A NOTE ABOUT HURRICANE SANDY: Sunday night, as Hurricane Sandy took aim at the heart of America’s financial district, both the New York Stock Exchange and Nasdaq stock market said they would not open for trading Monday due to the storm. Depending on how much damage is inflicted on the Eastern seaboard, there is a possibility that trading might also be halted on Tuesday.[i] With Hurricane Sandy approaching, and likely bringing high winds and flooding, its potential economic impact is a point of concern. The historic storm is thought to be the largest to hit the U.S. and could cause major damage to cities in the northeast and mid-Atlantic. Please be assured that we will keep you informed about any developments with the potential to affect your investments.[ii]
Markets Lower but Economy Growing
Weekly Update – October 29, 2012
Markets got off to a slow start last week as disappointing earnings and a downgrade of Spanish debt combined to fuel bearish sentiment. Major indices closed near their seven-week low with the S&P trimming 1.48%, the Dow sliding 1.77%, and the Nasdaq losing 0.59%.[iii]
Last week’s earnings reports mostly continued the downbeat trend we’ve seen this year of top-line revenue misses and a weak earnings outlook. With earnings reports in from nearly half of S&P 500 companies, just 36.9% have reported revenue that beat forecasts, far below the 62% historical average, according to Thomson Reuters data. Earnings are faring slightly better, with 62.5% above expectations.[iv]
Moody’s downgraded the debt of five Spanish regions last week, citing limited cash reserves and upcoming interest payments. This move will make it more likely that these regions will reach out to the national government for a lifeline, worsening Spain’s already-precarious debt situation.[v] This move is an unfortunate reminder that the European debt situation is far from resolved.
On the bright side, Friday’s GDP reading showed that the U.S. economy grew at an accelerated rate in the third quarter. The Commerce Department’s initial GDP estimate clocked in at 2% growth, beating economists’ estimate of 1.9% and showing a substantial improvement over the second quarter’s 1.4% increase. The uptick in growth was a result of a last-minute surge in consumer spending and an increase in government spending. Despite the tough economy, consumers went on a shopping spree, buying up automobiles and iPhone 5s, driving up consumer spending by 2% in Q3.[vi]
ECONOMIC CALENDAR:
Monday: Personal Income and Outlays, Dallas Fed Mfg. Survey
Tuesday: S&P Case-Shiller HPI, Consumer Confidence
Wednesday: ADP Employment Report, Employment Cost Index
Thursday: Motor Vehicle Sales, Jobless Claims, Productivity and Costs, ISM Mfg. Index, Construction Spending
Friday: Employment Situation, Factory Orders