Pump Up the Volume – DANCE

It was a one hit wonder from the 1980’s by MARRS and it evokes memories of pegging my jeans and wearing preppy blucher shoes that I tied the laces into little curly cue knots.  What was I thinking!?  Actually, I was thinking that they probably looked cool with my Van Halen jean jacket.

Even though the major indices were essentially flat for the week, people seem to be staying at the current dance in the market despite some weaker economic news last week coupled with good data on housing.

Here’s how markets finished up the week.

Some data released by the regional Federal Reserve Banks of New York and Philadelphia showed that manufacturing started out September on, how shall I state this, a way that would make you check a baby’s diaper.  In addition to that, weekly jobless claims remain elevated and the Leading Economic Index, which is supposed to predict future trends, fell 0.1% in August. It is now down in three of the last six months, including two of the last three.  Finally, some data coming out of Europe and China are signaling that the recession in Europe isn’t subsiding while manufacturing in China continues to struggle.

BUT – there is the housing news.  It’s good and it keeps getting better.

Look, here’s the deal – a huge component of the economy’s health has to do with housing and cars.  You can, to some extent, ignore all the other economic reports and just watch these two things.  Call it the “RedZone Channel” of domestic economics.   There is still a long way to go, but there was a 7.8% rise in existing home sales in August and that’s the best reading in 2 years.  Tack onto that the +10% rise in home prices in the same month and you have what we call…a winner. Here’s why – the increase in housing prices is more important that the increase in the number sold.  Don’t get me wrong, both are important and both numbers in August were good but the increase in prices lifts consumer confidence, lifts consumer net worth, encourages buyers to get off their butts and buy, and it also helps the overall banking system.

Finally, earnings season is about to start again. Yup – it’s almost the 4^th quarter.  I just know my next trip to Home Depot will treat me to a display of – gasp – Holiday decorations… I think this is why as I’ve gotten older, time seems to fly by even faster.  I now pay attention to the calendar quarters vs. when school starts and ends like when I was a kid.

Just like we have seen over the past few quarters, the analysts on Wall Street have already reduced their earnings estimates for the third quarter and the companies that have adjusted their own forecasts down have mostly warned everyone that things don’t look so grand.  So while poor demand in the U.S., a recession in Europe, and moderating growth in China are all impeding profits at U.S. corporations, much of the bad news is already out there.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 is an unmanaged index generally comprised of companies with lower price-to-book ratios and lower forecasted growth values.  The 2, 10 and 30 year Treasury is simply the yield at the close of the day.

⁽¹⁾      West Texas Intermediate crude spot price is as of end of week.

⁽²⁾      London Bullion Market Association; gold fixing pricing at 3 p.m. London time.