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MARKET WEEK: DECEMBER 19, 2011

December 21, 2011

The Markets

Domestic equities gave back last week’s gains and then some. The Dow once again fell below the 12,000 mark but managed to remain the only domestic index in positive territory for the year, while the tech-heavy Nasdaq was the hardest hit. Meanwhile, investors once again fled to U.S. Treasuries, pushing the 10-year yield down to a level last seen in late September, while the euro dropped briefly below $1.30.

Market/Index 2010 Close Prior Week As of 12/16 Week Change YTD Change
DJIA 11577.51 12184.26 11866.39 -2.61% 2.50%
Nasdaq 2652.87 2646.85 2555.33 -3.46% -3.68%
S&P 500 1257.64 1255.19 1219.66 -2.83% -3.02%
Russell 2000 783.65 745.40 722.05 -3.13% -7.86%
Global Dow 2087.44 1830.78 1751.60 -4.32% -16.09%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.30% 2.07% 1.86% -21 bps -144 bps

Last Week’s Headlines

  • Noting that the economy has been “expanding moderately,” the Federal Reserve Open Market Committee gave no indication that additional quantitative easing measures are forthcoming. However, it will continue to replace short-term bond holdings with longer maturities and reinvest the proceeds of its portfolio of agency and mortgage-backed securities. It also kept the fed funds rate steady at 0.25%, marking the third anniversary of record low rates.
  • The Commerce Department said that though the 0.2% growth in November’s retail sales was slower than the 0.6% and 1.3% gains seen during the previous two months, sales were still 6.7% higher than a year ago. The biggest monthly increases were in electronics and appliances (2.1%) and sales by nonstore retailers (1.5%).
  • Declining energy costs for the second month in a row helped keep consumer inflation flat in November, the Bureau of Labor Statistics said. That put inflation over the past 12 months at 3.4%, a more moderate pace than the 3.9% annual rate seen in June. Meanwhile, inflation at the wholesale level rose 0.3%, led by a 3.8% increase in raw materials. That put year-over-year inflation at 5.7%, the smallest annual increase since March.
  • A parts shortage caused by flooding in Thailand contributed to a 3.4% drop in auto manufacturing, which in turn helped cut overall industrial production by 0.2% in November, according to the Federal Reserve. However, industrial production was still 3.7% higher than a year ago.
  • The Securities and Exchange Commission filed civil charges against six former executives of Fannie Mae and Freddie Mac, accusing them of deliberately misleading the public about the extent of the mortgage giants’ exposure to risky subprime mortgages prior to the 2008 financial crisis.

Eye on the Week Ahead

Housing data will trickle in throughout the week, while the final number for third-quarter economic growth is due Thursday. And a certain gentleman in red is expected to make an appearance on Sunday.

Key dates and data releases: housing starts (12/20); home resales (12/21); final Q3 gross domestic product (12/22); durable goods orders, personal income/spending, new home sales (12/23).

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 www.theretirementgroup.com.

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