Economic Journal - Monday, 9/30/2013

(As of 7:18 am PST)

 

Markets are under serious selling pressure this morning as the fiscal showdown in Washington continued over the weekend.  The federal government risks shutting down for the first time in 17 years as members of the House and Senate were unable to agree to terms of a budget deal over the weekend that would raise the debt ceiling and keep the government paying its bills.  The House sent a bill back to the Senate Sunday afternoon that included a delay to the implementation of the Affordable Care Act (Obamacare) for another year.  The Democratic led Senate will most certainly vote against the bill this afternoon, and if Congress cannot come to an agreement by Tuesday morning the government will shutdown.  Markets are reacting to the developments as we’d expect.  Volatility has surged this morning with the VIX (otherwise known as the fear gauge) up 12% as investors bought protection against a market decline.   All 30 stocks that make up the Dow component are lower while the S&P500 and Nasdaq are down near 1%.  All other global financial news has taken a backseat to the drama unfolding in Washington.  After a surprisingly calm trading month in September, the last day of the quarter looks to be a doozy.

Economic Journal - Friday, 9/27/2013

(As of 7:08 am PST)

 

Stocks opened lower today after enjoying some slight gains yesterday.  Economic data is light although a report on consumer spending showed spending rose 0.3% in August (the third fastest increase of the year) and July spending was revised upward.  The main story continues to be the debt showdown in Washington.  A possible government shutdown as a result of not raising the debt ceiling is the biggest concern on investor minds.  The nation is scheduled to reach its debt ceiling on October 17, and thus unable to pay its bills, unless congress can come to an agreement to raise it by Monday’s deadline.  Compared to the debt ceiling debate in 2011 which saw volatility soar, it’s been a relatively calm market during these budget negotiations.  Volatility is picking up today, however, with the VIX trading up 6%.  Expect volatility to pick up as the day progresses and uncertainty weighs on investor minds going into the weekend.  In other news, gold is higher by 1% and interest rates are lower with the 10 yr. treasury yielding 2.62%.  Asia finished trading mixed and Europe is following US markets lower.  The ‘come up for air’ yesterday may be short-lived as market momentum is to the downside today.

Economic Journal - Thursday, 9/26/2013

(As of 7:16 am PST)

 

Stocks are getting a nice bounce today after several consecutive days of losses, the most for the S&P500 on the year.  Incoming data showed jobless claims falling last week and hovering just above a 6 year low.  Also, the third and final review of GDP for the second quarter showed growth unchanged at a 2.5% annualized pace.  It appears most analysts expected a very slight pick up in growth, so perhaps the miss is playing into a "bad news is good news" scenario on the market today.  US growth has been sluggish since the recession, expanding at roughly a 2% rate over the past several years and perhaps an unchanged number for growth in the second quarter supports the view of the Fed continuing its asset purchase program.  In any case, the market is enjoying a nice rebound after several days of losses.  Other data showed pending home sales fell 1.6% in August while 30-year mortgage rates dropped to 4.32% in the most recent week.  European markets hovered near the unchanged line most of the day but have picked up momentum as the US stock market has in early trading.  Asian markets were mixed on the day.  Interest rates are higher as the US dollar rose.  Gold is down and oil is up slightly. Expect gains to deteriorate as the day progresses, as investors remain fixated on the debt ceiling debate and the taper.

Economic Journal - Wednesday, 9/25/2013

(As of 7:19 am PST)

 

Nervousness is the order of the day as the debt ceiling approaches.  Although markets are not reacting with the harsh volatility that went along with this debate in 2011, nonetheless, investor anxiety is growing.  Economic data has been uninspiring today.  New home sales were slightly above expectations and the durable goods order numbers were in line with expectations.  Gold is up a small amount, along with oil and the dollar is generally lower against other currencies.  With stock markets at all time highs investors are taking a breather and letting September's gains consolidate. A resolution of the debt ceiling debate would likely be the catalyst to send markets higher.  

Economic Journal - Tuesday, 9/24/2013

(As of 7:22 am PST)

Stocks opened flat this morning but are slowly losing steam as investors digested new economic data.  Home prices rose just 1.8% in July, down from a 2.2% gain in June, according to the Case-Shiller Index of home prices.  After accounting for seasonal adjustments, June’s gain was the lowest since last September, which had some analysts remarking the housing boom we’ve seen the past couple years may be slowing.  Investors also digested data on consumer confidence which showed confidence falling in September, in line with expectations.  Markets appear unwilling to push higher without some clarity around the debt ceiling debate and a possible government shutdown.  Investors also are weighing Fed comments this week on tapering.  Good news is we’re not seeing the volatility that we saw back in 2011 during the same debate.  Expect things to be status quo through the end of the quarter and pick up again once earnings season starts (pending any surprise out of Capitol Hill).  International markets are mixed today with Asia lower and Europe higher.  Gold continues its slide, down nearly 1% today, while oil is also lower. 

Economic Journal - Monday, 9/23/2013

(As of 7:03 am PST)

 

It’s another quiet day on the markets with no economic data to report today.  Investors continue to strategize over the Fed’s ‘taper’ plans, paying close attention to several Fed officials speeches today and looking for clues for an upcoming October taper.  In company news, shares of Apple are higher by 5% as the iPhone maker reported record sales of the new iPhone 5S and 5C over the weekend.  Chief executive Tim Cook called the opening weekend the best iPhone launch yet, as nearly 9 million of the new iPhones were sold.  Cook also reported that over 200 million iPhone users had downloaded the new iOS7 software.  Guidance on earnings for the 4^th quarter for Apple was lifted to the higher end of its previous range.  It’s a quiet day for international markets as well.  European stocks are lower with investors digesting mixed PMI data and Asian markets were mixed as well.  Gold continues to slide, down $11 per oz. on taper worries and oil is also lower.  Expect markets to muddle along the rest of the day.

Economic Journal - Friday, 9/20/2013

(as of 7:05 PST)

 

It is very quiet on markets today and will likely remain so.  Market indexes are mixed, with the Dow down marginally, while the Nasdaq and S&P 500 are up slightly. There is no significant economic data today and parts of Asia are closed for a holiday.  Gold is down moderately and oil down a small amount.  Expect markets to meander around flat-line today digesting September’s gains.

Economic Journal - Thursday, 9/19/2013

(as of 7:20 PST)

 

Markets are digesting yesterday’s surprise move (or lack of movement by the Federal Reserve).  It was a surprise to most when the Fed delayed its plan to reduce economic stimulus by paring its bond purchases.  Stock markets soared, as did the price of gold, while bond yields plummeted.  Apparently the Fed sees trouble on the horizon that has escaped most economists.  Today’s economic news has been positive for the most part.  Home sales were up, housing inventories up as well, while the price of homes was up 14% year over year.  Jobless claims were up a small amount.  The Philly Fed index, a key measure of industrial activity came in strong and above analyst expectations.  Leading economic indicators also were higher, up .7%.  It is hard to know how this market will follow-up to yesterday’s stunning development.  There are a lot of befuddled investors wondering where we go from here, including this one!

ALERT! ALERT! ALERT!

(As of 12:10 pm PST)

 

At 2 pm EST today the Federal Reserve shocked investors around the globe, announcing it would hold its $85 billion per month bond buying program steady for the foreseeable future.  After months of ‘taper talk’, the market was anticipating an announcement today of at least $10 to $20 billion in cutbacks to the Fed’s easy money policies.  Not so, said Big Ben!  After trading lower for most of the morning the markets accelerated to the upside on the news.  All 3 major US indexes are up over 1% while gold prices are soaring over 3%.  Bernanke is currently holding a press conference detailing the Fed’s reasons behind delaying the taper.  So far, the market likes what it hears.  Thanks for the parting gift Big Ben!

Economic Journal - Wednesday, 9/18/2013

(as of 7:15 PST)

 

All eyes are on the Federal Reserve Bank, which is in the final day of a two day meeting, the primary purpose being to set a course to reduce Fed bond buying.  The market seems to have already priced in a mild reduction, but any larger reduction (20 Billion), would likely send interest rates higher and the equity markets lower. Housing starts were up slightly this morning, but slightly below expectations thus no market reaction to the data.  Gold continues downward and oil is up on reduced inventories.  Interest rates are up slightly. 

Economic Journal - Tuesday, 9/17/2013

(As of 7:15 am PST)

 

Stocks continue to inch higher but investors seem reluctant to make big moves ahead of the Fed’s two day policy meeting that kicks off today.  The Federal Open Market Committee which sets monetary policy decisions for the Fed is meeting today and tomorrow in a much anticipated deliberation surrounding the Fed’s asset purchase program, also known as QE3.  Most investors and the market expect the Fed to announce tomorrow the beginning of its bond ‘tapering’ strategy to wean the economy off the easy money policies that have driven long term interest rates artificially low since the financial crisis.  What is unknown, however, is how much the Fed will begin to taper.  Most economists expect a $10 billion reduction of the $85 billion per month in bond purchases the Fed is currently making.  We could be in for a wild ride in either direction tomorrow depending on what course of action the Fed takes.  Postponing the taper until October would likely cause a stock market rally, while tapering more than the estimated $10 billion per month may cause a selloff.   We’ll have to wait until 2 pm eastern time tomorrow to find out.  In other news today, shares of Microsoft are higher as the tech company announced a 22% dividend hike and a $40 billion share repurchase plan.   Economic data was light with a report on consumer prices showing inflation remains in check.  European and Asian markets are cautious ahead of the Fed’s taper decision.  Treasuries rose slightly sending interest rates lower while gold and other commodities are down.  Expect gains to give way as the day progresses and uncertainty over the Fed's decision prevails.

Economic Journal - Monday, 9/16/2013

(as of 7:15 PST)

Markets are in a rally mode this morning with news dominated by Larry Summers, the Presidential favorite to succeed Ben Bernanke as the head of the Federal Reserve Bank.  Summers removed his name from consideration.  The markets are rallying because there was concern that Summers as the Fed banker would cause a sharp change in direction including a reduction of economic stimulus.  Other names under consideration would seemingly maintain the loose monetary status quo.  Gold is up moderately after hefty declines last week, while oil is down sharply on easing tensions over Syria.  Apple continues to fall on negative news from its China operations.  The Federal Reserve Bank meets this week and it is widely expected that a tapering of the 85 Billion dollar per month will be a likely outcome.  How markets react will depend on the magnitude of the purchasing cutback.   Volatility is likely to pick up on Fed watching and political wrangling over the US debt ceiling.

Economic Journal - Friday, 9/13/2013

(As of 7:14 am PST)

Stocks wobbled at the start but have picked up momentum as investors analyze economic data reports in lieu of next week’s Fed meeting.  The Commerce Dept. reported US retail sales climbed just 0.2% in August, the smallest increase since April and well below consensus estimates.  On a positive note, retail sales for June and July were revised upward.  US wholesale prices rose in August as gasoline and food costs moved higher.  Core wholesale prices (which removes the volatile food and energy categories) was unchanged indicating low inflationary pressure.  Lastly, the University of Michigan consumer sentiment report showed the preliminary reading for September falling unexpectedly to 76.8, below initial estimates.  With a military strike on Syria avoided, investors have turned back to the issue of bond tapering and how and when the Fed will execute its strategy to wean the economy off its' stimulus programs that have been in place since the financial crisis.  Next week’s FOMC meeting will be under the microscope with markets looking for direction for the final quarter of the year.  International markets are mostly lower today as are commodities.  Interest rates ticked down and the US dollar is slightly higher.  The first two weeks of September have been surprisingly strong for equities, but expect volatility to return in the second half of the month as the taper gets underway.

Economic Journal - Thursday, 9/12/2013

(as of 7:15 PST)

 

Markets are digesting yesterday’s gains.  The markets were strong excepting the disappointment that went along with the new launch of Apple I-Phones.  Consolidation today might be a sign of strength, especially if there is even a small drift upwards as the day progresses.  Gold is getting hammered for the second straight day perhaps because geopolitical pressures are easing, including Syria.  Oil is up slightly but looking for direction from the global economy.  The US dollar is generally up against other currencies.  Jobless claims were down, but the report is being ignored by investors because of unreliable data.  The strong market performance of the last week has come as a big surprise to most investors in light of the headwinds of Syria and the Federal Reserve Bank’s expected withdrawal of some economic stimulus.

Economic Journal - Wednesday, 9/11/2013

(As of 7:16 am PST)

 

Markets are mixed this morning with the Dow higher while the Nasdaq and S&P500 are slightly lower.  Shares of Apple are leading early losses after the tech giant unveiled its newest iPhones yesterday.  The new iPhone 5S seemed to please spectators and analysts alike at its unveiling yesterday, while Apple’s cheaper iPhone, the iPhone 5C, fell short of expectations.  The iPhone 5C, priced at $99 in the US, is Apple’s strategy to increase overall market share and tap into the low-price smartphone market.  Analysts at Bank of America-Merrill Lynch, Credit Suisse, and UBS were disappointed enough to downgrade shares of Apple citing the challenges Apple faces to expanding market share with a phone priced that high.  The stock took a beating at the open with shares falling 5% to $471.  Fears of a military strike on Syria have subsided providing some optimism in the markets the past 48 hours.  President Obama addressed the nation Tuesday evening saying he asked Congress to postpone a vote on Syria while he considers Russia’s diplomatic solution to Syria’s chemical weapons use.  Markets in Asia and Europe were mostly higher on the Syrian news.  Interest rates and the US dollar are slightly lower while oil is up and gold down slightly.  The markets seem to be taking a break today after a week of very strong gains.  September is off to a great start (surprisingly), but expect volatility to pick up as we approach the Fed’s September 18th meeting and the taper returns to the top of global headlines. 

Economic Journal - Tuesday, 9/10/2013

(As of 7:13 am PST)

 

Following yesterday’s momentum, stocks continue to march higher as positive data out of China and developments out of Syria ease investor concern.   Asian markets surged for the second straight day as data out of China continued to impress.  Industrial production for August rose 10.4% from a year earlier, while retail sales increased 13.4% from August last year.  Both reports came in much stronger than expected and sent most equity markets throughout Asia higher.  Developments out of Syria are also drawing investors back in.  The Syrian government has accepted a proposal from Russia to put its chemical weapons under international control likely averting a US military strike.  As expected, oil prices have fallen sharply today.  Gold is also lower by 2% while the US dollar is higher.  In other news, Apple is under the microscope  in early trade as the tech giant gets set to unveil its new low-cost iPhone 5C later this afternoon.   Shares rallied above $500 yesterday and have fallen back slightly today ahead of the announcement.  With strong global economic data and a Syrian resolution taking shape it appears another positive day for equity markets is in the making. 

Economic Journal - Monday, 9/8/2013

(as of 7:15 PST)

 

Spillover from a surging Asian markets has US stocks strongly higher at the open this morning.  Strong economic data from both China and Japan were catalysts that sent Asian markets up near 2% overnight.  Gold is up slightly and oil is down after a big run-up last week due to Syrian fears.  The US dollar is down against most foreign currencies and interest rates have reversed to the downside after a significant surge over the last few weeks. The Congressional vote on Syria this week will dictate market direction for the short term, while Federal Reserve talk of tapering activity will also have a strong impact.  Don’t expect these early gains to hold.  There is just too much uncertainty on the horizon and markets hate uncertainty.

Economic Journal - Friday, 9/6/2013

(as of 7:15 PST)

Sudden Syrian turmoil sent a mundane market sharply lower.  Russia’s leader, Putin, took a much harsher tone on Syria, indicating that it stands ready to provide Syrian aid if the US launches a military strike.  Prior to this news the market was meandering around flat line, weighing mixed employment data with the possibility of a Federal Reserve Bank tapering this month.  Volatility is up sharply.  Gold is up along with oil.  The US dollar is down sharply against other currencies.  Interest rates continue to click higher because of the potential effect of the reduction of Fed bond buying.  Markets may continue to be driven by news from Syria. It could be a wild ride!

Economic Journal - Thursday,09/05/2013

(as of 7:15 PST)

Solid economic data both in the US and abroad have overcome worries over Syria and markets are up moderately as a result.  Taper talk has fallen out of the news over the last couple of days allowing markets to build positive momentum.  Jobless claims were down more than expected while ADP data showed that private job creation was at the lowest level since May.  ADP data has been known to be inconsistent however.  The ISM services report came in at a very strong reading indicating that the recovery is picking up speed.  Gold is near unchanged after a big drop yesterday and oil is up on reduced inventory levels.  Interest rates continue to march upward, with 30 year mortgage rates topping 4.5% and the 10 year treasury approaching 3%.  The dollar is mixed against foreign currencies today.  Expect Federal Reserve talk of tapering its huge debt purchases to resurface over the next few days cutting into the positive market momentum. 

Economic Journal - Wednesday, 9/4/2013

(As of 7:19 am PST)

 

Markets are quiet to start this morning with the major indexes inching higher.   Gold and oil are taking a beating, leading commodities lower as the US dollar is down slightly.  Economic data is light although a report showed the US trade deficit widened sharply in July after dropping significantly in June.  The trade gap jumped 13.3% mostly due to higher oil prices and an increase in auto imports.  A widening trade deficit is not good for US growth as more dollars leave the US for overseas goods.  Support for a military strike on Syria grew on Capitol Hill yesterday, with several House and Senate leaders speaking out in support for President Obama’s plan.  The remaining challenge for lawmakers is agreeing to the scope of the strike.  Although Syria is a major concern, the bigger issue facing markets continues to be the Fed’s timeline for tapering its bond purchases and the resulting impact of rising interest rates on the economy.  The latest release of the Fed’s Beige book is due out today which will likely shed some light on whether rising rates are taking a toll on growth.   September is known as one of the worst months for the stock market historically, and with a lot of negative events on the horizon, expect market volatility to pick up as the weeks go on. 

Economic Journal - Tuesday, 9/3/2013

(As of 7:21 am PST)

 

It was a good start for markets globally yesterday while the US stock market sat out the exuberance with the observation of Labor Day.  International gains based on positive economic data in Asia and Europe spilled over to US markets this morning with the Dow Jones Average being up triple digits to start.  The big news in corporate acquisitions was Microsoft’s announcement to buy Nokia’s cell phone operations. Microsoft intends to make Finland (home to Nokia) its base of operations for mobile phone operations.  Nokia soared in value while Microsoft was one of the biggest decliners on the Dow.   Another large acquisition involved Verizon’s purchase of global cell phone powerhouse Vodaphone.  Both are down after recording significant gains in the days leading up to merger finalization.  Gold is up and oil is down slightly.  Worries over Syria are on the back burner since nothing is likely to happen at least until Congress reconvenes later this month.  Expect investor anxiety to continue at a high pace after European news is digested.  Markets might give back some of these built in gains as investors weigh the significant events that September might provide.