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In the Markets – Week-Ending October 7th

by Peter J. Creedon

Newsletter: In the Markets – Week-Ending October 07
Crystal Brook Advisors
We Make Financial Planning Crystal Clear

United States: The stock slopped after the release of weaker-than-expectations job report. In September, American employers continued to add 156,000 jobs at a modest pace, less than expected by economists. The unemployment rate increased by 0.1% from August up to 5%. The labor-force participation rate ticked up to 62.9% and expected to decline further in the coming years. Average hourly earnings for private-sector workers were up 2.6%, which was the 72nd consecutive month.(1)

Europe: Prime Minister announced that she will invoke Article 50 to get the advantage of EU. However, German Prime Minister Merkel signalled her toughening stance on Brexit Talk and won’t treat U.K. specially. (2) Driven by weaker prices of imported goods, Switzerland’s consumer prices continues to fall. However, the drop is much moderate than last year. Consumer prices may return to positive later this year and into 2017. (3)

Asia: Japanese air-bag supplier Takata is weighing U.S. bankruptcy filing due to huge recall cost with auto maker. (4)  Loose home-purchase curbs and lending policies have led to a buying craze in China. According to BNP Paribas, more than a third of new loans in the first half year went to housing, which made household debt soar to unprecedented levels.(5)

Latin America: Recently, Brazil approved a bill that allows more foreign investments in the nation’s offshore oil field. Support believes that the bill is significant to revive critical oil sector and further boom ailing economy. Due to reduction of food costs, the nation’s inflation rate also dropped in September. (6)

Monday 10/03
  • Both PMI Manufacturing and construction spending dropped. Output and new orders expand at a slower rate. Nevertheless, average American spending remained unchanged. (7)
  • According to federal data, prescription drugs expenditure has risen 8%, compared with a 5.6% increase on all health-care consumption. Drugmakers blame rising drug price on the practice of privately negotiating rebates. Wholesalers, pharmacies and pharmacy-benefit managers all have incentives to take their benefits from prescriptions in the current dysfunctional system. (8)
Tuesday 10/04
  • The pound drops by about 1% to its lowest level since 1980s, roughly 15% lower than on “Brexit” vote day. Uncertainty over Britain’s trade deal with Europe may lead the pound to further fall. (9)
  • Gold price slipped below $1,300 per ounce and closed to a three-month low of $1,290.6, which was dragged down by oil. Investors    have an acute response to economic change and expected an interest rate increase. (10)
Wednesday 10/05
  • Moody’s anticipated that the default rate of high-yield corporate debt will decrease next year, drop from 5.7% to 4.5%. It benefits from a rebound in commodity prices and good capital market access. (11)
  • Private-equity firm Pretium Partners increased investment on residential real estate. They expected a growth of single-family rental because of tight credit availability for new households. (12)
Thursday 10/06
  • According to the Freddie Mac Report, mortgage rates remain unchanged even though the treasury yields fluctuated in recent days. The average 30-year fixed rate is 3.42%. The average 15-year fixed rate is 2.72%. (13)
  • Verizon is trying to get $1 billion discount on its 4.83 billion to acquire company’s internet business. Yahoo’s secret program to scan customer e-mails at the U.S. government’s request has lessened the company’s value.  (14)
Friday 10/07
  • Blackrock, the world’s largest asset management cut its management fee on iShares ETF to 0.04% and other ETF has zero management fees. ETF funds can rebate from security leading, which covers the management fee. (15)
  • McDonald’s is losing the burger market. The growth rate of hamburgers sold at McDonald’s in the U.S. dropped from 1-2% to 0%. More than 25% of millennials prefer to try better and made-to-order hamburgers.  (16)

Market Close

U.S. stocks close lower on Friday because of the worse-than-expected job report after a turbulent week. The Dow Jones Industrial Average DJIA, -0.15% fell 28.01 points, or 0.2%, to close at 18,240.49, weighed down by declines in United Technologies Corp. UTX, +0.01% and Home Depot Inc. HD, -0.01%. The S&P 500 Index SPX, -0.33% declined 7.03 points, or 0.3%, to finish at 2,153.74, led by declines in the materials and industrials sectors. The Nasdaq Composite index COMP, -0.27% slipped 14.45 points, or 0.3%, to close at 5,292.40. For the week, both the Dow and the Nasdaq declined 0.4%, while the S&P 500 fell 0.7%. (18)

Contributor: Dan Wang

Sources:
(1 – 17) Source: Wall Street Journal
(7,10,11,12,13,14) Source: Seeking Alpha 
(18) Source: MarketWatch