Economic Journal - Friday, 3/29/2013

The US stock market is closed today for Good Friday and will reopen on Monday.  Have a wonderful Easter weekend and enjoy the beautiful Oregon sunshine that's coming our way.  See you on Monday!

- Bruce and Ben

Economic Journal - Thursday, 3/28/2013

(As of 7:20 am PST)

 

There is not much to like in today’s economic news.  The markets opened slightly higher, but don’t expect those levels to hold.  Generally news has been negative across the globe and domestically.  It is not enough to change market momentum in a big way, but with current run-ups, and record market closes, it feels as if profit taking is in the cards and these less than stellar reports might give investors a reason to pause.  It is the end of what has been a great quarter for the stock market since Good Friday is a stock holiday.  Gold is down and oil is flat.  The US dollar is mixed, but mostly down. 

Economic Journal - Wednesday, 3/27/2013

(As of 7:15 am PST)

 

Europe is dominating the headlines once again this morning.  Italy has yet to form a coalition government since its election in February with the leader of the Democratic party remarking today that only an “insane” person would want to govern Italy and that the country was a “mess.”  The comments sent investors running for the hills frustrated by the lack of progress and nervous about the future of Italy.  The Cyprus situation is not getting any better either.  Banks remain closed as Cypriot authorities are expected to detail capital controls later today in an attempt to reopen banks tomorrow.  Customers may find it more difficult than they expect to access and move money for months to come.  Economic sentiment throughout the euro-zone region fell larger than expected this month.  US data is light today with one report showing pending home sales declining by 0.4% in February.  Treasury prices are roaring higher this morning as investors flock to safety sending interest rates lower.   Gold is higher and oil lower.  The market is acting in a frenetic manner at these tops, with small pullbacks triggering opportunities for some investors to “buy on the dips” while others still waiting for a deeper correction.  

Economic Journal - Tuesday, 3/26/2013

(As of 7:14 am PST)

 

Cyprus has faded into background noise in today’s market action.  A strong durable goods order is breathing life back into a market that choked on yesterday’s European action.  The durable goods number was a strong plus 5.7%, but excluding the volatile aircraft and defense sectors, it was slightly negative.  Real estate prices increased the most in six years in another of many signs that the housing sector is regaining its footing.   Positive momentum regains the edge but the basis of the change is not that solid, with investors giving way too much emphasis on middling reports.  Gold is down a half percent while oil is up about one percent, along with most other commodities.  Interest rates are trending up while the dollar is down against most other currencies.  Expect wishy washy market action with investors trying to interpret mixed data.

Economic Journal - Monday, 3/25/2013

(As of 7:45 am PST)

 

Good news out of Europe compliments solid US economic data providing a lift for stocks at the outset of today’s market activity.  Cyprus has averted a looming crisis taking pressure off of the Euro.  Gold is down while oil is up, along with most other commodities.  Interest rates are stable, but expect an upward trend as the markets continue to digest positive data.  Positive momentum continues to be the stock market story.  Little in the way of economic reports will move markets this holiday shortened week.

Economic Journal - Friday, 3/22/2013

(As of 7:15 am PST)

 

It seems that markets are looking at Cyprus in the rear view mirror as investors are shrugging off the mini-crisis and moving back to the positive momentum we have seen for the past few weeks.  Europe is relatively quiet and Asian markets were mixed last night.  Gold is giving back some of yesterday’s gains and oil is up.  Some positive earnings reports, most notably from Nike, are adding to investor enthusiasm.  It is a quiet day for economic data and we expect this positive momentum to settle in for a while. 

Economic Journal - Thursday, 3/21/2013

(As of 7:13 am PST)

 

It is a battle of sorts, with weak economic data out of Europe pulling US stocks down in spite of positive data out of the US.  Europe continues to be mired in recession with a recent PMI number coming in at 46.5.  Any reading below 50 indicates business contraction.  On the other hand, a US flash PMI report came in at a very healthy 54.9, another in a string of reports showing that the US economy is starting to hum.  Jobless claims continue to be at 5 year lows, construction is up and leading economic indicators also rose.  Gold is up moderately and oil is down, after a healthy gain yesterday.  Mortgage interest rates and rates in general are drifting lower as the uncertainty of Cyprus and Europe in general create a desire for the stability of US dollar assets.  I expect strong US data to win the day and that early losses will give way to a positive day on US stock markets.

Economic Journal - Wednesday, 3/20/2013

(As of 7:25 am PST)

 

Stocks are making a comeback after a slow start to the week as the Cypriot parliament rejected the unpopular tax levy solution.  After dominating headlines earlier in the week, a vote on a proposed tax levy on bank deposits in Cyprus banks has been rejected.  The markets are taking the news in stride, but Cyprus is not out of the woods yet.  The 5.8 billion euros that the tax levy would have raised is still needed to rescue the struggling nation from its debt crisis.  There are several scenarios that may play out for Cyprus now, including default and an exit from the euro, but that risk is still low at this point. In the meantime, Wall St. is higher on the heels of the Cyprus news and as investors await guidance from Fed chairman Ben Bernanke later on today.  The Fed has been locked in a two day interest rate policy meeting where, in that regard, the status quo is expected.  The Fed has made it clear that rates will remain at current levels until the economy picks up and unemployment drops to 6.5%.  What is on the minds of investors and markets is when and how the Fed will exit its current $85 billion per month bond buying program known as QE3.  The Fed’s economic forecast will be the most focused-on part of today’s press conference.  A more upbeat forecast could likely send stocks lower as investors perceive an earlier exit of QE3.  In other words, the better the economy is doing the less stimulus is needed and investors will have a hard time weaning off the easy money policies of the past few years.  The Fed will be particularly careful with their language as they put out forecasts later today. Gold is lower and oil up while interest rates are also slightly higher. 

Economic Journal - Tuesday, 3/19/2013

(As of 7:20 am PST)

 

After a back and forth day that saw stocks trade down in the final hour, investors are hopping back in to recoup most of yesterday’s losses.  Investors applauded US housing data that showed construction on new US homes rose 0.8% in February while building permits rose 4.6% to the highest level since June 2008.  The data continues to point to a longer-term trend of strength in the housing recovery.   After dominating discussions and headlines Monday, Cyprus remains front and center today with legislators scheduled to meet in just a few hours to vote on the controversial bailout plan for the struggling nation.  A new draft bill has been submitted that would eliminate a portion of the tax levy on deposits below 20,000 euros, however the levy still exists for amounts above that.  The issue with Cyprus is not Cyprus itself, but whether or not it sets a precedent for other larger struggling economies throughout Europe.  We will keep our eyes on the story.  European markets remain mixed while Asian markets recouped most of yesterday’s losses.  Gold and oil are slightly lower and interest rates are down with the 10 year below 2%.  Economic conditions appear to be improving in the US.  As such, investors will be listening closely this week as the Fed begins its two day interest rate meeting today, looking for guidance on the central bank’s plan for exiting its bond buying program as the economy rebounds.

 

Economic Journal - Monday, 3/18/2013

(As of 7:20 am PST)

 

A small nation is packing a big punch to the markets this morning.  Cyprus, the tiny island nation in the Mediterranean is the culprit of a global sell off in stocks this morning as investors are eyeing the country’s controversial bailout agreement.  Over the weekend, Cyprus announced it would receive over 10 billion euros in a bailout from the Euro-zone and International Monetary Fund to resolve its debt crisis.  The bailout agreement included however, a controversial tax levy on bank deposits for depositors’ money at the banks.  Depositors with more than 100,000 euros will see a tax of 9.9%, while those with less deposits will receive a 6.75% tax.  The levy is unprecedented causing concern over a run on the banks particularly if this sort of program takes effect in larger struggling economies like Spain and Italy.  A parliamentary vote for the proposed levy is set for Tuesday.  Many analysts think the likelihood of a bank run in peripheral countries is unlikely, however in the short term the risk is worth noting.  The only US report of note today showed that US homebuilder confidence declined in March.   Gold is rallying, up 1% as investors moved money out of risky assets and into the safe haven.  Asian markets finished in the red, and the same story is shaping up in Europe and the US.  The risk trade appears off, while investors appear to be using Cyprus to consolidate gains.

Economic Journal - Friday, 3/15/2013

(As of 7:19 am PST)

 

Markets are lower this morning after yesterday saw the Dow adding to its record run and the S&P500 closing within 2 points of its all-time record high.  Economic reports were mixed this morning.  Consumer prices rose 0.7% in February led by a surge in gasoline prices.  However, looking at the core CPI (the figure used by the Fed to determine inflation targets) which strips out volatile food and energy prices, prices rose a scant 0.2%, in line with expectations.  Industrial production rose 0.7% after a weak report in January and capacity utilization, which measures output, rose to its highest level since 2008.  The Empire State index, which surveys manufacturers in the New York region slipped slightly but remained positive for the second straight month.  Despite the relatively positive data, investors began selling early.  Adding to the downward pressure was a disappointing consumer sentiment report which showed sentiment dropping to its lowest level since December 2011.  Stocks in Europe were lower following US data, while Asian markets finished mostly higher after yesterday’s gains on Wall Street.  Gold and oil are up while interest rates slipped slightly.   With the mixed data and triple witching (a day in which stock-index futures, stock-index options, and stock options contracts expire simultaneously), investors may be finding this a good day to trim out some profits after these record highs.

Economic Journal - Thursday, 3/14/2013

(As of 7:20 am PST)

 

It's nosebleed altitude for most market indexes as today's market action has a record high in sight for the S&P 500 Index.  Positive economic data in the form of lower unemployment claims and a producer price index well under control have added fuel to the flame.  International markets are also higher.  Oil is up slightly, with gold down a small amount.  All systems are go as domestic economic reports continue an impressive run of positive news.  It is unusual to see a run of this length, so watch out for some profit taking action as investors lock in gains.  Don't expect much in the way of Federal Bank intervention in the form of higher interest rates.  The sequestration should keep the economy from overheating at this point.  Mortgage rates continue to creep up but are still historically low and should be no threat for the surging real estate recovery.

Economic Journal - Wednesday, 3/13/2013

(As of 7:20 am PST)

 

The Dow’s winning streak is at risk in early trading with the index down .25%, while the S&P and Nasdaq follow suit.  A positive retail sales report suggested that consumers have not been as hard-pressed as expected by the payroll tax increase and budget sequester that hit earlier this year.  Retail sales increased 1.1% in February, ahead of estimates.  Although nearly half of the gain was seen at the pump with rising gasoline prices, sales at other retailers were strong and added to the momentum we’ve been seeing in the economy.  Investors shrugged off the positive report, turning to the budget battle heating up in the halls of Washington.  Democrats are expected to roll out their budget proposal today in response to the Republican plan that was presented yesterday.  Investors are also keeping their eyes on China as property market concerns continue to weigh down markets.  Chinese markets pulled down the broader Asian markets in trading today.  Europe added to the selling as Italian bond yields rose sharply in their first auction since Fitch’s recent downgrade.  Oil and gold are up, as are interest rates.  It appears the momentum may be to the downside this morning as investors consolidate gains from the Dow’s record run.

Economic Journal - Tuesday, 3/12/2013

(As of 7:18 am PST)
 

Irrepressible is the term that best describes today's market.  Just when it appears that profit taking will take a bite out of market gains, another wave of buying pushes indexes to new highs.  International news is mixed and no significant economic reports are out yet today, but the Dow Jones Average has reversed itself from the negative, and if activity of the prior week is any indication, other markets will follow. Optimism abounds.  In the meantime commodities have joined the parade.  Oil and gold are up about 1% and most other commodities are higher.  The US dollar index is down as risk is not a great concern in this frothy market.

Economic Journal - Monday, 3/11/2013

(As of 7:12 am PST)

 

After a strong performance last week that saw the Dow soar to record heights, stocks are starting this week off on a softer note.  Investors have taken the foot off the pedal, keeping an eye on fiscal headwinds from the sequester while digesting disappointing Chinese data out today.  Although markets for the most part shrugged off Congress’ inability to a strike deal back on March 1^st regarding the budget sequestration, there’s still cause for concern for the next couple months as the effects of billions of dollars in spending cuts hit the economy.  This week, investors will be watching as both heads of Congress work to introduce their budget resolutions aimed at addressing the deficits.  In international news, Chinese stocks finished lower after disappointing data showed consumer inflation rising and industrial activity growing at a slower pace in January and February.  European markets traded mostly lower after Fitch rating agency cut Italy’s credit rating on Friday.  Gold is slightly higher, and oil down by 0.5% while interest rates are up.  The US economic calendar is empty today, with investors pausing to look for direction after an historic week last week.

Economic Journal - Friday, 3/8/2013

(As of 7:07 am PST)

 

Get ready for a manic market.  The markets are brushing off a great jobs creation number and giving back some early gains.  The unemployment rate ticked down to 7.7% is concert with the jobs creation number.  Why the hesitation of the market then? This is another in a series of positive economic reports indicating that  the economy is starting to take off.  What's the problem?  Stimulus!  Good news reduces the argument for further stimulus and the easy money policies are drawing closer to an end.  Remember that much of our markets gains have been stimulus driven over the last few years.  As the economy presses on, the markets might not follow, fearing stimulus reduction and investment deleveraging.  Still, it is great to see such positive economic data and perhaps our recovery can spill over to Europe as well.

Economic Journal - Thursday, 3/7/2013

(As of 7:15 PST)

US markets are marching forward on their own, ignoring somewhat negative news out of Europe.  Jobless claims came in lower today and economic data in general has been positive for some time.  Europe...not so much.  Longer term mortgage rates are creeping up which shorter durations have actually fallen.  This may be an indication that operation twist is winding down.  Operation twist is the Feds attempt to lower long term rates by buying long term duration mortgage bonds and it has worked well.  Gold is up today along with oil and other commodities.  Expect the markets to pause for a bit here as investors digest new data and consolidate gains.  Reports indicate that some hedge fund managers are moving to a larger cash position in light of major historical highs on various markets.

Economic Journal - Wednesday, 3/6/2013

(As of 7:15 am PST)

 

Stocks are edging higher adding to gains for the 3rd straight day. Investors were optimistic as they watched the Dow break through an all time high in early trading yesterday. New buyers are coming in today after payroll processor ADP reported private sector job growth of 198,000 in February, more than expected. US factory orders declined 2% in February, but the sharp decline was anticipated. International markets are higher with Japan and Australia reaching multi-year highs and Europe trading up as well. Commodities were lower with gold slipping as investors left the safe haven to take more risk. We're seeing all time highs as corporate profitability is also near all time levels. There's still some hurdles to jump through with the sequester, but there is a good deal of momentum to the upside at this point.

Economic Journal - Tuesday, 3/5/2013

(As of 7:20 am PST)

 

It appears a risk-on scenario is in play this morning as the Dow Jones Industrial Average surpassed its all-time high in early trading.  Asian markets rebounded from yesterday’s drumming with the Shanghai Composite index bouncing back 2.3% after falling 3.7% on Monday.  China’s outgoing Premier Wen Jiabao announced to the new People’s Congress a growth forecast for 2013 at 7.5%, in line with expectations.  The buying spilled over into Europe with broad gains on all major indices of 1%-2%.  European investors were surprised to the upside with positive retail sales data while looking ahead to an expected rate cut by the European Central Bank in its meeting Thursday.  Meanwhile, Wall St. is adding to gains seen Monday with all 3 major indices higher.  There were no “Dow 10,000” hats on the trading floor to celebrate the indexes break through an all-time high, yet the rocky climb back to these levels was worth reflecting on.  Adding to the rally was a positive reading of the ISM services report which showed expansion in the services sector for the 39^th straight month.  Commodity prices are higher in this risk-on trading day, with markets likely to hold its gains as the day progresses.

Economic Journal - Monday, 3/4/2013

(As of 7:24 am PST)

 

In a quiet day for US economic reports, the market is down on international news.  The Chinese market took a tumble with leaders attempting to rein in a high flying real estate market.  Measures aimed at curbing speculation in that market took a heavy toll with the Shanghai Index down over 3%.  Commodities are very quiet, most trading near unchanged.  Mortgage interest rates ticked lower.  There are few ill effects thus far from the imposition of the sequestration (forced budget cuts).  It looks like a negative day on tap with little positive action in view to turn things around.

Economic Journal - Friday, 3/1/2013

(As of 7:05 am PST)

 

The market opened lower this morning after the sequester deadline was hit.  Automatic budgets cuts are now taking hold and are likely to repress the fledgling economic recovery we were seeing over the last few months.  It is surprising that the market is not down by a greater margin.  Global economic data was mixed, but slanted to the negative.  China manufacturing growth eased a bit and numbers out of Europe were generally negative.  The dollar is up strongly as investors seek safety in US Treasuries.  Commodities are slumping except for gold, which is up moderately.  Oil prices, in particular are being hit hard, with the price of a barrel off over 1% and approaching $90 per barrel.  Volatility is surging with the uncertainty that the sequester brings.  Interest rates are stable.