IS IT TIME FOR QE3?
May’s unemployment report threw Wall Street for a loop Friday. Economists polled by Reuters forecast a payroll gain of 150,000, but only 69,000 new jobs were created. Even worse, part-time positions accounted for all of the increase. The jobless rate ticked up to 8.2% in May, and the Labor Department also downwardly revised April and March job gains by a total of 49,000. All this has analysts wondering if the recovery is losing momentum, and if the Federal Reserve might rethink its stance and announce further easing at its summer policy meetings.1,2
CONSUMER SPENDING RISES 0.3% IN APRIL
That gain was complemented by a 0.2% rise in consumer incomes. The Commerce Department’s personal consumption expenditures (PCE) price index showed a 1.8% annual increase, in line with the Fed’s inflation target. The personal savings rate was at 3.4% in April, matching the four-year low seen in February.1,3
SILVER LININGS IN NEW HOUSING & FACTORY DATA
The National Association of Realtors reported a 5.5% drop in pending home sales for April, but also a 14.4% annual gain. March’s S&P/Case-Shiller Home Price Index showed a 2.6% 12-month decline (the smallest since December 2010). The Institute for Supply Management’s April manufacturing index fell 1.3% in May to 53.5, yet its new orders sub-index hit a 13-month peak at 60.1. Construction spending rose 0.3% in April with the Commerce Department noting a 6.8% annual gain.4,5,6
A ROUGH START TO JUNE
The Dow lost 275 points Friday as investors came to grips with May’s weak jobs report. The NASDAQ ended the week down 12.0% from its March 26 peak while the S&P 500 was 9.9% off its April 2 peak. The weekly performances: S&P 500, -1.33% to 1,278.04; DJIA, -2.03% to 12,118.57; NASDAQ, -1.13% to 2,747.48. Turning to the NYMEX and COMEX, gold climbed 3.39% last week to settle at $1,622.10 Friday; oil dropped 8.40% in five days to end the week at $83.23.1,7
THIS WEEK: Monday brings a report on April factory orders and Q1 results from Dollar General. Tuesday, the May ISM service sector index arrives. On Wednesday, the European Central Bank weighs an interest rate decision, the Fed issues a new Beige Book and earnings come in from Hovnanian and Pep Boys. The Bank of England makes a policy statement Thursday; stateside, Ben Bernanke testifies in Congress and new initial claims numbers arrive along with earnings from Lululemon and J.M. Smucker. Friday, the Commerce Department reports the U.S. trade deficit.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA -0.81 -1.40 -2.27 +2.21
NASDAQ +5.46 -0.78 +1.02 +7.00
S&P 500 +1.63 -2.78 -3.36 +1.98
REAL YIELD 6/1 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.59% 0.74% 2.57% 3.48%
Sources: money.msn.com, bigcharts.com, treasury.gov, treasurydirect.gov – 6/1/121,8,9,10 Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.
“Love is a friendship set to music.”
– Joseph Campbell
Through tax-loss harvesting, long-term portfolio losses can be put to work. They may be used to offset long-term capital gains or to lower regular income.
Name three consecutive days without using the words Monday, Wednesday, Friday, or Sunday.
Last week’s riddle:
Five girls took part in a bicycle race. Barbara finished before Vicki but behind Susan. Katarina finished before Sara but behind Vicki. In what order did they finish?
Last week’s answer:
1- Susan, 2- Barbara, 3- Vicki, 4- Katarina, 5- Sara.
1 – money.msn.com/market-news/post.aspx?post=109dd732-6daa-4f8a-b878-a8ee80dd9aba [6/1/12]
2 – www.cnbc.com/id/47645265 [6/1/12]
3 – www.nasdaq.com/article/us-personal-spending-income-grow-in-april-20120601-00342 [6/1/12]
4 – www.foxbusiness.com/industries/2012/05/30/pending-home-sales-unexpectedly-slide-in-april/ [5/30/12]
5 – www.latimes.com/business/money/la-fi-mo-housing-market-case-shiller-20120529,0,2344345.story [5/29/12]
6 – www.latimes.com/business/money/la-fi-mo-consumer-construction-manufacturing-20120601,0,230989.story [6/1/12]
7 – montoyaregistry.com/Financial-Market.aspx?financial-market=common-financial-mistakes-and-how-to-avoid-them&category=29 [6/1/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F1%2F11&x=0&y=0 [6/1/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F1%2F11&x=0&y=0 [6/1/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F1%2F11&x=0&y=0 [6/1/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F1%2F07&x=0&y=0 [6/1/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F1%2F07&x=0&y=0 [6/1/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F1%2F07&x=0&y=0 [6/1/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F31%2F02&x=0&y=0 [6/1/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F31%2F02&x=0&y=0 [6/1/12]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F31%2F02&x=0&y=0 [6/1/12]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [6/1/12]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [6/1/12]
10 – treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm10902.pdf [1/9/02]
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 Stonecreek Wealth Advisors, Inc. an independent fee only registered investment advisor firm. Salt Lake City, Provo, Utah. Mark Lund is the author of The Effective Investor.