Weekly Market Update: January 22, 2010

– Weekly Market Update

The Economy

* Tighter proposed banking regulation from the U.S. and initial steps to scale back lending by China, combined with gloomy economic data, resulted in uncertainty about the ongoing recovery-yet another bump on what we expect will be a long and winding road to recovery.

* The Obama administration proposed the “Volcker Rule,” legislation to limit the size and trading practices of banks.

* The U.S. Index of Leading Economic Indicators gained 1.1%, fueled by an increase in building permits for December.

* The Philadelphia Fed Index of manufacturing activity dropped to 15.2, which was weaker than expected and below its median level of 18.0.

* U.S. jobless claims rose unexpectedly; consensus estimates

predicted that claims would fall.

* U.S. housing starts fell 4% in December, and total housing starts for 2009 were the lowest on record dating back to 1959.

* European Central Bank President Jean-Claude Trichet warned that the euro-zone recovery would like be uneven despite government stimulus efforts.

Economic Calendar

* Existing home sales and Dallas Fed Manufacturing Activity will be released January  5.

* Consumer confidence and the Richmond Fed Manufacturing Index will be released January 26.

* New home sales and the Federal Open Market Committee’s rate decision will be released January 27.

* Initial jobless claims and durable goods will be released January 28.

* Gross domestic product, employment costs and the Chicago Purchasing Managers Index will be released January 29.


* Global markets fell on anxiety that additional regulation and tighter monetary policies may hinder the fragile recovery.

* In the U.S., small caps outperformed their large-cap brethren. Growth stocks outperformed their value counterparts.

* In the U.S., Telecommunications was the best-performing sector, while Materials lagged behind the broader markets.

* In the UK, investors flocked to defensive sectors; leaders were Healthcare, Utilities, Telecommunications and Consumer Staples. Materials and Financials lagged.

* In Europe, Healthcare, Consumer Staples and Information Technology led while Materials and Financials lagged.

* Oil and gold both fell at the end of the week in response to Obama’s plan to regulate banks and China’s possible rate increase.


* Global government bonds rallied on weaker economic data and the announcements from China and President Obama.

* Demand for U.S. Treasuries rose as investors worried about the impact of increased regulation on economic growth.

* Corporate bonds fell as investors snapped up government bonds.

* High-yield and emerging-market debt fell as investors sought safety in government bonds.

The Numbers as of Friday 1

Week YTD 1 Year Friday’s

Jan 22, 2010 Close

Global Equity Indices

MSCI World ($) -2.4% -0.1% 40.5% 1166.9

MSCI EAFE ($) -2.4% -0.3% 44.4% 343.2

MSCI Emerging Mkts ($) -2.9% -0.8% 90.8% 981.2

US & Canadian Equities

Dow Jones Industrials ($) -4.1% -2.4% 25.2% 10173.0

S&P 500 ($) -3.9% -2.1% 31.9% 1091.8

NASDAQ ($) -3.6% -2.8% 50.5% 2205.3

S&P/ TSX Composite (C$) -2.9% -3.4% 33.7% 11343.4

UK & European Equities

FTSE All-Share (£) -2.7% -1.7% 33.5% 2714.1

MSCI Europe ex UK (