Monthly Economic Update: January 2013

Monthly Economic Update: January 2013

Developments that affected the economy and the markets in December. 

Our economy doesn’t revolve around a single issue – but in December, it almost seemed as if it did. Households, businesses, economists, financiers, journalists and politicians all worried that America would fall off the “fiscal cliff” come January 2. Congress passed a partial fix at the very edge of the cliff – on New Year’s Day. In the wake of the crisis, stocks showed remarkable resilience – the S&P 500 actually gained 0.71% in December. Away from the cliff, the real estate market was improving, overseas stock markets were rallying seemingly en masse, and commodity futures were all over the place. Hopefully, consumer confidence would rebound in January.¹

Domestic economic health. The small-scale fiscal cliff deal hammered out in the waning hours of 2012 hiked some taxes, extended some tax breaks and settled more than a few questions. It preserved the Bush-era tax cuts for all but the wealthiest taxpayers (the highest federal income tax bracket went from 35% to 39.6%), took the top estate tax rate to 40%, permanently patched the Alternative Minimum Tax, extended long-term unemployment benefits for another year and set dividend and long-term capital gains tax rates at 20%.²

Consumers more or less bit their nails last month waiting on a resolution. The Conference Board’s consumer confidence index fell 6.4 points to 65.1 in December; economists expected a decline of 1.5 points. The University of Michigan’s consumer sentiment survey hit 72.9, losing 9.8 points on the month. On the bright side, the jobless rate had dipped to 7.7% in November.^3,4

Households were spending more money. Retail sales managed to rise 0.3% in November, and personal spending rose 0.4% in that month. Consumer prices declined 0.3% in November – their first retreat since May. Annualized consumer inflation was running at a mere 1.8%.^5,6,7

The Federal Reserve announced it would buy $45 billion in longer-term Treasuries beginning in January, following the expiration of Operation Twist v. 2.0. It also made one of its most direct and clear policy statements in some time: it said interest rates would remain at rock-bottom levels “at least as long” as inflation is 2.5% or less and the jobless rate remains above 6.5%.^7,8

The twin Institute for Supply Management purchasing manager indices showed some improvement. The November service sector PMI rose 0.5% to 54.7 while the manufacturing PMI came in at 50.7 in December, up 1.2% for the month and back in expansion territory. Total durable goods orders had increased 0.7% in November; wholesale inflation fell 0.8% in that month to an annual pace of 1.5%.^6,9,10,11

Global economic health. As 2013 began, German finance minister Wolfgang Schaeuble looked at the EU debt problem and proclaimed, “I think we have the worst behind us.” However, the Wall Street Journal reminded its readers that the EU was living with a “perma crisis”. The eurozone didn’t fracture in 2012, European stocks realized big annual gains, and net foreign portfolio investment in Italy and Spain actually turned positive in December. Yet many analysts saw a bailout ahead for Spain (even as its 10-year bond yield fell to 5.23% at the end of last month), and Greece hadn’t left the danger zone. German manufacturing contracted for a tenth straight month in December, Italian manufacturing for a seventeenth straight month.^12,13,14

China was holding up nicely: its official manufacturing PMI came in at 50.6 for a second straight month, and HSBC’s China PMI reached its highest level since May. India’s Markit PMI had its best month since January 2012 in December, rising to a healthy 54.7. Factory activity increased in the PRC, Taiwan and South Korea last month as well.¹⁴

World markets. Virtually all benchmarks of consequence advanced last month. In Europe, the DAX rose 2.79% in December, the FTSE 100 0.53% and the CAC 40 2.36%. On our side of the pond, the TSX Composite gained 1.59%, the Bovespa 6.05% and Mexico’s Bolsa 4.48%. The Nikkei 225 soared an eye-popping 10.05%; the Shanghai Composite topped that with a December gain of 14.60%. The Sensex rose 1.46%, the KOSPI 3.32%, the Hang Seng 2.84% and the All Ordinaries 3.17%. Four major overseas indices gained 20% or better in 2012 – the Sensex (31.20%), the DAX (29.06%), the Nikkei 225 (22.94%) and the Hang Seng (22.91%). The MSCI World Index went +1.75% in December to finish 2012 at +13.18%; the MSCI Emerging Markets Index rose 4.78% last month, leaving it at +15.15% for 2012.^1,15

Commodities markets. Precious metals had a poor month but a solid year. Silver futures dipped 2.2% in December and gold futures plunged 9.2%; platinum fell 3.9% while palladium gained 2.2%. For the year, gold gained 7.0% on the COMEX, finishing 2012 at $1,675.80 an ounce; palladium rose 7.2%, silver 8.3% and platinum 9.8%. NYMEX crude gained $1.02 on December 31 to settle at $91.82 a barrel (it lost 7.1% in 2012, its poorest year since 2008; Brent crude gained 3.4% last year). Natural gas rose 12.1% on the year. Crop futures were up and down, leading to the following annual gains and losses as December ended: cocoa, +6.0%; coffee, -37.0%; corn, +7.3%; soybeans, +18.8%; sugar, -16.0%; wheat, +19.3%. The U.S. Dollar Index ended 2012 at 79.77, losing 0.47% for December.^16,17,18,19

Real estate. New home sales rose 4.4% in November, the Census Bureau noted. The National Association of Realtors reported November gains of 5.9% in existing home sales (to a three-year peak) and 1.7% in pending home sales; residential resales were up 14.5% in the past 12 months. The October S&P/Case-Shiller Home Price Index recorded the index’s best annual advance in existing home prices since the May 2010 edition (4.3%). Building permits rose 3.6% in November; housing starts fell 3.0%, but were up 21.6% year-over-year.^4,20,21

Some key mortgage rates ticked up in December. Comparing Freddie Mac’s November 29 and December 27 Primary Mortgage Market Surveys, the average interest rate on the 30-year FRM rose 0.03% to 3.35%. Average rates on 15-year FRMs went from 2.64% to 2.65% in that period; average rates on 5/1-year ARMs declined 0.02% to 2.70. Average rates on 1-year ARMs were unchanged at 2.56%.²²

Looking back … looking forward. All that worry masked a good year for equities. The S&P 500 ended 2012 at 1,426.19, the Dow at 13,104.14 and the NASDAQ at 3,019.51.¹

% CHANGE	2012	1-MO CHG	1-YR CHG	10-YR AVG
DJIA	+7.26	+0.60	+7.26	+5.71
NASDAQ	+15.91	+0.31	+15.91	+12.61
S&P 500	+13.41	+0.71	+13.41	+6.21
REAL YIELD	12/31 RATE	1 YR AGO	5 YRS AGO	10 YRS AGO
10 YR TIPS	-0.67%	-0.07%	1.73%	3.10%

Sources: bloomberg.com, bigcharts.com, treasury.gov, treasurydirect.gov – 12/31/12^{1,23,24,25,26}

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

Wall Street was elated when Congress passed a partial fix for the fiscal cliff dilemma. Will the exuberance continue through the new quarter, even if the next earnings season disappoints and legislators resume skirmishing over spending cuts? There is a growing assumption that 2013 will turn out to be a strong year for the markets, maybe a year in which stocks face milder threats than in 2011 and 2012. The optimism on Wall Street is palpable: there seems to be a base level of confidence in the potential of the market that we haven’t seen in a while, and hopefully headlines about Spain or spending cuts or America’s creditworthiness won’t erode it. The economy is still facing obstacles, but 2013 may be a year without debacles of the kind that have threatened to wipe out gains entirely or invite a new recession. Will the bull market continue to flourish this year? Optimism seems to be catching on, and perhaps it will influence market behavior significantly in the coming quarters.

Upcoming economic releases. The rest of January unfolds like this: ISM’s December non-manufacturing index, November factory orders and the December jobs report (1/4), November wholesale inventories (1/10), December retail sales, November business inventories and the December PPI (1/15), January’s NAHB housing market index, a new Fed Beige Book and December’s CPI and industrial output (1/16), December housing starts and building permits (1/17), the University of Michigan’s preliminary consumer sentiment survey for January (1/18), December existing home sales (1/22), the November FHFA housing price index (1/23), the Conference Board’s Leading Economic Indicators index for December (1/24), December new home sales (1/25), December durable goods orders and pending home sales (1/28), the Conference Board’s first monthly consumer confidence survey of 2013 and the November Case-Shiller home price index (1/29), an FOMC policy statement and the initial estimate of Q4 GDP out of Washington (1/30), and the December consumer spending report (1/31). The University of Michigan’s final consumer sentiment survey for January actually comes out on February 1, a day loaded with other crucial data (the January jobs report, the January ISM manufacturing index and January auto sales figures).

If the bullish sentiment shown in the opening days of 2013 can be sustained, January could be a fine month for the markets. If you have any financial questions or concerns on your mind this month, please contact me at 863.382.0037 or via e-mail at pstatler@sfsretirement.com.

Weekly Economic Update January 21, 2013

WEEKLY QUOTE “Never mistake a clear view for a short distance.”       – Paul Saffo         WEEKLY TIP See if you can keep your essential expenses down to about 50% of your after-tax income.       WEEKLY RIDDLE You can rearrange the letters in insatiable to make another ten-letter word that starts with the letter b. What is this ten-letter word?        Last week’s riddle: It has avenues, rivers and parks – but no grass, water or asphalt. What is it?    Last week’s answer: A map.	January 21, 2013     WILL THE DEBT LIMIT BE LIFTED SHORTLY? Friday, House GOP leaders announced a new proposal to authorize a three-month extension of federal government borrowing authority. House Majority Leader Eric Cantor (R-VA) summed up the plan in four words: “No budget, no pay.” Under the terms of the proposed legislation, members of Congress would end up working for free if they failed to approve a federal budget by April 15. The GOP still wants major spending cuts as a condition of any long-term debt limit increase.1 NO MONTHLY CHANGE IN CONSUMER PRICE INDEX December’s CPI was flat, with core CPI rising only 0.1%. A 2.3% dip in gas prices helped, even as food prices rose 0.2%. The overall Producer Price Index posted a 0.2% decline for a third straight month. Inflation was tame in 2012: the CPI advanced only 1.7% last year compared to 3.0% for 2011, while the PPI rose just 1.3% for its smallest annual increase since 2008.2,3 RETAIL SALES STRONG IN DECEMBER The Census Bureau notes that they increased 0.5% last month, bringing the yearly advance to 4.7%. Purchases made through non-store retailers rose 12.6% in 2012.3,4 CONSUMER SENTIMENT DECLINES The University of Michigan’s preliminary January consumer sentiment index came in at 71.3 Friday, well under the 75.0 consensus forecast of economists surveyed by Reuters. This represents a 13-month low.5 STOCKS REACH A 5-YEAR PEAK After a 0.95% weekly advance, the S&P 500 settled at 1,485.98 Friday.  The DJIA (+1.20% to 13,649.70) and NASDAQ (+0.29% to 3,134.71) also extended their win streaks. On the COMEX Friday, gold settled at $1,687.00, oil at $95.56.5,6 THIS WEEK: All U.S. markets will be closed Monday as the nation observes Martin Luther King Jr. Day; the Presidential Inauguration will also be held in Washington, D.C. Tuesday, data on December’s existing home sales arrives plus earnings from Verizon, DuPont, Texas Instruments, Johnson & Johnson, Travelers, Google, IBM and AMD. Wednesday is another big earnings day, with Apple, McDonald’s, United Tech, Abbott Labs, Coach, WellPoint, Amgen, Netflix, SanDisk, Symantec and Western Digital all reporting results. On Thursday, Microsoft, 3M, Bristol-Myers, Nokia, Xerox, AT&T, E-Trade and Starbucks offer earnings reports. The Census Bureau releases December new home sales figures Friday, and earnings will be announced at Kimberly-Clark, P&G, Halliburton and Honeywell. % CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG DJIA +4.16 +8.51 +2.56 +5.90 NASDAQ +3.82 +13.18 +6.79 +12.78 S&P 500 +4.19 +13.60 +2.43 +6.48 REAL YIELD 1/18 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO 10 YR TIPS -0.66% -0.15% 1.42% 2.34%   Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 1/18/125,8,9,10 Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.
Please feel free to forward this article to family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.   Citations. 1 – http://www.reuters.com/article/2013/01/18/us-usa-fiscal-budget-idUSBRE90H11H20130118 [1/18/13] 2 – http://www.usatoday.com/story/money/business/2013/01/16/consumer-price-index-december/1838907/ [1/16/13] 3 – news.morningstar.com/articlenet/article.aspx?id=581091 [1/15/13] 4 – http://www.census.gov/retail/marts/www/marts_current.pdf [1/15/13] 5 – http://www.cnbc.com/id/100390628 [1/18/13] 6 – http://www.bloomberg.com/news/2013-01-18/natural-gas-rises-on-cold-weather-forecast-commodities-at-close.html [1/18/13] 7 – montoyaregistry.com/Financial-Market.aspx?financial-market=retirement-investment-funds&category=3 [1/18/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F18%2F12&x=0&y=0 [1/18/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F18%2F12&x=0&y=0 [1/18/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F18%2F12&x=0&y=0 [1/18/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F18%2F08&x=0&y=0 [1/18/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F18%2F08&x=0&y=0 [1/18/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F18%2F08&x=0&y=0 [1/18/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F17%2F03&x=0&y=0 [1/18/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F17%2F03&x=0&y=0 [1/18/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F17%2F03&x=0&y=0 [1/18/13] 9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/18/13] 9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/18/13] 10 – treasurydirect.gov/instit/annceresult/press/preanre/2003/ofm010803.pdf [1/8/03]

 

 

Weekly Economic Update January 14, 2013

WEEKLY QUOTE “Always forgive your enemies. Nothing annoys them so much.”       – Oscar Wilde         WEEKLY TIP Divorcing spouses should check to see if they will have sufficient insurance coverage after the end of their marriage. This detail is too often overlooked.       WEEKLY RIDDLE It has avenues, rivers and parks – but no grass, water or asphalt. What is it?        Last week’s riddle: You serve it, but you can’t eat it. You hold it, only to smash it. Sometimes love is involved when you use it. What is it?    Last week’s answer: A tennis ball.	January 14, 2013     NEW YEAR, NEW LAWS AFFECTING YOU  Singles earning more than $200,000 and couples earning more than $250,000 will face a 3.8% Medicare surtax and a 0.9% increase in Medicare payroll tax. Tax rates on dividends and long-term capital gains remain at 15% for most, but have risen to 20% for the wealthiest. A scheduled 2% cut to Medicare spending has been delayed until at least March. Social Security recipients will see benefits rise 1.7% this year.1,2,3 HUGE CHANGES AHEAD FOR HOME LOANS Last week, the Consumer Financial Protection Bureau presented new rules for the mortgage industry – rules that will ban teaser-rate mortgages and “liar loans” in 2014. Next year, no legal protection will be available for banks offering interest-only or negative-amortization loans, and restrictions will prevent lenders from originating mortgages with balloon payments and severe upfront points and fees. Banks will also be barred from offering mortgages with a payment-to-income ratio exceeding 43%, though FHA/VA loans or mortgages backed by Fannie Mae or Freddie Mac could be exempt from this restriction.4 JACK LEW NOMINATED FOR TREASURY SECRETARY The former hedge fund manager and current White House chief of staff has strong ties to Wall Street, which worries some members of Congress. Still, opposition to the nomination does not seem to be widespread. If confirmed, Lew could start his new job in late January, when Timothy Geithner is slated to leave the post.5 A SECOND STRAIGHT WINNING WEEK The S&P 500 settled at 1,472.05 Friday, up 0.38% in five trading days. The Dow rose 0.40% last week to 13,488.43, while the NASDAQ gained 0.77% to settle at 3,125.63. The CBOE VIX fell 3.33% on the week to go -25.80% YTD.6,7 THIS WEEK: Fed Chairman Ben Bernanke speaks at the University of Michigan Monday; the Detroit Auto Show also begins. Tuesday, the December PPI and December retail sales figures are out; Lennar offers Q4 results. Wednesday brings December’s CPI, a Fed Beige Book, a report on December industrial output and earnings from Goldman Sachs, eBay, JPMorgan and Bank of NY Mellon. Thursday, December housing starts data arrives plus earnings from Bank of America, BB&T, BlackRock, Capital One, Citigroup, UnitedHealth, American Express and Intel. Friday, earnings are in from Morgan Stanley and General Electric. % CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG DJIA +2.93 +8.35 +1.40 +5.35 NASDAQ +3.51 +15.30 +5.62 +11.59 S&P 500 +3.22 +13.89 +1.01 +5.87 REAL YIELD 1/11 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO 10 YR TIPS -0.63% -0.10% 1.56% 2.34%   Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 1/11/126,8,9,10 Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.
Please feel free to forward this article to family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.   Citations. 1 – money.msn.com/tax-tips/post.aspx?post=0788a6e0-58d0-4a46-81d2-309089bbc1ac [1/11/13] 2 – http://www.fidelity.com/viewpoints/personal-finance/new-medicare-taxes [1/4/13] 3 – http://www.ssa.gov/pressoffice/pr/2013cola-pr.html [10/16/12] 4 – http://www.nytimes.com/2013/01/10/business/consumers-win-some-mortgage-safety-in-new-rules.html [1/10/13] 5 – http://www.cbsnews.com/8301-250_162-57563329/jack-lew-accepts-treasury-secretary-nomination/ [1/10/13] 6 – http://www.cnbc.com/id/100372685 [1/11/13] 7 – montoyaregistry.com/Financial-Market.aspx?financial-market=retirement-investment-funds&category=3 [1/11/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F11%2F12&x=0&y=0 [1/11/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F11%2F12&x=0&y=0 [1/11/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F11%2F12&x=0&y=0 [1/11/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F11%2F08&x=0&y=0 [1/11/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F11%2F08&x=0&y=0 [1/11/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F11%2F08&x=0&y=0 [1/11/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F10%2F03&x=0&y=0 [1/11/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F10%2F03&x=0&y=0 [1/11/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F10%2F03&x=0&y=0 [1/11/13] 9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/11/13] 9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/11/13] 10 – treasurydirect.gov/instit/annceresult/press/preanre/2003/ofm010803.pdf [1/8/03]

 

Weekly Economic Update

WEEKLY QUOTE “The only limit to our realization of tomorrow will be our doubts of today.”       – George Washington         WEEKLY TIP Many people confuse Medicaid with Medicare. If you aren’t yet a senior, read up on both of these programs to learn the benefits they provide and the distinctions between them.       WEEKLY RIDDLE You serve it, but you can’t eat it. You hold it, only to smash it. Sometimes love is involved when you use it. What is it?        Last week’s riddle: It is found in the ground, round as a circle and yards deeper than a cup, and a hundred horses cannot pull it up. It isn’t going anywhere, it cannot think; it might provide you with something to drink. What is it?    Last week’s answer: A well.	January 7, 2013                         STEADY HIRING AT THE EDGE OF THE CLIFF Employers added 155,000 jobs in December. The encouraging news is that non-farm payrolls continued to expand while businesses fretted about the fiscal cliff. The discouraging news is that December’s job growth roughly approximated that seen in September, October and November – and at the current pace, it would take about seven years to bring the jobless rate down to prerecession levels. The Labor Department reported 7.8% unemployment in December.1 MAJOR TAX LAW CHANGES PASSED IN CONGRESS As a result of the fiscal cliff deal approved on Capitol Hill last week, the top marginal tax rate was raised to 39.6% and the top estate tax rate was hiked to 40%. While the Bush-era tax cuts were preserved permanently for individuals with taxable incomes of $400,000 or less and couples with incomes of $450,000 or less, the payroll tax holiday came to an end. The Alternative Minimum Tax was permanently patched, long-term jobless benefits were extended through the end of the year, and dividend and capital gains taxes were given a new 20% ceiling.2 ISM GAUGES BOTH RISE   U.S. manufacturing and service sectors both expanded last month, according to the purchasing manager indices released by the Institute for Supply Management. ISM’s manufacturing PMI rose from 49.5 to 50.7 in December; its service sector index increased to 56.1 from November’s 54.7 reading.3 CONFIDENCE GROWS, STOCKS SOAR  Wall Street saw fantastic gains last week. Across four market days, the S&P 500 climbed 4.57% to 1,466.47, the NASDAQ jumped 4.66% to 3,101.66 and the Dow rose 3.84% to 13,435.21. The CBOE VIX ended the week below 14 after its largest weekly drop since 1987. On the NYMEX, gold ended last week at $1,657.90 while oil wrapped up the week at a settlement price of $93.19.4,5,6 THIS WEEK: The data stream is very light over the next few days. No major U.S. economic releases are scheduled for Monday. The Q4 earnings season does begin this week, with results from Alcoa and Monsanto on Tuesday and Constellation Brands on Wednesday. Thursday, the latest initial jobless claims numbers arrive, as do earnings results from Ruby Tuesday and interim earnings from Chevron. Wells Fargo reports Q4 results on Friday. % CHG Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG DJIA +2.53 +8.19 +0.99 +5.62 NASDAQ +2.72 +17.12 +4.77 +12.36 S&P 500 +2.82 +14.81 +0.78 +6.14 REAL YIELD 1/4 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO 10 YR TIPS -0.55% -0.08% 1.56% 3.10%   Sources: usatoday.com, bigcharts.com, treasury.gov, treasurydirect.gov – 1/4/127,8,9,10 Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.
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This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.   Citations. 1 – http://www.nytimes.com/2013/01/05/business/economy/us-economy-adds-155000-jobs-jobless-rate-is-7-8.html [1/4/13] 2 – blogs.wsj.com/totalreturn/2013/01/02/what-the-new-law-means-for-taxpayers/ [1/2/13] 3 – briefing.com/investor/calendars/economic/2012/12/31-04 [1/4/13] 4 – http://www.cnbc.com/id/100354557 [1/4/13] 5 – online.wsj.com/public/page/news-financial-markets-stock.html [1/4/13] 6 – montoyaregistry.com/Financial-Market.aspx?financial-market=retirement-investment-funds&category=3 [1/4/13] 7 – http://www.usatoday.com/money/markets/overview/ [1/4/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F4%2F12&x=0&y=0 [1/4/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F4%2F12&x=0&y=0 [1/4/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F4%2F12&x=0&y=0 [1/4/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F4%2F08&x=0&y=0 [1/4/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F4%2F08&x=0&y=0 [1/4/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F4%2F08&x=0&y=0 [1/4/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F3%2F03&x=0&y=0 [1/4/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F3%2F03&x=0&y=0 [1/4/13] 8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F3%2F03&x=0&y=0 [1/4/13] 9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/4/13] 9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/4/13] 10 – treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm71002.pdf [7/10/02]