The Markets
Investors appeared to be as optimistic as a newly-engaged couple last week. Strong housing data, a positive labor report, temporary easing of debt ceiling pressures, and some stronger-than-expected earnings results helped the Standard & Poor's 500 and the Dow Jones Industrials indices close at five-year highs.
Commerce Department data showed housing starts climbed by 12.1 percent in December, on an annualized basis, exceeding economists' expectations. Home construction is expected to continue to rebound, as long as mortgage rates remain low, and experts anticipate sales of new and existing homes will show improvement this week. This continued improvement in the housing market may have contributed to a more positive investor outlook.
The possibility of a debt ceiling compromise also encouraged markets higher. Unlike down-to-the-wire fiscal cliff negotiations, which caused investors to hold back at the end of 2012, discussions of temporary debt ceiling extensions by House Republicans soothed investors' concerns.
Several companies, including several high-profile Wall Street banks, reported strong results last week, and several companies reported earnings that beat lowered expectations. This helped drive bank, transportation, and housing indices to historic or multi-year highs. Since the Transportation sector includes many highly cyclical and economically sensitive stocks, which tend to underperform when investors anticipate recession, this was seen as positive news for the economy.
According to Barron's, a secular bull market begins when both transportation companies and the Dow Jones Industrial Average hit new highs. The Dow Jones Transportation Average reached a new high last week, but the Industrials index remains 4 percent below its highest close which was reached back in October 2007. Are we headed for a bull market? Only time will tell.
Data as of 1/18/13
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1-Week
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Y-T-D
|
1-Year
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3-Year
|
5-Year
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10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
0.9%
|
4.2%
|
13.6%
|
9.0%
|
2.3%
|
5.3%
|
10-year Treasury Note (Yield Only)
|
1.8
|
N/A
|
1.9
|
3.7
|
3.7
|
4.0
|
Gold (per ounce)
|
1.9
|
-0.3
|
2.5
|
14.2
|
13.9
|
16.8
|
DJ-UBS Commodity Index
|
2.1
|
1.7
|
0.2
|
0.7
|
-5.5
|
2.0
|
DJ Equity All REIT TR Index
|
1.2
|
3.6
|
20.7
|
18.6
|
8.9
|
12.6
|
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
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