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Market Week: February 2, 2015

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Key Dates/Data Releases

2/2: Personal income/spending, ISM manufacturing report, construction spending

2/3: Auto sales, factory orders

2/4: ISM services report

2/5: Business productivity, balance of trade

The Markets

The strength of the U.S. dollar contributed to weak Q4 earnings reports from some major blue-chip companies that earn a substantial portion of their revenues overseas. That in turn contributed to more losses for equities across the board, with the Dow and S&P 500 suffering the most. As a result, investors continued to seek the security of U.S. Treasuries; the benchmark 10-year yield has now lost roughly half a percentage point since the beginning of the year as demand has driven up prices.

Market/Index 2014 Close Prior Week As of 1/30 Weekly Change YTD Change
DJIA 17823.07 17672.60 17164.95 -2.87% -3.69%
Nasdaq 4736.05 4757.88 4635.24 -2.58% -2.13%
S&P 500 2058.90 2051.82 1994.99 -2.77% -3.10%
Russell 2000 1204.70 1188.93 1165.39 -1.98% -3.26%
Global Dow 2501.66 2501.48 2441.41 -2.40% -2.41%
Fed. Funds .25% .25% .25% 0% 0%
10-year Treasuries 2.17% 1.79% 1.68% -11 bps -49 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

  • The U.S. economy grew more slowly in Q4, according to the Bureau of Economic Analysis’s initial estimate. The 2.6% increase in gross domestic product was roughly half the 5% seen in Q3. The BEA said increased imports, cuts in federal government spending, reduced business investment, and sluggish exports helped slow economic growth. The major bright spot in the report was a 4.3% increase in consumer spending–the fastest growth since before the financial crisis.
  • The Federal Reserve’s monetary policy committee once again said it is in no hurry to begin raising interest rates, in part because it foresees inflation slowing even further in the short term before eventually rising closer to its 2% target. The committee said it expects moderate U.S. growth to continue, and its statement expressed little concern about international economic weakness.
  • The Commerce Department said durable goods orders unexpectedly fell 3.4% in December–the fourth decline in the last five months. Though a 55% drop in commercial aircraft orders played a significant role in the weakness in new orders, the Commerce Department said business spending on capital equipment also fell 9.7%.
  • After a slow November, sales of new homes were up 11.6% in December, according to the Commerce Department. However, the S&P/Case-Shiller 20-City Composite Index showed that home prices continued to struggle; the index fell 0.2% in November, and the 4.3% increase over November 2013 was less than the 4.5% annual gain seen the previous month.

Eye on the Week Ahead

As the new Greek government settles in, investors will be assessing its chances of success in altering the bailout agreement imposed by the so-called “troika”–the European Commission, the European Central Bank, and the International Monetary Fund. Consumer and manufacturing data are on tap as earnings reports continue to come in. And the release of President Obama’s budget for the upcoming fiscal year will doubtless prompt discussion of the potential impact of any proposed tax reforms.

Data sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). 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. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

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 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

 


  
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