Economic Journal - Friday, 8/30/2013

(as of 7:15 PST)

 

Stocks are off a small amount in quiet early morning action.  With many traders on vacation it will be a slow day.  US economic reports have been mildly negative, enough to give the few investors trading today pause.  Spending data was weak, Chicago PMI showed very slight growth, and consumer confidence was down.  With worries over Syria and the Federal Reserve Bank tapering process, negative anxiety is likely to prevail today.  Given a lack of traders, we might see an overreaction on the down side.  Gold is down a fair amount after an impressive rally.  Oil is also off slightly.  The US dollar continues to be strong against other currencies.  Interest rates are stable with mortgage rates ticking down a bit.

Economic Journal - Thursday, 8/29/2013

(as of 7:15 PST)

Global political tensions are high today.  The international community is stepping back on support of a military strike against Syria even as the US seems on an irreversible course of action.  US stock markets are experiencing a disconnect from the Syrian problem with strong economic data pushing the markets up moderately this morning.  US 2^nd Quarter GDP was revised upward to 2.5% growth, a very strong reading. Jobless claims dropped below expectations as well, indicating that the US recovery continues on track.  Gold is down after a downgrade by a major investment bank, while oil is also retreating from yearly highs.  Expect fears of Federal Reserve tapering its bond purchases to put a ceiling on markets gains.  A US military strike against Syria could rapidly change market dynamics.

Economic Journal - Wednesday, 8/28/2013

(as of 7:10 PST)

US stock markets opened slightly higher this morning after a down market yesterday that was dominated by fears of what the effects of a US strike on Syria would produce.  Oil skyrocketed along with gold yesterday and both commodities opened this morning with continuing gains, another result of the Syrian effect.  Asian and European markets followed the US lower overnight.  There is a rush to safety occurring.  The dollar is strengthening against all major currencies as investors seek a safe haven.  Talk of a Fed tapering program is on the back burner while the Syrian situation plays out.  Watch for continuing volatility until the US strikes Syria with a barrage of sea launched cruise missiles.

 

Economic Journal - Tuesday, 8/27/2013

(As of 7:25 am PST)

 

Stocks are lower as tensions rise in Syria and global markets sold off on the likelihood of a US military strike.  Markets erased gains in the late afternoon yesterday after US Secretary of State, John Kerry, said in a press conference that the US will hold Syria accountable for its actions, charging the Syrian government with chemical weapons use which killed hundreds of innocent civilians.  Global markets sold off on the escalating situation, while gold prices surged 2% as investors sought after the perceived safety of the metal.  Oil prices are also higher by 2% and treasury prices were bid up as investors moved to the safe haven.  Yields consequently fell.  In economic news, US home prices continued to grow in June, according to the US Case-Shiller index.  Home prices increased 2.2% in June, but lower than May, possibly indicating a slowing pace due to the recent surge in interest rates.   US consumer confidence rose slightly in August, but not enough to erase early losses.  In other news, investors continue to remain concerned about the Fed’s bond taper strategy while also being reminded yesterday by US Treasury Secretary, Jacob Lew, that the US government will hit the country’s debt ceiling in mid-October unless the debt limit is increased by congress.  Expect losses to accelerate as the day wears on.

Economic Journal - Monday, 8/26/2013

(As of 7:20 am PST)

 

Markets appear relatively stable this morning despite a disappointing durable goods report and a bizarre week last week that saw the Nasdaq halted for half of a trading day.  US durable goods orders disappointed, with orders dropping 7.3% in July.  A decline was expected but not to that extent.  A sharp decline in orders for jetliners/aircrafts accounted for most of the drop.  Excluding transportation (a volatile sector), orders fell only 0.6%.  Overall, despite the slowdown, the underlying report continues to support a growing manufacturing sector.  Global markets are mixed with Asian indexes closing mostly higher except for the Nikkei which finished down slightly.  Europe is also mixed.  The Fed’s Jackson Hole meeting wrapped up over the weekend.  Sentiment out of the conference is that the Fed will begin bond tapering as early as September.  How much and when exactly still remains to be seen, however the consensus is a return to “normal” monetary policy is desired in the near term.  Rates on the 10 yr. treasury yield which have sky-rocketed the past 3 months on the ‘taper talk’ are slightly lower today.  Gold and other commodities are slightly down.

Economic Journal - Friday, 8/23/2013

(As of 7:15 am PST)

 

Stocks are edging higher after a bizarre session yesterday which saw trading on the Nasdaq halted for more than 3 hours due to a technical glitch.  Trading resumed in the late afternoon and all 3 major indexes held up despite the system failure.  Although the Dow snapped its week long losing streak yesterday, momentum appears to be to the downside with investors still very cautious on the Fed’s plan to taper its bond purchases.   With the annual Jackson Hole conference under way, investors are looking for clues as to how and when the Fed will exit its stimulus program.  Competing views among the Fed of how to end its easy money policies is cause for concern for the markets.  Expect volatility to persist until September’s FOMC meeting where a plan may be outlined.  In other news, Microsoft is leading US stocks, with the tech giant up 7% on news that chief executive, Steve Ballmer, will retire within the next 12 months.  Economic data is light today, although a report on housing showed new US home sales dropped dramatically in July to an annual rate of 394,000.  The surprise drop took stocks lower just after 7:00 am PST.  International markets are higher keying off yesterday’s Wall St. gains.  It looks like a back and forth day with markets swinging between small gains and losses.

Economic Journal - Thursday, 8/22/2013

(As of 7:12 am PST)

 

Positive news from Europe and Asia has investors forgetting about troubles with tapering.  Markets are up after a week’s worth of declines.  PMI, a key measure of economic activity, was up and above consensus estimates both in China and in Europe.  It seems that Europe may be awaking from its economic malaise.  On the US domestic side of the data, jobless claims were up moderately, easing anxiety about the rate of stimulus withdrawal that will occur this fall.  Gold and oil are both up slightly, while the US dollar is stronger against most other currencies.  Interest rates continue to rise and home buyers continue to buy as well. It seems that buyers fear that rising interest rates will price them out of the market.  The dramatic rise that we have seen in interest rates is likely to place a tight ceiling on any potential rallies.

Economic Journal - Wednesday, 8/21/2013

(As of 7:30 am PST)

 

Existing home sales jumped by 6.5% and home inventories jumped as well with more people putting up ‘for sale’ signs to take advantage of soaring prices.  Interest rates continue to rise, but it is not deterring home buying.  It feels as if people on the fence are jumping into homes, fearing that the continuing surge in interest rates might price them out of the market down the road.  The spectacular home sales number did little for stocks as markets opened mostly lower.  Fed fears once again trump positive data. Gold is down along with oil.  The US dollar is up against most foreign currencies.  It feels as if a consolidation phase is solidifying a base foundation and that an upward surge might be around the corner.

Economic Journal - Tuesday, 8/20/2013

(As of 7:00 am PST)

 

It’s all about the Fed and its tapering program.  Markets are mixed after solid earnings by retailers this morning could not shake off investor anxiety about a reduction in the bond buying program by the Federal Reserve Bank.  International markets are volatile as well since it seems that easy money policies are coming to an end.  India, in particular, is experiencing financial turmoil.  Gold is just slightly positive while the price of oil is getting hammered after a very positive month of increases.  Interest rates continue to soar with the 30 year mortgage back above 4.5%.  Deleveraging is likely to continue so expect continuing market weakness as the day wears on.

Economic Journal - Monday, 8/19/2013

(As of 7:07 am PST)

 

Stocks are near unchanged this morning after last week’s pummeling which saw markets decline for the worst weekly losses of 2013.  Economic data is light today while investors remain spooked over the Fed’s plan to exit its stimulus program.  The markets will be eyeing Wednesday’s release of meeting minutes from the Fed’s most recent policy setting meeting, looking for more clues on the Fed’s next move.  The big story of the day is the sharp rise in interest rates, with the 10 yr. treasury yield approaching 3%.  The 10 yr. treasury yield hit 2.87% this morning, the highest level in 2 years for the key interest rate benchmark.  Rates have been climbing higher since talk of ending the Fed’s bond buying program began in late Spring.  In company news, shares of Intel are higher by 1% on an analyst upgrade, while Facebook and Apple are leading tech gains.  International markets are mostly lower following Wall Street’s selloff last week.   A lack of data over the next two days may bring some calm to markets, but volatility will likely pick up as Wednesday’s Fed minutes are released.

Economic Journal - Friday, 8/16/2013

(As of 7:28 am PST)

 

After two consecutive days of steep losses, stocks have opened flat to start the Friday trading session.  Economic data remains mixed.  Reports on the housing sector continue to support a strong housing recovery.  Construction on new US homes climbed 5.9% in July, while building permits (sign of future demand) rose 2.7%.  US productivity edged up in the second quarter but the year-over-year gain marked the slowest since 2008.  Some would argue, including Atlanta Fed President Dennis Lockhart, that productivity growth is in a “temporary downdraft” due to a pickup in hiring from the recession.  He indicated that productivity remains a key data point the Fed is watching to determine when and how to taper its stimulus program.  As long as data is mixed, the uncertainty surrounding the taper will bring higher volatility to the markets over the coming weeks.   Asian markets finished the day lower on Wall Street’s beating yesterday, while Europe is in flux.   Expect volatility to pick up as the day progresses and investors analyze their portfolio positions after a week that saw some of the worst losses on the year. 

Economic Journal - Thursday, 8/15/2013

(As of 7:19 am PST)

 

Conflicting economic data has stocks broadly lower this morning adding to sharp weekly losses.  Jobless claims were the lowest since 2007, a positive sign for the economy, but a reminder that the Federal Reserve’s tapering program is just around the corner.  Worries of what will happen to interest rates and the stock market when the Fed stops or lowers its bond buying program has created great anxiety among investors.  Negative profit reports or reduced projections from Wal-Mart, Cisco and Netapp have added to large market losses.  The Philly Fed Index came in well below expectations and other economic data this morning has also been leaning to the negative.  An unusual pattern exists in the fact that ‘good is bad’ and ‘bad is good’, at least when it comes to the stock market.  ‘Yes, we need more stimulus!’  ‘No, it’s time to reduce or eliminate stimulus!’  Every report takes on a different meaning.  In the meantime oil is up, gold is down and interest rate yields are climbing.  Expect increasing volatility and for negative momentum to persist.

Economic Journal - Wednesday, 8/14/2013

(As of 7:07 am PST)

 

Stocks are slipping this morning despite positive European news as investors await another Fed President speech later today.   All three indexes are lower with the blue-chip Dow leading equity losses.  US wholesale prices were unchanged in July, with core producer prices (which exclude the volatile food and energy sectors) increasing slightly.  Tomorrow, the government will release data on the consumer level with expectations that inflation will remain contained.  A few company names to note include Apple which continues its impressive run, up 1.5% today.  Macy’s shares are off 3.7% after reporting disappointing earnings, while farming equipment manufacturer Deere &Co. is also lower 2% despite strong earnings.  Dow component Cisco is set to report after today’s closing bell.  Europe got a boost after data showed Euro-zone GDP rose 0.3% in the second quarter, breaking a six quarter recession.  Individual reports on GDP growth from Germany and France were very strong.  Asian markets were up following a higher finish from Wall St. Tuesday while trading in Hong Kong was halted due to a severe typhoon.  Gold is slightly higher and interest rates are up as the US dollar slips.  Worries remain over the Fed’s exit from its bond purchase program with today’s Fed speaker, St. Louis President James Bullard under the spotlight.

Economic Journal - Tuesday, 8/13/2013

(As of 7:15 PST)

International markets are mostly higher with stabilization in Europe and China smoothing investor anxiety.  US markets opened slightly higher, but have reversed and are trading near unchanged on economic data that is uninspiring. A Microsoft downgrade has not helped.  Gold is down slightly after a nice run-up over the last week and Apple continues its very impressive rally.  Oil is mixed and interest rates have ticked up on a very strong dollar.  Republican House leaders have indicated that they will not force a government shutdown due to the debt ceiling debate next month.  The elephant in the room is still the tapering of the purchase of US government debt and mortgage debt.  Many analysts fear that this will cause a market correction over the next few months.

Economic Journal - Monday, 8/12/2013

( As of 9 AM, PST) 

Worries over China and the Federal Reserve set the early morning pace with a negative market opening. A Japan GDP number that did not match economist’s estimates also weighed on stocks.  But positive news out of Europe helped turned things around and stocks are now trading slightly positive.  Gold is having a big day, up nearly $27 an ounce and oil is near unchanged after losing ground initially.  The US currency is up, with international investors seeking a bit of a safety net, in anticipation of a market correction.  Corporate earnings have been good so far, with nearly 90% of the S&P 500 having reported their results.  With earnings season winding down, it is hard to see the next catalyst for a market surge.  It feels like profit taking is in the cards over the next few weeks.

 

Economic Journal - Friday, 8/9/2013

(As of 7:13 am PST)

 

Stocks are flat this morning as all three major US indexes face weekly losses, the first time in 6 weeks for the Dow.  Economic data is light today and with earnings seasons coming to a close there is an eerie calm hovering over markets.  Investor focus will likely shift over the coming weeks to a macro level, with the Fed’s decision on monetary policy and the US debt ceiling debate driving buy or sell decisions.  We could see some volatility pick up as the summer comes to a close.  Today, positive economic data out of China has buoyed stocks around the world.  China reported strong industrial production and retail sales were also positive but slightly below expectations.  Asian markets finished the day in the green.  Europe is higher on the China news.  Oil prices are higher while gold is slightly off and interest rates are flat.  Heading into next week, investors will have plenty to chew on with reports on retail sales, manufacturing, industrial production, and housing all due out. 

Economic Journal - Thursday, 8/8/2013

(As of 7:00 am PST)

 

Positive earnings reports have set the stage for a morning surge.  Tesla Motors a darling of investors over the last few months is soaring 15% after a beat on earnings and revenue.  Tech company Groupon is also up strongly.  There is a sense of optimism today for investors.  Gold is up slightly, while oil is down a bit.  The US dollar is falling against most currencies, propping up commodity prices. Interest rates continue along a stable path and should continue to support the surge in home sales and home prices.  Jobless claims are stabilizing at a positive range as well. Still lurking, and likely to set a short ceiling on market gains, is the fact that Fed tapering is likely to occur sooner than later.  Volatility is likely to pick up as political squabbling over the debt limit surfaces over the next couple of weeks.  As earnings season winds down it seems that the resulting void will to lead to profit taking and a mild correction.

Economic Journal - Wednesday, 8/7/2013

(As of 7:25 am PST)

 

Stocks are lower this morning on worries that the Federal Reserve might start reducing its government bond buying program as early as September of this year.  This reduction in economic stimulus has been widely telegraphed over the last year, but it is still making investors nervous.  Much of the huge stock market gain we have experienced over the last few years is a result of economic stimulus so we might see some market giveback even as the US economy picks up speed.  Corporate profit reports were also disappointing.  Disney beat expectations, but indicated that a large loss on its recent movie bust ‘The Lone Ranger’ will cut into future profits.  In other news, the US Justice Department filed a civil suit against Bank of America, citing fraud in its packaging of mortgaged backed securities prior to the financial crash of 2008.  Gold and oil are near unchanged and the US dollar is mostly down against other currencies.  Interest rates are stable.  Expect continuing weakness as the day wears on.

Economic Journal - Tuesday, 8/6/2013

(As of 7:20 am PST)

 

Stocks are slipping this morning despite a surprise narrowing to the US trade gap.  The Commerce Department reported this morning that the US trade deficit shrank 22.4% in June to $34.2 billion, the lowest level since 2009.  The sharp decline reflected higher exports and lower imports.  A smaller deficit is a positive for GDP as it means we are buying more of our own goods and services.  Markets shrugged the positive report as investors grappled with comments made by Atlanta Fed President, Dennis Lockhart.  In an interview, Lockhart discussed the likelihood of the Fed tapering its asset purchases as soon as its next meeting in September.  Tapering has been and will continue to be the main threat to the market for the remainder of the summer.  European markets are looking to hold on to their seventh straight day of gains, while Asian markets closed mixed.  Commodities are getting hit hard, with gold breaking through $1300 per oz. on the comments from Lockhart.  It looks like a day of profit taking with ‘taper’ talk ruling the day. 

Economic Journal - Monday, 8/5/2013

(As of 7:11 am PST)

 

Stocks are retreating from record highs set last week.  The ISM Services report came in very strong, but it was not enough to overcome the negative tone set at the market open.  There is little in the way of additional economic data today and a pullback based on profit taking would be no surprise. August is traditionally a slow month for trading with significant players taking time off for summer vacations.  Gold is down slightly along with oil.  The dollar is mixed against other currencies.  Market activity has been driven by corporate profit reports for the last few weeks and that trend is likely to continue this week.  

Economic Journal - Friday, 8/2/2013

(As of 7:15 am PST) 

 

After a nice rally yesterday, stocks are retreating in early trade as investors digest a disappointing US nonfarm payrolls report.  According to the report, the US private sector added 162,000 jobs in July, well short of Wall Street’s expectations of an 180,000 gain.  The unemployment rate ticked down to 7.4% from 7.6% in June, but downward revisions to May and June’s jobs numbers dampened investor mood.   Reactions to the jobs data and its impact on the Fed’s “tapering” strategy have been mixed.  Some analysts are saying the disappointing jobs growth supports the Fed’s plan to continue its asset purchase program while others suspect the Fed will begin tapering at its September FOMC meeting.  While the market continues to look for clues, one thing is certain…uncertainty.  And as we’ve said many times before, the market does not like uncertainty.  Today’s jobs data has sent European stocks lower, while Asian markets closed mixed.  Gold prices are finding some support above $1300 per oz., while treasury prices surged sending interest rates lower.  Expect a quiet day on the markets as investors digest this jobs number and set their course for the remainder of the summer.

Economic Journal - Thursday, 8/1/2013

(As of 7:25 am PST)

 

Markets are in full rally mode as investors reacted to upbeat global data and yesterday’s dovish statements from the US Federal Reserve.   The Fed released its most recent policy statement late Wednesday, calling the economic pace “modest” and reiterating it would continue its stimulus package of $85 billion per month in asset purchases.  Other central banks around the world followed the Fed’s stance, as today the European Central Bank kept its key lending rate unchanged and the Bank of England also maintained its bond-buying programs.  Economic data fresh off the wire is adding to positive sentiment.  The number of people filing for unemployment benefits in the US fell last week to the lowest level in 5 years.  The ISM report on manufacturing showed a surge in activity for July, with the index jumping to 55.4 from 50.9 in June, the highest level since August 2011.  The only disappointing report to hit this morning showed construction spending dropping unexpectedly in June.  Global economic data is strong today.  The official PMI reading in China registered a surprise gain in July which sent Asian markets higher.  European markets are also higher on China and the Fed.  Commodity prices are up with oil higher by 2.5% and gold inching higher.  Treasuries are sliding as the risk on trade has taken hold.  Expect a positive day on the market today with good news winning the day.