Markets and Economy Weekly Update

Alcoa kicked off earnings season last week by reporting a net loss of $143 million (13 cents a share) loss in the third quarter. The results included the cost of settling a four-year legal battle over bribery allegations but were still slightly better than Wall Street expected. This compares with a 15 cent a share profit a year earlier. Alcoa also cut its forecast for global aluminum demand growth from 7% to 6%. The market didn’t take kindly to the profit warning and the Dow shed 128 points on Wednesday.


Two of the nation’s largest banks, Wells Fargo and J.P. Morgan reported third quarter earnings last week. The improved results were most due to a rebound in the housing sector. Both banks said the housing market had “turned the corner”. Earnings are still under pressure from historically low interest rates.

The International Monetary Fund (IMF) World Economic Outlook report stated “Risks are alarmingly high,” for a slowdown in global growth. The IMF revised their expectations downward 0.2% to 3.3% this year and 0.3% to 3.6% in 2013. The stagnation of global growth is noted by its 5.1% advancement in 2010 and 3.8% in 2011.

Due to the reduction in global growth, Europe continued to be a drag on the domestic markets as France, Spain and other nations in the EU won’t hit budget deficit targets agreed to with EU authorities.

S&P Ratings Services downgraded Spain again in light that country’s deteriorating economy. This put the rating in line with Moody’s downgrade a few months ago.

The trade deficit widened by $2 billion in August to $44.2 billion. The drop was broad based and due to weakening demand from Europe.

The Producer Price Index (PPI) came in higher than expected with a 1.1% jump. Most of the increase came from the energy sector. The widely followed “core” PPI came in unchanged month over. This suggests that suppliers and manufacturers have not been able to pass on cost increases to consumers.

Applications for jobless benefits dropped 30,000 to 339,000 for the week ending Oct. 6th. That was the fewest since February, 2008 and shows the economy is still improving, although at a snail’s pace.