Last week saw many important economic developments that \u2013 for most investors \u2013 made for a very good week.<\/p>\n
Positive<\/strong><\/p>\n Probably last week\u2019s biggest news came out of Europe.\u00a0 Germany\u2019s Constitutional Court ratified the country\u2019s participation in the 700-billion-euro European<\/strong> Stability Mechanism (ESM<\/strong>), the euro zone bailout fund.\u00a0 Germany is liable to contribute 27% of the ESM, or about 190 billion euro.\u00a0 Combined with the European Central Bank\u2019s plans to buy the government bonds of struggling countries and the establishment of the ESM, investors will see the European crisis in better control, which is certainly positive to global capital markets.<\/p>\n As the market expected and longed for, the Federal Open Market Committee announced the third round of quantitative easing (\u201cQE3\u201d) to help foster maximum employment.\u00a0 The Fed will purchase additional agency mortgage-backed securities at a pace of $40 billion per month.\u00a0 In addition to June\u2019s accommodative program, the Fed will acquire longer-term securities by about $85 billion each month, which would help keep longer-term interest rates from rising and help support the mortgage market.\u00a0 The committee also decided to extend current fed fund rates near the zero level from late 2014 to at least mid 2015.<\/p>\n The University of Michigan\u2019s consumer sentiment index<\/strong> climbed to 79.2 in August from 74.3 in July, above the projected level of 74.\u00a0 Gradual improved consumer sentiment will help the economy to keep edging forward and support 70% of the economy.<\/p>\n Negative<\/strong><\/p>\n Initial jobless claims<\/strong> in the week ending September 8th rose unexpectedly to 382,000, an increase of 15,000 from the previous week.\u00a0 Special factors such as Tropical Storm Issac were cited to explain the approximately 9,000-application increase for initial unemployment benefits in several states.\u00a0 On the other hand, continuing jobless claims<\/strong> during the week ending September 1 declined by 49,000 to 3,283,000 from the preceding week.<\/p>\n Industrial production<\/strong> fell 1.2% in August, worse than the expected flat trend.\u00a0 Following a 0.5% gain in July, the index\u2019s unexpected monthly decline in August is the largest since March 2009, highlighting risks to the economic outlook.\u00a0 Output from manufacturing, mining and utilities all went downward.\u00a0 Hurricane Isaac had a negative impact on industrial activities in the Gulf Coast region at the end of the month.\u00a0 It was estimated to have taken away 0.3% from the monthly rate of change in total industrial production.<\/p>\n Capacity utilization rates<\/strong> shrank by 1% from 79.2% in July to 78.2% in August, 2.1% below its long-run average of 80.3%.\u00a0 There is still quite a bit of slack in the economy to keep inflation in check.<\/p>\n Mixed<\/strong><\/p>\n Headline CPI<\/strong> rose 0.6% in August, which was in line with expectations.\u00a0 However, it was the biggest monthly increase in CPI since June 2009.\u00a0 Gasoline saw the steepest price hike with a 9% increase from July, contributing 80% of August\u2019s CPI increase.\u00a0 Over the past 12 months, the gasoline index has increased 1.8% while the total energy index has actually declined 0.6%.\u00a0 The food index rose only 0.2% in the month; however, higher food prices are likely to surface after the worst Midwest drought in 76 years.\u00a0 General price declines occurred for used cars and trucks, apparel, household furnishings and airline fares.\u00a0 Excluding food and energy, the core index increased 0.1% month-over-month and was up 1.9% year-over-year.\u00a0 Overall, inflation pressures remained contained.<\/p>\n The Producer Price Index (PPI)<\/strong> for finished goods increased 1.7% in August, higher than consensus expectations of 1.2%.\u00a0 The finished energy goods index jumped 6.4% and led to more than 80% of the broad-based rise in PPI.\u00a0 Excluding foods and energy, the core PPI advanced mostly by 0.2%, which was in line with expectations.<\/p>\n Retail sales<\/strong> were up 0.9% month-over-month in August, slightly higher than the median forecast of 0.8%.\u00a0 Gasoline stations\u2019 sales soared by 5.5% compared to July and were mainly driven by higher gas prices at the pumps.\u00a0 Building-material and garden-equipment stores and auto-and motor-parts stores all experienced above 1% increase in sales.\u00a0 Excluding the above items, the core component of retail sales rose only 0.1%, missing the 0.4% median forecast.\u00a0 Sales at electronics stores declined by 1.4%, the weakest in all categories.<\/p>\n Market Notes <\/em><\/strong><\/p>\n Period ending 9\/14\/2012<\/strong><\/td>\n 1 Week (%)<\/strong><\/p>\n<\/td>\n YTD (%)<\/strong><\/p>\n<\/td>\n<\/tr>\n 2.20<\/p>\n<\/td>\n 13.47<\/p>\n<\/td>\n<\/tr>\n 1.99<\/p>\n<\/td>\n 18.40<\/p>\n<\/td>\n<\/tr>\n 2.71<\/p>\n<\/td>\n 17.84<\/p>\n<\/td>\n<\/tr>\n 3.71<\/p>\n<\/td>\n 14.1<\/p>\n<\/td>\n<\/tr>\n 4.67<\/p>\n<\/td>\n 10.66<\/p>\n<\/td>\n<\/tr>\n -0.40<\/p>\n<\/td>\n 3.17<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n 3 Mo.<\/strong><\/p>\n<\/td>\n 2 Yr.<\/strong><\/p>\n<\/td>\n 5 Yr.<\/strong><\/p>\n<\/td>\n 10 Yr.<\/strong><\/p>\n<\/td>\n 30 Yr.<\/strong><\/p>\n<\/td>\n<\/tr>\n 0.02<\/p>\n<\/td>\n 0.25<\/p>\n<\/td>\n 0.83<\/p>\n<\/td>\n 1.89<\/p>\n<\/td>\n 2.89<\/p>\n<\/td>\n<\/tr>\n 0.11<\/p>\n<\/td>\n 0.25<\/p>\n<\/td>\n 0.64<\/p>\n<\/td>\n 1.67<\/p>\n<\/td>\n 2.81<\/p>\n<\/td>\n<\/tr>\n 0.11<\/p>\n<\/td>\n 0.27<\/p>\n<\/td>\n 0.72<\/p>\n<\/td>\n 1.88<\/p>\n<\/td>\n 3.09<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Risky assets saw the most rallies last week after the positive ruling by the German high court and additional easing measures announced by the Fed.\u00a0 Foreign stocks outperformed domestic stocks for the week, helped by the weakening dollar and investors\u2019 increased appetite for risk.\u00a0 Small-cap stocks beat large-cap stocks.\u00a0 From the sector perspective, energy, materials, and financial stocks led the market, while utilities, consumer staples and health care lagged.\u00a0 The release of the iPhone 5 sent Apple\u2019s stock price to almost $700 per share.\u00a0 As the largest U.S. company ever, Apple\u2019s market cap reached $648 billion.<\/p>\n The U.S. Treasuries yield curve steepened sharply, with the longer-term securities yield up the most.\u00a0 Bonds underperformed stocks. Investors shied away from treasuries and pursued mortgage-backed securities, corporate bonds and high yield bonds.\u00a0 Treasury Inflation-Protected Securities (TIPS) performed well, too, as investors raised their future inflation expectation.<\/p>\n The Fed\u2019s further quantitative easing also sparked rallies in several commodity markets.\u00a0 For example, gold and silver have climbed to six-month highs as demand for a hedge against potential inflation rose.\u00a0 Geopolitical tensions in the crude-rich Middle East and the Fed\u2019s accommodative stance to stimulate the economy strengthened global oil prices.<\/p>\n Have a good week.<\/p>\n Karl Schroeder, RFC, CSA, AACEP<\/p>\n Investment Advisor Representative<\/p>\n Schroeder Financial Services, Inc.<\/p>\n 480-895-0611<\/p>\n Sources:\u00a0 FocusPoint Solutions, Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, Goldman Sachs, JPMorgan Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Thomson Reuters, Schroder\u2019s, Standard & Poor\u2019s, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.\u00a0 Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return\/excluding dividends.\u00a0 Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.<\/p>\n The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.\u00a0 All information and opinions expressed are subject to change without notice.\u00a0 Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.\u00a0 Schroeder Financial Services, Inc. is a registered investment advisor.<\/p>\n","protected":false},"excerpt":{"rendered":" Last week saw many important economic developments that \u2013 for most investors \u2013 made for a very good week. Positive Probably last week\u2019s biggest news came out of Europe.\u00a0 Germany\u2019s Constitutional Court ratified the country\u2019s participation in the 700-billion-euro European Stability Mechanism (ESM), the euro zone bailout fund.\u00a0 Germany is liable to contribute 27% ofRead more<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-912","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/912","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/comments?post=912"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/912\/revisions"}],"predecessor-version":[{"id":913,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/912\/revisions\/913"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=912"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=912"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=912"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n\n
\n \n \n \n \n DJIA<\/td>\n \n \n \n S&P 500<\/td>\n \n \n \n Russell 2000<\/td>\n \n \n \n MSCI-EAFE<\/td>\n \n \n \n MSCI-EM<\/td>\n \n \n \n BarCap U.S. Aggregate<\/td>\n \n \n \n\n
\n U.S. Treasury Yields<\/strong><\/td>\n \n \n \n \n \n \n 12\/31\/2011<\/td>\n \n \n \n \n \n \n 9\/07\/2012<\/td>\n \n \n \n \n \n \n 9\/14\/2012<\/td>\n \n \n \n \n \n