The Market Today

Weekly Market Update, August 23, 2010

Presented by Adam Brooks, Daniel Evans, & Jared Pearson

General market news

• Early last Friday, Treasuries rallied as the 2-year reached another low of 0.471 percent; the 10-year broke through its 2.55-percent support level, reaching 2.549 percent; and the 30-year fell to 3.609 percent.

• Many domestic equity indices—including the S&P 500, Dow Jones Industrial Average, and Russell 2000—are now well below their 50-, 100-, and 200-day moving averages. These three indices closed down for the week with losses of 0.65 percent, 0.74 percent, and 0.70 percent, respectively.

• A symbolic 500,000 initial jobless claims were filed last week. The number of claims was higher than the estimates of all 42 economists interviewed by Bloomberg and also represented a nine-month high.

• Philadelphia Fed indicators left investors with a sour taste, plunging to –7.7 when analyst consensus forecasts had been for an increase to positive 7. Orders, shipments, and employment led the drive downward.

• Less than a week after announcing it will restart its Treasury purchasing program, the Federal Reserve (the Fed) bought $2.5 billion in Treasuries maturing in 2014 and 2016. It plans to maintain a level of $2 trillion in its System Open Market Account at the Federal Reserve Bank of New York for the foreseeable future, as it attempts to stimulate a seemingly slumping economy.

• The Fed will be purchasing 2-year and 4-year Treasuries on Tuesday and 10-year and 30-year Treasuries on Thursday.

• The 3-month LIBOR has fallen for 26 consecutive days and is now at 0.345 percent, its lowest level since April 2010.

What to look forward to

Existing Home Sales slid 5.10 percent in June, and analysts expect a further 13.90-percent decline in July. Because existing sales incorporate transactions from prior months, however, a better indicator for the housing market may be New Home Sales, which are anticipated to rise 0.80 percent. It would be great to see an increase in sales, which may benefit from extremely low rates going forward.

Analysts expect that Durable Goods Orders will increase 2.80 percent, after falling 1 percent in June. Higher demand for long-lasting products is a good sign because it means consumers either have a better outlook for the economy and are willing to replace expensive items or that there is pent-up demand for these types of goods. Either way, a greater number of orders bodes well for the manufacturing economy.

Initially, GDP QoQ growth was reported at 2.40 percent, which represented an improving economy. Now analysts are calling for a revision down to 1.40 percent. While this would still represent an improving economy, it certainly would suggest that growth is slowing at an accelerated pace. Investors will be watching this revision closely to try to decipher if their economic outlook is still based on solid numbers.

Disclosure: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. All indices are unmanaged and investors cannot invest directly into an index. The S&P 500 Total Return Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks and includes the effects of dividend reinvestment. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not ensure against market risk.

Adam Brooks, Daniel Evans, & Jared Pearson are financial advisers practicing at Brooks Financial Advisors, LLC, 1567 SW Chandler Ave, Suite 102, Bend, OR 97702. They offer securities and advisory services as registered representatives of Commonwealth Financial Network®, a member firm of FINRA/SIPC. Brooks Financial Advisors is a Registered Investment Adviser. They can be reached at 541-330-6411 or at brooksfinancial@bendcable.com.

© 2010 Commonwealth Financial Network®