STORY TOOLS

• E-mail story
• Comments
• iPod friendly
• Printer friendly

More Business

• DOW FALLS 128: Stocks end wild session mixed
• Business Buzz: October 7
• TAX SECRETS: Multiple owners, multiple problems?

Share and Enjoy [?]

“The times they are a-changing” -- Bob Dylan (American folk singer and oldest living person to top the music charts, at age 65, with his release of Modern Times in August of 2006.)

Was that a hot flash, a fever or the flu? A blip on the radar screen or could it be more serious and deserve professional attention?

While strategizing for an upcoming meeting, a friend and I chuckled at the similarities between stock market capitulation and certain physical changes encountered as we age. Mood swings, temperature surges, weight fluctuation — who knows what’s going on anymore?

Just as physicians look at the underlying causes of physical changes, we study the origins of what makes the markets tick. Last week there were plenty of events to review.

The Fed lowered short-term interest rates, as expected, and at the same time signaled that it is unlikely to move again at its December 11 meeting.

Real Gross Domestic Product (GDP) growth came in stronger than expected in the advance estimate for the third quarter of 2007, helping to assuage recession fears. And non-farm payrolls rose strongly in October. However, credit market concerns continued to fan financial market worries.

The Federal Reserve’s Open Market Committee (FOMC) lowered its federal funds target rate another 25 basis points (to 4.5 percent), and in the process noted that growth is likely to slow following a “solid” third quarter.

The Fed commented that the upside risks to inflation were “roughly balanced” by the downside risks to growth — in other words, don’t expect another rate cut.

Real GDP rose at a 3.9 percent annual rate in 2007, boosted, in part, by a surge in exports and increased defense spending.

Domestic Final Sales (GDP less inventories and foreign trade) came in at a moderate 2.5 percent pace (measured against a 2.0 percent average over the three previous quarters). Core inflation readings were mild.

Non-farm payrolls rose by 166,000 in October, with a net downward revision of 10,000 to the two previous months. However, anxiety about sub-prime mortgage fallout and related financial weakness sent the major stock market indices reeling. Bonds benefited in a flight to quality. The dollar continued to weaken.

Analysts generally point to continuing fallout from the sub-prime lending mess. News seem to drip out daily that a major financial institution or bank is taking a large write-down because of exposure to securitized sub-prime mortgages.

Last Thursday the Fed injected $41 billion into the U.S. financial system, a cash infusion designed to help firms get through the credit crunch.

Additionally, there is concern about the steep run up in oil costs. Futures for light sweet crude reached $96.24 a barrel on Thursday before closing Friday at a record $95.93 a barrel on the New York Mercantile Exchange. Gold, often a refuge in uncertain conditions, finished the week at $808.50, its highest close since 1980.

As a real estate tracking website reported that foreclosures jumped 30 percent — to 446,000 properties — in the third quarter, and oil giants Exxon Mobil Corp. and Chevron Corp. reported third quarter income dips, there was also some positive economic news.

U.S. firms created 166,000 new non-farm jobs in October, a robust total that beat expectations. In the meantime, unemployment was constant at 4.7 percent. Those are signs credit woes are having less practical effect than some observers fear.

Investors (not “traders”) with a long-term (versus short-term) perspective may recall that it was only on Oct. 9 that the Dow closed at a record 14,164.53 and despite all the misgivings since, it is still trading in the mid-13, 000 range at the time this is being written.

With all of this it’s no surprise we have market turbulence. We’re up, then down, than back up — is it hot in here or is it just me?

Watch the velocity of the moves and percentage changes relative to the indexes. Know what you own, why you own it and stay close with a professional advisor to help guide you through these changing times. Change is the one certainty.

---

Darcie Guerin is a financial adviser and branch manager at Raymond James & Associates Inc. at 606 Bald Eagle Drive, suite 401, Marco Island. Contact her at Darcie.Guerin@raymondjames.com, 389-1041 or toll-free (866) 343-0882.