Weekly Market Review

10/08/07

 

One of the critical statistics that played a role in last month’s rate reduction of ½ of 1% by the Fed was the release of the nation’s August employment totals.  It was originally reported that US employers had fired more workers than they had hired during August (a net reduction of 4,000 workers), the 1st monthly nationwide decline since November 2003.  When the employment totals were revised last Friday (as they are every month), not only did employers create +110,000 new jobs in September, but August actually produced +89,000 new jobs, not the job losses as initially suggested (source: DOL).  
 
The S&P 500 raced ahead on the employment news, closing at a record 1558, up +11.4% YTD (total return).  After hitting a bear market low on 10/09/02 (i.e., 5 years ago tomorrow), the stock index has doubled in the last 5 years (source: BTN Research). 
 
Final federal deficit numbers for fiscal year 2007 will be reported this upcoming week.  The latest government projection calls for a loss of $158 billion for the year ending 9/30/07, a $90 billion improvement from last year’s $248 billion deficit (source: CBO).  
 
Notable Numbers for the Week:
1.        UP FROM THERE - Tomorrow is the 5-year anniversary of the low-point of the 2000-02 bear market for US stocks.  At the close of business on Wednesday 10/09/02, the S&P 500 bottomed at 777, before beginning a 5-year bull market run that closed at 1558 last Friday.  The business section headline in USA Today on Thursday morning 10/10/02 was “Where’s the Bottom, No End in Sight” (source: USA Today).    
 
2.        DETERIORATING DEBT - US corporate bonds worth $7.1 billion defaulted in 2006, a relatively low total by historical standards.  From now through 12/31/08, an estimated 75 corporate bonds worth $35 billion are at a high risk of default according to a major US rating agency.  The worst period for bond defaults was the 2-year stretch from 2001-02 when $250 billion of debt defaulted (source: S&P).  
 
3.       WHO PAYS WHAT - The average employer-sponsored health insurance plan requires a $2.69 contribution from the employer towards the total premium cost for family coverage for every $1.00 contributed by the employee (source: Kaiser Family Foundation). 
 
4.       INSECURITY BY THE TRILLIONS - The government estimates that the present value of future Social Security benefits to be paid out exceeds the present value of future Social Security taxes to be collected by $13.6 trillion.  This shortfall could be eliminated by a 20% reduction in all current-law scheduled benefits (source: Treasury Department).     

 

 

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