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MARKET WEEK: JULY 18, 2011

July 18, 2011

John Jastremski Presents:

 

MARKET WEEK: JULY 18, 2011
The MarketsDespite the wrangling over the deficit and its connection to the debt ceiling, Treasury securities held up well; prices even rose slightly as investors sought refuge from anxieties over Europe’s financing problems, particularly Italy’s. However, domestic equities gave up some of the previous two weeks’ gains as uncertainty led some investors to book profits.
Market/Index 2010 Close Prior Week As of 7/15 Week Change YTD Change
DJIA 11577.51 12657.20 12479.73 -1.40% 7.79%
NASDAQ 2652.87 2859.80 2789.80 -2.45% 5.16%
S&P 500 1257.64 1343.81 1316.14 -2.06% 4.65%
Russell 2000 783.65 852.57 828.78 -2.79% 5.76%
Global Dow 2087.44 2148.99 2095.71 -2.48% .40%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.30% 3.03% 2.94% -9 bps -36 bps

Last Week’s Headlines

  • With roughly two weeks left until August 2 and Congress unable to agree on a path to raising the debt ceiling, both Moody’s and Standard & Poor’s placed the United States on review for possible downgrade of its credit rating. Both cited the risk of at least a short-lived default, as did a Chinese rating agency. Meanwhile, Senate Minority Leader Mitch McConnell proposed fail-safe legislation that would permit President Obama to raise the debt ceiling by up to $2.4 trillion in three stages.
  • Concerns over the financing needs of the European Union’s third largest economy sent yields on Italy’s sovereign bonds soaring, increasing the cost of borrowing when the country already faces a budget deficit. Meanwhile, Moody’s downgraded Ireland’s debt to junk status. Finally, eight European banks failed the stress tests designed to show whether they have enough capital to withstand financial shocks.
  • Hurt by high oil prices in June, the U.S. trade deficit rose to its highest level since October 2008. According to the Bureau of Economic Analysis, the gap between imports and exports hit $50.2 billion, an increase of more than 15% from April. Declines in exports of consumer goods and industrial materials were responsible along with more imports of industrial materials and capital goods.
  • Prices at the consumer level fell in June for the first time in a year, though a decline in gas prices was chiefly responsible. The Bureau of Labor Statistics said prices other than food and energy rose 0.3%, putting the inflation rate over the past 12 months at 3.6%. Meanwhile, wholesale inflation also fell 0.4% in June for a 12-month inflation rate of 7%.
  • Helped by worries about European debt and U.S. political wrangling over the debt ceiling, gold has bounced back from its $50-an-ounce slump of late June to hit a new record every day last week, ending at roughly $1,590.
  • Federal Reserve Chairman Ben Bernanke seemed to leave the door open to the possibility of further quantitative easing. However, he also said the Fed is expecting economic recovery to pick up and that QE3 is only one of several options for easing financial conditions if necessary.

Eye on the Week Ahead

Absent something unexpected, debt questions here and abroad will likely trump most other issues as earnings season continues.

Key dates and data releases: housing starts (7/19); home resales (7/20).

Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com,  access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at http://www.theretirementgroup.com.

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