Market Week: May 16, 2011
BSV Financial Services Aaron W. Johnson, CRPC® Financial Advisor 764 East Ellerslie Ave Colonial Heights, VA 23834 804-520-5612 Fax:804-520-7935 [email protected] www.bsvnet.com
Market Week: May 16, 2011 The Markets An up and down week in the equity markets ended with a selloff on Friday. Nasdaq finished down 1.2% for the day, while the Dow and S&P 500 both finished down 0.8%, essentially leaving the indices back where they'd started the week. Commodities, which had been moving in lockstep with equities, also finished essentially flat for the week, with oil closing just under $100 a barrel. Investors had reason to be skittish: a strengthening dollar, renewed anxiety over the cost of the eurozone bailouts, an unexpected increase in U.S. crude oil reserves coupled with a reduced demand for gasoline, and inflationary pressures at home and abroad all led to concerns about the U.S. and global recoveries. A better-than-expected reduction in initial claims for unemployment benefits for the week, the only real positive news for the period, couldn't do much to assuage those fears. Market/Index
2010 Close
Prior Week
As of 5/13
Week Change
YTD Change
DJIA
11577.51
12638.74
12595.75
-0.34%
8.80%
Nasdaq
2652.87
2827.56
2828.47
0.03%
6.62%
S&P 500
1257.64
1340.20
1337.77
-0.18%
6.37%
Russell 2000
783.65
833.34
835.67
0.28%
6.64%
Global Dow
2087.44
2208.28
2177.35
-1.40%
4.31%
Fed. Funds
.25%
.25%
.25%
0 bps
0 bps
10-year Treasuries
3.30%
3.19%
3.18%
-1 bps
-12 bps
Last Week's Headlines • Despite record exports of $172.7 billion in March, the U.S. trade deficit widened to $48.2 billion, the largest monthly deficit since June 2010. The Bureau of Economic Analysis said part of the reason was that the United States imported more crude oil and petroleum products at higher prices. Petroleum imports soared to $37.3 billion in March, up 34% from February's $27.8 billion. In contrast, China reported a trade surplus of $11.4 billion for April. That far exceeded analyst expectations of $3 billion, and led to increased calls for China to let the yuan rise at a faster rate against the dollar. • The Department of Labor reported that initial claims for unemployment benefits (seasonally adjusted) for the week ending May 7 totaled 434,000, a decrease of 44,000 from the previous week's revised figure of 478,000, and the steepest weekly decline since February 2010. However, the four-week moving average was 436,750, an increase of 4,500 from the previous week's revised average of 432,250. • The Energy Information Administration reported that U.S. crude oil inventories increased by 3.8 million barrels from the previous week. The EIA also reported that gasoline inventories increased by 1.3 million barrels, and that demand for gasoline over the last 4 weeks has averaged approximately 9 million barrels per day, down 2.4% from the same period last year. • The Consumer Price Index rose 0.4% in April, primarily because of higher food and energy costs (gasoline prices alone accounted for almost half the monthly increase). The Bureau of Labor Statistics (BLS) said the accelerating price increases (which were in line with expectations) helped push the year-over-year consumer inflation rate to 3.2% (unadjusted), the highest since October 2008. However, excluding volatile food and energy costs, core prices were up only 0.2% in April, and 1.3% year-over-year. • Wholesale prices for finished goods (Producer Price Index) were up 0.8% in April, and 6.8% for the 12 months ended April 2011, the
May 16, 2011 See disclaimer on final page
largest year-over-year gain since September 2008. As with the Consumer Price Index, higher food and energy costs were the culprit; excluding food and energy, core prices were up only 0.3% in April (2.1% year-over-year, unadjusted). • The BLS also reported that import prices increased 2.2% in April following a 2.6% increase in March, the first time import prices increased by more than 2% in consecutive months since June 2008. The year-over-year increase was 11.1%, the largest 12-month gain since April 2009 to April 2010. Export prices increased 1.1% in April, and 9.6% year-over-year.
Eye on the Week Ahead The looming deadline for increasing the U.S. debt ceiling, discussions in Brussels about the worsening Greek debt situation, and volatile commodity prices will all compete for investors' attention in the coming week. Key dates and data releases: international capital flows (5/16); housing starts, industrial production (5/17); Federal Open Market Committee (FOMC) minutes (5/18); home resales (5/19); options expiration (5/20). Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. BSV Financial Services is a trade name of the bank. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.
Page 2 of 2 Prepared by Forefield Inc. Copyright 2011
Market Week: May 16, 2011 The Markets An up and down week in the equity markets ended with a selloff on Friday. Nasdaq finished down 1.2% for the day, while the Dow and S&P 500 both finished down 0.8%, essentially leaving the indices back where they'd started the week. Commodities, which had been moving in lockstep with equities, also finished essentially flat for the week, with oil closing just under $100 a barrel. Investors had reason to be skittish: a strengthening dollar, renewed anxiety over the cost of the eurozone bailouts, an unexpected increase in U.S. crude oil reserves coupled with a reduced demand for gasoline, and inflationary pressures at home and abroad all led to concerns about the U.S. and global recoveries. A better-than-expected reduction in initial claims for unemployment benefits for the week, the only real positive news for the period, couldn't do much to assuage those fears. Market/Index
2010 Close
Prior Week
As of 5/13
Week Change
YTD Change
DJIA
11577.51
12638.74
12595.75
-0.34%
8.80%
Nasdaq
2652.87
2827.56
2828.47
0.03%
6.62%
S&P 500
1257.64
1340.20
1337.77
-0.18%
6.37%
Russell 2000
783.65
833.34
835.67
0.28%
6.64%
Global Dow
2087.44
2208.28
2177.35
-1.40%
4.31%
Fed. Funds
.25%
.25%
.25%
0 bps
0 bps
10-year Treasuries
3.30%
3.19%
3.18%
-1 bps
-12 bps
Last Week's Headlines • Despite record exports of $172.7 billion in March, the U.S. trade deficit widened to $48.2 billion, the largest monthly deficit since June 2010. The Bureau of Economic Analysis said part of the reason was that the United States imported more crude oil and petroleum products at higher prices. Petroleum imports soared to $37.3 billion in March, up 34% from February's $27.8 billion. In contrast, China reported a trade surplus of $11.4 billion for April. That far exceeded analyst expectations of $3 billion, and led to increased calls for China to let the yuan rise at a faster rate against the dollar. • The Department of Labor reported that initial claims for unemployment benefits (seasonally adjusted) for the week ending May 7 totaled 434,000, a decrease of 44,000 from the previous week's revised figure of 478,000, and the steepest weekly decline since February 2010. However, the four-week moving average was 436,750, an increase of 4,500 from the previous week's revised average of 432,250. • The Energy Information Administration reported that U.S. crude oil inventories increased by 3.8 million barrels from the previous week. The EIA also reported that gasoline inventories increased by 1.3 million barrels, and that demand for gasoline over the last 4 weeks has averaged approximately 9 million barrels per day, down 2.4% from the same period last year. • The Consumer Price Index rose 0.4% in April, primarily because of higher food and energy costs (gasoline prices alone accounted for almost half the monthly increase). The Bureau of Labor Statistics (BLS) said the accelerating price increases (which were in line with expectations) helped push the year-over-year consumer inflation rate to 3.2% (unadjusted), the highest since October 2008. However, excluding volatile food and energy costs, core prices were up only 0.2% in April, and 1.3% year-over-year. • Wholesale prices for finished goods (Producer Price Index) were up 0.8% in April, and 6.8% for the 12 months ended April 2011, the
May 16, 2011 See disclaimer on final page
largest year-over-year gain since September 2008. As with the Consumer Price Index, higher food and energy costs were the culprit; excluding food and energy, core prices were up only 0.3% in April (2.1% year-over-year, unadjusted). • The BLS also reported that import prices increased 2.2% in April following a 2.6% increase in March, the first time import prices increased by more than 2% in consecutive months since June 2008. The year-over-year increase was 11.1%, the largest 12-month gain since April 2009 to April 2010. Export prices increased 1.1% in April, and 9.6% year-over-year.
Eye on the Week Ahead The looming deadline for increasing the U.S. debt ceiling, discussions in Brussels about the worsening Greek debt situation, and volatile commodity prices will all compete for investors' attention in the coming week. Key dates and data releases: international capital flows (5/16); housing starts, industrial production (5/17); Federal Open Market Committee (FOMC) minutes (5/18); home resales (5/19); options expiration (5/20). Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. BSV Financial Services is a trade name of the bank. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.
Page 2 of 2 Prepared by Forefield Inc. Copyright 2011
