Weekly Economic Update 8/14/13

 

WEEKLY QUOTE “When the only tool you have is a hammer, you tend to see every problem as a nail.”       – Abraham Maslow           WEEKLY TIP If much of your net worth is tied to the value of your home and you are seeing home equity as a tool to help fund your retirement, recognize that the ups and downs of your local real estate market may alter that possibility.        WEEKLY RIDDLE A cat falls into a hole 14.5 feet deep. The cat can jump 3 feet high, but she slides back 1 foot with each jump. How many jumps does it take her to get out of the hole?      Last week’s riddle: I am usually only as wide as a thumb, and I typically travel across the nation for less than a dollar, all while lying flat. What am I?     Last week’s answer: A postage stamp.	August 12, 2013      IMPRESSIVE SERVICE SECTOR GROWTH Last month saw solid expansion in U.S. service industries, according to the July non-manufacturing PMI from the Institute for Supply Management. ISM’s latest service sector PMI came in at 56.0 compared with 52.2 in June. July’s new orders index rose 6.9% to 57.7, and July’s business activity index climbed 8.7% to 60.4.1 OBAMA: FANNIE MAE & FREDDIE MAC SHOULD GO Last week in Phoenix, the President said that “private capital should take a bigger role in the mortgage markets” and advocated the passage of bipartisan legislation circulating in the Senate that would “end Fannie and Freddie as we know them” and create a Federal Mortgage Insurance Corporation to regulate the home financing system. Even though winding down Fannie and Freddie has widespread support, mortgage interest rates would likely rise without their credit guarantees.2,3 HOW DOES EARNINGS SEASON LOOK SO FAR? The short answer: it looks better than many analysts had expected. Just after Friday’s close, Bloomberg reported that 447 firms in the S&P 500 had reported quarterly results; 72% of them had beaten the profit projections of analysts and 56% had exceeded sales forecasts.4   OIL & GOLD FINISH THE WEEK WITH A FLOURISH NYMEX crude settled up at $106.03 per barrel Friday after rising 2.54% in a trading day. On the COMEX, gold ended the week at $1,314.60 an ounce, up $3.90 Friday.5   STOCKS BEAT A RETREAT The big three all traded lower last week. The Dow went -1.49% to settle at 15,425.51 Friday, the NASDAQ went -0.80% to end the week at 3,660.11, and the S&P 500 went -1.07% to wrap up the week at 1,691.42.6 THIS WEEK: Monday brings earnings from Sysco. July retail sales numbers from the Census Bureau, a report on June business inventories and earnings from Flower Foods and Cree arrive Tuesday. Wednesday, the July Producer Price Index appears, plus earnings from Cisco, NetApp, Deere, Macy’s and NetEase. July’s Consumer Price Index comes out Thursday, along with the August NAHB Housing Market Index, numbers on July industrial output, and quarterly results from Nordstrom, Applied Materials, Kohl’s and Wal-Mart. Friday, the initial August consumer sentiment index from the University of Michigan appears, along with numbers on July housing starts and building permits. % CHG YTD 1YR CHG 5-YR AVG 10-YR AVG DJIA +17.71 +17.17 +6.29 +6.78 NASDAQ +21.22 +21.25 +10.32 +12.26 S&P 500 +18.60 +20.57 +6.10 +7.30 REAL YIELD 8/9 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO 10 YR TIPS 0.33% -0.58% 1.72% 2.27%   Sources: cnbc.com, bigcharts.com, treasury.gov – 8/9/136,7,8,9 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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Citations. 1 – ism.ws/ISMReport/NonMfgROB.cfm [8/5/13] 2 – nytimes.com/2013/08/07/us/politics/obama-fannie-mae-freddie-mac.html [8/7/13] 3 – csmonitor.com/Business/new-economy/2013/0808/If-Obama-eliminates-Fannie-Mae-Freddie-Mac-will-mortgage-rates-go-up [8/8/13] 4 – bloomberg.com/news/2013-08-09/u-s-stock-index-futures-decline-monster-beverage-drops.html [8/9/13] 5 – reuters.com/finance/commodities [8/9/13] 6 – tinyurl.com/luqsm63 [8/9/13] 7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F9%2F12&x=0&y=0 [8/9/13] 7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F9%2F12&x=0&y=0 [8/9/13] 7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F9%2F12&x=0&y=0 [8/9/13] 7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F8%2F08&x=0&y=0 [8/9/13] 7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F8%2F08&x=0&y=0 [8/9/13] 7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F8%2F08&x=0&y=0 [8/9/13] 7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F8%2F03&x=0&y=0 [8/9/13] 7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F8%2F03&x=0&y=0 [8/9/13] 7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F8%2F03&x=0&y=0 [8/9/13] 8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [8/9/13] 9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [8/9/13]