Review of Last Week - Financially Speaking

Review of Last Week


POSITIVE WITH NEGATIVES... The U.S. economy keeps delivering mixed signals, but this week investors on Wall Street let a positive vibe drive the proceedings. Stocks went up four days in a row, which ended with a big rally Friday driven by an August Employment report that was by no means great, but better than the downbeat readings that were expected. All three major stock indexes ended up for the week with the Dow now up for the year.
There were notable negatives that continue to show the pace of recovery has slowed. The ISM Services Index came in below estimates indicating modest growth in the non-manufacturing sector. Consumer inflation was UP 0.2% in July and UP 1.5% over a year ago. This is still within the Fed's acceptable range, although some economists think inflation should start rising noticeably next year. Personal income was up 0.2% for July, but this was below what the consensus expected. Finally, final Q2 Productivity dropped to a 1.8% annual rate, a bigger dip than previously estimated.

Positive signs included the ISM Manufacturing index, reported up for July instead of down as expected. August Consumer Confidence also beat expectations. But the big news came with Friday's Employment Report. The U.S. economy lost 54,000 nonfarm jobs in August, far less than the 100,000+ job losses expected. The private sector added 67,000 jobs, while upward revisions to the two prior months took the net gain to 133,000 jobs. Average hourly earnings were UP 0.3% for the month and UP 1.9% this year. But unemployment ticked up to 9.6%, due to an increase in the work force. So even though the report played well on Wall Street, it didn't on Main Street.

For the week, the Dow ended UP 2.9%, to 10447.93; the S&P 500 was UP 3.7%, to 1104.51; and the Nasdaq was UP 3.7%, to 2233.75.


Bond prices held up for most of the week, but Friday's jobs report surprise kept things in check. The FNMA 30-year 4.0% bond we watch ended UP 7 basis points for the week, closing at $102.27. Again, Freddie Mac's weekly survey showed national average fixed rates for conforming mortgages at historic low levels making now an excellent time to invest in real estate. Call me with all your real estate needs.

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