Economic Journal - Tuesday, 7/31/2012

(As of 7:30 am pacific)

Stocks drifted lower in early trading as a slew of economic reports gave investors time to weigh the health of the overall economy ahead of this week’s central bank meetings.  This morning the Commerce Dept. reported that personal spending for the month of June fell 0.1%, while May personal spending was revised downward to a 0.1% decline.  It was the first time since early 2009 that personal spending declined for 2 consecutive months, suggesting a slowdown in economic growth.  On a positive note, data continues to support a slight recovery in the housing market with a report showing today that home prices rose 2.2% on the month for the 2^nd straight month of increases.  Also, a report out of Chicago, the Chicago PMI, showed the manufacturing gauge rising ahead of expectations.  Today, kicks off a 2 day meeting at the Federal Reserve where officials will discuss potential policy actions to help stimulate growth.  Economists do not expect the Fed to conduct any new asset purchase programs, or QE3, until September, however it is expected that the Fed will announce extending its plan to keep interest rates at near record lows through mid 2015, a year longer than previously announced.   Last month the Fed announced it will extend its program called Operation Twist, a strategy that has brought 30 yr. mortgage rates to historic lows.  In Europe, it’s a similar story today as investors are anxiously awaiting Thursday’s European Central Bank (ECB) meeting.  Stocks were down on negative earnings reports.  Asian markets were mixed as India’s Reserve Bank announced its cutting its GDP forecast for this current fiscal year to 6.5% growth from previously forecasted 7.3% growth.  Commodity prices were mixed with oil and gold down slightly.  The US dollar was also mixed and volatility was up slightly.  We expect a quiet day with the markets looking for direction on clues from Fed meeting this week.

Economic Journal - Monday, 7/30/2012

(As of 7:30 am pacific)

Talk may be cheap, but it can be market moving and profitable.  The European Union is rolling out a cast of characters promoting the ability of financial authorities to handle any European crisis that comes along.  Just this weekend, in an effort to squash a long streak of negative Mondays, another bureaucrat trumpeted European resolve.  While there has been little to back it up, it is calming markets and driving down bond yields, particularly for Italy and Spain.  Whether this use of smoke and mirrors can continue without action to push markets forward is questionable.  In the meantime we have continued stability in the marketplace.  The dollar is mixed and most commodities are little changed.  The shorter side of the yield curve is increasing while longer rates are holding steady.  The markets are slowly moving higher and if this Monday can break the streak of negative starts to the week, it could be very positive for the rest of the week.

Economic Journal - Friday, 7/27/2012

(As of 7:23 am pacific)

Today’s market gain appears solid, complimenting yesterday’s large rally.  The Michigan sentiment indicator came in slightly above forecast as did the domestic GDP number. GDP was pretty anemic at 1.5%, but better than the 1.4% that was expected.  Both figures should have negligible effect on the market, but there is an afterglow of positive momentum after yesterday.  European jawboning by politicians is telling the market that there is a floor to European risk and this is shoring up that fragile piece of the puzzle and keeping a cap on volatility.  Significant profit misses by Starbucks and Facebook sent their shares plummeting, but a mild miss by Amazon was good enough to send that stock up.  The dollar is down against most currencies.  Oil and gold are up slightly while interest rates are stable.  Today should be a quiet day, with gains eroding a bit, but nothing serious. 

Economic Journal - Thursday, 7/26/2012

(As of 7:00 am pacific)

Risk is ‘on’ again.  European leader Draghi’s comments got things rolling and then a series of positive economic reports added to upward momentum and the market is on fire right now.  Earnings reports, although mixed, have been generally positive, also helping the surging markets.  The dollar is down big against most currencies and oil and gold are up.  Other commodities are mixed.  Interest rates yields are up slightly.  Volatility is down significantly.  I think this gain is solid and short sellers will be forced to liquidate positions, creating a ‘melt-up’, a situation that occurs when those betting against the market are forced to buy back their short positions.  We could see further gains as the day moves along.

Economic Journal - Wednesday, 7/25/2012

(As of 7:00 am pacific)

The market is overcoming selling pressure from an unlikely source, Apple.  Apple announced that earnings missed estimates and its stock fell about 5% in the aftermarket yesterday.  In spite of Apple, the markets are all up this morning.  The dollar is down against most currencies and most commodities are up as a result, with gold up nearly 2%.  Longer term interest rates continue to fall as short term rates are up slightly.  In what feels like a sigh of relief, the risk trade is on again, although a shadow of its former self.  Europe is less pessimistic, which is about as good as it gets these days.  I think it unlikely that the market can stay in positive territory as the Apple miss continues to roost.  

Economic Journal - Tuesday, 7/24/2012

(As of 7:20 am pacific)

Caution prevails as news is light out of Europe, but one can’t help but feel that investors still have Europe on their mind.  The German bond was downgraded yesterday after the market close.  Earnings reports are heavy today, and should have the say as to whether we move back into a more positive mood.  So far earnings are mixed with nothing to write home about.  Oil and gold are up slightly while most commodities are down and the dollar is mixed against other currencies.  Longer term interest rates continue a downward trend as short term rates rise slightly, probably the continuing influence of ‘Operation Twist’. Volatility has dampened from yesterday.  A flash PMI figure, which is a measure of manufacturing activity was at its lowest since December of 2010, another in a disturbing trend of weakening economic activity reports  in the US.  I suspect that earnings reports will turn more positive as the day progresses and that we end with a slight gain while we wait for more direction from Europe.

Economic Journal - Monday, 7/23/2012

(As of 7:10 am pacific)

Today’s massive negativity is no surprise to those who were watching the news in Europe this weekend.  Huge problems loom in Greece and Spain and once again Europe has become the hot topic in the market.  All commodities are down big including oil and gold.  The dollar is soaring in a flight to safety.  Volatility is soaring once again.  McDonalds miss on earnings and revenue has added fuel to the fire.  Watch for central bank intervention and a recovery from market lows, although still a downer of a day.

Economic Journal - Friday, 7/20/2012

(As of 7:08 am pacific)

Earnings reports have become a bit mixed this morning with some big hits and a few misses.  But Europe is taking center stage this morning.  Spanish bond yields, which have risen sharply, and other troubling Europe news are dampening what was generally a good aftermarket for earnings yesterday.  Concern about China growth has also contributed to investor worry.  Gold is down slightly, while oil is down moderately as the dollar is rising strongly against all currencies except Japan’s yen.  Interest rates are mixed, slightly up on short term rates and slightly down on the longer term.  This down market might be a preview of life after earnings season.  Earnings enthusiasm has masked a series of negative economic reports and when the glow of a somewhat positive earnings season fades investors may not like what they see.

Economic Journal - Thursday, 7/19/2012

(As of 7:30 am pacific)

Earnings continue to dominate the financial headlines and provide positive momentum to a market that is ignoring negative news from Europe and the US.  Jobless claims were up, home sales were down, Leading Economic Indicators were down and the Philly Fed Index, a measure of business growth, was also down. Walgreens is in the news and up substantially because of a resolution of its conflict with Express Scripts.  Oil is up as is gold and most commodities.  The dollar is mixed.  It almost looks like a ‘risk on’ scenario, with buying across all sectors, but the negative economic news is keeping a damper on the upward momentum.  Generally earnings season has been much more positive than expected and is powering the market forward.  Mortgage interest rates are up slightly from what seems to have been a bottom last week.

Economic Journal - Wednesday, 7/18/2012

(As of 7:17 am pacific)

US Home sales rose a brisk 6.9%, the highest level since 2008.  Europe is quiet this morning.  Ben Bernanke continues his testimony before Congress today and it is sure to be market moving, just as it was yesterday.  The market had a very volatile day yesterday starting with a large gain, swinging to a large loss as Bernanke was in testimony, and then swinging back to a large gain later in the day.  Oil is up slightly, gold is down moderately and the dollar is mixed.  There is positive momentum, especially in technology as Intel and EMC both beat earnings estimates after yesterdays close.  Mortgage rates appear to have bottomed out and are rising slightly.  Generally earnings reports are coming in better expected.

Economic Journal - Tuesday, 7/17/2012

(As of 7:00 am pacific)

Stocks drifted higher this morning as investors awaited Fed Chairman Ben Bernanke’s congressional testimony.  Bernanke is set to testify this morning before the Senate Banking committee on the current condition of the economy and as has been the pattern of 2012, the markets are up in hopes that Bernanke signals new Fed stimulus action.  Economic reports out this morning from the Labor Department showed that the Consumer Price Index (CPI) was unchanged for July signaling prices flattened and the risk of inflation is not a near-term threat.  Core CPI, which strips out the volatility of food and energy prices rose 0.2%, in line with economists expectations.  Falling energy prices pulled down prices and as we’ve been saying will ultimately serve as a tax break, putting dollars back in the pocket of consumers.  Another report this morning showed industrial production in June increased more than expected, mostly led by automobiles and machinery makers.  Capacity Utilization, which measures what portion of a manufacturing plant is producing, rose from 78.7 to 78.9 in June.  The average reading since 1967 has been 80.7.  The surprise increase in manufacturing comes after a decline in May.  News out of Europe was quiet this morning and overshadowed by markets anticipating Bernanke’s testimony this morning.  The main economic report was out of Germany with the ZEW index of German investor confidence falling in July.  Oil prices continued their climb back up and gold fell slightly.  The US dollar was mostly down and the 10 yr. treasury yield remained at 1.49%.  Volatility was down to start trading and then began to increase as Bernanke’s testimony began.  It looks to be a volatile morning as investors trade on the comments of the Fed chairman.

Economic Journal - Monday, 7/16/2012

(As of 7:30 am pacific)

We’re back in the red after a brief rally Friday sent stocks higher.  Today, stocks traded lower as economic reports brought investors back to grips with the slowdown.  The Commerce Department reported today that June retail sales fell 0.5%, for the 3^rd straight monthly decline.  The last time retail sales declined for 3 straight months was in the latter half of 2008.  Retail/Consumer spending accounts for more than 2/3 of our nation’s economic growth.  The largest decline in the report came at gas stations, led by the drop in fuel prices which will ultimately be a good thing for consumers, putting dollars back in their pockets.  Another report, the Empire State Index, which measures manufacturing activity in the New York area, showed manufacturing expanding at a faster pace than June.  European markets are down and stocks in Asia were mixed today.  Gold prices were slightly down and oil was slightly up.  The US dollar was mixed but up against the euro while the 10 yr. treasury continued its decline, hitting 1.45% in early morning trading.  Despite the poor retail sales, volatility remained in check, up only 0.78% and falling as the morning goes on.  I expect a fairly quiet day today, with volume picking up tomorrow as several major companies report Q2 earnings including Coca-Cola, Johnson & Johnson, and Intel.

Economic Journal - Friday, 7/13/2012

(As of 7:04 am pacific)

We are experiencing what appears to be a relief rally from China’s GDP report, which was not as bad as it could have been.  Also, the market is due for a bounce after a number of days of declines.  Oil is up slightly, gold is rallying, interest rates continue their downward trend and the dollar is mixed.  Earnings reports are mixed, but, once again, not as bad as they could have been.  Alas, I don’t see this rally going much of anywhere today as the implications of a global slowdown overtake the relief from these poor reports which, although better than expected, will still dampen the opening market optimism.

Economic Journal - Thursday, 7/12/2012

(As of 7:41 am pacific)

Jobless claims came in above expectations, but have given no positive bounce to a very negative market opening.  Worries from Asia, particularly China growth stats now seem to be the markets focus.  I sense that the market is starting to sense that earnings season might present more negative surprises.  It looks a little bit like a ‘risk-off’ scenario, with most asset classes dropping.  The Federal Reserve minutes from yesterday indicating no imminent quantitative easing packages are on the table may lend credence to this ‘risk off’ scenario.  Oil and gold are down. Interest rates are down. Volatility is up.  The dollar is down against all except the yen.  Expect the jobless claims numbers to gradually add strength and a bit of a recovery to today’s market.  It wouldn’t surprise me to see a market reversal and a positive close.  

Economic Journal - Wednesday, 7/11/2012

(As of 7:19 am pacific)

It is eerily quiet in the markets this morning.  Spain has set some cost cutting goals to meet austerity requirements, while Italy is talking of needing help in lowering borrowing costs.  Economic reports are scarce today, with the balance of trade coming in with decrease.  Gold is up slightly, oil is down moderately and interest rates are flat.  Volatility is down.  There have been more warnings on earnings and revenue guidance.  Expect corporate earnings to dictate market action for the next couple of weeks.  Unfortunately earnings are not looking very impressive.  The dollar is down against all other currencies and commodities are generally up as a result.

Economic Journal - Tuesday, 7/10/2012

(As of 4:15 pm pacific)

Check out our Monthly Market Recap video for June by clicking on the Videos tab.

(As of 7:00 am pacific)

European news has had a positive effect on US markets.  There are no significant economic reports today.  Gold is up while oil is down and the US dollar is mixed against world currencies.  Interest rates are down slightly.  Alcoa kicked off what could be a bumpy earnings season with an uninspiring earnings report.  There seems to be a positive momentum to the markets but I see that waning as the day goes on.

Economic Journal - Monday, 7/9/2012

(As of 7:26 am pacific)

Although the market seems flat and uninspiring today, there are some interesting things going on.  A ‘merger Monday’, there have been a couple of buyouts, most notably in the health care field, where the Supreme Court’s decision on Obamacare is raising some consolidations and opportunities.  Where we normally see a down Monday market due to Europe concerns, today’s relatively flat opening  is a departure from that pattern, and also somewhat positive.  Interestingly, the bad news for this Monday AM is coming from Asia, with Japan showing a marked slowdown.  If past patterns repeat themselves, we should see a fairly positive day.  Prospects for reduced profits during earnings season may limit the upside potential.  Oil is relatively flat.  Most other commodities are up.  The dollar is generally down.  Gold is up and volatility continues to decline.

Economic Journal - Friday, 7/6/2012

(As of 7:34 am pacific)

Stocks start the day lower as disappointing US jobs data adds to the growing concern over global growth.  Most major asset classes are down today in a risk off scenario for markets around the globe.  This morning the US Labor Department announced the economy added 80,000 jobs in June, well below the 100,000 economists had forecasted and the jobless rate remained unchanged at 8.2%.  After a strong first quarter which saw an average of 276,000 jobs created per month, only 75,000 jobs have been added per month in the second quarter, indicating a sharp slowdown in hiring.  The other news that could be moving the markets are comments made earlier this morning by IMF Director Christine Lagarde when she stated that growth indicators had become worrisome and to expect a cut in the IMF’s global growth outlook.  European markets were down on jobs data and Lagarde’s comments as well as lingering fears over the situation in Spain where Spanish bond yields spiked today.  Asian markets were down in response to yesterday’s poor US services data and investors were cautious as they awaited today’s jobs data.  Commodities are down across the board with oil down nearly 3% and gold off 1.2%.  The US dollar is surging as investors flocked to the safety of the greenback.  Interest rates fell slightly and volatility was up, but not as much as we expected.  It’s a risk off day, and we don’t expect much change in the afternoon.  Next week starts earnings season with Alcoa kicking it off on Monday.  Have a great weekend!

Economic Journal - Thursday, 7/5/2012

(As of 7:14 am pacific)

Stocks are down this morning despite positive economic data as the market reopens after the 4^th of July holiday.  Strong US jobs data released today from ADP indicates that the private sector added more jobs than economists forecasted in June.  The number of people filing for unemployment benefits fell last week to its lowest level in over a month and a half.   A more accurate report of job growth will come out tomorrow from the US Labor Department.  Due out later today is a report from ISM on US nonmanufacturing economic activity.  Despite the positive reports we’re seeing today out of the US, the market seems to be shrugging them off and focusing on comments made by European Central Bank President Mario Draghi.  After cutting the key lending rate of European banks to record lows, ECB President Mario Draghi made several statements during a press conference that weighed on investor confidence, overshadowing the stimulus measure and sending stocks around the globe lower.  Draghi stated that economic growth in the euro region is weak and risks remain on the downside.  Other global central banks took action today with China announcing a surprise interest rate cut for the second time in a month, and the Bank of England expanding its quantitative easing program.  It wasn’t enough however to overcome the gloomy outlook on Europe.   Oil and gold are both down while the dollar is mostly up.  US treasury bonds are up, as interest rates fell slightly.  Volatility is trending up and pointing to a choppy day.

Economic Journal - Tuesday, 7/3/2012

(As of 7:40 am pacific)

Stocks edged up slightly as the only economic report of the day came in positive and investors recovered from yesterday’s disappointing manufacturing data.  The Commerce Department reported early this morning that US factory orders rose in May for the first time in 3 months, ahead of expectations.  In corporate news, US retail stocks fell as weekly sales rose at the slowest pace in 9 weeks during the week ended June 30^th.  JCPenney, Home Depot, and Lowe’s led the decline.   In Europe, stocks rose for a second day in a row as expectations continued for the European Central Bank (ECB) to further cut interest rates on Thursday, which would act as a stimulus measure for Europe.  Commodities soared across the board on expectations that a central bank rate cut would increase demand for raw materials.  Crude oil surged 4% to over $87/barrel on geopolitical concerns about Iran and missile drills that were conducted late Monday.   Trading activity is light today as the US stock market will close at 1:00 pm Eastern today in observance of the 4^th of July holiday.  The stock market will be closed all day tomorrow and trading will resume at normal market hours on Thursday.  We expect a relatively quiet day in the market with low volatility and look to Thursday’s ECB meeting as the most important indicator for the outcome of the rest of the week.  Happy 4^th of July!!!

Economic Journal - Monday, 7/2/2012

(As of 6:45 am pacific)

The market is rising again this morning into the new quarter, the afterglow of Friday’s spectacular gain.  It’s a different feel this morning however as gold and oil have left the party, falling moderately.  Interest rates are stable and the dollar is mixed.  I would say that if the market can continue this rally through the day, it would be a very bullish sign for the future.  I think we may see a pullback as the day wears on due to weak domestic economic news.  A key manufacturing index the PMI came in at an 18 month low, but still expanding slightly.