Clarksville, TN – Due to a lapse in appropriations, the government entered a partial shutdown. Some 800,000 federal workers were furloughed and about two million others continued to work but without getting paid. The economic impact of the shutdown will depend on how long it lasts.
A few days would not be a big deal, but a prolonged shutdown would result in a larger disruption of worker income (and corresponding restraint in consumer spending). In addition, the uncertainty may lead businesses to delay new hiring or capital expenditures. During the 1995-96 government shutdown, about 20% of private contracts with the government were affected.
The stock market gyrated, oscillating between concerns about a protracted shutdown (and possible breach of the federal debt ceiling) and strong hope that the situation would be resolved at some point. The dollar weakened. The four-week Treasury bill yield popped, reflecting some possibility of a default.Next week, the government shutdown is expected to continue and most of the economic data releases will be delayed. The debt ceiling is likely to become a more immediate concern, as the downside risks to the financial markets and the economy are a lot more substantial.
Indices
Last | Last Week | YTD return % | |
DJIA | 14996.48 | 15328.30 | 14.44% |
NASDAQ | 3774.34 | 3787.43 | 25.00% |
S&P 500 | 1678.66 | 1698.67 | 17.70% |
MSCI EAFE | 1820.63 | 1832.08 | 13.51% |
Russell 2000 | 1070.90 | 1078.41 | 26.08% |
Consumer Money Rates
Last | 1-year ago | |
Prime Rate | 3.25 | 3.25 |
Fed Funds | 0.09 | 0.17 |
30-year mortgage | 4.32 | 3.36 |
Currencies
Last | 1-year ago | |
Dollars per British Pound | 1.617 | 1.609 |
Dollars per Euro | 1.362 | 1.291 |
Japanese Yen per Dollar | 97.240 | 78.550 |
Canadian Dollars per Dollar | 1.032 | 0.986 |
Mexican Peso per Dollar | 13.230 | 12.824 |
Commodities
Last | 1-year ago | |
Crude Oil | 103.31 | 88.14 |
Gold | 1316.35 | 1779.18 |
Bond Rates
Last | 1-month ago | |
2-year treasury | 0.32 | 0.45 |
10-year treasury | 2.62 | 2.92 |
10-year municipal (TEY) | 4.34 | 4.94 |
Treasury Yield Curve – 10/04/2013
S&P Sector Performance (YTD) – 10/04/2013
Economic Calendar
October 8th |
— |
Small Business Optimism Index (September) Trade Balance (August) |
October 9th |
— |
FOMC Minutes (September 17th-18th) |
October 10th |
— |
Jobless Claims (week ending October 5th) |
October 11th |
— |
Producer Price Index (September) Retail Sales (September) Consumer Sentiment (mid-October) Business Inventories (August) |
October 14th |
— |
Columbus Day (bond market closed) |
October 16th |
— |
Consumer Price Index (September) Fed Beige Book |
October 17th |
— |
Building Permits, Housing Starts (September) Industrial Production (September) |
Mid-October |
— |
Debt Ceiling becomes binding |
October 30th |
— |
FOMC Policy Decision, no press briefing |
Important Disclosures
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
Material prepared by Raymond James for use by its financial advisors.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business October 3rd, 2013.
©2013 Raymond James Financial Services, Inc. member FINRA / SIPC.