Economic Journal - Friday, 9/28/2012

(As of 7:14 am pacific)

 

A mixed pot of domestic and international data and sentiment is causing the stock market to retreat from yesterday's moderate gain.  The Chicago PMI, a key manufacturing statistic, fell into negative territory at 49.7, well below consensus, and indicating economic contraction in that area. The consumer sentiment index was up, but did not match lofty expectations.  US consumer spending is up .5 percent, which is normally a positive, but the fact that much of the gain was due to higher gas prices has nixed the stimulative effect of the report.  The US savings rate was down as consumers spent more, while incomes remained nearly flat.  Mixed reports from Europe and lingering worries about global growth have contributed to what is shaping up as a somewhat negative end to the 3rd quarter of 2012.  Oil, gold and the US dollar are all mixed.  Volatility is slightly higher.  Interest rates continue lower as mortgage rates plumb new lows.  It has been a great quarter, but it is likely that given the mostly negative news that profit taking will be the order of the day, and we will see a triple digit drop in the Dow with other indexes following suit.

Economic Journal - Thursday, 9/27/2012

(As of 7:19 am pacific)

 

Mixed signals for the US economy are puzzling investors this morning. US markets opened with mild gains on a report that jobless claims had dropped significantly.  At the same time, some negative data was added to the mix as durable goods orders were down 13%, mostly due to the volatile transportation sector.  2nd quarter GDP was revised downward to 1.3%, a very anemic reading.  Europe is quiet this morning and Asia is positive due mainly to expectations of further economic stimulus.  It feels like the market wants to move into a 'risk on' mode, with most commodities up, including solid gains in oil and gold, but the negative data is putting the brakes on.  Further questioning of the QE3 strategy is also repressing the bullish tones.  Expect another up and down day, but in the end I think that the prospect of a good jobs number tomorrow, based on today's jobless claims number, will lead to a moderately positive day on the markets.

Economic Journal - Wednesday, 9/26/2012

(As of 6:37 am pacific)

 

The European economic scene shifted from a sea of tranquility to a storm tossed ocean in a very short period of time.  Volatility is skyrocketing as investors try to measure a number of stories coming out of the Euro-zone.  Spanish yields are up amid political jockeying over a Euro bailout plan, while the affluent Spanish State of Caledonia is preparing a referendum on secession from Spain.  Peripheral stories from Greece and Italy have investors further on edge.  A Federal Bank governor issued a statement questioning the wisdom of QE3 and its open ended commitment.  We are in a 'risk off' scenario as the dollar is strengthening in a flight to safety and most commodities and other investments are down.  Oil and gold continue their drop from yesterday.  One beneficiary of the flight from risk is that interest rates are down, including mortgage rates, which are near historic lows.  US markets opened surprisingly stable in spite of the flurry of negative momentum, but don't expect a positive home sales number to overcome global worries.  Expect a volatile, but eventually negative day on Wall Street.   

Economic Journal - Tuesday, 9/25/2012

(As of 7:25 am pacific)

 

Stocks are steadily rising this morning as housing data comes in better than expected.  The Case Shiller Index, which measures home prices for 20 major US cities, rose 1.6% in July for the 4^th straight monthly increase and reached its highest level in almost 2 years.  It was the 3^rd month in a row that every city in the 20 city index recorded positive price gains, confirming the recent good news in housing.  Consumer confidence also rose to a 7 month high.  The reports were enough to lift all major US indices into the green.  European markets also reversed direction after the US data was released adding to slight gains.  News is light out of Europe today, with one report stating that Greece will likely need more time to get its finances in order.  In company news, Caterpillar trimmed its 2015 earnings forecast calling for modest economic global growth, causing shares to tumble 2.5%.  The US dollar is down today causing commodities to rise, including oil and gold.  Interest rates are flat with the 10 yr. treasury yield at 1.71%.  Volatility remains low.  Expect the market to hold on to modest gains today as the housing data has been the one bright spot in the economic reports we’ve been seeing the past couple months. 

Economic Journal - Monday, 9/24/2012

(As of 6:56 am pacific)

 

'Risk off' today.  Most assets are on the downside.  Oil, gold and most commodities are down as the US dollar is surging against most currencies.  Global growth concerns and restive news out of Europe are raising investor concerns so there is a strong move into US Treasuries.  Interest rates are down slightly.  There are no significant economic reports out today so expect this negative trend to continue as the day wears on.  Watch out for complacency.  It is possible that this negative opening might snowball into a significantly down day, something we haven't seen in awhile.   Volatility is on the rise.

Economic Journal - Friday, 9/21/2012

(As of 7:28 am pacific)

 

With a lack of economic news this morning, investors are looking to prospects out of Europe for direction.  A report from the Financial Times that Spain may announce an economic reform plan as soon as next week, has markets higher in Europe and the US.  According to reports, Spain and EU officials are working together on a plan for economic reform that could open the door for bailout funds to be released from the EU.  The news has boosted the euro and caused the dollar to slip, while investors risk appetite appears on.  Also lifting stocks are expectations of strong sales over the weekend of the new iPhone 5.  The phone hit stores today and many analysts expect over 6 million units to be sold by Monday.   Apple shares are up 0.75%.  Oil has reversed its downward trend after sliding 6% this week, and also is carrying stocks higher today.  Gold and most other commodities are higher.  Interest rates are slightly higher and volatility remains low.

Economic Journal - Thursday, 9/20/2012

(As of 7:30 am pacific)

 

Economic reports coming in from Asia and the US are pulling down markets this morning.  It's hard to pick one particular piece of data as the cause of the pullback, because while not meeting expectations, the data is not that bad.  Chinese manufacturing data came in low, but slightly above expectations, and there is worry that a Chinese slowdown will resound globally.  Jobless claims in the US were not quite what was expected and has taken some of the glimmer off the hopes for a resurgent US economy.  Taken together, along with some disappointing earnings news and announcements of more layoffs, there is a strong negative sentiment taking over markets this morning.  By the end of the day I would expect losses to moderate.  Oil is down slightly, adding to huge losses for the week.  Commodities are generally down, including gold.  The US dollar index is up strongly as the risk trade seems to be off and capital protection is today's watchword.

Economic Journal - Wednesday, 9/19/2012

(As of 7:23 am pacific)

 

There is a lot of news today and most of it is good. Markets are reacting with a modest gain.  Real Estate continues to recover with impressive gains in existing home sales.  Low interest rates seem to be finally turning the housing sector around.  Japan announced a new fiscal stimulus program that will pump $160 billion into its economy.  Oil prices are continuing to plummet, down another 2-3%.  Gold is mixed and the dollar index is up slightly.  Longer term mortgage rates are down and short term rates are up, a sign that 'Operation Twist' is having a continuing effect on the yield curve.  Look for markets to strengthen through the day as the impact of this series of positive reports takes hold.

Economic Journal - Tuesday, 9/18/2012

(As of 7:03 am pacific)

 

Stocks are listless this morning.  It feels as if there is a hangover from last week's celebration of the Fed's announcement of QE3.  The dollar is up against most currencies, while oil and gold are down marginally.  Individual company news is weighing on stocks.  Fed Express reiterated its concern about global growth as it cut future estimates.  Though no solid news from Europe or China, there is a negative tone to those areas and that is adding to the hesitancy of investors to bid up stocks.   Expect a mildly positive economic report to stir the pot and create more positive economic sentiment as the day wears on.

Economic Journal - Monday, 9/17/2012

(As of 7:25 am pacific)

 

Markets are taking a short breather this morning after last week’s rally which saw the S&P500 hit a 5 year high.  After a week which saw the Federal Reserve announce its 3^rd round of stimulus and a major German constitutional court ruling clear the way for more stimulus in Europe, the markets are trying to get back to reality today.  It’s not a pullback by any means, but perhaps some small profits being taken off the table.  The other factor keeping the markets lower this morning was a surprise drop in the Empire State Index.  The gauge which measures manufacturing activity in the New York area decreased unexpectedly in September recording its lowest reading since November 2010.  In company news, shares of Apple are 1% higher this morning as the tech giant reported that pre-orders for the new iPhone 5 topped 2 million units in the 24 hours after announcing its release last week.  European shares are lower today as finance ministers were unable to come to terms for a more unified banking sector in a meeting on Friday.  Asian markets were higher except for Chinese shares after Citigroup cut its 2013 growth forecast.  Oil and gold are slightly higher and the US dollar is also edging up.  Interest rates have come down slightly and volatility is low.  It looks to be a quiet day today with some tight range trading as investors look to the week ahead for more direction.

Economic Journal - Friday, 9/14/2012

(As of 7:30 am pacific)

 

The risk trade is on throughout the global markets today as virtually every sector is up on the heels of yesterday’s Fed announcement to continue its stimulus program known as QE3.  Investors are leaving the safe haven treasury today and buying up stocks, as confidence has increased that central banks have and may well continue to deliver on their promises.  Economic data out of the US showed the consumer price index rose 0.6% in August for its biggest advance since June 2009.  However, most of the increase was due to rising oil prices.  Stripping out volatile food and energy prices, core CPI only rose 0.1%.  The core CPI is a more closely watched figure by investors and the Fed as an inflation indicator.  Industrial production fell in August and retail sales rose, again with gas stations making up the bulk of the gains.  The avg. cost of a gallon of gas rose 8% in August.  Ultimately the rising cost of filling up at the pump will have a negative effect on the economy as consumers will have less discretionary income to spend.  Despite the mixed economic data the market is surging due to the easy money policy announced by the Fed yesterday.   Nearly every market index in the US and throughout Europe and Asia are in the green this morning.  Gold and oil are up and interest rates made a big jump today as investors dumped the safe haven treasury to buy stocks.  Volatility is down.  It looks to be a positive day today, with markets poised to finish the week at multi-year highs.

Economic Journal - Thursday, 9/13/2012

(As of 7:10 am pacific)

 

It’s a surprising day today because nothing is happening.  Most markets and commodities are hovering around unchanged, ignoring economic news and awaiting an announcement by the Fed as to whether a QE3 (Quantitative Easing Phase 3) is on the table.  Wholesale prices came in a whopping 1.7% higher, led by gasoline prices which surged 13%.  Jobless claims increased more than expected and some downgrades in the computer chip sector have been offset by a surging Apple stock, in light of excitement related to the release of the Iphone 5.  The feeling is that the Fed is on the bubble, trying to weigh stubbornly high unemployment rates against other more positive economic developments, with potential inflation a background factor.  The imminent fiscal cliff might also have an effect as the Fed tries to hold ammunition for future financial shocks.  All eyes are on the Fed and the markets will likely react strongly one way or the other after the announcement.

 

Economic Journal - Wednesday, 9/12/2012

(As of 7:13 am pacific)

 

The murder of a US envoy, Chris Stevens, and three of his staff members in a Libyan riot that overran the US consulate has cast a pall over other events, including financial news this morning.  It is a very disturbing development that resulted from the release of a US movie that the Muslim faith contends ridicules their prophet Mohammed.  Riots are expected to spread in the Muslim world, with progress in Afghanistan particularly at risk.  In financial news, good news from Europe and expectations of a QE3 from the Fed this week is fueling a mild rally on Wall Street.  Commodities are generally up, led by gold.  The US dollar is down.  The market has surged over the last week based on the expectation of positive Fed action.  Anything less than aggressive action on their part could see a market pullback.

Economic Journal - Tuesday, 9/11/2012

(As of 7:11 am pacific)

 

The threat of a downgrade of US debt is sending the dollar markedly lower today.  The threat, by research and ratings company Moody’s, is linked to the approaching fiscal cliff and how Congress will deal with it over the next few months.   Oil and gold are up moderately while interest rates are mixed.  The US trade deficit is up slightly, likely a result of higher oil prices. Stock markets are rallying on generally positive news from Europe and the Far East, where China has reaffirmed its growth target for the year.  Company news is also positive, with McDonalds reporting higher same store sales, among other positive news reports.   There is also hope that another round of quantitative easing by the Fed will juice the markets with liquidity.   There is a sense of positive momentum today, in spite of the Moody’s threat.

 

Economic Journal - Monday, 9/10/2012

(As of 7:25 am pacific)

 

Stocks are trading slightly lower this morning after rallying last week for the best weekly gain in 3 months.  There is a lack of economic data out of the US today which has investors weighing the prospects of more Fed stimulus.  The effects of more bond buying from the Fed may already be priced into the market as evidenced by Friday’s market move.  After a very disappointing jobs report, the market drifted higher seeing the negative report as an open door for more economic stimulus.  The expectations are high going in to this week for the Fed to announce additional monetary easing.  The central bank will wrap up a two day policy meeting on Thursday.  Negative news out of Asia today seems to be what’s preventing the market from breaking higher.  Japan lowered its GDP for the April-June quarter from 0.3% growth to 0.2%.  China reported inflation rose more than expected in August, as well as industrial output grew at the slowest pace in 3 yrs.  It’s quiet in Europe today, with a decision coming on Wednesday from the German constitutional court regarding the country’s challenge to the stimulus plan being offered by the euro zone bailout fund.  The ruling could have a big impact on the market later in the week.  Oil and gold are down today and the US dollar is mixed.  Interest rates are down, with the average 30 yr. mortgage rate as low as 3.51%.  Volatility is slightly lower today as well.   

Economic Journal - Friday, 9/7/2012

(As of 7:24 am pacific)

 

In a new twist, it’s positive news from Europe this morning that is propping up a US market that has been hit with a couple of jolts this morning.  German production increased more than expected and there was good news from Great Britain as well on industrial activity.  In big news on the domestic scene, tech giant Intel announced a significant downward revision in projected revenue and has fallen about 3%.  On the economic front, new jobs created came in less than expected at 96,000 vs the projected 125,000.  This figure surprised especially because ADP reports had indicated a more positive projected outcome.  Gold is up big while oil is down slightly.  The dollar is down against most currencies while interest rates are flat.  The markets are hoping that these negative reports will prompt a new round of quantitative easing from the Fed and have been holding steady in light of a Friday morning full of dismal economic news.  Markets should drift lower as the day goes on.

Economic Journal - Thursday, 9/6/2012

(As of 7:26 am pacific)

 

Markets opened strongly this morning on several bits of news most notably, the Euro Bank’s pledge to buy unlimited amounts of bonds from distressed countries within the zone.  ADP employment reports, which are regarded as somewhat inaccurate, suggest that employment is picking up.  China also is in the news with attempts at stimulus, approving 25 subway projects in the country.  The August ISM Services report came in strong and above expectations, indicating growth in this important sector of the economy.  Oil and gold are up, as are most commodities while the dollar is mostly up.  Lost in the news and rhetoric is the fact that the ECB also lowered growth forecasts for the next two years for the Eurozone.  When the dust settles from this raft of news, after an extended period of dormancy, I think that investors will focus more on the negatives aspect of European prospects and that much of today’s huge initial gain will be erased.

Economic Journal - Wednesday, 9/5/2012

(As of 7:25 am pacific)

 

A positive surprise in a report on US productivity has offset somewhat negative global news this morning.  A disconcerting revenue and profit warning from Federal Express was a downer, not only because of the micro view of the stock itself, but the fact that the warning was due to the global slowdown in manufacturing.  Gold and oil are flat as are interest rates.  It is possible that as the day wears on, the global slowdown fears will give way to more optimism on the possibility of more quantitative easing.  While globally things look pretty dismal, the rise in productivity of 2.2% in the US may be a sign that the US economy is pulling out of its doldrums.  If that report were to be coupled by more good news on real estate or a positive surprise on the employment front later in the week, it could spark a significant rally.  In a similar pattern to yesterday, look for the market to recover from early losses and finish mixed to moderately higher.

Economic Journal - Tuesday, 9/4/2012

(As of 7:13 am pacific)

 

So far so good for September.  It is a notorious month for down markets and the fact that it opened nearly unchanged is a mild plus.  All eyes are focused on possible bank interventions which might occur this week.  The Bank of China, the European Bank (ECB) and the Fed all have potential, in the eyes of investors, to institute more quantitative easing.  Oil is up as is gold while the dollar is marginally higher.  Commodities are mixed and interest rates are near unchanged.  The August ISM report came in lower than expected and shows a slight contraction in manufacturing, which mirrors global manufacturing statistics. Traders are back from vacation and we expect trading volume to increase and a tone for the markets to be set.  It’s likely that absent other news, the thought of more quantitative easing is strong enough to provide market support and that the market will erase early losses.