U.S. Weekly Market Commentary
Weekly Stock & Bond Market Update
(November 16 - November 20, 2009)
The Stock Market
Stock prices ended the week mixed. The health care sector led the advancers on the week, while the technology sector led the decliners. The Dow Jones Industrial Average rose 48 points, finishing the week at 10,318. The S&P 500 was down two points to end at 1,091 while the Nasdaq fell 22 points and closed at 2,146. The Transportation Index moved lower by 15 and the Utility Index was down by two. The NYSE average daily trading volume was below average at 1.0 billion shares.
The Economy
Retail sales rose 1.4% in October compared to September, more than expectations for a 0.9% increase due to a rebound in auto sales. Excluding autos, retail sales rose 0.2% for the third straight monthly advance. Industrial production rose for the fourth straight month in October, up 0.1% from September, but was below expectations of 0.3%. The increase was largely
attributed to the rise in utilities due to an unseasonably cold October. Consumer prices continued to rise at a moderate pace in October, indicating that the slack in the economy is keeping inflation contained. The consumer price index rose 0.3% in October compared to September and fell 0.2% compared to the year prior. Core inflation, which excludes volatile food and energy costs, rose 1.7% from the year prior. The producer price index rose 0.3% in October from the month prior, as energy and food prices saw strong advances. Compared to the year prior, producer prices fell 1.9%.
Uncertainty over renewal of a tax credit for home buyers caused builders to increase caution, resulting in a drop in housing activity in October. Housing starts decreased 10.6% compared to the prior month to a 529,000 annual rate, its lowest level in six months. Building permits fell 4.0% to a 552,000 annual rate. Leading indicators rose 0.3% in October from September, its seventh straight increase, albeit the smallest. Expectations were for an increase of 0.4%.
Next week's expected economic reports include existing and new home sales, gross domestic product, the Case-Shiller home price index, consumer confidence, the house price index, personal income and spending, durable goods orders, and the minutes from the November FOMC meeting.
The Bond Market
Bond prices were higher on the week, pushing rates lower. When investing in fixed income, don't try to predict where interest rates are headed. Instead,
focus on holding a portfolio composed of bonds with staggered maturities.
Summary
Stocks ended the week mixed, as the Dow ended higher but the S&P 500 and the Nasdaq ended lower. Economic news was mixed on the week as past and potential government stimulus efforts caused data to be erratic. We remind you to stay true to solid investment principles and not get caught up in predictions about where the economy is headed. Instead, focus on holding quality investments that tend to better weather the ups and downs in the market over the long term.
Alan F. Skrainka, CFA, Chief Market Strategist
Mario D. De Rose, CFA, Fixed Income Strategist
Doug Stine, Research
