U.S. and World News
- Minutes from the October Fed meeting were released this week and were largely in line with market expectations. Members generally believed that tapering of asset purchases was not warranted in the immediate-term but pointed out that if economic conditions warranted, the Fed could decide to reduce asset purchases at one of its next few meetings. The minutes left a December taper on the table, although it seems more likely that any action will be pushed off likely until March of next year after the next round of debt ceiling negotiations take place in Washington D.C.
- China has announced a sweeping economic reform plan that is being characterized by some analysts as “the biggest freeing up of China’s economic policy since the 1990’s.” The proposals include financial reforms, allowing the market to set prices and an easing of the country’s one child policy. If implemented successfully, these reforms would substantially reduce the downside risks associated with China’s economy.
- IT experts provided a warning to a Congressional hearing this week saying that the Healthcare.gov website should be shut down as it is full of security flaws that could expose the extremely sensitive user data of millions of people. These experts recommended a complete rebuild of the troubled website so that it would run better and make it more secure.
- Last week President Obama announced people would indeed be allowed to renew their current health insurance plan for 2014 if they wished, following many Americans finding that their plan would not be renewed by their insurer despite Obama’s proclamation that “if you like your plan, you can keep it.” The President may have spoken too soon yet again as there are at least five states that won’t be letting those plans be reinstated, as they believe it would harm their state health care exchanges. Many individual carriers are also not allowing their customers to extend their old policies, due to time constraints and other obstacles and if they are allowing them to be renewed, many will be increasing premiums substantially.
- Stock markets set new record highs again this week as the S&P 500 Index increased by 0.40%, closing at 1,805. The Dow Jones Industrial Average was up 0.68% to close at 16,065. The S&P and the Dow respectively are up 26.54% and 22.59% year to date.
- Treasury yields rose some this week on some comments within the Fed minutes indicating that tapering could be coming in the next few months. The 5 year and 10 year treasury are now yielding 1.36% and 2.75% respectively.
- The spot price of WTI Crude Oil went up this week, rising by 1.20% and closing at $94.83per barrel. Year to date, oil is now up 1.76%.
- The spot price of Gold dropped this week, falling by 3.62% and closing at $1,243.47 per ounce. Gold is now down 25.78% this year.
- Initial jobless claims fell from last week to 323,000 vs. consensus estimates of 335,000. The four week moving average for claims fell to 338,000. The Labor Department noted that while no states estimated claims, seasonal adjustment around the Veterans’ Day holiday may be affecting claims numbers.
- The level of existing home sales declined more than expected in October, falling by 3.2% vs. expectations of a 2.9% drop. The decline in existing home sales, which measures closings rather than contract signings, follows several months of weaker pending home sales numbers, potentially reflecting the impact of higher mortgage rates. Despite the weaker October numbers, existing home sales have risen 6.0% in the last 12 months.
- Inflation data continues to come in lower than expected with the headline Consumer Price Index falling 0.1% vs. expectations of being flat. Energy price decline of 1.7% in the month was the largest contributor. This report points to a continued subdued inflationary trend and may result in any tapering by the Fed being pushed back even further than expected.
Fact of the Week
- According to a study by the Department of Labor, private sector employers of union workers pay almost four times as much money for retirement benefits (per hour worked by an employee) as compared to private sector employers of non-union workers.
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*Official portrait of Janet L. Yellen, Vice Chair of the Board of Governors of the Federal Reserve System. Source: Obtained via email from Federal Reserve OPA. Date: October 5, 2010. Author: United States Federal Reserve. Permission by Public Domain, per correspondence with the Federal Reserve (See, http://commons.wikimedia.org/wiki/File:Janet_Yellen_official_portrait.jpg).