Market Matters…         

A good week for Candidate Romney ended on a high note for Prez O.  After months of political attacks, criticisms, and rants, the two rivals met on stage to debate the issues of the day.  Most polls have O clearly in the lead, but Romney came out the aggressor and pundits on both sides of the aisle agreed that he emerged victorious in round 1.  He seemed more clam, confident, and knowledgeable (though opponents objected to the “accuracy” of his knowledge) and laid out a distinct vision to that of the current Administration.  He moved to the political center to appeal to independents, offered specifics to his tax and deficit reduction plans, and took a giant step forward in his campaign.  (Too little, too late?)  He spoke of failed economic policies and used the high unemployment rate as an example. 

As Team Obama began strategizing about regaining lost momentum, they received some excellent news on the labor front to end the week.  The jobless rate fell to levels not seen since early 2009 and nonfarm payroll growth surprisingly picked up in the prior few months.  Next up: the VP debate…Can Ryan build on Romney’s solid performance?  Will he force fact-checkers to work overtime confirming some of his facts and figures?  Will Veep Biden become the obedient attack dog and go on the offensive in defense of O’s record and policies?  Will he provide a few laughable “gaffe” moments that the American people have grown to enjoy over the past for years?  Looks like Must-See-TV at its finest.

In corporate news, the consumer moved front and center as analysts looked for clues about the upcoming holiday season.  Though same-store sales grew by a lower-than-expected percentage, optimists pointed out that September is usually a down month as back-to-school has ended, but holiday shopping is still several weeks away.  Gap posted solid results, though Macy’s missed its forecast, and Target announced that it will no longer report the monthly sales figures after the new year.  (Wal-Mart, Saks, and J.C. Penney are among the notables that previously dropped the monthly reporting.)  Shifting to autos, Toyota and Chrysler recorded strong double-digit sales gains last month, though GM and Ford struggled a bit as buyers may be steering clear of gas-guzzling trucks.  Meanwhile, HP warned about revenues in the coming year as it (slowly) enacts its turnaround plan.  On the transaction front, commodities firms Xstrata and Glencore tried to revive their proposed $70 billion merger; T-Mobile is buying MetroPSC; Tenet Healthcare announced a sizable share buyback plan and hinted at future acquisitions.    

Investors welcomed the stronger-than-expected economic data and stocks began the final quarter of 2012 on a nice note as major indexes surged to five-year highs.  Some even enjoyed the spirited performance by Romney and hinted that a Republican victory would prove favorable for Corporate America and the markets as a whole (though the Obama years have actually been quite good for equities).  Oil traders took cues from China’s suddenly sluggish economy (though many developed nations would love such sluggishness) and plunged below $90/barrel to a two month low.  A new quarter; a bullish market sentiment; a rebounding economy; a tightening Prez race.  Stay tuned…the next month could be fun.   

Economic Calendar

While his political rivals have scoffed at the direction of the economy and hoped for a few more weeks of disappointing data, President Obama welcomed news from manufacturing, housing, and labor.  For starters, the Institute of Supply Management (ISM) reported that manufacturing expanded in September for the first time in four months and factory orders increased once the volatile transportation component was excluded from the equation.  The ISM also depicted a services sector that was growing at its fastest pace since March.  Shifting to housing, though construction spending declined in August on lower commercial and industrial activity, private residential building jumped to its highest level in three years.  The biggest  news of the week came from labor, however.  While nonfarm payroll expanded at a steady pace last month, both July and August’s figures were revised higher and the third quarter’s overall results turned out to be better than the second.  Additionally, the unemployment rate dropped below the dreaded eight percent level to the same rate that Obama inherited when he assumed office in January 2009.

Looking abroad, manufacturing activity in the eurozone contracted for the 14^th consecutive month and the jobless numbers continued to rise.  Even mighty Germany reported that factory orders dropped in September and Spain and France led the negative charge with poor readings from the services sector.  Still, Spain’s bond auction was generally well-received as investors believe that its bailout may be getting closer (despite some utterings by its Prime Minister).  China’s purchasing managers’ index remained in contraction mode (though it did increase from last month).  Its services sector index expanded ever-so-slightly (below expectations) and consumer confidence declined for the third month in a row.       

The Fed released minutes from its last policy meeting and several voting members want to discontinue comments about specific dates (i.e. leaving rates low until mid-2015) and instead describe factors (labor, inflation rates) that must occur that would lead to a policy shift.  The Fed expects the economy to grow at a moderate pace over the next few quarters and begin to pick up at some point during 2013.  Bernanke continued to defend the actions and ensured the public that the Fed’s stated 2015 timeframe to keep rates low did NOT mean that officials expect the economy to remain weak until then, but rather, they want the current policy intact “for a considerable time after the economy strengths.”    

On the Horizon…The Fed releases its Beige Book and analysts will get an updated feel for the activity within the various regions of the country (to help justify QE3).  PPI will show how the volatile energy market is affecting the inflation picture, though Bernanke and friends do not seem too worried.  Alcoa kicks off earnings season and a few key financials (JP Morgan and Wells Fargo)  report late in the week.  Some analysts worry that third quarter earnings season may actually experience contraction for the first time in three years.  The political landscape heats up after Romney’s debate performance and Obama’s gloating over the labor rebound.  Ryan and Biden…you’re on the clock. 

The information set forth was obtained from sources which we believe reliable but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities.  Past performance is not a guarantee of future performance.

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