Category: Financial

The Markets

Despite drops in consumer confidence, import and export prices, crude oil inventories, and producer prices, the stock market rallied at the end of the week to post positive gains across the board lead by the S&P 500, which closed at an all-time high. However, the biggest gainers for the week were the Nasdaq (0.89%) and the Russell 2000, which gained 0.73% over last week. The domestic market’s positive close to the week may be in response to the rather sluggish economic news, which has increased sentiment that a Federal Reserve interest rate hike is not in the immediate future.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

• The Treasury Department reported that government receipts in April reached an all-time high. Total receipts came in at $471.8 billion, which created a surplus of $156.7 billion, the largest surplus in the last seven years. Of course, April is generally the biggest tax month of the year, with the bulk of the government’s receipts coming from individual income taxes ($288 billion). Through the first seven months of the budget, the deficit ($282.8 billion) is about 7.7% lower compared to this time last year.
• Compared to February, the March nonfarm jobs market saw fewer job openings (4.99 million vs. 5.14 million) according to the Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS). Yet the number of unemployment claims continued to decrease, down 1,000 for the week ending May 9, while the four-week moving average (271,750) is the lowest level since April 22, 2000. It appears that while employers aren’t hiring at a brisk pace, they’re also not letting employees go either.
• Continuing a trend, U.S. import prices fell 0.3%, while prices for U.S. exports fell 0.7% in April. Compared to last April, import prices are down 10.7% with export prices dropping 6.3%.
• April also saw producer prices fall 0.4%, while industrial production decreased 0.3% for its fifth consecutive monthly loss.
• The Census Bureau’s latest report for April showed virtually no change in advance estimates of retail and food sales compared to March. Sales of autos, furniture, electronics/appliances, and food/beverages all declined, as did department store sales.
• For a second week in a row, crude oil inventories fell, a decrease of 2.2 million barrels from the previous week. Nevertheless, at 484.8 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years.
• Last quarter’s sluggish economy coupled with increasing gas prices at the pumps may have caused a distinct drop in consumer confidence, according to the University of Michigan’s preliminary index of consumer sentiment for May. The 7.3% decrease from April (95.9 to 88.6) is the largest decrease since December 2012.

Eye on the Week Ahead

The week begins with housing data. Will this lagging sector begin to gain momentum during the spring season? And will jobless claims reports continue to show a positive trend?

The Markets

It was a clean sweep for the Nasdaq as it posted gains on all four days of a market week shortened by Martin Luther King Day. As the Nasdaq was moving into positive territory for the year, the other major indices lost ground on Friday, at least in part due to the uncertainty caused by the death of Saudi Arabia’s King Abdullah, but all posted solid gains for the week. The markets generally ignored signs of an economic slowdown in China and the continuing slide in oil prices.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

• While “deflategate” dominated American airwaves last week, concern about a deflationary spiral of a different kind caused the European Central Bank to announce a qualitative easing program worth at least €1.1 trillion ($1.3 trillion). The ECB hopes this monetary stimulus will increase investment and consumption, and turn around Europe’s stagnating economy.
• Greek drama redux: Greece’s anti-austerity opposition party Syriza, led by Alexis Tsipras, topped vote-getters in Sunday’s election, but fell just two seats short of the number necessary for a parliamentary majority, leading Syriza to announce it would form a coalition government with another anti-austerity party, the Independent Greeks. At risk, with the anti-bailout Syriza party in control, is Greece’s willingness to go along with conditions imposed by its creditors after bailouts in 2011 and 2013, which could prompt fresh concerns about default and a “Grexit” from the eurozone.
• Despite low inventories, existing-home sales bounced back in December and climbed above an annual pace of 5 million sales for the sixth time in seven months, according to the National Association of Realtors^®. Existing-home sales rose 2.4% to a seasonally adjusted annual rate of 5.04 million in December, up from 4.92 million in November, and up 3.5% from last December, the third straight month of year-over-year increases. Median home prices for 2014 rose to $208,500, their highest level since 2007, but total sales fell 3.1% from 2013.
• Meanwhile, the Department of Commerce announced that new residential construction rose to a seasonally adjusted annual rate of 1,089,000, a 4.4% increase over November, and a 5.3% increase over December 2013. Single family home starts rose 7.2% in December, to a seasonally adjusted annual rate of 728,000, the best since 2007.
• The Conference Board’s Leading Economic Index^® for the United States increased 0.5% in December, following a 0.4% increase in November, and a 0.6% increase in October. Ataman Ozyildirim, Economist at The Conference Board, said that “December’s gain in the LEI was driven by a majority of its components, suggesting the short-term outlook is getting brighter and the economy continues to build momentum.”

Eye on the Week Ahead

In what should be a very interesting week, all eyes will be on the Federal Reserve to see how the European stimulus plan might impact the Fed’s plans for U.S. interest rates. And investors will be closely watching for any developments in Saudi Arabia and Greece. Meanwhile, earnings season continues in high gear, with major companies like Apple and Microsoft reporting.

The Markets

A surprise move by Switzerland’s central bank made already unsettled financial markets even more volatile. For the third straight week of 2015, equities saw strong ups and downs that resulted in losses for the week. The uncertainty drove the benchmark 10-year U.S. Treasury yield even further below 2% as demand for a safe haven sent prices higher.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

• The Swiss National Bank shocked financial markets by deciding not to maintain a cap on the amount the Swiss franc can rise against the common eurozone currency. As a result, both the euro and shares of Swiss companies were hard-hit in the wake of the decision, which was made in anticipation of further weakening of the euro once the European Central Bank meets next week. In other central bank actions, India cut its key interest rate by 25 basis points to 7.75%; it was the first cut in almost two years and is intended to help spur growth.
• The largest monthly decline in U.S. consumer energy costs since December 2008, which included a 9.4% drop in gas prices, was largely responsible for cutting the Consumer Price Index by 0.4% in December. The Bureau of Labor Statistics said that means consumer prices overall have increased only 0.8% over the last 12 months; that’s sharply lower than the 1.3% annual rate recorded in November. Higher costs for shelter and medical care were offset by declines in not only energy but also clothing, air fares, vehicles, and household furnishings.
• The plunging cost of oil also helped cut wholesale prices 0.3% in December, according to the Bureau of Labor Statistics. The decline–the fourth in the last five months–was the sharpest drop in more than 3 years. December’s figure left the wholesale inflation rate for the last 12 months at 1.1%; however, excluding food and energy, the 12-month increase in wholesale prices was 2.1%.
• Early holiday shopping may have helped cut December’s retail sales by 0.9% in the wake of a strong November. The Commerce Department said December’s decline was the largest since January 2014.
• Warmer than usual temperatures in some parts of the United States in December led to reduced production by utilities, which contributed to a 1% decline in the nation’s industrial production. However, the Federal Reserve Board said that aside from utilities, industrial production rose 0.7%. The Fed’s Empire State manufacturing survey showed stronger growth than in November, while its Philly Fed survey showed slower growth.
• Exports from China increased 9.7% in December, according to the country’s General Administration of Customs. Investors took that as an encouraging sign for the global economy as a whole.
• The Federal Reserve’s Beige Book report showed that the U.S. economy continued to expand at a moderate pace in December, with consumer spending increasing in most of the Fed’s 12 districts.

Eye on the Week Ahead

Europe is likely to dominate the coming week’s news. Investors are hoping for additional stimulus measures from the European Central Bank, and will be watching polls in Greece to see if anti-bailout forces are likely to make gains in Sunday’s parliamentary election. Those results could affect the country’s willingness to go along with conditions imposed by its creditors after bailouts in 2011 and 2013, and could prompt fresh concerns about a “Grexit” from the eurozone.

The Markets

It was a grim week, not only in France but in financial markets worldwide. Despite a mid-week bounce, equities prices continued to follow oil on a downward path. The small caps once again bore the brunt of the selling, while the price of oil fell below $50 a barrel. Not surprisingly, U.S. Treasuries benefitted from the world’s black mood; as prices rose, the benchmark 10-year yield dropped below 2% for the first time since May 2013.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

• Minutes of December’s Federal Open Market Committee meeting showed that the committee’s recent shift to language about “patience” was intended to underscore its desire to remain flexible in dealing with rate hikes, basing decisions on ongoing data rather than a timetable.
• The addition of 252,000 new jobs in December cut the unemployment rate by 0.2% to 5.6%. According to the Bureau of Labor Statistics, those additions exceeded 2014’s 246,000 monthly average gain. However, hourly wages fell 5 cents to $24.57, though they were 1.7% higher than in December 2013.
• The pace of growth in the U.S. manufacturing sector slowed in December, according to the Institute for Supply Management. The institute’s most recent survey showed a 3.1% drop from November’s 59.3% reading. However, any figure above 50% represents expansion, and December’s figure was roughly equal to the monthly average for all of 2014.

Eye on the Week Ahead

Monday’s after-hours Alcoa announcement marks the unofficial kickoff to the earnings reporting season for Q4, which could overshadow U.S. inflation and manufacturing data.

The Markets

A couple of disappointing economic reports coupled with year-end tax maneuvers put the few traders who were at their desks last week in selling mode. All four domestic indices plus the Global Dow lost more than 1%, while the benchmark 10-year Treasury yield fell as prices rose.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

• The growth of U.S. home prices showed signs of slowing in October as the S&P/Case-Shiller 20-City Composite Index saw a -0.1% downturn for the month. October’s 4.5% increase year-over-year also was slightly less than September’s 4.8%. However, 8 cities reported the pace of increases had actually accelerated; two months ago, all 20 cities reported weakening.
• The Institute for Supply Management said its gauge of U.S. manufacturing showed slowing growth. The index reading of 55.5% was 3.2% lower than November’s reading, though any number above 50 indicates expansion.
• Construction spending in the United States fell 0.3% in November, and the Commerce Department said a 1.7% drop in government spending on schools and infrastructure was responsible for much of that decline. However, total construction spending was up 2.4% from last November.

Eye on the Week Ahead

In 2015’s first full week of trading, minutes of the Federal Reserve’s most recent monetary policy committee meeting will be parsed for information about what led to elimination of the “considerable time” language in its most recent statement about future interest rates. And as always, Friday’s unemployment report will be of interest.

Wishing you all an AMAZINGLY SUCCESSFUL 2015 !

The Markets

Grinches were few and far between on Wall Street last week as the Dow industrials topped 18,000 for the first time and the S&P 500 also set yet another new record. Even the small caps of the Russell 2000 participated in the merriment, turning in the best performance of the week. The price of the benchmark 10-year Treasury slipped a bit as the yield rose.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

• The U.S. economy grew at its fastest pace in 11 years during the third quarter. The Bureau of Economic Analysis said the 5% annualized growth of gross domestic product outpaced Q2’s 4.6% and represented the strongest growth since Q3 2003’s 6.9%. Health care and business investment in buildings and equipment were a large part of the increase. After-tax corporate profits also were up, rising 2.8% from Q2.
• Personal income rose 0.4% in November, but consumer spending rose even more. According to the Commerce Department, consumer expenditures were up 0.6% as falling gas prices left consumers with more money to spend. Meanwhile, disposable income was up 0.5% after adjusting for taxes and inflation.
• Existing home sales slowed a bit in November as the number of homes available for sale fell almost 7%. The National Association of Realtors^® said total sales were down 6.1% for the month, but were 2.1% higher than the previous November. The Commerce Department said new sales of single-family homes also fell 1.6% during the month, and were down 1.6% from a year ago.
• An 8.1% drop in military spending helped cut orders for durable goods 0.7% in November, according to the Commerce Department. It was the third straight month of declines in orders for goods intended to last three years or more. Also, business spending on equipment was basically flat.

Eye on the Week Ahead

As the year winds down in yet another abbreviated week of trading, volumes are likely to continue to be light. A few economic reports are due out, but many traders will be off toasting 2014’s string of record highs and hoping 2015 will bring more of them.

The Markets

Patience is a virtue: The Federal Reserve’s announcement that it would be “patient” with interest rate hikes was Santa’s cue to drop off gifts a little early. Equities regained much of what they had lost the week before. The Dow industrials’ 288-point gain on Wednesday was its best day of 2014–that is, until Thursday’s eye-popping 421-point increase left it in the dust. The Russell 2000 had its best week of the year, and the S&P is less than 5 points from the all-time high set two weeks earlier. Meanwhile, oil prices continued to fall, ending the week at roughly $57 a barrel.

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

• The Federal Reserve’s monetary policy committee replaced its promise to wait “a considerable time” before raising interest rates with a promise to be “patient” before doing so. Almost all committee members expect higher rates to hit in 2015, but investors paid more attention to members’ belief that rates may rise more slowly than previously thought. The committee’s median forecast for the fed funds rate at the end of 2015 is now 1.125%, while the median expectation for December 2016 is now 2.5%.
• The Russian ruble plunged 20% on Tuesday, prompting the country’s Central Bank to hike its key interest rate from 10.5% to 17% to try to support the currency. Concerns about the currency accelerated after bonds issued by Russia’s largest oil company received favorable treatment from the Central Bank; that raised questions about whether the action was essentially a government bailout of the company, which has been hard-hit by both economic sanctions and lower oil prices.
• Plummeting oil prices were good news for U.S. consumers in November. The 0.3% drop in the Consumer Price Index was fueled largely by the 6.6% decline in gas prices, which the Bureau of Labor Statistics called the sharpest decline since December 2008. Lower energy costs more than offset the 0.2% increase in food and 0.3% rise in housing, and helped cut the inflation rate for the previous 12 months to 1.3% from 1.7% a month earlier. Meanwhile, November’s 0.6% increase in inflation-adjusted hourly wages accounted for almost all of the 0.8% increase in wages over the last 12 months.
• President Obama announced that the United States will move to re-establish diplomatic relations with Cuba, which were cut off in 1961. However, congressional action would be needed to lift the decades-old trade embargo against Cuba.
• Both housing starts and building permits slipped in November, by 1.6% and 5.2% respectively. According to the Commerce Department, single-family housing was responsible for most of the decline in housing starts, while multi-unit buildings caused most of the decline in permits.
• U.S. industrial production rose 1.3% in November, helped by cold weather that pushed up heating demand and thus output from utilities. The Federal Reserve also said that industrial output from June through October was stronger than previously reported, and usage of the nation’s industrial capacity finally reached its long-term average of 80.1%. However, manufacturing growth measured by the Philly Fed survey slipped slightly, while the Empire State survey showed its first negative reading in nearly two years.

Eye on the Week Ahead

With a holiday-shortened week ahead, it might be difficult for equities to match last week’s blockbuster performance. The final Q3 GDP number and data on housing as well as consumer income and spending are on tap.