The nightmare before Halloween: The last week of October once again spooked the equities markets (though not nearly on the scale of, say, the last week of October 80 years ago, when the Dow lost more than 12% two days in a row). A strong rally Thursday prompted by a positive GDP report halted a string of down days but was followed by an even stronger slide Friday in the wake of weak consumer spending numbers. The small-cap Russell 2000 lost more than 3% on Friday alone, and the other major indexes weren't far behind. Ouch.
Market/Index | 2008 Close | Prior Week | As of 10/30/09 | Week Change | YTD Change |
DJIA | 8776.39 | 9972.18 | 9712.73 | -2.60% | 10.67% |
NASDAQ | 1577.03 | 2154.47 | 2045.11 | -5.08% | 29.68% |
S&P 500 | 903.25 | 1079.60 | 1036.19 | -4.02% | 14.72% |
Russell 2000 | 499.45 | 600.86 | 562.77 | -6.34% | 12.68% |
Global Dow | 1526.21 | 1940.90 | 1860.13 | -4.16% | 21.88% |
Fed. Funds | .25% | .25% | .25% | 0 bps | 0 bps |
10-year Treasuries | 2.24% | 3.48% | 3.39% | -9 bps | 115 bps |
- Preliminary estimates of third-quarter gross domestic product (GDP) turned positive for the first time in a year. That could mean a turning point for the longest recession since the Depression era, though no official call would be made for some time. The Bureau of Economic Analysis said the U.S. economy grew at an annual rate of 3.5%. Contributing to the increase were consumer and government spending, exports, improved inventory levels, and more residential investment.
- Consumer spending fell 0.5% in September after "cash for clunkers" expired in late August, while incomes remained flat.
- U.S. home prices rose in August for the fourth straight month. Though still 29.3% down from its peak, the S&P/Case-Shiller index of prices in 20 leading cities was up by 1.2% from July, with only 3 cities experiencing declines.
- The Conference Board's measure of consumer confidence in October fell to its lowest level in 26 years. The job market played a major role in the second decline in a row. However, the pulse-takers must have been talking to different consumers than the Reuters/University of Michigan crew, which found that consumer sentiment rose during the month.
- The Federal Reserve Board's program of buying Treasury bonds, launched to support the bond markets in the wake of last year's financial crisis, came to an end.
- Durable goods orders rose 1% in September, and existing inventories fell for the ninth month in a row.
- For the first time in six months, new home sales fell 3.6% in September. The median sales price of $204,800 is 9.1% lower than last September.
- CIT Group, a major lender to small and mid-sized businesses, filed for Chapter 11 bankruptcy.
Investors will try to assess whether the last two weeks are an indicator of things to come, or a needed correction that could bring out those who sat out the seven-month rally and now are looking to get back in. We'll learn Friday whether unemployment has reached 10%, as is anticipated at some point. A possible Congressional extension and expansion of the homebuyer's tax credit could be significant, and the Fed's Wednesday announcement will be parsed for clues about when a future interest rate hike might be in the cards.
Key data releases: Manufacturing, car sales, pending home sales (11/2); Federal Reserve Board announcement (11/4); unemployment/payrolls (11/6).
Data source: Includes data provided by Brounes & Associates. 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.
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 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
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