WEEKLY ECONOMIC UPDATE - November 1, 2010

WALL STREET AWAITS QE2, CONSIDERS 3Q GDP
Yes, QE2 – that is the media nickname for the expected second round of quantitative easing from the Federal Reserve, a move which could boost long-term bond prices and lower long-term interest rates. Will the Fed buy more than $500 billion in Treasuries? Or less? The Wall Street Journal says the purchases will amount to “a few hundred billion dollars over several months.” The Fed will reveal its plans on Wednesday at the end of its November policy meeting. Meanwhile, the initial third quarter GDP reading is in: +2.0%. The good news: consumer spending in 3Q 2010 was the strongest in four years. The bad news: a 2.0% gain in GDP isn’t strong enough to reduce unemployment.^1,2

HOME SALES PICK UP
Existing home sales improved 10.0% in September – the biggest one-month leap since the National Association of Realtors began keeping track of monthly sales volume. The median price was still 2.4% below year-ago levels. New home sales rose 6.6% in September, with the median price up 3.3% from 12 months ago. In related news, the August S&P/Case-Shiller home price index showed a year-over-year gain of 1.7% across 20 metro markets.^3,4,5

CONSUMER SENTIMENT WAVERS
The Conference Board’s survey of consumer confidence reached 50.2 this month, a 1.6% improvement. However, the final October Reuters/University of Michigansurvey hit an 11-month low of 67.7, perhaps on election season pessimism.^6,7

DURABLE GOODS ORDERS RISE 3.3%
September’s overall gain was mostly attributable to a 105% jump in aircraft orders. Core durable goods orders declined by 0.6% on the month.⁸

MARKETS MOVE CAUTIOUSLY
Wall Street largely held its breath last week, waiting for November’s data and policy moves. The performance across the last five trading days of October: Dow, -0.13% to 11,118.49; S&P 500, +0.02% to 1,183.26; NASDAQ, +1.13% to 2,507.41.⁹

COMING NEXT WEEK: Monday, we have September consumer spending and construction spending data and the October ISM manufacturing report. Wednesday is also big – the Fed announcement comes at 2:15pm EST, and before that we get the ISM service sector report for October, plus data on October auto sales and September factory orders. Thursday, we receive the latest initial claims figures. Friday, we have the October unemployment report and September pending home sales.

% CHANGE	Y-T-D	1-YR CHG	5-YR AVG	10-YR AVG
DJIA	+6.62	+11.60	+1.38	+0.26
NASDAQ	+10.50	+19.54	+4.00	-2.14
S&P 500	+6.11	+10.99	-0.25	-1.54
REAL YIELD	10/29 RATE	1 YR AGO	5 YRS AGO	10 YRS AGO
10 YR TIPS	0.50%	1.50%	2.01%	4.03%

Source: cnbc.com, bigcharts.com, ustreas.gov, bls.gov - 10/29/10^9,10,11,12

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

WEEKLY QUOTE

“One loyal friend is worth ten thousand relatives.”
– Euripides

WEEKLY TIP

If you like to itemize, consider organizing your receipts by expense type. It will save your accountant time and help them on their quest to save you money.

WEEKLY RIDDLE

Joe and Paul both live in the same town, on the same street. They both visit the same hardware store and purchase the same type and brand of product on the same day and at the same time. Paul spends $3.00 on 102, but Joe is charged only $2.00 for 98. Assuming Paul has not been overcharged and Joe has not been undercharged, what have they purchased?

Last week’s riddle:
Before Mt. Everestwas measured in 1819, what was the highest mountain on earth?

Last week’s answer:

Mt. Everest was the highest - it simply hadn't been measured yet.

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Citations. 1 –online.wsj.com/article/SB10001424052702303891804575576533845166848.html [10/25/10] 2 – abcnews.go.com/Business/wireStory?id=12000624 [10/29/10] 3 – businessweek.com/news/2010-10-25/u-s-existing-home-sales-rise-more-than-forecast.html [10/25/10] 4 - blogs.wsj.com/developments/2010/10/27/new-home-sales-stuck-at-rock-bottom/?mod=google_news_blog [10/27/10] 5 - bloomberg.com/news/2010-10-26/home-prices-in-20-u-s-cities-rose-less-than-forecast-case-shiller-says.html [10/26/10] 6 - theatlantic.com/business/archive/2010/10/consumer-confidence-remains-weak-going-into-midterms/65173/ [10/26/10] 7 - dailyfinance.com/story/consumer-sentiment-dips-on-economic-concerns-ahead-of-elections/19694879/ [10/29/10] 8 - marketwatch.com/story/durable-goods-orders-jump-33-in-september-2010-10-27 [10/27/10] 9 – cnbc.com/id/39916022 [10/29/10] 10 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=10%2F29%2F09&x=0&y=0 [10/29/10] 10 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=10%2F29%2F09&x=0&y=0 [10/29/10] 10 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=10%2F29%2F09&x=0&y=0 [10/29/10] 10 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=10%2F28%2F05&x=0&y=0 [10/29/10] 10 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=10%2F28%2F05&x=0&y=0 [10/29/10] 10 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=10%2F28%2F05&x=0&y=0 [10/29/10] 10 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=10%2F30%2F00&x=0&y=0 [10/29/10] 10 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=10%2F30%2F00&x=0&y=0 [10/29/10] 10 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=10%2F30%2F00&x=0&y=0 [10/29/10] 11 - ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [10/29/10] 11 - ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [10/29/10] 12 - treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [7/12/00]

C.W. Copeland
"Your Personal CFO"
C.W. Copeland & Associates
Lifestyle Management Advisors
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Atlanta, GA 30313

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