Market Week: September 3, 2013

The Markets

As some sort of U.S. military strike in Syria began to seem increasingly likely, investors had something else to worry about in addition to the Federal Reserve. That translated into weakness in equities. Heading into what has historically been a relatively weak month for stocks, the Dow industrials had lost almost 4.5% during August, while the S&P 500 was down just over 3% for the month. The Nasdaq’s 1% loss gave it August’s best performance. Meanwhile, bonds didn’t seem to benefit much from any flight-to-quality sentiment during the week, and the benchmark 10-year Treasury yield ended the month up 18 basis points.

Market/Index 2012 Close Prior Week As of 8/30 Week Change YTD Change
DJIA 13104.14 15010.36 14810.31 -1.33% 13.02%
Nasdaq 3019.51 3657.79 3589.87 -1.86% 18.89%
S&P 500 1426.19 1663.47 1632.97 -1.83% 14.50%
Russell 2000 849.35 1038.24 1010.90 -2.63% 19.02%
Global Dow 1995.96 2240.44 2182.63 -2.58% 9.35%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.78% 2.82% 2.78% -4 bps 100 bps

Equities data reflect price changes, not total return.

Last Week’s Headlines

  • The U.S. economy grew more than previously thought in the second quarter, according to the Bureau of Economic Analysis. The 2.5% annualized growth in gross domestic product is substantially higher than either the initial estimate of 1.7% or Q1’s 1.1% growth. An 8.6% increase in exports and imports that were lower than previously thought were the biggest factors in the GDP revisions. Business investments were up 9.9% and corporate profits rose 2.6%, while the sequester budget cuts contributed to a 0.9% decline in government spending. Though another revision is due in late September, this is the last GDP report before the Fed’s next monetary policy meeting.
  • A 52.3% drop in orders for commercial aircraft cut July durable goods orders by 7.3% in July. However, even apart from the volatile aircraft sector, orders were down 0.6% for the month, according to the Commerce Department, though non-transportation orders gained more than 2.5% over the past 12 months. Business spending on capital equipment fell 3.3% after five straight months of increases.
  • Both consumer spending and personal incomes were up 0.1% in July, according to the Bureau of Economic Analysis; both were lower than in June.
  • Home prices continued to rise in June, though at a slower pace than the month before. The cities included in the S&P/Case-Shiller 20-City Composite Index saw an average 2.2% gain. Prices were 12.1% ahead of last June, which put them back at early 2004 levels. Prices in Dallas and Denver hit record highs, while New York saw its greatest monthly gains since 2002. However, 13 of the 20 cities saw weaker returns from May to June, and S&P said higher mortgage rates could be part of the reason.
  • BATS Global Markets, which operates electronic securities exchanges in the United States and Europe, and U.S. stock exchange operator Direct Edge Holdings will merge. The combined company will compete with the New York Stock Exchange and the Nasdaq Stock Market.
  • Here we go again: The federal government will hit its borrowing limit in mid-October, Treasury Secretary Jack Lew said. That raised the specter of renewed debate over raising the debt ceiling to pay the government’s existing bills.

Eye on the Week Ahead

A holiday-shortened week will feature the final unemployment report before the Fed’s September monetary policy meeting. Data on construction spending, imports/exports, and manufacturing also will suggest the state of the economy.

Key dates and data releases: U.S. manufacturing, construction spending, auto sales (9/3); balance of trade, Fed “beige book” report (9/4); U.S. services sector, business productivity/costs, factory orders (9/5); unemployment/payrolls (9/6).

All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. 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.