 to new records yet again on light trading volumes. The enthusiasm for equities coupled with the Fed’s recent decision to taper its bond purchases cut demand for bonds, sending the benchmark 10-year Treasury yield above 3% for the first time since mid-2011.

Market/Index 2012 Close Prior Week As of 12/27 Week Change YTD Change
DJIA 13104.14 16221.14 16478.41 1.59% 25.75%
Nasdaq 3019.51 4104.74 4156.59 1.26% 37.66%
S&P 500 1426.19 1818.32 1841.40 1.27% 29.11%
Russell 2000 849.35 1146.47 1161.09 1.28% 36.70%
Global Dow 1995.96 2435.48 2476.65 1.69% 24.08%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.78% 2.89% 3.02% 13 bps 124 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

  • U.S. incomes increased 0.2% in November, rebounding from the previous month’s decline. And as the holidays approached, consumer spending (especially on durable goods) rose 0.5% and the savings rate fell from 4.5% to 4.2%. The Bureau of Economic Analysis said November’s figures put personal incomes 0.6% ahead of last November and personal consumption up 2.6% over the same time.
  • A nearly 22% jump in orders for commercial aircraft was largely responsible for a 3.5% increase in durable goods orders in November. However, the Commerce Department said that even aside from the notoriously volatile aircraft sector, business spending on equipment rose 9.4% during the month.
  • After the biggest one-month gain in decades, sales of new homes slid 2.1% in November. However, they were still 16.6% ahead of last November, and the Commerce Department’s upward revisions to the previous three months’ worth of figures suggested a stronger-than-anticipated rebound from a summer slowdown induced by higher mortgage rates.

Eye on the Week Ahead

Investors will be watching to see if the New Year’s baby can extend the last two weeks’ Santa Claus rally into 2014.

Key dates and data releases: home prices (12/31); construction spending (1/2); auto sales (1/3).

Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.