Weekly Market News for the Week of January 25, 2010

Presented by Mark Lund, The Investor Coach.

Quote of the week. “Popularity: it is glory’s small change.”– Victor Hugo

“Volcker rule” worries Wall Street. Investors frowned last week as the President talked of rules that would bar banks and bank holding firms from getting involved in hedge funds or conducting proprietary trading operations. Crafted with input from former Federal Reserve chairman Paul Volcker and past SEC head William Donaldson, the new regulatory proposal is likely to face stiff opposition from Senate Republicans.^1,2

Big gain in leading indicators. The Conference Board’s index of leading indicators rose 1.1% in December, with November’s gain revised to 1.0% from 0.7%. The index, a forecast of future economic activity, rose 5.2% across the second half of 2009.³

PPI up 0.2% for December. That gain was much smaller than November’s 1.8% jump. Core producer prices (minus food and energy) were flat last month.⁴

Encouraging housing news. While new home construction decreased by 4.0% in December, housing starts were up 0.2% from a year before, marking the first year-over-year gain since March 2006. Building permits were up 10.9% in December.⁵

30-year loans back under 5%. For the third consecutive week, Freddie Mac measured a decline in average rates on 30-year FRMs: they were at 4.99% last week, down from 5.06% a week prior. 15-year FRMs averaged 4.40%. Rates on 5-year and 1-year ARMs respectively averaged 4.27% and 4.32%.⁶

A quick pullback. Besides the envisioned limits on bank risk, investors got news of China’s instruction to its banks to raise capital ratios. These factors took stocks south: the Dow closed Friday at 10,172.98, the NASDAQ at 2,205.29, and the S&P 500 at 1,091.76.⁷

(Source: CNBC.com, CNNMoney.com, ustreas.gov, bls.gov, 1/22/10)^7,8,9,10
Indices are unmanaged, do not incur fees or expenses, and cannot be
invested into directly. These returns do not include dividends.

Riddle of the week. A glass of water has an ice cube in it. If the ice cube fully melts, will the water level increase, decrease or remain the same?

Contact my office or see next week’s Update for the answer.

Last week’s riddle: If it were two hours later than right now, it would be half as long until midnight as it would be if it were an hour later than right now. What time is it?

Last week’s riddle answer: 9:00 p.m.

Citations.
1 curiouscapitalist.blogs.time.com/2010/01/21/a-question-about-the-volcker-steagall-act/?xid=rss-topstories [1/21/10]
2 online.wsj.com/article/SB10001424052748703699204575017300364900036.html?mod=WSJ-Markets-LeadStory [1/21/10]
3 abcnews.go.com/Business/wireStory?id=9622837 [1/21/10]
4 money.cnn.com/2010/01/20/markets/markets_newyork/ [1/20/10]
5 money.cnn.com/2010/01/20/real_estate/housing_starts_building_permits/?postversion=2010012012 [1/20/10]
6 washingtonpost.com/wp-dyn/content/article/2010/01/21/AR2010012105404.html [1/23/10]
7 cnbc.com/id/35017549 [1/22/10]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F22%2F09&mode=add&symb=DJIA  [1/22/10]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F05&mode=add&symb=DJIA  [1/22/10]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F00&mode=add&symb=DJIA  [1/22/10]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F22%2F09&mode=add&symb=COMP  [1/22/10]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F05&mode=add&symb=COMP  [1/22/10]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F00&mode=add&symb=COMP  [1/22/10]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F22%2F09&mode=add&symb=SPX  [1/22/10]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F05&mode=add&symb=SPX  [1/22/10]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F00&mode=add&symb=SPX  [1/22/10]
9 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml  [1/22/10]
9 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml  [1/22/10]
10 treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [1/12/00]

These views are those of Peter Montoya Inc., and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice. 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. 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. The 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 other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards.