Pat Webb - Phase 2 Advisors
 
Weak Earnings Weigh on Markets
  Weekly Update - October 22, 2012
In This Issue
Performance
Headlines
Recipe
Golf Tip
Health Tip
Green Fact
The Markets:

Markets declined for most of the week on disappointing third quarter earnings reports, with the technology sector hardest hit. On Friday, the 25th anniversary of 1987's stock market crash (known as Black Monday)[1], trading was mostly downbeat as investors digested a string of disappointing earnings reports. In spite of this, markets staged a brief comeback in the last hours of trading to close mixed. For the week, the S&P gained 0.32%, the Dow gained 0.11%, and the Nasdaq fell 1.26%.[2]

Overall this earnings season, Q3 profits have managed to come in just a shade over the doom and gloom estimates. However, the bad news is that top line revenue is much worse than forecasted. One of the big disappointments this week was Google (GOOG), which missed its revenue forecasts for the first time because of its struggling Motorola division and drove a tech selloff on Friday. Market stalwarts GE (GE) and McDonald's (MCD) also turned in downbeat reports, pushing shares of both companies lower.[3]  With about one-third of S&P 500 companies reporting in, a solid 65% have beaten profit estimates, while just 42% have managed to beat revenue forecasts. This repeats the performance we saw in the second quarter, which shows that companies are learning to do more with less while dealing with challenging business conditions.[4]

Not all the earnings news is grim though; banks and consumer discretionary companies such as luxury stores and hotels are expected to report the best growth. Banks were given a boost by Fed actions, and, despite the tough economy, luxury retailers and hotel chains are doing well as wealthy consumers continue to spend.[5]

Next week, analysts will turn their attention to two big economic reports on Friday - the GDP report and consumer sentiment. With remaining earnings reports likely to show more of the same, investors will be looking at the GDP report to see whether the Fed's QE3 activities are giving the economy the boost it needs. Although we can hope for some solid economic performance, there is a good chance the rest of October will be turbulent for markets.

ECONOMIC CALENDAR:
Wednesday: New Home Sales, EIA Petroleum Status Report, FOMC Meeting Announcement
Thursday: Durable Goods Orders, Jobless Claims, Pending Home Sales Index
Friday: GDP, Consumer Sentiment



Performance




Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not available.


Headlines

Unemployment rate falls in 41 states in September. According to the Bureau of Labor Statistics, the U.S. saw a sharp drop in the unemployment rate in all but 9 states last month. South Carolina posted the largest improvement, with its unemployment rate falling from 9.6% to 9.1%.[6]

Home resales fall in September. Sales of existing homes retreated from a two-year high last month, reminding us that the housing market is a long way from a full recovery. Resales fell 1.7%, pushed lower by tight inventory and a slowdown in distressed sales.[7]

Mortgage processing delays may undermine QE3. To meet surging demand for mortgages after the Fed's QE3 housing boost, banks are hiring new mortgage processors. However, they are still struggling to process applications, leading to delays for beleaguered mortgage applicants.[8] 

European bank shares fall on new discord. Shares of European banks fell last week as EU nations bickered over how to help debt-ridden Spain and Greece. While some analysts believe this is a blip, others believe that markets could fall further if permanent solutions are not found.[9]

Quote of the Week

"No amount of ability is of the slightest avail without honor."  

- Andrew Carnegie

Recipe of the Week

Oven Pear Pancake



This non-traditional dessert features a custard center with a browned cinnamon-sugar
 topping. Recipe from RealSimple.com.

Ingredients:

2 pears
1/2 cup sugar
1/4 cup all-purpose flour
3 eggs
1 cup whole milk
2 teaspoons vanilla
1 tablespoon unsalted butter, melted salt
1/2 teaspoon ground cinnamon
2 tablespoons sugar


Directions:
1) Heat oven to 400 F.
2) Lightly coat a 9-inch pie plate with vegetable cooking spray. Peel, core, and cut into eighths and arrange them in the pie plate.
3) Combine 1/2 cup minus 2 tablespoons sugar, flour, eggs, whole milk, vanilla, unsalted butter, and a pinch of salt in a blender. Pulse until smooth, about 30 seconds.
4) Pour over the pears. Place in the oven and bake until springy to the touch, 25 to 30 minutes. Remove from oven. Heat broiler. Sprinkle the pancake with ground cinnamon and the 2 tablespoons sugar. Broil until browned, about 1 minute. Serve warm.




Golf Tip
Loosen Your Grip

A common problem for many golfers is gripping the club too tightly. Tight muscles slow the club head speed, affect the club face at impact, and can even rob you of distance. Do you routinely top the ball? Grip pressure may be the culprit.

A constant light pressure - just tight enough to hold onto the club through the swing, but not enough to tighten the forearm muscles - will keep your upper body relaxed. This facilitates a full turn and acceleration through the ball.


Healthy Lifestyle
Get to the Point, Doc

Research shows that today's doctors are more rushed than ever and a doctor typically only sees each patient for an average of three minutes per office visit. To get the most out of your time with the doctor, come prepared with a written list of symptoms or issues and get right to the point. According to recent patient satisfaction reports, patients who bring up issues right at the start of the appointment are more likely to feel satisfied with the visit and follow their doctor's recommendations.


Green Living
Share a Subscription

Do you find that old magazines pile up and eventually get thrown away? There's a good chance you have a friend or neighbor who is doing the exact same thing. Sharing a magazine subscription with someone will not only save you money, but will also cut down on the amount of trees used!

Share the Wealth of Knowledge!

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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 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.

The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.

The Pending Home Sales Index, a leading indicator of housing activity,  measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops.  The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.

The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.

The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.

The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.

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.

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Consult your financial professional before making any investment decision.

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Pat Webb
Pat Webb - Phase 2 Advisors
8100 Turman Ct
Fort Collins, CO 80525
970-776-3306
patwebb@phase2adv.com
http://www.phase2adv.com