Week of October 5, 2015

Friday saved the week when stocks moved from sharply down after a disappointing jobs report, to sharply higher by the end of the day. The S&P 500 and Dow Jones Industrial Average each advanced 1% for the week. The Nasdaq Composite rose at half that rate. Earlier in the week, the 3rd quarter came to a close. The S&P 500 fell 8% during the quarter, one of the worst periods in recent history. The lackluster jobs report also pushed the yield on the 10-year Treasury below 2% as investors questioned the Fed’s ability to raise rates.

September Jobs Data Disappoints

On Friday, the U.S. Labor Department announced what can only be described as a dismal employment report. Non-farm payrolls climbed by just 142,000 jobs in September, well below the consensus expectations of economists who were forecasting 200,000 new jobs. On top of this, the August figure was revised lower to 136,000, and wages continued to stagnate as average hourly earnings fell by a penny to $25.09. Digging below the surface is more concerning. Not only did wages fall month to month, but the workweek contracted to 34.5 hours. This wage and hour decline is basically the equivalent of nearly 350,000 job losses. The one silver lining in the report was that the unemployment rate remained at 5.1%, but this was largely due to another decline in the participation rate.

_{Source: New York Times, October 2, 2015, https://www.nytimes.com/2015/10/03/business/economy/jobs-report-hiring-unemployment-wages-fed-rates.html}

Falling Out of Love With Deals

One of the notable changes in the market between the first and second half of 2015 has been investor reception to mergers and acquisitions. During the first half of the year, the share price of firms making an acquisition larger than $1 billion rose ~5% on the day following the announcement, according to data from Dealogic. Since July 1st, the average share price of acquirers has fallen 0.6%. The primary culprit for this change has been the uptick in volatility.

_{Source: Wall Street Journal, September 28, 2015 (subscription required),  http://www.wsj.com/articles/investors-give-cold-shoulder-to-deals-1443463297}

China Manufacturing Data Weakens Again

The manufacturing news coming out of China continues to disappoint. Last Thursday, China’s official purchasing manager’s index came in at 49.8. Any reading below 50 indicates a contraction. This is the second month in a row below 50 and also represents a three-year low. A private survey by Caixin/Market showed more contraction as its PMI hit a six-year low at 47.2. China’s central bank has cut interest rates five times over the past year, and continued weak manufacturing survey data suggests another round of easing could occur before year-end.

Fun Story of the Week

One of the biggest concerns with the digitization of everything surrounds privacy and protection. Most of us closely guard financial information and passwords, but there are perhaps more important secrets that need to be protected: what songs we sing in the shower. The data scientists at Spotify, the streaming music service, predicted which songs are most sung in the shower based on playlists created by users. Believe it or not there are nearly 40,000 active playlists titled “Shower” that get streamed nearly 550,000 times per day. Among the most popular tracks are classics like Earth, Wind & Fire’s “September” and Al Green’s “Let’s Stay Together”, to modern pop like “Earned It” by The Weeknd and “It’s Time” by Imagine Dragons. But, the data show that when we lather up, most of us prefer to channel our inner George Michael and belt out Wham’s “Wake Me up Before You Go-Go.”

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