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June 10, 2013 - Stocks Stumble But Regain Footing

| June 10, 2013
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Troubling economic reports and fears of Fed tapering caused markets to stumble early last week, though they regained their footing later in the week, eventually ending positive. For the week, the S&P 500 gained 0.78%, the Dow gained 0.88%, and the Nasdaq gained 0.39%.[i] International stocks had a bad week; the benchmark MSCI EAFE index dropped 1.14%[ii] as Asian equities took a beating. The Hong Kong stock market turned its worst weekly performance in more than a year as Chinese investors grappled with a cash squeeze and weak economic data.[iii]

The Dow dropped to its lowest level in a month last Wednesday after a series of weak economic reports caused a selloff. Factory orders increased less than forecast in April, growing just 1% after March’s 4.7% drop.[iv] A decrease in weekly mortgage applications also unnerved investors since the housing sector has been one of the key factors supporting the market rally. Applications for home loans dropped 11.5% from the previous week, though it’s possible tight housing supplies contributed to the decrease.[v]

On a more positive note, the May jobs report beat expectations, causing markets to rebound after a short decline. However, the underlying job trends point to a stable, not growing, labor market, meaning that we probably won’t see significant improvements in income levels or consumer spending this month. Nonfarm payrolls increased by 175,000 jobs in May, significantly improving upon April’s revised 149,000 new jobs. The headline unemployment rate ticked upwards to 7.6%, surprising analysts who had expected the rate to remain unchanged at 7.5%. However, the increase in unemployment was the result of an increase in the labor force, indicating that previously discouraged job searchers have enough confidence in the economy to start looking for jobs again.[vi]

While the increase in the headline unemployment rate surprised analysts, it suggests that the Fed will have to maintain its accommodative monetary policy in the coming months. Markets rose after Federal Reserve Bank of Atlanta President Dennis Lockhart said central bank officials are committed to continuing to support the economy.[vii]

Economic data is light this week, but analysts will be watching retail sales data and consumer sentiment numbers closely to see whether consumer spending is likely to increase this quarter. Despite relatively flat jobs data, some analysts[viii] believe that there is room for additional upside since a drop in gas prices, higher home prices, and increasing stock prices are contributing to improvements in consumer confidence and willingness to spend.

 

 

ECONOMIC CALENDAR:

Wednesday: EIA Petroleum Status Report, Treasury Budget

Thursday: Jobless Claims, Retail Sales, Import and Export Prices, Business Inventories

Friday: Producer Price Index, Current Account, Industrial Production, Consumer Sentiment

 

 Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.

The Nasdaq is a computerized system that facilitates trading and provides price quotations on some 5,000 of the more actively traded over-the-counter stocks

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Google Finance is the source for any reference to the performance of an index between two specific periods.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.



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