FED MAKES ITS MOVE, STOCKS MOVE NORTH
In a 9-1 vote last Wednesday, Federal Reserve officials elected to taper the central bank’s monthly economic stimulus beginning in January. The taper was relatively minor – a cut of $10 billion to $75 billion – and the surprise announcement set off a major rally on Wall Street, with the Dow closing 292 points higher on the day. Both the Fed and investors seemed to think the move was warranted; it certainly removed a degree of uncertainty from the market. The Fed’s December 18 policy statement also noted its intention to keep the benchmark interest rate at the present historic lows “well past the time” the jobless rate reaches the central bank’s 6.5% target.1,2
FEWER HOMES SOLD, MORE GROUND BROKEN
Existing home sales fell 4.3% last month, and there was no annualized gain in home buying last month for the first time in more than two years. Was the November report from the National Association of Realtors an anomaly, or a sign that a red-hot housing market is cooling off a bit? NAR’s December and January reports may offer further clues. New construction certainly heated up in November: housing starts soared 22.7%, the best monthly advance since January 1990.3
CPI FLAT IN NOVEMBER; Q3 GDP REVISED UPWARD
Economists polled by Briefing.com thought the Consumer Price Index would tick up 0.1% in November; instead, it didn’t budge. (The core CPI did rise 0.2%.) Another important economic indicator communicated a welcome gain: the economy grew 4.1% in the third quarter, according to the final estimate of the Bureau of Economic Analysis. The BEA’s previous estimate put Q3 GDP at 3.6%.3,4
S&P 500 HAS BEST WEEK SINCE MID-OCTOBER
The broad benchmark closed at 1,818.55 Friday, gaining 2.44% in five days. Weekly gains for the DJIA (2.96%) and NASDAQ (2.59%) were even greater. The NASDAQ wrapped up the week at 4,104.74, the DJIA at 16,221.72.5
THIS WEEK: The University of Michigan’s final consumer sentiment index for December appears Monday, and so does the Commerce Department’s report on November personal spending. Reports on November new home sales, November hard goods orders and the October FHFA Housing Price Index arrive Tuesday, which is also Christmas Eve (the NYSE and NASDAQ will close at 1:00pm EST). All U.S. financial markets will be closed Wednesday in observance of the Christmas holiday. Markets resume trading Thursday, with the latest initial jobless claims data being released. Nothing major is slated for Friday.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +23.79 +21.86 +17.82 +5.78
NASDAQ +35.94 +34.56 +32.48 +11.04
S&P 500 +27.49 +25.97 +20.96 +6.70
REAL YIELD 12/20 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.73% -0.69% 1.98% 1.95%
Sources: USATODAY.com, bigcharts.com, treasury.gov – 12/20/136,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
WEEKLY QUOTE
“A man with ambition and love for his blessings here on earth is ever so alive.”
– Pearl Bailey
WEEKLY TIP
Some retirees don’t realize that a portion of Social Security income may be taxable. If you receive income from other sources, some of your Social Security benefits may be taxed if your modified adjusted gross income (MAGI) exceeds a certain amount.
WEEKLY RIDDLE
It is in seconds, seasons, centuries and minutes, but you won’t find in years, decades or days. What is it?
Last week’s riddle:
I have a bank, yet no cash. I can run, but can’t walk. I have a bed, but never sleep. I have a mouth, but ingest no meals. What am I?
Last week’s answer:
A river.
Citations.
1 – nj.com/business/index.ssf/2013/12/stocks_surge_after_fed_announc.html [12/18/13]
2 – marketwatch.com/story/fed-cuts-bond-buying-program-to-75-billion-2013-12-18 [12/18/13]
3 – investorplace.com/2013/12/gdp-inflation-housing-economic-data/#.UrTDwOJljs8 [12/20/13]
4 – briefing.com/investor/calendars/economic/2013/12/16-20 [12/20/13]
5 – thestreet.com/story/12162639/1/stocks-gain-us-growth-hints-at-santa-claus-rally.html [12/20/13]
6 – usatoday.com/money/markets/overview/ [12/20/13]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F20%2F12&x=0&y=0 [12/20/13]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F20%2F12&x=0&y=0 [12/20/13]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F20%2F12&x=0&y=0 [12/20/13]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F19%2F08&x=0&y=0 [12/20/13]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F19%2F08&x=0&y=0 [12/20/13]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F19%2F08&x=0&y=0 [12/20/13]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F19%2F03&x=0&y=0 [12/20/13]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F19%2F03&x=0&y=0 [12/20/13]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F19%2F03&x=0&y=0 [12/20/13]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [12/20/13]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [12/20/13]
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. This material was prepared by MarketingLibrary.Net Inc., for Mark Lund, The 401k Advisor, Investor Coach and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. an independent, fee-only, Registered Investment Advisor firm providing 401k consulting for small businesses and private investment advisory services for select individuals. Stonecreek is located in Salt Lake City and Provo Utah.
