The week that was:
The U.S. markets traded in a tight range and were mostly unchanged this week as it seems that most investors are anxiously awaiting election results and the Fed’s announcement on QE2.
Federal data indicated Friday that the U.S. economy grew at a slightly faster pace in the 3rd quarter but not by enough to raise hopes that unemployment will decrease.
Stocks:
The S&P 500 rose 0.18 points this week, or 0.02%, to 1183.26. During October, the S&P was up 3.06%, which constitutes it’s best October performance since 2006. The Nasdaq Composite rose 28.02 points, or 1.13%, to 2507.41. It rose 5.86% during October, which equals the biggest October percentage gain since 2003. The Dow Industrials fell 14.07 points, or 0.13%, to 11118.49. The Dow is up 3.06% on the month, which equates to it’s best October performance (point and percent) since 2006.
- Ford (F) reported a 69% jump in third-quarter earnings and said it would pay down $2 billion of debt and use cash to fully prepay the remaining $3.6 billion of debt owed to a health-care trust for retirees. The stock is up over 100% over the trailing twelve months.
- Microsoft (MSFT) posted a 52% gain in fiscal first-quarter profit as it benefited from widespread adoption of its Windows operating system and Office suite of tools. MSFT is underperforming the Nasdaq by 22% YTD.
- General Motors said it will buy back $2.1 billion worth of preferred stock held by the U.S. Treasury Department before raising funds in an IPO next month.
Bonds:
| End of week bond yields: |
| 2 Year yield = 0.34%, down 2 bps from last week. |
| 3 Year yield = 0.49%, down 4 bps from last week. |
| 5 Year yield = 1.13%, down 2 bps from last week. |
| 10 Year yield = 2.60%, up 4 bps from last week. |
| 30 Year yield = 3.98%, up 5 bps from last week. |
- The government auctioned $10 billion in 4 ½ year TIPS at a yield of -0.55%. This is the first time ever that TIPS have sold for a negative yield. It means that investors in these bonds are guaranteed to earn a return at 0.55% below inflation in the next four and a half years. Apparently this is the price for safety.
What to look for next week:
7:30 AM Monday Personal Income and Outlays
9:00 AM Monday ISM Manufacturing Index
Tuesday Elections
- Republican victories in the midterm elections are likely to increase the ideological gap between the parties in Congress.
1:15 PM Wednesday FOMC Meeting Announcement
- The Federal Reserve is expected to announce another round of quantitative easing. According to a Dow Jones Newswires survey, 11 of the 18 biggest banks in the world believe that the Fed will purchase a total of about $1 trillion in bonds during the course of the program.
7:30 AM Friday Employment Situation
- Unemployment is expected to remain at 9.6%.
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