Top Stories Last Week
• US Stock Markets Rose For the Week Despite the Technological Breakdown in Nasdaq
US stocks rose for the week despite the technology breakdown in Nasdaq.
In the week, S&P index rose 0.5%, while MSCI EAFE index dropped 0.2%. The MSCI Emerging Market Index tumbled 1.6%. However, gold continued to rally 1.7% while the SPGC commodity index declined 0.3%. The bond markets gained as well. Barclays US Treasury index was up 0.1%, and US high yield bonds was up 0.9%.
• Nasdaq Halted Trading on Technology Glitch
The US stock market showed again on Thursday that it remained vulnerable to technological breakdowns even as regulators and market operators work to keep up with trading that is increasingly electronic and driven by speed. The latest glitch shut down trading on the Nasdaq market and its more than 3,000 stocks, including some of the most popular among investors, like Apple and Google, for more than three hours Thursday afternoon. A source familiar with the matter described the problem as a “data feed issue.”
• Central Bankers Met at Jackson Hole Symposium, Some Presenters Argued QE was Less Effective
The U.S. central bank’s bond buying is a less potent tool for stimulating growth than policy makers believe, two economists said in a paper released today at a Federal Reserve conference in Jackson Hole, Wyoming. The paper scrutinizes the stance of some Fed officials that quantitative easing works through a “portfolio-balance channel” in which Fed asset purchases induce investors to rebalance their investments to boost a wide range of financial assets. “The portfolio balance channel of QE works largely through narrow channels that affect the prices of purchased assets, with spillovers depending on particulars of the assets and economic conditions,” Northwestern University finance professor Arvind Krishnamurthy and University of California-Berkeley professor Annette Vissing-Jorgensen wrote in the paper. “It does not, as the Fed proposes, work through broad channels such as affecting the term premium on all long-term bonds.”
Fed officials are debating when to taper their bond purchases. Minutes of the Federal Open Market Committee’s July 30-31 meeting, released Aug. 21, showed that Fed policy makers were “broadly comfortable” with Bernanke’s plan to slow the pace of purchases later this year and end them in mid-2014 if the economy performs as the Fed forecasts.
• US New Home Sales Plunged, But the Existing Home Sales Reached a 3-Year High
New home sales plunged 13.4% in July, in one of the first signs that higher mortgage rates may be cutting into home demand. Sales fell to a seasonally adjusted rate of 394K a year, from 497K in June, the Census Bureau reported Friday. Analysts’ consensus estimate was 487K. Sales were 6.8% higher than last July. The report was concerning because sales fell even though more homes were for sale.
However, U.S. existing home sales rose in July to their highest level in over three years, suggesting a sharp increase in borrowing costs is having only a limited impact on the housing market’s recovery. The existing home sales jumped 6.5% to an annual rate of 5.39 million units. That was well above analysts’ expectations and marked the fastest pace of sales since November 2009, when a home buyer tax credit was expiring.
Top Stories to Watch This Week
• US Home Prices
June S&P/Case-Shiller home price indexes should show continued monthly gains.
• Durable Goods Orders
The median forecast of July durable goods orders calls for a 3% drop, but excluding transportation, the durable goods orders are expected to increase by 0.6%.
• More Earnings Results
Earnings from the retail sector continue this week, with reports due from jewelers Tiffany and Zale Corp. (ZLC), footwear seller DSW Inc. (DSW) and home-furnishings company Williams-Sonoma. Other notable names releasing results this week include enterprise software company Salesforce.com Inc. (CRM) and packaged-foods maker Campbell Soup Co. (CPB).