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The week that was:
The Dow Industrial Average was sharply lower on the final trading day of the week, down 241 points. Stocks across the board were lower with the markets experiencing the strongest drop for the total quarter since the 2008-2009 financial crisis, with U.S. indexes shedding more than 2% on Friday. The DOW lost 6% for the month, its fifth consecutive monthly loss. For the quarter, the loss was 12.1% - the worst since Q1 2009. The S&P 500 shed over 28 points and was off 0.4% for the week, down 7.2% for September and off 14.3% for the quarter striking the worst quarter since December 2008. The NASDAQ lost 65.36 points or 2.6% to 2,415.40 and has fallen by 2.7% for the week, down 6.4% for September and 12.9% for Q3.
BofA will start to nickel and dime consumers as they try to cushion revenue losses it expects to incur from new caps on fees merchants pay when a customer uses a debit card at their stores. So instead of the merchants paying the fees, consumers are expected to pad the banks bottom line - not something that will go over well with consumers at all. Bank of America (NYSE: BAC) plans to begin charging customers a $5 monthly fee for making debit card purchases starting early 2012. I don't know about you but, I have no intention to help pad the bottom line of any bank - maybe reduce the salary of some of the top execs and leave Main Street America alone to spend that $5 someone else instead of the execs pockets.
Freddie Mac reported for week ending September 29, the average rate on a 30-year fixed-rate mortgage fell to a record low of 4.01%, from 4.09% in prior week. In Freddie Mac's data for the five regions, here are what rates hit: in the West 3.95%; in the Northeast 4.01%; in the North Central 4.02%; in the Southwest 4.08% and in the Southeast 4.09%.
Per reports from Commerce Department, the sale of new U.S. homes fell 2.3% during August to an annual rate of 295,000, marking the fourth straight decline - indicating that the depressed U.S. housing market shows no signs of recovery. Sales during the month of August dropped to the lowest level since February. The sale of new US homes in July were revised up to 302,000 from 298,000 on a seasonally adjusted basis. After peaking in April 2011 at 316,000, new-home sales have gradually declined. The average selling price tumbled 8.7% from July to $246,000, the lowest level since early 2009.
Berkshire Hathaway Inc (NYSE: BRK-B) announced a stock-buyback plan that promised a premium of up to 10% over book value at the time of purchase. Berkshire said it is repurchasing shares as “the underlying businesses of Berkshire are worth considerably more than this amount, though any such estimate is necessarily imprecise.” Omaha-based Berkshire reported they will fund the buyback with cash on hand. “Repurchases will not be made if they would reduce Berkshire’s consolidated cash equivalent holdings below $20 billion.
Consumer-confidence index rose to 45.4 in September from 45.2 in August after it plunged on U.S. debt worries, among other factors. "Consumer expectations, which had plummeted in August, posted a marginal gain. However, consumers expressed greater concern about their expected earnings, a sign that does not bode well for spending," said Lynn Franco, director of the Conference Board's consumer research center, in a statement. August confidence reading was upwardly revised from a prior estimate of 44.5.
Per the Labor Department, new applications for unemployment benefits plummeted by 37,000 last week to 391,000 to mark the lowest level since April, but a government official suggested the surprising drop may have stemmed from a variety of "technical" issues not captured by normal seasonal adjustments. Initial claims from two weeks ago were revised up to 428,000 from an original reading of 423,000.
The Commerce Department reported U.S. real gross domestic product for Q2 was revised to an increase of 1.3% annualized rate from earlier estimate of a 1.0% rise. The revision to second-quarter GDP was largely due to a pickup in construction spending and slightly faster consumer spending. The core personal consumption index, excluding food and energy prices, increased 2.3% up from 2.2% as reported earlier.
A hawkish member of the European Central Bank's Governing Council Yves Mersch said he does not rule out interest rate cuts if the euro-zone's economy worsens considerably. "Interest rate cuts aren't completely ruled out," Mersch, who is also the head of Luxembourg's central bank, is quoted as saying by German newspaper Boersen-Zeitung. "We have leeway if the euro-zone's economic dynamics worsen considerably, which would go against current data." The ECB has noted the 'distinct weakening' of the economy, however this "has been in our forecasts for a long time," he said. Mersch added that the likelihood of a recession in the euro-zone is small.
What to look for this week:
Wall Street traders will be anxious to begin a new trading week with the start of Q4 and earnings season. Concerns over the financial debacle in Europe will remain high on the totem pole of worries after Stoxx Europe 600 index posted a quarterly drop of more than 17%. Worries are escalating about rising inflation in the euro zone, weak German retail sales and contracting Chinese manufacturing activity.
Gold prices may be on the verge of a rebound after December contract traded below $1,550 an ounce last week. On the month, gold has lost 11%, but it has risen 8% on the quarter. It is potential for gold to face some vigorous buying at the current rate. September’s stumble was gold’s largest monthly fall since October 2008. December futures traded at a record high above $1,900 early September before embarking on the plunge that took it below the $1,600 level. For September, Platinum declined 18% and for the quarter, it was lower by 12%. Precious metals may begin to take front and center once again as we begin the final quarter of the year and investors reach out for a safe haven.
After shares of Eastman Kodak have been slammed over the past few weeks added with another hit of a 60% loss last Friday, are they headed for bankruptcy? The slump on Friday was due to news that the company hired a group of attorneys who specialize in restructuring. Reports are that Kodak has signed up Jones Day, which advises companies on bankruptcy, along with other options for getting out of a financial squeeze they face. Last week the company lost about a third of its value after it drew $160 million from a credit line, raising fears that it is running out of cash. In after market hours last Friday they apparently dispelled rumors of a potential bankruptcy.
So, are we officially in a bear market or is this a correction. Are we heading for a new recession that government intervention cannot prevent?
And what about Bank of Americas attempt to get Main Street America to help with their bottom line by hitting customers with the $5 per month charge to use their debit cards? The economy is tough and the principle behind their attempts to help make payroll for their high paid execs isn’t seen to be something any consumer is even remotely interested in. What they will likely see is hoards of customers running for the doors on the principle of the matter. Maybe they should spread some of the corporate love to their customer service staff that has a whole lot to be desired. Improve their service to try to help their bottom line instead of asking help from consumer that are bound to say, no thank you to any more, taxpayer assistance.
Key economic data to keep an eye on
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| Date | Time |
| ISM Manufacturing PMI | Oct 3 | 10:00am |
| Fed Chairman Bernanke Testifies | Oct 4 | 10:00am |
| ADP Non-Farm Employment Change | Oct 5 | 8:15am |
| ISM Non-Manufacturing PMI | Oct 5 | 10:00am |
| Unemployment Claims | Oct 6 | 8:30am |
| Non-Farm Employment Change | Oct 7 | 8:30am |
| Unemployment Rate | Oct 7 | 8:30am |
