The Market: "What's Now?"

Once again, European politics drove the movement of the equities markets. Once leadership changes in Greece and Italy seemed imminent, equities recovered some momentum. The S&P 500 Index managed to turn positive for the year, while the Dow continued to be the year-to-date leader. Even the Global Dow saw some benefit from the political shifts, while the yield on 10-year Treasuries remained relatively stable.

 

Market/Index 2010 Close Prior Week As of 11/11 Week Change YTD Change
DJIA 11577.51 11983.24 12153.68 1.42% 4.98%
NASDAQ 2652.87 2686.15 2678.75 -0.28% 0.98%
S&P 500 1257.64 1253.23 1263.85 0.85% 0.49%
Russell 2000 783.65 746.49 744.64 -0.25% -4.98%
Global Dow 2087.44 1860.04 1862.40 0.13% -10.78%
Fed. Funds 0.25% 0.25% 0.25% 0 bps 0 bps
10-year Treasuries 3.30% 2.06% 2.04% -2 bps -126 bps

The performance data quoted represents past performance, which is not a guarantee of future results. Indices are unmanaged and cannot be invested into directly

Last Week’s Headlines

  • Faced with pressure from Greece's eurozone colleagues, Prime Minister George Papandreou resigned. He was replaced by former European Central Bank Vice President Lucas Papademos, who will lead a provisional coalition government in trying to adopt legislation that would meet the conditions needed to receive ongoing financial assistance.
  • After the yield on 10-year Italian bonds briefly spiked well above 7%, the Italian Parliament passed austerity measures designed to keep investors from shunning the debt of the region's third-largest economy. As part of the deal, Italian Prime Minister Silvio Berlusconi resigned and former European Union Commissioner Mario Monti was asked to take over and lead a coalition "technocrat" government in implementing the reforms.
  • Mortgage foreclosures, which had been delayed last year by processing problems, are on the rise again. The number of foreclosures was up 7% for the month of October; according to RealtyTrac, that's a seven-month high. However, the foreclosure rate was still almost a third less than last year.
  • Jefferson County, Alabama, home of the state's capital, filed for bankruptcy that was brought on in part by a corruption-plagued sewer project. The roughly $5 billion at stake makes it the largest municipal bankruptcy in U.S. history, exceeding even the $2 billion owed by Orange County, California, when it collapsed in 1994.
  • A $2.5 billion increase in exports helped cut the September U.S. trade deficit to $43.1 billion, according to the Bureau of Economic Analysis

The Week Ahead

As new governments in both Italy and Greece attempt to address budget issues, domestic data will focus on manufacturing, inflation and retail sales. Investors also will be watching the direction of yields at various European bond auctions. And as the bipartisan Joint Deficit Reduction Committee's November 23 deadline approaches, its progress (or lack thereof) could begin to draw attention.

Key dates and data releases: wholesale inflation, retail sales, business inventories, Empire State manufacturing survey (11/15); Philadelphia Fed manufacturing survey, housing starts (11/17); options expiration, leading economic indicators (11/18).


What's Now — week ended November 4, 2011
 

Once again, uncertainty about Greece eclipsed domestic news to send equities south. The Dow's five-week winning streak was snapped as the industrials once again fell below 12,000, although the Dow remained the strongest domestic index year-to-date. The slump left the S&P 500 Index just below even for the year and sent investors back into the arms of U.S. Treasuries, pushing the 10-year yield down.


 

Market/Index 2010 Close Prior Week As of 11/4 Week Change YTD Change
DJIA 11577.51 12231.11 11983.24 -2.03% 3.50%
NASDAQ 2652.87 2737.15 2686.15 -1.86% 1.25%
S&P 500 1257.64 1285.08 1253.23 -2.48% -0.35%
Russell 2000 783.65 761.00 746.49 -1.91% -4.74%
Global Dow 2087.44 1964.49 1860.04 -5.32% -10.89%
Fed. Funds 0.25% 0.25% 0.25% 0 bps 0 bps
10-year Treasuries 3.30% 2.34% 2.06% -28 bps -124 bps

The performance data quoted represents past performance, which is not a guarantee of future results. Indices are unmanaged and cannot be invested into directly

Last Week’s Headlines

  • Greek Prime Minister George Papandreou blindsided the world by announcing a referendum on whether to accept the terms of the eurozone bailout package. However, the proposal had all the durability of a reality-TV marriage. Under pressure from G-20 summit attendees, he not only reversed himself but agreed to form a new coalition government, prompting reports that he would step down. Meanwhile, European officials said bailout payments would be halted until resolution of the referendum issue, which they said would effectively be a vote on whether Greece wanted to remain in the eurozone.
  • Elsewhere on the continent, Italian 10-year bond yields rose to 6.33% at Thursday's auction, underscoring concerns about the country's indebtedness and increasing calls for Prime Minister Silvio Berlusconi's resignation. The European Central Bank (ECB) cut its key interest rate from 1.50% to 1.25% to try to keep yields from spiraling upward, and new ECB head Mario Draghi said the region faces a "mild recession" by the end of the year.
  • An additional 80,000 jobs created in October nudged the unemployment rate in the U.S. down slightly to 9.0%. It was the 12th straight month of increases, although the 125,000 new jobs created monthly on average for the past year have been just enough to keep the unemployment rate between 9.0% and 9.2% since April. Business and professional services, leisure and hospitality, health care and mining created many of October's 104,000 new private-sector jobs, while government employment continued to contract.
  • Despite seeing stronger growth in the year's third quarter, the Federal Reserve lowered its forecast for U.S. economic growth in 2011 to 1.6%–1.7% rather than the previous 2.7%–2.9%. It also predicted unemployment would remain static for the rest of the year and stay above 8.0% through 2013.
  • U.S. manufacturing growth slowed in October, according to the Institute for Supply Management (ISM), whose index registered 50.8%. Although that represented the 27th straight month of expansion, it was just above the 50.0% mark that separates expansion from contraction. The ISM's gauge of the U.S. services sector, at 52.9% in October, also indicated growth at a slightly slower pace.
  • Troubled European debt claimed its first U.S. victim as brokerage MF Global Holdings filed for Chapter 11 bankruptcy after the firm's leverage of its bond holdings helped bring on a downgrade of its credit rating to junk status. In the wake of reports of discrepancies in the company's accounting of its assets, CEO and former New Jersey Gov. Jon Corzine resigned.


 

The Week Ahead

Domestic data will be skimpy, and all eyes will be on Greece and Italy to see what emerges from their respective political situations.

Key dates and data releases: international trade, import/export prices (11/10); consumer sentiment (11/11).


What's Now — week ended October 28, 2011
 

Double-barreled relief over the economy and the plan for attacking the European debt crisis powered a rally in equities. In the wake of Thursday's 340-point jump in the Dow, the industrials were closing in on their best month since January 1987 with a 12% gain, and the Russell 2000 Index's 18% gain since September 30 will likely make October its best month ever. By Friday, the S&P 500 Index and the NASDAQ had regained roughly three-fourths of their losses since mid-July. The renewed global optimism sent bond yields up.
 

Market/Index 2010 Close Prior Week As of 10/28 Week Change YTD Change
DJIA 11577.51 11808.79 12231.11 3.58% 5.65%
NASDAQ 2652.87 2637.46 2737.15 3.78% 3.18%
S&P 500 1257.64 1238.25 1285.08 3.78% 2.18%
Russell 2000 783.65 712.42 761.00 6.82% -2.89%
Global Dow 2087.44 1846.63 1964.49 6.38% -5.89%
Fed. Funds 0.25% 0.25% 0.25% 0 bps 0 bps
10-year Treasuries 3.30% 2.23% 2.34% 11 bps -96 bps

The performance data quoted represents past performance, which is not a guarantee of future results. Indices are unmanaged and cannot be invested into directly

Last Week’s Headlines

  • Eurozone leaders finally announced an agreement they hope will build a firewall around Europe's sovereign debt problems and enable banks to keep credit flowing in the region. Under the agreement, banks holding Greek debt will receive 50% of what they're owed, in hopes that the reduction will enable Greece to cut its debt to 120% of its gross domestic product (GDP) by 2020. To help cushion future losses, banks will have to raise €147 billion to cover higher capital reserves. The agreement also would raise the resources of the European Financial Stability Facility (EFSF) to roughly €1.4 trillion, although there were no details on how the increase would be paid for. Finally, the agreement allows the EFSF to maximize its resources by guaranteeing sovereign bonds or setting up special-purpose vehicles to provide financial support.
  • The odds of a double-dip recession seemed to dim after the Commerce Department said the economy grew almost twice as fast in the third quarter as it did during the second. The 2.5% initial estimate of growth surpassed Q2's 1.3% and Q1's anemic 0.4%. The report also said that consumer spending rose 2.4%, including a 4.1% increase in durable goods and a 3.0% growth in spending on services. Exports were up 4.0%, and business capital spending jumped 16.3%. Government spending was unchanged as a 1.3% drop in state and local government spending helped offset a 2.0% increase in federal government spending.
  • Home prices rose in August in the 20 cities tracked by the S&P/Case-Shiller Home Price Index. Although prices were still 3.8% lower than a year earlier, the increase was the fifth in a row, suggesting that prices could be starting to stabilize. Meanwhile, the Commerce Department said sales of new single-family homes were up 5.7% in September.
  • Americans spent more and saved less in September; according to the Bureau of Economic Analysis, consumer spending was up 0.6%, while the savings rate dipped to 3.6% from 4.1% the month before. Meanwhile, incomes rose 0.1%.
  • A drop in orders for transportation equipment led to a 0.8% decrease in new durable goods orders in September. The Commerce Department said it was the third straight month of declines.
  • The more income you had over the last two decades, the more income you got, according to a study by the nonpartisan Congressional Budget Office. For the 1% of the population with the highest income, average real after-tax income rose 275% between 1979 and 2007. Households in the top 20% saw a 65% increase in income, while for the 60% of the population in the middle, incomes grew just under 40%. Those in the bottom 20% saw an 18% increase from 1969 to 2007. The CBO said the shift in overall pre-tax income (not counting taxes and payments such as Medicare/Social Security benefits) was caused by two factors. Income sources, such as jobs, became increasingly concentrated in fewer individuals (the most important factor); also, capital gains and business income represented a larger percentage of overall U.S. income, while the share of income from salaries and wages fell.

The Week Ahead

Earnings reports should receive more attention now that a European rescue operation has been announced (although details of the debt game plan also will be under scrutiny). Unemployment data will be of interest in light of the new GDP number, as will the Fed's Wednesday announcement.

Key dates and data releases: U.S. manufacturing, auto sales, construction spending (11/1); Federal Reserve Open Markets Committee (FOMC) meeting (11/2); weekly new jobless claims (11/3); business productivity, factory orders, U.S. services sector (11/3); unemployment/payrolls (11/4).


 


What's Now — week ended October 21, 2011
 

 A tug-of-war between earnings and Europe dominated equities last week. The Dow industrials overcame a discouraging start to the week and managed a third straight week of gains. However, the NASDAQ slipped back into the loss column, while the S&P 500's encouraging week still left it in negative territory for the year and the small-cap Russell 2000 Index continued to struggle.

 

 

Market/Index 2010 Close Prior Week As of 10/21 Week Change YTD Change
DJIA 11577.51 11644.49 11808.79 1.41% 2.00%
NASDAQ 2652.87 2667.85 2637.46 -1.14% -0.58%
S&P 500 1257.64 1224.58 1238.25 1.12% -1.54%
Russell 2000 783.65 712.46 712.42 -0.01% -9.09%
Global Dow 2087.44 1845.80 1846.63 0.04% -11.54%
Fed. Funds 0.25% 0.25% 0.25% 0 bps 0 bps
10-year Treasuries 3.30% 2.26% 2.23% -3 bps -107 bps

The performance data quoted represents past performance, which is not a guarantee of future results. Indices are unmanaged and cannot be invested into directly

Last Week’s Headlines

  • Despite strong words from G-20 finance ministers about the need for a formal plan for containing the damage from European debt problems, the eurozone continued to debate ways to enhance the European Financial Stability Facility's resources. However, any formal agreement failed to appear last week, although French and German leaders said they anticipated having one this week. In the meantime, Moody's warned that France's AAA debt could be hit with a negative outlook if its budget is strained by bailout demands; it also downgraded Spain's debt from Aa2 to A1.
  • September's 0.3% consumer inflation rate was the third increase in as many months. According to the Bureau of Labor Statistics that put the inflation rate for the last 12 months at 2.0%. At the wholesale level, inflation was worse; driven mostly by a 2.3% jump in energy costs and a 10.0% increase in the prices of vegetables, it spiked up 0.8% in September, for a 6.9% rate for the last year.
  • Federal Reserve manufacturing numbers were mixed. The New York region was negative for a fifth straight month, while new orders were flat. However, the Philadelphia Fed survey showed improvement, jumping from –17.5 in September to 8.7, the first positive number in three months. Nationwide, industrial production rose 0.2% in September and was 3.2% higher than a year ago.
  • China's efforts to try to control inflation there contributed to a slower pace of economic growth — 9.1% — during the third quarter. According to China's National Bureau of Statistics, that's down from Q2's 9.5%.
  • Housing starts shot up 15.0% in September, putting them 10.2%above last year. According to the Commerce Department, that's the highest level since before the homeowner's tax credit expired last year. Building permits, an indicator of future construction activity, fell 5.0% from August, although they also were up from a year ago.
  • Sales of existing homes dropped 3.0% in September, according to the National Association of Realtors®, although compared to the previous September, they were up 11.3%.

The Week Ahead

Action or lack thereof at the midweek European debt summit is likely to affect the mood of the markets. A first look at Q3 economic growth also will be of interest.

Key dates and data releases: home prices, consumer confidence (10/25); new home sales, durable goods orders (10/26); initial estimate of Q3 gross domestic product, pending home sales, weekly new jobless claims (10/27); personal income/spending, labor costs, consumer sentiment (10/28).


What's Now — week ended October 14, 2011
 

Equities built strongly on last week's gains as the Dow and NASDAQ surged back into positive territory for 2011. The S&P 500 Index, NASDAQ and Russell 2000 Index all had their strongest week of the year, with the tech-heavy NASDAQ and the small-cap Russell seeing the biggest gains. Little Slovakia provided at least some temporary reassurance about European bailout capabilities, which encouraged investors to drive bond yields higher as prices fell.

 

Market/Index 2010 Close Prior Week As of 10/14 Week Change YTD Change
DJIA 11577.51 11103.12 11644.49 4.88% 0.58%
NASDAQ 2652.87 2479.35 2667.85 7.60% 0.56%
S&P 500 1257.64 1155.46 1224.58 5.98% -2.63%
Russell 2000 783.65 656.21 712.46 8.57% -9.08%
Global Dow 2087.44 1756.93 1845.80 5.06% -11.58%
Fed. Funds 0.25% 0.25% 0.25% 0 bps 0 bps
10-year Treasuries 3.30% 2.10% 2.26% 16 bps -104 bps

The performance data quoted represents past performance, which is not a guarantee of future results. Indices are unmanaged and cannot be invested into directly

Last Week’s Headlines

  • After an initial negative vote, Slovakia provided the final ratification of expanded powers for the European Financial Stability Facility (EFSF), enabling it to buy bonds issued by troubled eurozone countries. Meanwhile, there were more ratings downgrades: Standard & Poor's cut Spain to AA– with a negative outlook, indicating additional downgrades are likely in the future. It also downgraded several Spanish banks, while Fitch cut the ratings of four other European banks.
  • A 1.1% improvement in September's retail sales represented the biggest increase in seven months, although the figures were not adjusted for price increases. A 3.6% increase in auto sales helped a lot after sales had been hurt earlier in the year by parts shortages. According to the Commerce Department, even without autos, retail sales still rose 0.6%.
  • Minutes of last month's Federal Reserve Open Markets Committee (FOMC) showed that members seem to be as divided as the rest of the country over whether or not and how to stimulate the economy. Some felt the Fed's recent decision to tweak its bond portfolio was not necessary; others argued for more aggressive measures.

Eye on the Week Ahead

As earnings season gets into high gear, several bellwether banks and tech companies are scheduled to report. Two key manufacturing surveys and inflation data will also serve as economic indicators.

Key dates and data releases: Empire State manufacturing survey, industrial production (10/17); wholesale inflation, international capital flows, housing market (10/18); consumer inflation, housing starts, Fed "beige book" report (10/19); weekly new jobless claims, home resales, Philadelphia Fed survey (10/20).

 



What's Now — week ended October 7, 2011
 

Domestic equities once again spent much of the week recuperating from damage done on Monday, hitting their lowest levels of the year before rebounding strongly. On Monday, the S&P 500 Index closed below 1,100 for the first time this year; despite advancing the rest of the week, it couldn't quite recapture the previous week's 1,175 high. The NASDAQ and Russell 2000 Index saw the strongest moves upward, gaining 6.1% and 7.7%, respectively, between the closing bells on Monday and Friday. Bonds retreated in the face of equities' advances.

Market/Index 2010 Close Prior Week As of 10/7 Week Change YTD Change
DJIA 11577.51 10913.38 11103.12 1.74% -4.10%
NASDAQ 2652.87 2415.40 2479.35 2.65% -6.54%
S&P 500 1257.64 1131.42 1155.46 2.12% -8.12%
Russell 2000 783.65 644.16 656.21 1.87% -16.26%
Global Dow 2087.44 1725.68 1756.93 1.81% -15.83%
Fed. Funds 0.25% 0.25% 0.25% 0 bps 0 bps
10-year Treasuries 3.30% 1.92% 2.10% 18 bps -120 bps

  The performance data quoted represents past performance, which is not a guarantee of future results. Indices are unmanaged and cannot be invested into directly

Last Week’s Headlines

  • Companies added 103,000 jobs to the nation's payrolls in September, including those of 45,000 striking telecommunications workers who returned to work. The Bureau of Labor Statistics also revised upward its estimates for previous months. However, the increase wasn't enough to budge the unemployment rate, which remained stuck at 9.1%. Professional and business services, health care and construction saw gains, while government employment continued to fall.
  • The European Central Bank (ECB) said it will resume bond purchases through October 2012 and took measures to help ensure liquidity for European banks. The International Monetary Fund called for a coordinated plan to recapitalize European banks if necessary; French and German leaders said they agreed on the need to do so and would announce details by the end of the month.
  • Eurozone finance ministers postponed a decision on whether to pay the next installment of financial assistance to Greece after the country announced it had not been able to meet the requisite deficit reduction targets. Meanwhile, Fitch Ratings downgraded both Italian and Spanish debt to A+ and AA–, respectively, while Moody's downgraded Italy to A2. Outgoing ECB president Jean-Claude Trichet said it would be inappropriate for the ECB to lend money to the European Financial Stability Fund set up to offer financial assistance to struggling countries such as Greece. The ECB also kept its key interest rate at 1.5%.
  • The U.S. services sector continued to grow in September, but somewhat more slowly; the Institute for Supply Management (ISM) said its index fell 0.3% to 53, although new orders rose 3.7%. Meanwhile, the ISM's index of U.S. manufacturing rose at a slightly faster pace (1.0%) than the previous month, with 12 of 18 industries reporting growth. However, the Commerce Department said new factory orders were down 0.2% in August after jumping 2.1% the month before.
  • The average rate on a 30-year mortgage fell below 4.0% for the first time since Freddie Mac began keeping records.
  • "... Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new." — Steve Jobs, 1955–2011.

Eye on the Week Ahead

Investors will get something to react to this week besides Europe as Alcoa's after-the-bell report on Tuesday marks the unofficial start of the Q3 earnings season. However, Greece and European debt problems, including Thursday's Italian bond auction, will still be very much on the radar screen. Fed minutes could shed light on dissension in the ranks over how and whether monetary policy can and should provide further economic assistance, while retail sales will hint at the consumer mindset.

Key dates and data releases: Federal Open Markets Committee minutes (10/11); international trade, weekly new jobless claims (10/13); retail sales, import/export prices, business inventories, consumer sentiment (10/14).


What's Now— week ended September 30, 2011
 

Equities markets continued to be volatile as a rough quarter drew to a close. The Dow actually managed to end the week in positive territory, but the other domestic indexes suffered. Treasuries backed off a bit after their recent strong run; the 10-year Treasury yield rose slightly as prices fell.

Market/Index 2010 Close Prior Week As of 9/30 Week Change YTD Change
DJIA 11577.51 10771.48 10913.38 1.32% -5.74%
NASDAQ 2652.87 2483.23 2415.40 -2.73% -8.95%
S&P 500 1257.64 1136.43 1131.42 -.44% -10.04%
Russell 2000 783.65 652.43 644.16 -1.27% -17.80%
Global Dow 2087.44 1700.42 1725.68 1.49% -17.33%
Fed. Funds 0.25% 0.25% 0.25% 0 bps 0 bps
10-year Treasuries 3.30% 1.84% 1.92% 8 bps -138 bps

 The performance data quoted represents past performance, which is not a guarantee of future results. Indices are unmanaged and cannot be invested into directly

Last Week’s Headlines

  • The German parliament voted overwhelmingly to increase its contribution to the European Financial Stability Facility (EFSF) and expand its bond-buying authority. Finland and Austria also agreed to the expansion of the EFSF, which also requires approval by the other EU nations. Meanwhile, Greece adopted new property taxes in an attempt to balance its budget and qualify for its next round of bailout money.
  • The final estimate of U.S. economic growth during the second quarter was 1.3%. That's slightly higher than the Bureau of Economic Analysis's previous 1.0% estimate and an improvement from Q1's 0.4%. Nonresidential fixed investment, consumer spending, exports and federal government spending were primarily responsible for the increase, although they were offset by reduced spending by state and local governments and by lower private inventory investments.
  • Durable goods orders fell 0.1% in August, reversing July's 4.1% increase, according to the Department of Commerce. However, nondefense capital spending by businesses rose 1.1%, and shipments of capital goods were up 2.8%.
  • Sales of new single-family homes fell 2.3% in August, the Commerce Department said, but were 6.1% higher than in August 2010. The number of homes sold was the lowest since February; the inventory of unsold homes on the market — more than 6 months' worth — was relatively unchanged. However, home prices were on the rise, up an average of 0.9% in July for the 20 cities measured by the S&P/Case-Shiller Index. It was the fourth straight month of increases; however, prices were still 4.1% below July 2010.
  • Personal incomes fell 0.1% in August, while spending rose 0.2%, according to the Bureau of Economic Analysis.

Eye on the Week Ahead

As the new quarter begins, the eurozone debt watch will focus on whether Greece has done enough to reduce its deficit in order to qualify for this month's bailout payment. Friday's unemployment data will also be of interest.

Key dates and data releases: U.S. manufacturing, construction spending (10/3); factory orders (10/4); U.S. services sector (10/5); weekly new jobless claims (10/6); unemployment/payrolls, wholesale trade, consumer credit (10/7).


Whats Now — week ended September 23, 2011
 

Investors did a 180 from the previous week, deciding once again that the risk of global recession and financial contagion was high enough to justify getting rid of equities, commodities and practically everything else except U.S. Treasuries. A midweek global selloff took the small-cap Russell 2000 Index to just below its August low; having lost almost 25.0% since its April 29 high of 865, it has now reentered bear-market territory. The S&P 500 Index once again dipped below 1,200 and is down almost 17.0% from its April high, while the Dow is off almost 16.0% and the NASDAQ almost 14.0% in the same time period. Gold provided no refuge from the selling as it plummeted almost $150 an ounce, while oil prices turned downward to the $80 per barrel mark. The dollar continued to attract nervous global investors, and 10-year Treasury yields took a 16-basis-point nosedive on Thursday as prices shot up.

Market/Index 2010 Close Prior Week As of 9/23 Week Change YTD Change
DJIA 11577.51 11509.09 10771.48 -6.41% -6.96%
NASDAQ 2652.87 2622.31 2483.23 -5.30% -6.39%
S&P 500 1257.64 1216.01 1136.43 -6.54% -9.64%
Russell 2000 783.65 714.31 652.43 -8.66% -16.74%
Global Dow 2087.44 1840.92 1700.42 -7.63% -18.54%
Fed. Funds 0.25% 0.25% 0.25% 0 bps 0 bps
10-year Treasuries 3.30% 2.08% 1.84% -24 bps -146 bps

 Last Week

The Federal Reserve announced it will sell $400 billion worth of short-term bonds in its portfolio and buy an equal amount of longer maturities. The plan, which echoes a 1960s maneuver called Operation Twist, also will involve reinvesting principal payments on the Fed's agency debt holdings in agency mortgage-backed securities. The move is intended to support economic recovery by keeping already low long-term interest rates really low. The Fed cited concerns about "significant downside risks to the economic outlook, including strains in global financial markets."

  • Italy's debt challenges worsened when S&P cut its credit rating by one notch, to A, and issued a negative outlook, meaning further cuts are possible. Moody's downgraded eight Greek banks and three U.S. banks, citing uncertainty about the level of government support for "too big to fail" banks in the event of a 2008-style financial crisis.
  • The International Monetary Fund cut its forecast for U.S. economic growth this year to 1.5% — 1.0% below its estimate of just three months ago — and to 1.8% for 2012. Globally, the 4.0% annual growth forecast for both this year and next is down from 2010's 5.0% growth rate. Even China's 2012 forecast was lowered from 2011's 9.5% to 9.0%, and its factory sector contracted in September for the third straight month. Meanwhile, the Conference Board's index of leading economic indicators rose 0.3% in August, the third straight month of increases. However, it said weak consumer confidence has increased the possibility of reentering recession.
  • Despite tight credit and appraisal problems, existing home sales were up 7.7% in August, according to the National Association of Realtors® (NAR). The median sales prices were 5.1% lower than last August, which may have helped push home resales up 18.6% from a year earlier. More purchases were made by investors looking for bargains and a hedge against inflation, according to the NAR, and distressed properties represented 31.0% of sales.
  • President Obama laid out his proposal for deficit reduction, which the administration said would cut the deficit by more than $3 trillion over the next 10 years. The proposal anticipates a $1.5 trillion reduction from raising taxes on higher-income taxpayers by letting the so-called Bush-era tax cuts expire in 2013, limiting some deductions for households earning more than $250,000 a year and closing some tax loopholes. It also calls for a minimum tax rate for individuals making more than $1 million a year — the "Buffett rule" advocated by billion
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