September 9th, 2013 9:23 AM by Mel Samick
Stocks closed out a volatile week on Wall Street broadly in the red. The market was mainly dragged by financials, technology and the industrial sector as investors were on edge with a possible U.S. military strike on Syria. Adding to investors' cautiousness was the news indicating the debt ceiling will be reached in mid-October and that Congress has yet to begin budget negotiations ahead of the new fiscal year, which begins October 1. A war-like situation loomed in the Middle East region after reports came out suggesting Syria has used chemical weapons in its internal conflict. However, the British Parliament turned down the vote to support military action in Syria. But with Secretary of State John Kerry's comments on the Syrian situation, implying the U.S. will act alone if necessary, investors were kept on edge.
In major indices, the S&P closed at 1,632 while the Dow ended the trading week at 14,810. With investors adjusting their near-term volatility expectations, the CBOE Volatility Index (VIX), was up .8 percent for the week. Over the Labor Day weekend, news of two major buyouts came to the forefront - Verizon agreeing to buy 45 percent of Vodafone for $130 billion and, Microsoft buying the Finland based Nokia handset business for $ 7.2 billion. In economic indicators for the month of August, there was higher factory activity reported in Richmond, New York, Philadelphia and from the Kansas City Federal Reserve reports, which means, most likely, that manufacturing will help higher GDP in the third quarter. Also, there was a better-than-expected revision in second quarter GDP. The second quarter GDP was revised to 2.5 percent from 1.7 percent. The revision was mainly due to the stronger than the originally reported Trade Deficit. Also, for the month of August, a revised University of Michigan Consumer Sentiment came in at 82.1, down from the previous month.
With investors looking for a safe harbor amid all this uncertainty, Ten-Year treasuries witnessed some demand and yields were down by 10 bps during the week, while settling at 2.75 percent at the end of the week. Towing the same line, conforming mortgages rates were also volatile during the week. At the end of week the Conforming Fixed 30-year rate leveled out at around 4.45 percent, while the Conforming Fixed 15-year rate finished around 3.4 percent. The effects of upward mortgage rates and home prices can now be seen as Pending Home Sales and New Home Sales indicators were down.
This week, a holiday-shortened week, is full of data from the Institute for Supply Management, on Construction Spending, the Fed's own regional economic survey (Beige Book) plus the employment report. Additionally, investors will be looking at Congress for a decision on military action in Syria.
Information Provided by NYCB Capital Markets