The Dow Jones Industrial Average fell 2.1% this week but is still up 9.1% year to date and the S&P 500 slid 2.2% this week and is up 13.6% in 2012.
Links Worth Snacking On:
- Wall Street Oasis – For ballsy college seniors interviewing right now, how to ask for more $
- WonkBlog – The evolution of airfare in one chart
- The Atantic – The good & bad reasons oil prices are coming down
- NY Post – Don’t pay your debts, Argentina? This hedge-funder’s simply gonna repossess one of your ships
- Financial Post – The blueprint for a successful family biz
- The Wall Street Journal – How bad is Greece’s debt crisis? Their biggest company is going to a new country
- Businessweek – 3D printing. It’s happening. And it looks awesome.
So it looks like Lance Armstrong was in fact doping. A sad development for cycling fans and everyone who thought that French critics should mind their own business and just concentrate on what cheeses go with a Bordeaux. But whatever he was injecting for what felt like hundreds of those Tour de France victories, the market could have used some hits this past week. The 3rd quarter earnings season began to little enthusiasm as stocks fell most of the week, including 2 of the biggest losses in months.
Ah, earnings season. As usual (and alphabetically appropriate), Alcoa, America’s biggest steel & aluminum producer, started things off. Not well. The stock dropped on concerns of the company’s future earnings after they warned that growth in steel consumption will fall globally from 7% to 6%. Although revenues (sales in the cash register, before any costs) & earnings (profit) topped analysts’ expectations, China’s slowing growth and developed regions’ overall economic slowdown is simply going to hurt steel demand. As for jolly earnings season, investors are expecting revenues to fall this quarter for the 500 companies of the S&P 500 for the 1st time since ’09.
The 1st week of October was all about buildup for the major monthly Employment Report. This past week, the focus was just on 2 headlines. First the Fed released its “beige book,” which assesses economic growth in a bunch of industries nationally 8 times a year. The central bank confirmed that the economy is growing “modestly,” while the biggest improvement was in residential real estate. Despite the economy’s “general expansion,” investors were not that impressed and more worried about global slowdown concerns (see below for more on that).
The other highlight was the number of Americans filing for 1st time unemployment benefits, which dropped by 30K for its biggest decline since July. The number, indicating the number of people laid off from their jobs during the week, was the lowest since February of 2009. Despite this impressive Weekly Jobless Claims number, the Labor Department later noted that California was accidentally omitted, resulting in the big swing (insert California laziness joke here____).
Outside the US, things got catty. German Chancellor Angela Merkel paid a diplomatic visit to Athens (Athenians don’t like her). Germany’s relatively strong economy allows it to dictate the terms of much of the bailout packages that are saving debt-ridden countries like Greece. And the Greek government was graciously showing Merkel that they’re cutting budgets & increasing taxes to reduce debt – the average Greek citizen, on the other hand, feeling these austerity measures isn’t a huge fan. Protests raged during the German’s visit to Athens but investors were glad to see Greece is still making progress on their quest to reduce their deficits.
Outside the Aegean, the International Monetary Fund (who lends $ to struggling countries) revised its estimate of world GDP growth from 3.6% to 3.3% for this 2012 thanks to troubles in Europe and the American & Chinese growth slowdowns – global econ growth is the life force of global stock markets and the news dropped stocks internationally.
JP Morgan Chase and Wells Fargo made splashes on Friday morning as they both announced earnings that beat analysts’ expectations. JPMorgan’s results in particular were laughably awesome, despite the consensus that the global growth slowdown is going to take a toll on banking profits. Still, dubious and downright pessimistic investors found flaws in both of the banks’ earnings that made them sellers of the entire industry on Friday. Namely, interest rates are so low that banks aren’t making money on the business that they were born to do – make loans. Tightening loan margins convinced investors that tough times are still ahead for the American banks as regulations heighten and China and American reverse race each other, seemingly to see who can slow down faster.
To avoid hoards of MarketSnacks readers beginning this week by signing up for Oprah’s inspirational regular text messages, (“you’ve got to be willing to lose the financials sector, to find yourself”) let’s give you some news we can all be happy about. Both the CEOs of JPMorgan and Wells Fargo reflected that all of their business gains last quarter derived from the an improvement in the housing market. JPM made more cash because more people are buying houses, meaning not just mortgage related revenues for JPM, but also your home’s value is finally going up again! The MarketSnacks team, too, knows how to boost the spirits of down stock enthusiasts.
- Monday – September Retail Sales, Earnings: Citi
- Tuesday – September Consumer Price Index, Earnings: Coca-Cola, IBM
- Wednesday – September Housing Starts & Building Permits, China’s 3rd Quarter GDP, Earnings: American Express, Bank of America
- Thursday – Weekly Jobless Claims, the EU’s 2-day leaders meeting begins, Earnings: Microsoft, Google, Verizon
- Friday – September Existing Home Sales, Earnings: McDonald’s, General Electric
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