Weekly Market Snapshot
Market Commentary
by Scott J. Brown, Ph.D., Chief Economist
The economic calendar was thin this past week. Retail sales were reported to have fallen 2.8% in October – down 2.2% ex-autos – and figures for August and September were revised lower. The large drop in retail sales in October was concentrated in autos and gasoline (because of lower gasoline prices). Ex-autos and gasoline, retail sales would have fallen 0.5% – still a bad report, but not as horrible as the headline figures would suggest.
Consumer spending is being restrained by the weak job market – initial claims for unemployment insurance benefits rose to more than a half million last week – the loss of wealth (housing, 401[k]s) and tighter credit. In addition, consumers appear to be adjusting their spending habits. While it’s good to save, it’s bad when everyone does it at the same time. It’s difficult to say whether this will be a temporary, short-term phenomenon or a deeper, long-lasting shift.
Stock market volatility continued, with large intraday swings. Over the last couple of weeks, market participants appear to be ignoring much of the economic data. Increased market volatility is indicative of the high degree of uncertainty in the economic outlook. Policy efforts here and abroad should help support growth in 2009, but it’s unclear precisely how severe the current weakness will be and how long it will last.
Next week, the mid-month economic data pour in, but the stock market may not react much to the numbers. Industrial production was depressed by hurricane effects in September and should have rebounded from those effects in October. However, the recovery in energy processing will likely be offset by broader weakness in the manufacturing sector (watch for revisions). The monthly inflation gauges will show large declines due to lower energy prices; they should be mild otherwise.
Indices
| Last | Last Week | YTD return % | |
|---|---|---|---|
| DJIA | 8835.25 | 8695.79 | -33.39% |
| NASDAQ | 1596.7 | 1608.7 | -39.80% |
| S&P 500 | 911.29 | 904.88 | -37.94% |
| MSCI EAFE | 1148.02 | 1239.64 | -49.05% |
| Russell 2000 | 491.23 | 495.84 | -35.87% |
Consumer Money Rates
| Last | 1-year ago | |
|---|---|---|
| Prime Rate | 4.00 | 7.50 |
| Fed Funds | 1.00 | 4.50 |
| 30-year mortgage | 6.06 | 5.93 |
Currencies
| Last | 1-year ago | |
|---|---|---|
| Dollars per British Pound | 1.484 | 2.071 |
| Dollars per Euro | 1.277 | 1.460 |
| Japanese Yen per Dollar | 97.68 | 110.90 |
| Canadian Dollars per Dollar | 1.212 | 0.959 |
| Mexican Peso per Dollar | 12.92 | 10.85 |
Commodities
| Last | 1-year ago | |
|---|---|---|
| Crude Oil | 58.24 | 91.17 |
| Gold | 736.50 | 802.00 |
Bond Rates
| Last | 1-month ago | |
|---|---|---|
| 2-year treasury | 1.21 | 1.57 |
| 10-year treasury | 3.73 | 3.89 |
| 10-year municipal (TEY) | 6.65 | 6.77 |
Treasury Yield Curve – 11/14/2008
S&P Sector Performance Charts – 11/14/2008
Economic Calendar
| November 17 | — | Empire State Manufacturing Index (November) Industrial Production (October) |
| November 18 | — | Producer Price Index (October) |
| November 19 | — | Consumer Price Index (October) Real Weekly Earnings (October) Residential Construction (October) FOMC Minutes (October 28-29) |
| November 20 | — | Jobless Claims (week ending November 15) Leading Economic Indicators (October) Philly Fed Index (November) |
| November 27 | — | Thanksgiving Day (markets closed) |
| December 16 | — | FOMC meeting |
Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. Municipal bond interest is not subject to federal income tax but may be subject to AMT, state or local taxes. Investing involves risk and investors may incur a profit or a loss.
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business November 13th 2008.