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Weekly Economic Update for January 6, 2014

WeeklyMarketUpdate.jpgA MAJOR GAIN FOR A CONSUMER CONFIDENCE INDEX

The Conference Board’s monthly gauge of consumer confidence came in at 78.1 for December, beating the 76.0 median forecast from economists polled by Bloomberg. In November, it stood at 72.0. The index is way up from where it once was: its average reading was just 53.7 during the 2007-09 recession.1

 

HOME PRICES, HOME SALES CONTRACTS INCREASE

While existing home sales have fallen in recent months, the National Association of Realtors offered some positive news last week - pending home sales increased 0.2% in November, a contrast to October’s 1.2% retreat. The October S&P/Case-Shiller Home Price Index showed a 13.6% yearly gain in property prices measured across 20 cities, improved 0.3% from the September edition; that is the best annual gain the Case-Shiller index has recorded since February 2006.1,2

  

FACTORIES HUM IN DECEMBER

December’s manufacturing PMI from the Institute for Supply Management offered a reading of 57.0 – down from 57.3% in November, but still a mark of solid expansion in the factory sector. Analysts polled by MarketWatch expected the index to decline to 56.6.2

 

Weekly Economic Update for December 30, 2013

WeeklyMarketUpdate.jpgA HOLIDAY SHOPPING SEASON TO CELEBRATE

Good news from the Commerce Department: November brought a healthy 0.5% gain in personal spending (matching the consensus forecast of economists polled by Briefing.com) and a 0.2% rise in personal income that offset the 0.1% retreat in October. SpendingPulse, which tracks online and in-store retail purchases, says that retail sales increased 3.5% during the holiday season. It reports that 2013’s holiday spending was 2.3% greater than in 2012; the International Council of Shopping Centers puts the gain at 2.7%.1,2

 

NO CHANGE IN CONSUMER SENTIMENT

Against expectations, the University of Michigan’s final December consumer sentiment index came in at 82.5 – exactly where it was at the end of November. Analysts surveyed by Briefing.com had projected the index to end 2013 at 83.3.1

 

NEW HOME SALES DOWN, BUT UP FROM SUMMER

November’s 2.1% dip in new home buying seemed to reflect buyers adjusting to higher mortgage rates. Still, the pace of new home purchases (a seasonally adjusted annual rate of 464,000) was up nicely from July and August (when it was below 400,000). In November, new home sales were up 17% from a year ago; the Commerce Department noted a median price of $270,900, representing a 10.6% year-over-year gain.3

 

Weekly Economic Update for December 16, 2013

WeeklyMarketUpdate.jpg“MINI-BARGAIN” PASSES HOUSE, HEADS FOR SENATE

Last week, the congressional budget committee headed by Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA) succeeded where its 2011 predecessor had failed – it reached a deal, albeit a small-scale one. The House passed its budget bill by a 332-94 vote Thursday night; the legislation heads for the Senate this week. If made law, it will reduce the federal deficit by $23 billion during the next 10 years while halving 2014 sequestration cuts to defense spending and non-defense discretionary spending. (Other scheduled cuts in mandatory federal spending will proceed.) This deal doesn’t raise taxes, and it doesn’t extend unemployment insurance, which could expire on December 28 for 1.3 million Americans. Federal spending would increase by $45 billion next year as a result of the agreement.1,2

 

FALL BRINGS BETTER RETAIL SALES

The 0.7% November gain was the biggest recorded by the Commerce Department in five months and brought the year-over-year improvement to 4.7%. Minus auto sales, the gain was still 0.4%. October’s retail sales gain was revised up to 0.6%.3

 

PRODUCER PRICES RETREAT AGAIN

The Producer Price Index declined 0.1% in November following its 0.2% dip for October. Economists polled by Bloomberg thought the headline PPI would be flat for November, instead of retreating for a third consecutive month. November did bring a 0.1% rise in the core PPI.4   

 

Weekly Economic Update for December 9, 2013

WeeklyMarketUpdate.jpgGOOD NEWS ON MAIN STREET

Unemployment declined to a 5-year low of 7.0% in November, according to the Labor Department; underemployment also reached its lowest level in five years. The economy added 203,000 new jobs last month, far better than the 180,000 forecast by economists surveyed by Thomson Reuters. October also brought a 0.3% rise in consumer spending, even with the Bureau of Economic Analysis noting a 0.1% slip in consumer income. Finally, the University of Michigan’s consumer sentiment index jumped 7.4%. The initial December reading of 82.5 was the best in five months.1,2

 

NEW HOME BUYING HITS 33-YEAR PEAK

Surprising news from the Census Bureau: in October, the pace of new home sales was the strongest since 1980 thanks to a 25.4% boost. Even though sales slipped 6.6% for September, the annualized sales pace reached 444,000 units in October, putting the year-over-year increase in new home purchases at 21.6%.3

 

ISM RECORDS ADDITIONAL SECTOR GROWTH

According to the Institute for Supply Management’s purchasing manager indices, America’s service sector expanded for a forty-seventh consecutive month in November. The downside? ISM’s service sector PMI dropped 1.5 points for the month to 53.9. Its manufacturing PMI rose 0.9% in November to 57.3.4   

 

Weekly Economic Update for November 18, 2013

WeeklyMarketUpdate.jpgYELLEN EMPHASIZES FURTHER EASING

While conceding that the Federal Reserve’s current stimulus effort “will not continue indefinitely,” Federal Reserve chair nominee Janet Yellen sounded decidedly dovish at her confirmation hearing in the Senate last week. “Supporting the recovery today is the surest path to returning to a more normal approach to monetary policy,” she noted, which global markets took as a signal that tapering was not in the immediate future. The S&P 500 hit a new record close after her comments Thursday; gold and silver futures and the MSCI Emerging Markets Index all rose 1.4% on the day.1

 

HEALTHCARE ENROLLMENT ISSUES LINGER

While demand was reasonably high at the new online health insurance exchanges in October (975,000+ people found that they were eligible for coverage), total enrollment for the month was just 106,000. As tweaks continued to be made to healthcare.gov, President Obama announced that insurers don’t yet have to cancel plans that fail to meet Affordable Care Act standards. Friday, the House passed a GOP bill that would let insurers offer such policies to new customers as well as existing ones in 2014; President Obama has indicated he will veto this bill.2,3

   

EARNINGS GROWTH SURPASSES ESTIMATES

As of Friday, 461 firms in the S&P 500 had reported earnings – and according to Bloomberg, 75% of them had beaten profit forecasts. Bloomberg projects S&P 500 earnings up 4.9% for Q3 and 5.8% for Q4.4

Weekly Economic Update for November 11, 2013

WeeklyMarketUpdate.jpgSHUTDOWN DOESN’T DETER HIRING

The Labor Department’s delayed October employment report showed the economy adding 204,000 new jobs last month. Analysts polled by Reuters had only expected a gain of 125,000. The unemployment rate actually rose to 7.3%, as those analysts had predicted. This was a nice Friday surprise for Wall Street, and it also made investors wonder if the tapering of QE3 could come before the end of the year. A solid November employment report could offer further grounds for that move.1

 

FIRST Q3 GDP ESTIMATE TOPS EXPECTATIONS

In another nice surprise for Wall Street, the Bureau of Economic Analysis put third quarter growth at 2.8%, whereas economists surveyed by MarketWatch had projected a reading of 2.3%. In related news, a federal report showed factory orders up 1.7% in September, and the Institute for Supply Management’s service sector PMI rose a full point in October to 55.4.2,3

   

HOUSEHOLD INCOMES OUTPACE SPENDING

The September consumer spending report was a bit of a disappointment. Personal spending increased 0.2% (economists polled by MarketWatch had forecast a 0.3% rise) while personal incomes rose 0.5%, suggesting that households saved more and spent less of what they earned. November’s initial University of Michigan consumer sentiment index came in at 72.0, down from the final October mark of 73.2.3

  

DOW CLOSES AT NEW PEAK

Rising 1.08% on the day and 0.94% on the week, the DJIA settled at a new all-time peak of 15,761.78 Friday. The S&P 500 rose 0.51% across five days to settle at 1,770.61 at week’s end, while the tech-heavy NASDAQ lost 0.07% in the same stretch, closing Friday at 3,919.23. Incidentally, the S&P is now riding a 5-week win streak, its longest since mid-February.1,4

Weekly Economic Update for November 4, 2013

WeeklyMarketUpdate.jpgTAME INFLATION, 1.5% BOOST FOR SOCIAL SECURITY

Yearly inflation hit a 5-month low of 1.2% in September – the Labor Department noted a 0.2% rise in the headline Consumer Price Index. The core CPI rose 0.1%, with yearly core inflation at 1.7%. (Producer prices dipped 0.1% in September after a 0.3% advance in August.) With inflation so mild, the Social Security Administration announced a mere 1.5% increase in monthly benefit payments for 2014.1,2

 

MANUFACTURING SECTOR KEEPS GROWING

The Institute for Supply Management’s manufacturing index rose 0.2 points in October to 56.4. This marks a 2013 peak for the index. American factory activity grew for a fifth straight month.3   

    

RETAIL SALES HOLD UP; CONSUMER CONFIDENCE DIPS

While headline retail purchases declined 0.1% in September, the Census Bureau said retail sales were up 0.4% excluding autos. The Conference Board’s consumer confidence index fell 9.0% to 71.2 in October; chalk it up to the shutdown.4

  

HOT & COLD NEWS OUT OF THE HOUSING MARKET

Pending home sales fell again in September; the National Association of Realtors reported a 5.6% dip after a 1.6% retreat in August. August’s S&P/Case-Shiller Home Price Index, however, saw a 12.8% annual gain in house prices across 20 cities.4

Weekly Economic Update for October 28, 2013

WeeklyMarketUpdate.jpgAN ARGUMENT AGAINST TAPERING

According to the Labor Department, the economy added 148,000 jobs in September. The jobless rate dipped to 7.2%, but job creation has averaged less than 150,000 for three straight months. (August job growth was revised up to 193,000, July job growth down to 89,000.) The University of Michigan’s final October consumer sentiment index slipped in the wake of the federal shutdown: the 73.2 reading was an 11-month low. Economists polled by Reuters forecast it coming in at 75.0.1,2

  

EXISTING HOME SALES PACE SLOWS

There was good news beneath the 1.9% September decrease reported by the National Association of Realtors. Residential resales have increased 10.7% in the past 12 months, 25.0% with distressed sales factored out. Distressed sales made up 14% of the market last month compared to 24% a year before. The median sale price was $199,200 last month, improving 11.7% in a year.3

  

DURABLES & INVENTORIES: GOOD NEWS

September saw a 3.7% jump in durable goods orders (albeit a 0.1% retreat minus transportation orders). The Commerce Department also said wholesale inventories rose 0.5% in August, a hint that businesses and suppliers expect solid holiday sales.2

Weekly Economic Update for October 21, 2013

 WeeklyMarketUpdate.jpgFOCUS RETURNS TO EARNINGS, FUNDAMENTALS

A sense of normalcy returned to Wall Street late last week following Wednesday’s deal to end the federal shutdown. The sense of relief spurred the S&P 500 to an all-time high on Friday. At the end of last week, 85 S&P firms had reported quarterly results with earnings surpassing forecasts by an average of 4.2%. As for Washington, the new question is whether a bipartisan committee can negotiate its way to a federal budget agreement by December 13, while also crafting a 10-year plan for tax and entitlement reform. If this new budget panel can’t reach common ground by that deadline, the federal government will face the threat of another shutdown on January 15.1,2

 

MORE “MODEST TO MODERATE” GROWTH REPORTED

That was the big picture out of the Federal Reserve’s latest Beige Book. Eight of 12 Fed districts reported unchanged economic expansion over the past several weeks; however, the Chicago, Richmond, Kansas City and Philadelphia districts found the pace of the economic rebound slowing.3

  

STOCKS CLIMB 2.4%, OIL DECLINES, GOLD RISES 

To be precise, the S&P 500 advanced 2.42% last week, hitting a new intraday record of 1,745.32 on Friday before settling at 1,744.50. The NASDAQ finished the week at a 13-year high of 3,914.28, rising 3.23% across five days. A 1.07% weekly gain brought the Dow to a settlement price of 15,399.65 Friday. NYMEX crude settled at $100.81 per barrel Friday afternoon, down 1.2% since Monday for their fifth weekly loss in the past six weeks. COMEX gold jumped 3.2% on Thursday alone, with futures up 3.7% for the week to a Friday close of $1,314.60.1,4

 

Weekly Economic Update for October 14, 2013

WeeklyMarketUpdate.jpgHOPES FOR A DEBT DEAL EMERGE

After a Friday meeting with President Obama, GOP senators went to work on a bipartisan solution to both the federal budget and federal debt limit impasses, one that would lift the debt limit in exchange for spending cuts. House Republicans introduced a proposal last Thursday to raise the debt ceiling for 6 weeks contingent on budget negotiations. Sen. Lindsey Graham (R-SC) said Friday’s talks produced “nothing concrete,” but Sen. Mitch McConnell (R-KY) called the discussions “very useful” and thought they might lead forward. Hopefully, at least a short-term deal can be reached by the start of this week.1,2

 

NO SURPRISE: CONSUMER SENTIMENT INDEX SLIPS

The University of Michigan’s initial October consumer sentiment index came in at 75.2, which was a 9-month low. Still, that beat the 73.0 consensus forecast of economists polled by Briefing.com.1,3

    

NO TAX HOLIDAY THIS TUESDAY, IRS SAYS

If you filed Form 4868 with the IRS earlier this year, you must still send your federal tax return to the IRS with a postmark of October 15 or earlier. (Taxpayers in certain Colorado counties have until December 2 to file; most military personnel serving in war zones get an additional 180 days after departing the theater of combat to file.) The federal government shutdown did halt the release of the September Producer Price Index and September retail sales figures last week.1,4,5

 

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