Market Commentary

_______________________________________________________________________________ John Steele, CFP®, CRC®, CRPC, ChFEBC Presents

Weekly Economic Update for the Week of January 25, 2010

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Quote of the week. “Popularity: it is glory’s small

change.”– Victor Hugo

“Volcker rule” worries Wall Street. Investors

frowned last week as the President talked of rules

that would bar banks and bank holding firms from

getting involved in hedge funds or conducting

proprietary trading operations. Crafted with input

from former Federal Reserve chairman Paul Volcker

and past SEC head William Donaldson, the new

regulatory proposal is likely to face stiff opposition

from Senate Republicans.1,2

Big gain in leading indicators. The Conference

Board’s index of leading indicators rose 1.1% in

December, with November’s gain revised to 1.0%

from 0.7%. The index, a forecast of future economic

activity, rose 5.2% across the second half of 2009.3

PPI up 0.2% for December. That gain was much

smaller than November’s 1.8% jump. Core producer

prices (minus food and energy) were flat last month.4

Encouraging housing news. While new home

construction decreased by 4.0% in December,

housing starts were up 0.2% from a year before,

marking the first year-over-year gain since March

2006. Building permits were up 10.9% in December.5

30-year loans back under 5%. For the third

consecutive week, Freddie Mac measured a decline in

average rates on 30-year FRMs: they were at 4.99%

last week, down from 5.06% a week prior. 15-year

FRMs averaged 4.40%. Rates on 5-year and 1-year

ARMs respectively averaged 4.27% and 4.32%.6

A quick pullback. Besides the envisioned limits on

bank risk, investors got news of China’s instruction to

its banks to raise capital ratios. These factors took

stocks south: the Dow closed Friday at 10,172.98, the

NASDAQ at 2,205.29, and the S&P 500 at 1,091.76.7

% Change Y-T-D 1-Yr Chg 5-Yr Avg 10-Yr Avg

DJIA -2.45 +25.24 -0.42 -0.96

NASDAQ -2.81 +50.48 +1.68 -4.79

S&P 500 -2.09 +31.93 -1.30 -2.43

Real Yield 1/22 1 Yr Ago 5 Yrs Ago 10 Yrs Ago

10YrTIPS 1.31% 1.97% 1.69% 4.34%

(Source: CNBC.com, CNNMoney.com, ustreas.gov, bls.gov, 1/22/10)7,8,9,10

Indices are unmanaged, do not incur fees or expenses, and cannot be

invested into directly. These returns do not include dividends.

Riddle of the week. A glass of water has an ice

cube in it. If the ice cube fully melts, will the water

level increase, decrease or remain the same?

Contact my office or see next week’s Update for the

answer.

Last week’s riddle: If it were two hours later than

right now, it would be half as long until midnight as it

would be if it were an hour later than right now. What

time is it?

Last week’s riddle answer: 9:00 p.m.

___________________________________________________________________

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___________________________________________________________________

These views are those of Peter Montoya Inc., and not the presenting Representative or the Representative’s Broker/Dealer, and should not be

construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The

NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association

of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be

representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two

securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®,

and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York

Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy

and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium

markets, and the COMEX Division, on which all other metals trade. All information is believed to be from reliable sources; however we make no

representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. The

market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal,

accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent

professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as

currency fluctuations, political and economic instability and differences in accounting standards.

Citations.

1 curiouscapitalist.blogs.time.com/2010/01/21/a-question-about-the-volcker-steagall-act/?xid=rss-topstories [1/21/10]

2 online.wsj.com/article/SB10001424052748703699204575017300364900036.html?mod=WSJ-Markets-LeadStory [1/21/10]

3 abcnews.go.com/Business/wireStory?id=9622837 [1/21/10]

4money.cnn.com/2010/01/20/markets/markets_newyork/ [1/20/10]

5 money.cnn.com/2010/01/20/real_estate/housing_starts_building_permits/?postversion=2010012012 [1/20/10]

6 washingtonpost.com/wp-dyn/content/article/2010/01/21/AR2010012105404.html [1/23/10]

7 cnbc.com/id/35017549 [1/22/10]

8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F22%2F09&mode=add&symb=DJIA [1/22/10]

8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F05&mode=add&symb=DJIA [1/22/10]

8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F00&mode=add&symb=DJIA [1/22/10]

8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F22%2F09&mode=add&symb=COMP [1/22/10]

8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F05&mode=add&symb=COMP [1/22/10]

8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F00&mode=add&symb=COMP [1/22/10]

8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F22%2F09&mode=add&symb=SPX [1/22/10]

8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F05&mode=add&symb=SPX [1/22/10]

8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=1%2F21%2F00&mode=add&symb=SPX [1/22/10]

9 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [1/22/10]

9 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [1/22/10]

10 treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [1/12/00]

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