Deal or no deal: If there was any doubt about whether Washington has been driving equities lately, it vanished on Thursday when a glimmer of hope for an end to the fiscal stalemate emerged. After stocks started the week with a swoon, the two-day rally that followed let the Dow reclaim 15,000 and the S&P 500 edge above 1,700. Meanwhile, the Nasdaq, which had demonstrated some resilience the week before, couldn’t quite manage to turn positive.
|Market/Index||2012 Close||Prior Week||As of 10/11||Week Change||YTD Change|
|Fed. Funds||.25%||.25%||.25%||0 bps||0 bps|
|10-year Treasuries||1.78%||2.66%||2.70%||4 bps||92 bps|
Equities data reflect price changes, not total return.
Last Week’s Headlines
- Global growth this year is expected to be more sluggish than previously thought, according to the International Monetary Fund’s latest report. The new 2.9% figure for 2013 is lower than the 3.2% forecast in July and would be the slowest growth in four years. The IMF cited as key threats the potential impact of reduced Federal Reserve quantitative easing, slowing growth in China, high global debt, and the continuing eurozone credit problem. The IMF’s growth forecast for 2014 is 3.6%, with most of that acceleration coming from advanced economies rather than emerging markets. However, the IMF said its forecasts assume a short-lived U.S. government shutdown and timely resolution of the debt ceiling conflict.
- President Obama nominated Federal Reserve vice chairman Janet Yellen to replace Ben Bernanke when the Fed chairman’s term expires January 31. Her confirmation hearings could provide clues to Fed sentiment about future tapering of economic support. Minutes of the Fed monetary policy committee’s September meeting showed that most committee members continue to favor a start to tapering sometime before the end of the year. However, with one exception, they voted not do so in September because of concerns that it could bring on “unwarranted tightening of financial market conditions.”
- Data on the U.S. balance of trade, wholesale inflation, and retail sales were unavailable because of the federal government shutdown.
Eye on the Week Ahead
With government data nonexistent and the clock ticking down toward Thursday, when the Treasury says it will start running out of cash to pay all its bills, very little outside Washington is likely to matter to financial markets (unless the debt debacle prompts another U.S. credit rating downgrade, which would get plenty of attention). Options expiring at week’s end could prompt a scramble to adjust portfolios.
Key dates and data releases: Empire State manufacturing survey (10/15); consumer inflation, Fed “beige book” report, international capital flows (10/16); housing starts, industrial production, Philly Fed manufacturing survey (10/17); leading economic indicators (10/18).*
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.
*Because of the government shutdown, some data releases may not be available.