|Market/Index||Year Close (2008)||Qtr Close (09/30/09)||Previous Week (11/13/09)||Current Week (11/20/09)||YTD Change|
|Dow Jones Industrial||8,776.39||9,712.28||10,270.47||10,318.16||17.57%|
|Fed Funds||0.25%||0.25%||0.25%||0.25%||0 bps|
|10 yr Treasury (Yield)||2.24%||3.31%||3.43%||3.36%||112 bps|
Earnings season began winding down and the results show improvement from the prior quarter (though overall profits are still declining). Analysts fear the “favorable” news is not truly reflective of economic strength since much of the progress has been based on cost-cutting measures as opposed to enhanced consumer and biz activity. Saks led a group of retailers (Limited, Gap, AnnTaylor, TJX) with relatively positive reports, though less-than-enthusiastic investors remained cautious heading into the holiday season. Likewise, decent news from Home Depot and Lowe’s did little to excite them about prospects for home improvements. Dell disappointed (again) as the one-time industry leader continued to lose ground to HP. Sticking with techs, a noted analyst lowered his rating on Intel and TI (among others) due to inventory concerns, while another cut his views on Research in Motion (Blackberry) as it encounters new challenges from Verizon. AOL plans a major downsizing move and Microsoft appears to be reaping the benefits of a well-received Windows 7 (finally). In other corporate news, Goldman Sachs faced the wrath of shareholders over its (elevated) compensation and tried to lighten the blow by announcing a significant charitable program to the tune of $250 - $500 million. And Hershey Co. appears interested in bidding (against Kraft’s $16.7 bln) for Cadbury PLC.
After starting the week strong, equities struggled to a three-day losing streak on new concerns about techs, housing, and the recovery as a whole. The political bickering did little to instill confidence that powers-that-be could come together to generate effective economic, regulatory, or even healthcare policies. The Dems received good news from the non-partisan Congressional Budget Office which projected the Senate’s healthcare bill would bring $130 billion in deficit reduction over 10-years, though its passage remains uncertain (thanks to the public option). Oil drifted lower as analysts grew more skeptical about future demand given the sluggish recovery. The major indexes ended the week not far from where they began as traders prepared for a holiday-shortened week (and Geithner looked for a friendly face or two within the DC crowd).
Weekly Economic Calendar
|November 16||Retail Sales (10/09)||Large increase due to auto activity|
|November 17||PPI (10/09)||Core CPI dropped 0.6%|
|Industrial Production (10/09)||Surprising decline in factory production|
|November 18||Housing Starts (10/09)||Huge decline on uncertainty about tax incentive|
|CPI (10/09)||8 th straight monthly decline in consumer inflation|
|November 19||Initial Jobless Claims (11/14)||Unchanged from last week’s level|
|Leading Economic Indicators (10/09)||7 th consecutive monthly increase|
|The Week Ahead|
|November 23||Existing Home Sales (10/09)|
|November 24||GDP (3 rd quarter – revised)|
|Consumer Confidence (11/09)|
|November 25||Personal Income/Spending (10/09)|
|Initial Jobless Claims (11/21)|
|New Home Sales (10/09)|
|November 26||Thanksgiving Day|
For months, naysayers have cried “doom and gloom” over the labor picture, especially once that dreaded 10% jobless rate became reality. Now they have even more ammunition as some analysts claim “true” unemployment is actually 17.5%, its highest level on record. This number includes those individuals who have given up looking for work as well as the “underemployed,” part-time workers who would prefer to land permanent full-time positions. Housing data also proved disappointing this week as new construction plunged to its lowest level in six months, though the extension of the homebuyer tax credit should help generate new activity in the months to come. Industrial production rose for the fourth straight month in October, though analysts see signs that factory activity may be slowing. Similarly, though retail sales jumped last month, the results were deemed less favorable once auto sales were removed from the equation.
Inflation remained non-existent for the time being, giving the Fed one less thing to worry about as it attempts to jumpstart the economy with continued low interest rates and begins to debate the longevity of its prior stimulus moves. Dr. B. even addressed the dollar’s weakness by reaffirming the Fed’s commitment to a strong currency, but again stressed that rates will remain low for the foreseeable future. Earlier in the week, China’s key regulator lashed out at US policy and claimed that a weak dollar has led to “massive speculation” that could undermine any chance for a strong global rebound. (And very nice to meet you, Mr. Obama.) The European Central Bank took controversial actions (in contrast to the Fed’s) late in the week as its policymakers chose to begin unwinding certain measures that had initially been enacted to stimulate growth. While the various Bankers try to determine the most appropriate course of action, the Organization for Economic Cooperation and Development upwardly revised its projection for global growth in 2010 and 2011, but still disclaimed some of its positive comments by rehashing concerns about rising unemployment and the escalating government debt positions.
On the Horizon…Investors and traders cannot totally escape during the holiday-shortened week as some key economic numbers will be released. After a poor showing for the housing sector this week, economists will be looking at existing and new home sales data for indications that the would-be rebound is still alive and well. The revised GDP data also will be widely anticipated as some analysts expect a downward revision to account for the worsening trade picture. With another earnings season practically in the books, investors turn their full attention to the holidays (not vacations, but shopping data) and hope that the “doom and gloom” does not play out as retailers have projected. While many shoppers plan to hit the stores to take advantage of “Black Friday” specials, many discounts have been available for some time (thanks Wal-Mart). Hopefully, retailers (and investors) will be “giving thanks” come the new year.