Market Drivers: Gold Sell-Off and Jobs Numbers

McDonald's Hello Kitty Happy Meal Toy

McDonald's Hello Kitty Happy Meal Toy (Photo credit: Calgary Reviews)

Trading has been fairly quiet this week, with the 4th of July holiday likely inspiring traders to take a long summer weekend. Employment numbers are top of mind, as investors keep a sharp eye out for any improvement in the labor market. We also have continued concern on the Federal stimulus programs, and when the “taper” will begin. Here are three things that have been driving the market this week.

Half Year Review

With six months of 2013 behind us already, let’s take a quick look at a few performance metrics to see how the market has fared so far. For starters, the S&P 500 rallied 13% since January, its best performance  since a 17% gain in the first six months of 1998, and the DJIA finished the half up 13.77%.  While both indexes are off of their late May highs, it’s still not a bad run so far. The Russell 1000 and 2000 had similar returns, with the indexes gaining 12.78% and 15.08% respectively. The RMZ (MSCI US REIT) index had less impressive results, finishing only 4.5% on the up side after posting an impressive 18.03% increase toward the end of May. The big question will be if the market can uphold the momentum into through the fall, and in the face of monetary and global concerns.

Gold sell off

Largely seen as a “safe haven” , or a hedge against inflation for investors, gold has failed to live up to that mantra so far this year. The yellow metal has tumbled about 30 percent in the first half of 2013, marking its worst six-month performance since 1968. Rising real interest rates has been a popular scapegoat for the recent swoon, along with a stronger dollar. Historically, as the US dollar declined, money gravitated to gold in order to take advantage of the potential inflation that may occur as a result. With worries that the U.S. government will eventually wind down stimulus measures, depriving gold of the liquidity and inflation fears that have helped propel its stellar rise in the past few years. While some contend that the fundamentals of Gold remain intact, investor continue to pull funds out of gold exchange-traded funds at a staggering pace.

Jobs numbers

Fridays June jobs report may get much less attention given it follows the holiday, but is critical for gaming out when the Fed might start easing off the QE gas pedal. Consensus was for a solid gain of 175,000 new jobs and a drop in the unemployment rate to 7.5 percent. The jobs report did not disappoint coming in this morning at 195,000 with the jobless rate holding at 7.6%. Looking at employment numbers month over month indicates that the economy is holding strong which of course turns eyes to the Fed to slow QE sooner (perhaps beginning in September) rather than later, something that could dent stock prices and boost interest rates again.

Weekly Bonus : Hello Kitty!

Singapore, Malaysia: It is amazing how scarcity of a product could drive demand. Recently, fast food giant McDonalds began including small stuffed renditions of the popular Hello Kitty doll dressed in “fairy tale outfits” within meals (at a cost of about $3.63). The first few releases went off without a hitch, but demand for the "Singing Bone" toy - a black Hello Kitty with a white skeleton and pink bow, based on a German tale was off the charts! Kitty faithful lined up by the hundreds to get their hands on the rare offering which sold out in less than a day.  Shortly after they ran out, there were reports of the doll allegedly being sold on e-bay for $99,243!  Now that is what I call a nice return on investment!  


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