Weekly Market Update
Week of April 11, 2011
Fears of a government shutdown loomed large last Friday night. With less than an hour to spare, Congress pushed through a last-minute spending bill – the seventh in the past six months – which cut $2 billion and allows agencies to spend money through April 15. By that time, lawmakers expect to determine a budget for the remaining six months of the fiscal year. It is interesting to note how awareness of the potential shutdown affected investors.
As a result of the budget impasse, a sharply weaker dollar led investors into oil and commodities, while U.S. stocks fell. As we’ve mentioned before, equity markets don’t like uncertainty, and the exodus we saw on Friday is a classic example of this fact. At a time when concerns regarding the Middle East situation has sent oil prices surging, and the Japanese disaster has impacted supply chains, reaching a deal was extremely important. The last-minute agreement keeps 800,000 government workers on the job and a variety of services, from passport issuing to tax collecting, up and running. It also allows the military to continue receiving their paychecks.
“Both sides had to make tough decisions and give ground on issues that were important to them,” President Obama said. “But beginning to live within our means is the only way to protect those investments that will help America compete for new jobs.” Despite budget concerns, consumer confidence rose for a second consecutive week as an improving job market helped ease the burden of higher fuel costs.
As in the past, both international and domestic politics will continue to play a part in peoples investing decisions. The week ahead will likely be no exception as the new budget is voted on. Also next week, a series of labor reports are released and earnings season begins. We’ll let you know how things turn out in our commentary next week.
ECONOMIC CALENDAR: Tuesday – International Trade, Import and Export Prices, Bank of Canada Announcement, Treasury Budget Wednesday – Retail Sales, Business Inventories, EIA Petroleum Status Report, Beige Book
Thursday – Producer Price Index, Jobless Claims Friday – Consumer Price Index, Empire State Mfg, Treasury International Capital, Industrial Production, Consumer Sentiment
|Data as of 04/08/2011||1-Week||YTD||1-Year||5-Year||10-Year|
|Standard & Poor’s 500||-0.32||5.61||12.0||0.50||1.77|
|10-year Treasury Note (Yield Only)||3.45||N/A||3.90||4.96||4.87|
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. NA means not available.
Crude oil advanced 2.3% Friday, settling at $112 a barrel – its highest price in more than 30 months. In addition to sparking fears about a slowdown in the global economy, investors are also concerned about Libya’s civil war and the country’s 80% drop in production.
On April 6 Portugal asked for international assistance, joining Greece and Ireland in receiving bailouts from the European Union and the International Monetary Fund. The country faces around €4.3 billion ($6.2 billion) of bond redemptions in April, followed by a repayment of €4.9 billion in June.
The quarterly earnings season begins next week. Gas and commodity prices have surged this year, and could spell trouble for the rebound in consumer spending and sales growth. Overall, earnings for the companies in the S&P 500 are expected to be up 11.5% over last year. Revenues are expected to rise 8%, remaining unchanged from the fourth quarter.
QUOTE OF THE WEEK:
“Patience and fortitude conquer all things.” – Ralph Waldo Emerson
RECIPE OF THE WEEK:
From: Better Homes and Gardens
Serve this as an appetizer or dessert when strawberries are in season.
Servings: 24 servings
Total: 25 mins
1 8-ounce loaf baguette-style French bread
1 8-ounce tub cream cheese
1 tablespoon honey
2 cups strawberries, sliced
¼ cup strawberry jelly
1. Heat oven to 375 degree F. Cut bread into 24 slices about 1/4-inch thick. Place in a single layer on an ungreased cookie sheet. Bake about 10 minutes or until lightly brown, turning once.
2. Stir together cream cheese and honey; spread on one side of each bread slice. Arrange strawberry slices on the cheese. Heat jelly in a custard cup in a microwave oven on high power for 30 seconds; stir (or heat and stir in a small saucepan until melted). Brush jelly over strawberries. Makes 24 servings.
Toast the bread and store in a covered container at room temperature up to 2 days or freeze up to 1 month. Stir together the cream cheese and honey; cover and refrigerate up to 2 days.
GOLF TIP OF THE WEEK:
Can You Wiggle Your Toes?
With the proper setup, your weight should be distributed evenly on your feet. Many golfers have a tendency to stretch out towards the ball too much. This causes their weight to be too far forward. How can you tell if your weight distribution is proper? Easy! Just make sure you can wiggle your toes freely.
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
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