- Fed Chairman Ben Bernanke surprised markets this week when he announced that the Federal Reserve would not be tapering their $85 billion per month in asset purchases. Bernanke stated that they are waiting for more evidence that economic progress will be sustained as the economy is still well away from their stated goals of 6.5% unemployment and 2.0% inflation expectations. The announcement sent stock markets higher and interest rates lower. The focus now shifts to the likely final meetings of Bernanke’s term and if the process of tapering will occur under his watch or his eventual successor remains to be seen.
- Larry Summers has withdrawn his name for consideration to become the next Chairman of the Federal Reserve, saying that the confirmation process would be ugly and would not serve the interests of the Fed or the economy. The remaining top contenders are Janet Yellen and Don Kohn, both of whom helped shape the Fed’s super easy monetary policy, of which Summers was a critic.
- The U.S. and Russia have reached a deal whereby Syria will have a week to provide information about its chemical weapons and then until the middle of next year to let international inspectors destroy them. However, given Syria’s civil war, it’s not clear how realistic the timetable is. President Obama stated that if the agreement is not implemented, the U.S. is prepared to take military action.
- Stock markets gained again this week, reaching all-time highs midweek following the Fed’s decision to delay the tapering of asset purchases. The S&P 500 Index rose by 1.30%, closing at 1,710. The Dow Jones Industrial Average was up 0.49% to close at 15,451. The S&P and the Dow respectively are up 19.89% and 17.91% year to date.
- Treasury yields dropped this week on the back of the Fed’s decision to delay tapering of asset purchases with the 5 year and 10 year treasury yielding 1.49% and 2.74% respectively.
- The spot price of WTI Crude Oil declined this week on lessening odds of a Syria strike, falling by 2.47%, closing at $104.88 per barrel. Year to date, oil is up 12.20%.
- The spot price of Gold was flat this week, rising by 0.1% and closing at $1,326.41/ounce. Gold is now down 20.82% this year.
- Weekly Initial Jobless Claims came in artificially low again this week, rising by 17,000 and coming in at 309,000 vs. expectations of 330,000. Again, this data cannot be relied upon as an indication of labor market strength as the Labor Department noted the low level of claims was due to processing problems in two states that underestimated the amount of claims.
- Total housing starts rose 0.9% in August which was lower than expectations of 2.3%, however the less volatile single family home starts posted a solid 7.0% gain, rising to a five-month high.
- Total building permits also came in lower than expectations, falling by 3.8%. Again however, the single family permits showed strength as they rose by 3.0%, a new post-recession high.
Fact of the Week
- The United States and China are the top two oil consuming nations in the world with a combined 28.8 million barrels consumed per day. This is more consumption than the next 10 countries combined.
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