Markets started the week off slowly, but quickly picked up steam after several upbeat economic reports were released. Despite the headwinds blowing across global economies, a handful of important domestic indicators showed that the economy improved in September. All three major indices responded well to this news, posting their first positive week in three weeks, and the Dow finished at its highest level since December 2007. The biggest news last week was that Friday's jobs report showed that the unemployment rate slid to 7.8 percent - dropping to a near four-year low - and the economy gained 114,000 new jobs in September. While these numbers beat economists' expectations, the not-so-great news is that many of the jobs added were only part time. While it's too early to see the full effect of the Fed's QE3 program, the monthly jobs report is one of the best indicators of the economy's current state of health. Since the whole point of QE3 is to create more jobs and soothe jittery markets, economists and analysts will likely key in on this report to gauge the effectiveness of the Fed's plan. In the Federal Open Market Committee meeting minutes released last week, we were able to gain some insight into the Fed's decision to use mortgage bonds (instead of the usual Treasury securities) to bolster the economy. According to the official release, Fed officials determined that boosting the housing market was a good way to lift the broader economy. According to remarks by Chicago Fed President, the Fed will continue its QE3 actions until unemployment falls below 7 percent. Moving ahead, we should not be surprised to see some market volatility as earnings season heats up. Of the 103 S&P 500 companies that have provided earnings guidance, 78 percent of them (80) have issued a third-quarter forecast that falls below the Wall Street consensus estimate. But that doesn't mean you should buy into the doom and gloom forecasts you may be hearing. While past performance is no guarantee of future results, even during the peak of the 2007-2008 financial crisis, more than half of S&P 500 companies topped Wall Street estimates in the third and fourth quarters of 2008. As always, we'll be keeping an eye on things; and we'll be keeping you informed. We hope you have a great week!Headlines• Gas prices are still rising. Retail gasoline prices, already at the highest levels on average since July 2008, are likely to continue to climb this month as refinery and pipeline problems overshadow weakness in U.S. consumer demand. • Manufacturing expanded in September. The latest ISM manufacturing report shows that the manufacturing sector expanded last month after three months of contraction, showing that the housing boom may be spreading to other industries. Despite the growth, respondent manufacturing firms are still uncertain about their short-and medium-term futures. • European PMI shows return to recession. An important business report shows that dwindling new orders, layoffs, and a worsening business environment means Europe will not return to growth before 2013, at least. Despite actions by the ECB and major Eurozone economies, businesses are still not optimistic about their futures. • Retail sales in China slowed during the extra-long Golden Week holiday compared with last year, Reuters reported Sunday. Overall sales rose 15 percent during the eight-day holiday, which is actually slower than last year's 17.5 percent increase, Reuters said, citing local media. Mark Ballenger is an investment and financial planning consultant offering services to individual investors and business owners. His company, Ballenger Asset Management, is located at 110 E. Beaver Creek Blvd. in Avon. Reach him at 970-471-9962. This report has been created with the cooperation of Platinum Advisor Marketing Strategies LLC. Securities offered through Cambridge Investment Research, a broker/dealer, member FINRA/SIPC. Ballenger is an investment adviser representative for Cambridge Investment Research Advisors Inc., a registered investment adviser. Ballenger Asset Management and Cambridge are not affiliated.
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