Weekly Update – January 27, 2012
Disappointing corporate earnings reports and US economic data drove the Dow 74 points lower Friday. For the week, the Dow posted declines in all but one day, finishing down 60 points, or .5%. It was the Dow’s first weekly decline in 2012, though for the year, the index is still up 3.6%.
Domestically, economic data for the most part discouraged investors. The Fed’s announcement on Wednesday that interest rates will remain low until 2014 and that further stimulus measures are not out of the question spurred markets for a day, but reports announcing a decline in December home sales, an increase in weekly jobless claims, and a lower-than-expected first estimate of fourth quarter 2011 GDP (the consensus estimate was 3.0% – actual was 2.8%) sent markets lower. Though the GDP result was the highest growth rate since the second quarter of 2010, it’s worth noting that most of the growth came from inventory rebuilding.
In Europe, negotiations continued between Greece and its creditors, with progress reportedly being made. Borrowing costs for Italy and Spain fell to levels not seen in months, though the two countries were downgraded by Fitch Ratings, with a mention of the chance of further downgrades in the next two years.
Trust preferreds continue their solid performance in the new year. Through yesterday, Thursday, January 26th, our trust preferred portfolios were up over 6.5% year-to-date.
Next week, economic reporting highlights include the release of January manufacturing data on Tuesday and the ever-important January employment numbers on Friday. Look for manufacturing to remain relatively flat from December, the number of jobs created in January to decline slightly from December, and the unemployment rate to remain at 8.5%.