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Weekly Vantage Point | 10.19.15

 
U.S. Stocks Higher on Hopes for Fed Pause

October 19, 2015 — U.S. stocks were slightly up on Friday as investors continued to digest corporate earnings and economic data. In earnings news, shares of Industrials bellwether General Electric (GE) rose after the company beat earnings estimates. Economic data came in mixed on Friday, as one report showed U.S. factory output fell in September as high inventories and tepid overseas demand weigh on producers, while another report showed that consumer sentiment rose unexpectedly in October. Earlier in the week, a weak inflation report helped spur investor hopes that the Federal Reserve would hold off raising rates until sometime in 2016.

The major benchmarks ended mixed for the week, with the large-cap indices managing to build on their strong gain from the previous week, while the small-cap and mid-cap indexes struggled. For the week, the S&P 500 advanced 0.93%; the Dow Industrials added 0.77%; and the NASDAQ Composite rose 1.17%. The technology-heavy NASDAQ Composite led the S&P 500 and the Dow Industrials as it was helped by a bounce in biotechnology stocks after the topic of drug pricing did not feature prominently in the first Democratic presidential debate as some investors had feared.

In the bond market last week, U.S. Treasuries rallied, pushing their yields lower (10-year Treasury lost 7 basis points on the week), as generally weak economic data led more investors to believe that the Federal Reserve will delay interest rate "liftoff" until 2016. The week also featured many public speeches from Fed officials, whose statements largely struck a dovish tone.

Eight of the major sectors posted gains led by Utilities (2.29%), Health Care (1.96%) and Telecom (1.87%). Industrials (-1.21%) and Materials (-0.12%) were the only decliners of the week. 10-year Treasury yields fell 0.074 percentage points to 1.982%. For the week, despite falling on Friday, Gold rose 2.35%. On the other hand, WTI crude oil was down 4.44% for the week.

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Words of Wisdom
 

"Every day I get up and look through the Forbes list of the richest people in America. If I'm not there, I go to work."

— Robert Orben

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
DOW 0.77% 5.72% -4.99% -3.41% 6.82%
S&P 500 0.93% 5.98% -3.77% 0.38% 11.43%
NASDAQ 1.17% 5.80% -5.08% 4.10% 17.22%
Russell 3000 0.70% 5.84% -4.46% 0.07% 11.03%
MSCI EAFE 0.29% 7.25% -6.37% 1.59% 5.45%
MSCI Emerging Markets 0.71% 9.32% -7.58% -7.60% -8.66%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond 0.37% 0.43% 1.62% 1.56% 1.80%
Barclays Municipal 0.21% 0.25% 1.72% 2.02% 1.93%
Barclays US Corp High Yield 0.07% 2.22% -2.95% -0.29% -0.38%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity -1.35% 2.23% -8.45% -13.92% -23.61%
S&P GSCI Crude Oil -4.44% 5.83% -6.87% -10.42% -41.79%
S&P GSCI Gold 2.35% 6.09% 3.24% -0.08% -4.68%
Source: MorningStar
Homebuilders are Optimistic But Home Buyers Face Obstacles
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Home Buyers Still Face Obstacles

With the National Association of Home Builders/Wells Fargo housing market index, a monthly survey that measures market conditions for new home sales, showing its highest sentiment in 10 years, we thought it would be a great opportunity to review lending conditions and affordability. While builders are optimistic, buyers continue to face obstacles. The chart on the left illustrates one measure of housing affordability, which is well below its historical average. The chart on the top right shows while houses have become more affordable to those who already own one, the size of the down payment relative to income is keeping many out of the housing market. The bottom right chart shows the average FICO score on new approved mortgage loans, which is relatively high compared to historical averages, also limiting access.

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Week's Economic Calendar
 

Monday, October 19: Homebuilders Index;

Tuesday, October 20: Housing Starts;

Wednesday, October 21: MBA Mortgage Applications;

Thursday, October 22: Weekly Jobless Claims, Existing Home Sales;

Friday, October 23: PMI Manufacturing Index (Flash)

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Weekly Trivia
 

Today: In China, animals are forbidden to use human language. This belief led to the ban of which book and which famous writer in that country?

Last Week: Which of the following are available as 'drive-throughs' someplace in the United States?

  • casket viewings
  • weddings
  • voter registration
  • liquor store

Answer: All of them!

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