6.14.13 Week in Review

The week's turbulent activity continued in the week before the June meeting of the Fed as the market had 3 down weeks out of the past four. Pullbacks had been expected for the month of May, but it seems like the markets are experiencing them instead in June. A day after the strongest session in months for the S&P500 on Thursday closed with 0.6% losses and a 1% loss for the week.

As the market continues to react on the fast money being printed by the Fed through the QE program's $85B purchases, we are seeing the effects of investors not knowing what is going to happen. “The economy is not where it needs to be for the Fed to cut off stimulus, with inflation coming in under their target and with the jobs report still not being really strong, it still leaves room for the Fed to maintain its policies,” said Andrew Fitzpatrick, director of investments at Hinsdale Associates Inc. On Friday the Michigan Consumer Confidence report was released at 82.7 vs the forecast 84.5, showing that the retail sales report released Thursday showing 0.6% growth on retail sales was not capturing the entire economic picture.

Sunday had releases of positive Japanese data as the annualized GDP rose to 4.1%, more than the forecast 3.5%. QoQ and 1Q GDP also showed better than anticipated growth. Positive data came out of Australia on Thursday as employment increased by 1,100 jobs and unemployment decreased from 5.6% to 5.5%. Although not large gains they are signs of a potential start to recovery and a good sign in general.

US Treasury yields were down for the week, the 10-year note yield was down 3 basis points for the week at 2.130%, the 30-year note was down for 2 basis points on Friday at 3.297% and the 5-year note was down 3 basis points to 1.031%. “The market goes to extremes at times. I think there was some confusion over a reduction of purchases being a tightening move,” said Jennifer Vail, head of fixed-income research at U.S. Bank Wealth Management. To reiterate the Fed's goals, they are not looking to change the interest rates until the targeted unemployment level hits 6.5%.