U.S. and World News
- The U.S. government remains partially shut down as Republicans and Democrats can’t get on the same page to pass legislation that would fund the government. The funding issue is now being rolled into the reaching of the debt ceiling which is set to take place on October 17th. So far, only short term ‘solutions’ are being discussed with House Speaker John Boehner offering a temporary debt ceiling extension if President Obama agrees to negotiate a reopening of the government. This would potentially buy time for wider budget talks to be had but is being viewed as yet another ‘kick the can down the road’ type of measure.
- One piece of uncertainty was cleared up this week as President Obama announced he will nominate Janet Yellen as the first woman Chair of the Federal Reserve who will take over for Ben Bernanke when his term runs up in January. Yellen, who is known as a bit of a dove when it comes to monetary policy (accommodative), will have to be confirmed by the Senate, although that is not expected to be a major hurdle.
- Minutes from the Fed’s most recent meeting show that most FOMC members still see a tapering of asset purchases beginning this year. The decision to not begin the process in September being a “close call”. Members were aware that the September decision would be a surprise to the market but the majority felt that it was prudent to hold steady after the latest jobs data had been disappointing.
- Stock markets rose unassumingly this week amid turmoil in Washington D.C. as the S&P 500 Index increased by .75%, closing at 1,703. The Dow Jones Industrial Average was up 1.09% to close at 15,237. The S&P and the Dow respectively are up 19.42% and 16.28% year to date.
- Treasury yields climbed higher this week with the 5 year and 10 year treasury yielding 1.42% and 2.69% respectively.
- The spot price of WTI Crude Oil fell this week by 1.91%, closing at $101.86 per barrel. Year to date, oil is up 8.96%.
- The spot price of Gold dropped by 3.09% this week and closing at $1250.57/ounce. Gold is now down 24.16% this year.
- Weekly Initial Jobless Claims rose sharply this week, the most since Hurricane Sandy, climbing by 66,000 and coming in at 374,000 vs. expectations of 311,000. The Labor Department attributed the majority of the increase to issues with California’s processing issues and the government shutdown. As a result, not much can be taken from the report.
- While the headline unemployment figure has been slowly improving, job churn remains well below pre-crisis levels. In July, 2.3 million people quit their jobs vs. almost 3 million in 2007. Job churn is seen as lubricant for the economy, because it usually means workers are improving their income and/or moving away from poor companies to better ones. It also opens up positions for the unemployed but with the jobless rate still elevated, employees are staying put.
Fact of the Week
- The current partial government shutdown is the 12th such shutdown since 1980. Of the previous 11, the first 9 all lasted 3 days or less. The 10th shutdown (starting in November 1995) lasted 5 days and the 11th (starting in December 1995) lasted 21 days. The current shutdown is going on 11 days as of Friday.
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