Market Week: September 9, 2013

The Markets

Despite some flailing, the Dow managed its first positive week since the beginning of August, and the S&P, Nasdaq, and Russell 2000 all had strong gains. A disappointing jobs report and the intensifying Syrian dilemma fed the “bad news might be good news” syndrome that has been in place for weeks as investors hoped that both factors might help persuade the Fed not to begin tapering in September.

Market/Index 2012 Close Prior Week As of 9/6 Week Change YTD Change
DJIA 13104.14 14810.31 14922.50 .76% 13.88%
Nasdaq 3019.51 3589.87 3660.01 1.95% 21.21%
S&P 500 1426.19 1632.97 1655.17 1.36% 16.06%
Russell 2000 849.35 1010.90 1029.55 1.84% 21.22%
Global Dow 1995.96 2182.63 2240.81 2.67% 12.27%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.78% 2.78% 2.94% 16 bps 116 bps

Equities data reflect price changes, not total return.

Last Week’s Headlines

  • Though the U.S. economy added 169,000 jobs in August, the number was lower than expected, and the number of jobs added in July was revised downward. However, the unemployment rate fell slightly to 7.3% because 1.4 million people left the labor force.
  • U.S. manufacturers saw strong expansion in August, according to the Institute for Supply Management’s index, whose 55.7% reading was its highest since June 2011. Meanwhile, the ISM’s non-manufacturing measure for July hit its highest level since the index began in 2008; the 2.6% increase to 58.6% was driven primarily by the retail and construction industries.
  • The Federal Reserve’s “beige book” report cited moderate expansion in most of the 12 Fed districts but also weaker lending activity resulting in part from higher mortgage rates. The anecdotal report, which covered early July through late August, did little to increase clarity about what the Fed’s mindset might be at its September monetary policy meeting.
  • Businesses increased their productivity from April through June. According to the Bureau of Labor Statistics, productivity rose at an annualized 2.3% rate in Q2, and industrial output was up 3.7%. Though there was a 1.4% increase in hours worked by the labor force as a whole, per-person labor costs were basically flat.
  • Construction spending rose 0.6% in July. The Commerce Department said a more than 0.9% increase in spending on office/commercial buildings and factories as well as residential construction was partly offset by a nearly 0.4% drop in construction spending by state and local governments.
  • Stronger domestic spending on oil prices and auto imports as well as weaker spending overseas on U.S. products helped reverse June’s sharp decline in the U.S. trade deficit, putting it 13.3% higher at $39.1 billion–roughly the monthly average so far this year. July imports were up 1.6%, while exports fell 0.6% for the month.
  • Both the European Central Bank and the Bank of England left their key interest rates unchanged at 0.5%. ECB President Mario Draghi said the bank now sees the eurozone economy contracting slightly less (-0.4%) than it had previously forecast, though its outlook for 2014 growth was cut slightly to 1%. Meanwhile, the BOE will continue to buy UK government bonds at its current pace.

Eye on the Week Ahead

Investor anticipation of the Fed’s upcoming September monetary policy meeting will likely affect two auctions of long-term Treasury securities this week. As Congress returns to Washington, the debate over the Obama administration’s proposal to intervene in Syria could have increasing impact on the mood of the markets. Retail sales will reflect back-to-school spending.

Key dates and data releases: 10-year Treasury note auction (9/11); 30-year Treasury bond auction, Treasury budget figures (9/12); wholesale inflation, retail sales (9/13).

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.