- The U.S. government is heading for a shutdown if a budget agreement can’t be reached by October 1st. On Friday, the Senate passed a continuing resolution to keep the government running past the Monday night deadline. However, it included funding measures for Obamacare which is a major point of contention in the Republican-majority House where this resolution is expected to be voted down. Negotiations will take place over the weekend and any potential deal is likely to come right down to the deadline.
- Meanwhile, Treasury Secretary Jacob Lew believes that investor confidence that Washington will agree to a deal to increase or extend the debt ceiling is probably greater than it should be. Republicans and Democrats have until the middle of October to come up with something on that front after an agreement is reached on a funding bill.
- Angela Merkel and her Christian Democratic Union (CDU) achieved victory in last weekend’s German elections. Merkel maintains her role as the Chancellor of Germany, a post she has held since 2005 and will continue her efforts to strengthen Germany and the European Union.
- Stock markets fell this week, possibly due to the uncertainty in Washington D.C. as the S&P 500 Index dropped by 1.06%, closing at 1,692. The Dow Jones Industrial Average was down 1.25% to close at 15,258. The S&P and the Dow respectively are up 18.62% and 16.44% year to date.
- Treasury yields continued to drop 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 1.41% and 2.63% respectively.
- The spot price of WTI Crude Oil continued its decline this week as rhetoric out of Iran regarding a supply interruption has died down. Spot prices fell by 1.84%, closing at $102.82 per barrel. Year to date, oil is up 10.00%.
- The spot price of Gold was up this week, rising by 0.81% and closing at $1,336.64/ounce. Gold is now down 20.22% this year.
- Weekly Initial Jobless Claims came in artificially low again this week, falling by 4,000 and coming in at 305,000 vs. expectations of 325,000. Again, this data cannot be relied upon as an indication of labor market strength as the Labor Department noted that the claims numbers are still being affected by processing issues.
- Pending home sales declined a bit more than expected in August, falling by 1.6% vs. expectations of -1.0%. The moderate decline in pending home sales (based on contract signings) over the past several months is an unfavorable indicator for future existing home sales reports (based on closings).
Fact of the Week
- Using the Consumer Price Index as the gauge of inflation, an individual living on a fixed income (same year to year) for the last 20 years would have suffered a 38% loss of purchasing power over those two decades.
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