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Markets Drop on Fed Fears
Weekly Update - May 29, 2013
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In This Issue
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The Markets:
Stocks entered the holiday weekend down on worries that the Fed might cut back its quantitative easing. For the week, the S&P 500 dropped 1.07%, the Dow lost 0.33%, and the Nasdaq lost 1.14%.[1]
Fed officials went into a full-court communications press as markets wobbled on fears the Fed might begin shuttering its bond-buying program. To counter these worries, Fed officials stressed that there is no rush to exit and that the program is not on "autopilot;" rather, bond purchases will be scaled up or down as future conditions warrant. In a speech before the Joint Economic Committee, Fed Chairman Ben Bernanke warned that premature tapering could stall the recovery and reiterated that any tightening of monetary policy would be cautious and considered.[2] While it's good news that the Fed isn't rushing for the exits, we can expect additional volatility in the coming months as markets prepare for the end of easy Fed money.
While markets reacted poorly to the Fed's news, economic data last week was generally positive. The number of Americans applying for unemployment benefits fell last week, pointing to continued resilience in the jobs market despite the effects of sequestration. The improving employment picture is also propping up the housing market and consumer sentiment, with rising home prices supporting consumption and keeping Americans upbeat. The drop in unemployment claims erased most of the previous weeks' increase and indicates that employers are not laying off workers despite the fiscal austerity.[3]
Markets will be very focused on the economy this week, as a number of important economic reports are due to be released, including: consumer confidence, revised Q1 GDP, housing reports, and weekly jobless claims. The Thursday jobs report, the last one before the June 7th release of the May jobs report, will be closely watched as traders look for clues about final May numbers. The May report is the next major milestone for the Fed since it has targeted a 6.5% unemployment rate as part of its mandate. If there is significant improvement over the 165,000 new jobs created in April, we can expect the Fed to look for confirmation over the next few months and begin to talk more seriously about tapering the bond program.[4]
ECONOMIC CALENDAR:
Monday: U.S. Markets Closed for Memorial Day Holiday
Tuesday: S&P 500 Case-Shiller HPI, Consumer Confidence, Dallas Fed Mfg. Survey
Thursday: GDP, Jobless Claims, Pending Home Sales Index, EIA Petroleum Status Report
Friday: Personal Income and Outlays, Chicago PMI, Consumer Sentiment
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Performance  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. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
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Headlines
Durable goods orders rise. A surprisingly high increase in orders for long-lasting factory goods suggests that a manufacturing slowdown may be ending. New orders for factory goods rose 3.3% in April, roundly beating estimates of a 1.5% increase.[5]
Public schools spent less per student in 2011. In a sign that the Great Recession has reached public school budgets, a Census report shows that the amount per student spent by schools fell in 2011 for the first time in more than 30 years. Overall, nationwide school spending dropped less than one percent per student, but the number reflects greater declines in certain geographic areas.[6]
China's factory activity shrinks in May. Chinese factory production fell for the first time in seven months, indicating that its economic recovery may have stalled and another recession may be imminent. Since China is largely a manufacturing-based economy, policy makers must decide whether to act now to boost growth or risk a cool-off while laying groundwork for long-term economic activity.[7]
Oil prices drop on weak economic outlook. Brent crude dropped close to $102 per barrel after disappointing economic data from China and high oil supplies in the U.S. forecasted softer demand. Weaker demand and ample gasoline stockpiles in the U.S. might mean lower oil prices this summer.[8]
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"To have a great idea, have a lot of them."
- Thomas Edison
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Green Bean and Pasta Salad  This simple pasta dish is full of healthy fats and green vegetables. Recipe from RealSimple.com.
Ingredients:
4 ounces fresh fettuccini
4 ounces green beans, halved crosswise (about 1 cup)
1/4 cup chopped fresh flat-leaf parsley
2 tablespoons shaved Parmesan (2 ounces)
2 tablespoons olive oil
2 tablespoons fresh lemon juice
kosher salt and black pepper
Directions:
Cook the pasta according to the package directions, adding the green beans during the last 3 minutes of cooking. Drain and run under cold water to cool.
Toss the cooled pasta and green beans, parsley, Parmesan, olive oil, lemon juice, � teaspoon kosher salt, and � teaspoon black pepper. Divide the salad between 2 containers and refrigerate for up to 1 day.
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Train Your Putting Like the Pros
Having issues with putting? Here's a back-to-basics drill, coach Butch Harmon claims to have used when coaching Tiger Woods:
Set up two tees just wider than your putterhead, and practice stroking short putts without bumping the tees. "Tiger used to start with his right hand only, then add the left after a while." he's quoted as saying.
As he explains, the beauty of this technique is that "it gives you instant feedback. If you loop your stroke to the outside coming into the ball, you'll hit the outside tee. If you swing too much from the inside, you'll hit the inside tee. Great drill." Source: Golf Tips Mag.
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Eating Fruits & Vegetables?
Good! But bear in mind that some fruits and vegetables have been known to have high levels of chemicals.
Apples, bell peppers, celery, cherries, grapes (imported), nectarines, peaches, pears, potatoes, spinach and strawberries may all present quite high levels of pesticide residue. Check out www.foodnews.org for info and a free copy of their "Pesticides in Produce" guide.
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Donate or Recycle Electronics
Much energy is expended producing and shipping electronic devices, so it's vital to get as much "mileage" out of them as possible. Reusing electronics also keeps harmful metals and plastics from reaching landfills. So, the idea is to extend the usage of any electronic device for the longest possible time and resisting (as much as possible!) the urge to purchase all of the latest gadgets.
Another great alternative is to donate unused equipment. Check out the www.epa.gov for a list of places to donate used electronics.
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Share the Wealth of Knowledge!
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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.
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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.
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[1] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-may-20-2013.htm
[2] http://www.reuters.com/article/2013/05/23/us-fed-bullard-idUSBRE94M0GO20130523
[3] http://www.reuters.com/article/2013/05/24/us-usa-economy-idUSBRE94M0K220130524
[4] http://www.cnbc.com/id/100764914
[5] http://www.reuters.com/article/2013/05/25/us-durable-goods-idUSBRE94N0FR20130525
[6] http://www.cnbc.com/id/100765235
[7] http://www.reuters.com/article/2013/05/23/us-china-economy-flash-pmi-idUSBRE94M02720130523
[8] http://news.yahoo.com/brent-drops-towards-102-weak-demand-outlook-hurts-081811016.html
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