September 15, 2014 - Markets Slide Before Key Fed Meeting
| September 15, 2014
Markets closed last week on a down note - breaking five straight weeks of gains - as investors hedged their bets ahead of a pivotal Federal Reserve Open Market Committee Meeting. For the week, the S&P 500 lost 1.10%, the Dow dropped 0.87%, and the Nasdaq slid 0.33%.
After weeks of great performance, markets finally hit pause as investors declined to push markets higher ahead of a big week. Fed decisions have driven a lot of market activity in recent months and the upcoming FOMC meeting is highly anticipated. Analysts are poised to leap on any hint of Fed economists' thinking about the state of the economy and the return to normalized monetary policy.
What will the Fed be looking for? Overall, clues that the U.S. economy is still on the path to sustainable, broad-based growth. So much of what the FOMC does comes down to interpretation and reading the tea leaves; Fed economists are accustomed to delving deeply into the data and making judgments based on cloudy and uncertain data.
One of the biggest variables in the Fed's evaluation of the economy is the labor market. So far, most indicators show that the labor economy is improving, albeit modestly. The August jobs report was grim and showed that job creation slowed over the last three months. Worse, the labor force participation rate was a measly 62.8%, the lowest rate seen since the 1970s.
However, fresh research by a group of Fed economists suggests that declines in labor force participation since the financial crisis - often attributed to discouraged Americans who drop their job searches - may actually be due to the natural aging of the U.S. workforce as boomers move into retirement. If true, this means that the Fed may be able to discard some of their concerns about discouraged workers.
Digging a little deeper, the number of job openings in the U.S. ticked down slightly in July, but is still close to a 13-year high. On the other hand, the pace of hiring hasn't kept up with job openings, indicating that workers may be struggling to retool for new jobs or that employers may not be offering competitive wages. Unfortunately, these are not problems that the Fed can solve, but economists need to factor these issues into their thinking to ensure that they don't take away the training wheels too soon.
There are a couple of decisions that could come out of the FOMC meeting. (1) The Fed could decide to continue steadily trimming back bond purchases as they have at every meeting since the taper began in December. This decision would keep us on track for an October finish. (2) If the economic oracles show that the economy is doing well, the Fed could decide to accelerate the pace of its taper, ending its quantitative easing programs ahead of schedule. While doing so would be a huge vote of confidence for the economy, markets might react badly to the news that the party is ending early. (3) If economic prospects look uncertain, the Fed could decide to pause its taper, keeping bond purchases going until the end of the year.
Whatever decision comes out of the meeting, investors can expect some volatility as markets adjust to the news. Investors will also want to gauge the expected effects of a fresh round of sanctions against Russia, which many analysts worry will dampen growth in Europe. All told, it'll be an informative week and we'll keep you posted.
Monday: Empire State Mfg. Survey, Industrial Production
Tuessday: PPI-FD, Treasury International Capital
Wednesday: Consumer Price Index, Housing Market Index, EIA Petroleum Status Report, FOMC Meeting Announcement, FOMC Forecasts, Chair Press Conference 2:30 PM ET
Thursday: Housing Starts, Jobless Claims, Philadelphia Fed Survey
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. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Factory output in China drops. Chinese factory production growth fell to the lowest level in six years, stoking fears that the world's second-largest economy might be cooling off. Weak readings in several other sectors increase the probability that China's central bank may undertake additional stimulus.
U.S. retail sales rise in August. Retail sales, which account for about one third of consumer spending, rose broadly last month. While retail sales levels are still below pre-recession numbers, this increase bodes well for future spending and economic growth.
Consumer sentiment hits 14-month high. Friday's report showed that U.S. consumer sentiment rose to the highest level in more than a year, as Americans felt more upbeat about economic conditions. Though Americans still worry about a labor slowdown, they are more optimistic about the future.
Import prices decline. The cost of imports into the U.S. fell by the largest amount in nine months, largely due to a sudden decrease in petroleum prices. While this drop may be short-lived, lower import prices will help keep inflation down and cut Americans a break on imported products.
Quote Of The Week
"If the world is cold, make it your business to build fires."
- Horace Traubel
Recipe Of The Week
Fork and Knife
Easy Eggplant Parmesan
Pair this hearty eggplant parmesan with a Caesar salad for a healthful weeknight meal.
4 tablespoons olive oil
2 large eggplants (about 3 pounds total), sliced lengthwise
Kosher salt and black pepper
1 1/2 cups marinara sauce
1 15-ounce container whole milk ricotta
2 teaspoons dried oregano
8 ounces fresh mozzarella, cubed, or 8 ounces shredded mozzarella
1/2 cup grated Parmesan (1 1/2 ounces)
1.Preheat your oven to 450°F. Place a pasta strainer or colander over the sink, layered with two sheets of paper towels. Spoon the ricotta into the strainer and allow to drain for at least 30 minutes.
2.Coat two baking sheets with the olive oil and arrange the sliced eggplant into a single layer. Season with a pinch of salt and pepper and additional olive oil (if desired).
3.Mix together the ricotta, half of the mozzarella, oregano, and a pinch of salt and pepper.
4.In a 3 qt. ceramic or glass baking dish, spoon enough marinara sauce to coat the bottom. Starting with eggplant slices, arrange alternating layers of eggplant, sauce, and ricotta mixture until all ingredients are exhausted. Top the final layer with sauce, the remaining mozzarella, and a final layer of Parmesan cheese.
5.Bake for about 20 to 25 minutes until the top is bubbling and browned. If the top is browning too quickly, tent with foil until done.
Recipe adapted from Dawn Perry | RealSimple.com
Tips for Identifying Fraudulent Phone Calls
Hundreds of thousands of Americans have received phony phone calls purporting to be from the IRS. Scammers may demand payment for taxes owed or lure the unwary with promises of unexpected tax refunds. Like most con artists, tax fraudsters actually want access to financial accounts and sensitive personal information. The IRS has noted an uptick in over-the-phone tax scams and has the following tips:
•Fraudsters may know a lot about you when they call and may be able to spoof your caller ID to show that they are calling from an official number.
•If you don't answer the phone, they may leave an urgent callback request.
•If you receive a call that you think might be from the IRS, take down the agent's information and call them back at the official IRS hotline: 1-800-829-1040.
Remember, the IRS will never:
•Call you without mailing an official notice first.
•Demand that you immediately pay your taxes over the phone.
•Take a debit or credit card number over the phone.
•Threaten to call law enforcement or immigration services to arrest you for failure to pay.
If you believe that you (or someone you know) have been the victim of tax fraud, you can report the incident to TIGTA at 1-800-366-4484 or at www.tigta.gov. You can also contact the Federal Trade Commission at www.ftc.gov. Use their "FTC Complaint Assistant" to report the scam. Please add "IRS Telephone Scam" to the comments of your complaint.
If you are worried about owing money to the IRS, contact a qualified tax expert or call the IRS directly at 1-800-829-1040.
Tip courtesy of IRS.gov
Fix Slices by Avoiding Flying Elbows
If you're struggling with pulled shots or slices, a flying elbow may be the cause. A common mistake amateurs make is to let their right elbow float away from their body at the top of the backswing. If this sounds like you, imagine yourself as a waiter carrying a tray of dishes; at the top of your backswing, you need to keep your forearm in a vertical position to avoid spilling your dishes. Practice this technique to keep your elbow relaxed and in towards your body.
Tip courtesy of Al Wagner | Golf Tips Mag
Ask Your Pharmacy About Old Prescriptions
Getting rid of old and expired medications is often a hassle, but new regulations mean that pharmacies, clinics, and hospitals may be allowed to take back old drugs. It's a good idea to dispose of your old medications to avoid accidentally mixing up your prescriptions and to reduce the odds that potent medications could be stolen.
Ask your local pharmacy about options to drop off or mail in your expired medications. If you are unable to find a clinic or pharmacy willing to take back old medications, contact your local police station to find out the date of the next drug take-back event.
Tip courtesy of AARP
Avoid Contaminating Natural Areas
The next time you go for a walk in a natural area, think about what pests and organisms you might be transporting home on the soles of your boots or shoes. Ecologists are concerned about the effects of invasive plants and diseases on delicate environments. To avoid contributing to the problem, The Nature Conservancy recommends:
•Picking off the seeds and detritus on the bottom of your shoes and boots before getting into the car.
•Cleaning your soles with a 10 percent bleach solution between hikes to kill off organisms.
•Carefully washing clothing and gear with hot soapy water to avoid contamination.
Tip courtesy of The Nature Conservancy
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