Market Week: September 30, 2013

The Markets

The focus of investor attention remained in Washington but shifted from the Federal Reserve to Congress’s budget battles. The Nasdaq and the small caps of the Russell 2000 hung on to positive territory for the week–barely–while the Dow and S&P 500 each lost more than a percentage point. Meanwhile, despite the potential threat of default after October 17, the benchmark 10-year Treasury note benefitted from the uncertainty.

Market/Index 2012 Close Prior Week As of 9/27 Week Change YTD Change
DJIA 13104.14 15451.09 15258.24 -1.25% 16.44%
Nasdaq 3019.51 3774.73 3781.59 .18% 25.24%
S&P 500 1426.19 1709.91 1691.75 -1.06% 18.62%
Russell 2000 849.35 1072.83 1074.19 .13% 26.47%
Global Dow 1995.96 2349.36 2331.75 -.75% 16.82%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.78% 2.75% 2.64 bps -11 bps 86 bps

Equities data reflect price changes, not total return.

Last Week’s Headlines

  • Continuing irresolution: A partial shutdown of the federal government on Tuesday seemed likely as Congress divided over a bill that would eliminate some funding for the Affordable Care Act and delay implementation for a year. A second impending deadline arrives October 17, when Treasury Secretary Jack Lew said the Treasury will essentially run out of money to pay its bills unless Congress raises the nation’s debt ceiling.
  • Sales of new homes came back in August, according to the Commerce Department. After falling more than 14% in July, sales were up almost 7.9% in August. Also, July home prices in the cities measured by the S&P/Case-Shiller 20-City Composite Index rose 1.8%, and were up 12.4% over the last 12 months. However, the rate of increase in both new home sales and prices has slowed since the beginning of the year.
  • The Commerce Department’s final estimate of overall Q2 economic growth remained at an annualized 2.5%–better than both the initial estimate of 1.7% and Q1’s 1.1% growth. Businesses spent more on buildings and equipment than previously thought; state and local government spending also increased slightly from previous estimates, while the 1.6% drop in federal spending and the 1.8% increase in consumer spending remained unchanged.
  • Led by a 0.7% increase in transportation equipment (primarily autos and auto parts), durable goods orders were up 0.1% in August. The Commerce Department said the figure would have been stronger if not for a decline in orders for aircraft and military equipment. Business spending on capital goods was down 0.2%.
  • August’s 0.4% increase in personal incomes was the biggest increase in six months. It even exceeded the 0.3% rise in consumer spending, which was boosted by purchases of autos and back-to-school supplies. The Commerce Department said the increase helped workers save a little more; the personal savings rate rose to 4.6% of income from 4.5%.

Eye on the Week Ahead

The ongoing budget and debt conflicts in Washington will likely affect the mood of the markets, especially given the likely shutdown of some government functions starting Tuesday. As always, Friday’s unemployment report will be of interest (assuming the employees who produce it aren’t furloughed) and the Institute for Supply Management will supply data on the manufacturing and services sectors.

Key dates and data releases: U.S. manufacturing, construction spending (10/1); factory orders, U.S. services sector (10/3); unemployment/payrolls (10/4).

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.