Economic Journal - Thursday, 10/31/2013

(as of 7:30 PST)

 

It seems we are in for a ghoulish day on most markets.  Risk seems to be off the table as most asset classes are showing moderate to heavy losses.  A vibrant report on Chicago PMI was not enough to stem an early drop in stock indexes.  Gold is taking heavy losses while oil continues on its downward glide.  Chicago PMI, a key measure of industrial activity, came it at a whopping 65, strongly higher than the expected 54 number, and one of the highest readings in some time.  Corporate profit reports were mixed with Facebook garnering the most headlines.  Initial reports sent the stock skyward with a 14% gain in yesterday’s aftermarket, but it ended with a thud, giving back all gains and then some as analysts picked through the Social Media statistics.  A day of profit taking might be healthy for these markets which have experienced an extended rally and might be a little tired.

Economic Journal - Wednesday, 10/30/2013

(as of 7:10 PST)

It is a quiet day in the markets this morning.  What would normally be drama because of the Federal Reserve meeting is absent.  There is little anxiety this time because the dominant view is that nothing substantial will come since the Fed is in the middle of a leadership change.  Federal Reserve nominee Janet Yellen has yet to be confirmed but it is widely assumed that her nomination will occur without major opposition.  Profit reports came in mostly positive yesterday extending the trend of the last couple of weeks.  Markets are up slightly.  A day or two of consolidation after record highs might be expected and could be healthy for this market.  Gold is up and oil is down.  Interest rates are stable.

Economic Journal - Tuesday, 10/29/2013

(As of 7:20 am PST)

Stocks opened the day higher but are slipping off their highs as investors considered earnings and economic data ahead of a two day Fed meeting.  Apple was the buzz in yesterday’s after-market trading as the tech giant reported mixed earnings.  The iPhone maker reported its third consecutive quarter of earnings declines despite revenues coming in higher than the street expected on several new product launches.  Apple’s guidance on gross margin for the December quarter caused investors the most concern.  All in all, it was a rather unexciting report and reaction.  Shares are slightly lower this morning.  Today investors are navigating several  economic reports.  Retail sales fell in September for the first time in 6 months with auto sales leading the decline.  US home prices also lost some momentum, with the average home price rising 1.3% in August according to the S&P/Case-Shiller Index.  A report on wholesale prices showed inflation remains in check as core wholesale prices rose a scant 0.1%. The last report to cross the wires showed consumer sentiment plunging in October to the lowest level in 6 months.   There’s a cautious tone in the market today as the Fed kicks off a two day policy meeting.  The market expects the Fed to remain loose in its monetary policy as the recent government shutdown and weak economic data have put the brakes on the central bank’s plan to taper its asset purchase program.

Economic Journal - Monday, 10/28/2013

(As of 7:15 am PST)

 

It’s a data rich week with economic reports, Fed meetings, and big name earnings all on tap.  US stocks wobbled at the start but are inching towards positive territory as investors looked ahead to Apple’s earning report after the bell today.  Economic data released in early trade showed industrial production rising better than expected in September, while pending home sales in September fell to the lowest level in nine months.   Investor focus today is on Apple as the tech giant gets set to report earnings after the bell.  Since the company’s last report in July, shares have rallied 25% as new products have been introduced and rumors of a share buyback have propelled shares higher.   Investors will be looking for guidance for the December quarter as the key driver of trade this week.  Markets have a lot to digest on the economic front as well this week.  Reports on retail sales, auto sales, jobless claims, and the Chicago PMI will give investors plenty of information to trade on.  Not to mention a Fed meeting this week should affirm investor sentiment that a taper will likely not be seen until 2014.  There are a lot of positive drivers for the market this week, but also a cautious tone as market indexes reach or exceed all time record highs.

Economic Journal - Friday, 10/25/2013

(As of 7:15 am PST)

Markets have opened much like they did yesterday with modest gains as big names continue to report earnings.  Tech stocks are pacing gains with the Nasdaq up .7% as Microsoft and Amazon both reported strong earnings beats sending shares up 6% and 10% respectively.  Other companies who reported include Zynga, UPS, and Proctor & Gamble all in line or exceeding expectations.  There is some economic data out this morning worth noting.  US durable goods orders rose 3.7% in September led for the most part by a large increase in aircraft bookings.  Stripping out the volatile transportation sector, durable goods declined by 0.1% and core capital goods slipped 1.1%, a lackluster report.  Also released this morning was the Univ. of Michigan/Thomson Reuters Consumer sentiment index which showed the final reading of consumer sentiment in October falling to 73.2 from 77.5 in September.   Sentiment hit the lowest level since last December, likely due to the government shutdown and political squabbling of the past month.  European markets are mixed as they near the close of trade while Asia took a beating on poor Chinese earnings.  Gold is lower and oil higher while interest rates continue to slide with the 10 yr. treasury yield dipping for a moment just below 2.5%.  

Economic Journal - Thursday, 10/24/2013

(As of 7:10 am PST)

 

International news is triggering some movement in the US markets while earnings are impacting sector moves.  News out of China was upbeat as the world’s second-largest economy reported a rise in manufacturing activity that was greater than expected.  Asian markets were mixed most of the trading day but finished the day down.  Europe is higher on the China news and US company earnings.  The US equity markets are slightly higher as investors continued to wade through earnings reports.  Some names worth noting today include Ford, who provided an optimistic profit guidance that has propelled shares higher.  3M beat estimates as did AT&T and Southwest Airlines.  Tech giants Microsoft and Amazon are set to report after the closing bell today.  It’s nice to see a defined trade on earnings, instead of large macro events swinging the markets.  Expect earnings to overshadow economic data for the remainder of the week.

Economic Journal - Wednesday, 10/23/2013

(As of 7:30 am PST)

 

Markets are moving lower and picking up steam this morning after a slew of disappointing earnings reports hit the wires.  Perhaps the most disturbing was equipment maker, Caterpillar, which historically is seen by the market as a bellwether for global economic conditions.  CAT reported misses on both the top and bottom lines, but its lowering of its full year 2013 guidance concerned investors the most.  Broadcom also guided lower, overshadowing an earnings beat and sending the stock lower.  Boeing shares surged higher after reporting 3^rd quarter earnings that rose 12% and raising its EPS estimates. Pharmaceutical company, Eli Lilly, missed on earnings while revenues rose and Bristol-Myers Squibb beat estimates.  Several other companies reported in a mixed bag day that has the market taking profits after an historic run.  International markets are also taking a breather.  Asia finished lower and European stocks are trading down on earnings and ECB bank stress test news.  Expect market direction over the coming weeks to be driven by earnings as macro events slip into the background for now.

Economic Journal - Tuesday, 10/22/2013

(As of 7:20 am PST)

 

Markets are rallying this morning on a ‘bad news is good news’ sort of move.  The US nonfarm payrolls report for September came in much lower than expected.  The private sector created 148,000 jobs in September, lower than estimates of 185,000.  The unemployment rate ticked down from 7.3% to 7.2% while the labor force participation rate (which measures how many people are looking for work) remained near a 35 year low.  The jobs report, which was delayed by 18 days due to the shutdown, signaled an economy that is growing at a modest pace.  September’s report and the impacts of the government shutdown will likely dampen growth for the remainder of the year.  Why is this good for markets?  Investors are now speculating that the tepid growth signals the Fed will likely push back their bond tapering plans until at least spring of 2014, maybe later.  Let the easy money continue to flow.  Signs of this trade are evident in the treasury market today with treasuries rallying as interest rates dropped.  Besides the jobs report, investors are trading a big earnings day.  Netflix reported a beat yesterday, while Texas Instruments reported falling profits.  DuPont, Coach, Delta Air Lines, Harley-Davidson, Lockheed Martin, and RadioShack are some other names expected to report today.  Gold prices are higher by 1% as Fed taper worries subside.  We’ll see if the market can hold this rally today.

Economic Journal - Monday, 10/21/2013

(As of 7:15 am PST)

 

Stocks opened near the unchanged line but are inching higher in early trade as investors look to a peak week in earnings and upcoming economic data.  It’s a big week for earnings with names like McDonald’s, Proctor & Gamble, Microsoft and AT&T set to report.  It’s been a mixed bag for Q3 earnings so far.  Of the 93 companies that have reported from the S&P500 so far, 53% have topped Wall St. estimates on the revenue line, which is slightly below the 4 year average of 59%.  On the bottom line (earnings), 69% have topped estimates compared with a 4 year average of 73%.  Most reports have slid past markets as the government shutdown and debt ceiling debate took over headlines the past month.  Besides earnings, investors are looking ahead at a full week of economic data.  Several reports which were delayed by the government shutdown will be released this week including the Labor department’s key US nonfarm payrolls report.  This week’s report (delayed by 18 days) will not reflect the impact of the shutdown so market reaction will be difficult to interpret.  In any case, a return to fundamentals, including earnings and economic data, should determine price direction for this week and hopefully the remainder of the year.

Economic Journal - Friday, 10/18/2013

(As of 7:10 am PST)

 

It’s back to business as usual on Wall St.  With the threat of default and a reopening of the US government in the rearview mirror investors are turning to earnings and economic data for direction from these multi-year highs.  It’s all earnings today with some big names reporting.  General Electric beat estimates ahead of the bell with shares moving higher by 2%.  Morgan Stanley swung to a Q3 profit beating estimates.  Yesterday, Google surprised investors with a 36% year-over-year earnings increase which resulted in shares soaring 10% in after hours.  Also, a high flyer today are shares of Chipotle which reported revenues better than expected.  It’s been awhile since we have seen reliable economic data as the government shutdown delayed several reports.  Next week should be chock-full of reports with Tuesday’s important non-farm payrolls report kicking things off.  There appears to be some positive momentum right now with earnings coming in better than expected and the shutdown pushing talks of a Fed taper further out into next year.  There’s a lot of data yet to sift through but sentiment has improved since earlier in the week as investors game plan for the final two months of the year.

Economic Journal - Thursday, 10/17/2013

(as of 7:00 PST)

 

The deal was done.  It was very anti-climactic.  Markets rallied yesterday when it was all but assured.  But this morning negativity started the day.  Canvasing the political and economic landscape it is hard see that any significant good was accomplished from a huge expenditure of resources and emotion.  It is quite natural to feel that empty negativity.  But markets should quickly pick up the pieces and get back to the business at hand.  Economic reports and corporate earnings will now take center stage and markets should claw back from early morning declines.  Gold is up over 2% on the day while oil continues its downward trend.  The dollar is down across most currencies on the prospect of continued stimulus.  Interest rates have ticked higher. Expect a relatively quiet day as investors take stock of the situation.

Economic Journal - Wednesday, 10/16/2013

(as of 7:30 PST)

Investors see the collapse of the House GOP Plan as a positive and are driving up stock prices as if it is a done deal on reopening the US government and raising the debt ceiling.  The dysfunctional Republican caucus in the House was not able to put together a plan that would pass with its members, thus leaving the Senate Plan as the ‘only game in town’.  House speaker Boehner has indicated that he will put the bipartisan Senate Plan to a vote, almost assuring that the small group of radical Republicans, whose voice has been heard in a loud way, will be finally be silenced for the time being.  Details are currently being worked on, but things look very positive.  The Dow is up triple digits, with other markets following along.  Gold is off slightly and oil is near unchanged.  Interest yields are up a small amount.  Once this crisis is in the rearview mirror, investors will be able to focus on company earnings reports and other economic data.

Economic Journal - Tuesday, 10/15/2013

(As of 7:13 am PST)

 

Today’s open is similar to yesterdays with stocks trading modestly lower.  Investors remain cautiously optimistic about reaching a deal to fund the government and avoid a default this week.  Senate leaders Harry Reid and Mitch McConnell both made positive statements about reaching a deal yesterday that lifted stocks in the afternoon.  There’s still a lot of progress that needs to be made, but we’re in the red zone of a budget agreement it seems.  In other news today, the Empire State index, which measures manufacturing activity in the New York region, improved in October but by its slowest pace in 5 months.   Earnings have been mixed so far today with some big names reporting.  Citigroup missed estimates, while Johnson and Johnson beat and Coca-Cola met expectations.  Yahoo is set to report after the bell today.  Expect markets to become more earnings driven after we get through this budget impasse.  Until then, all eyes remain locked on congress over the next 48 hours.    

Economic Journal - Monday, 10/14/2013

(as of 7:00 PST)

Uncertainty persists with the market opening moderately down this morning.  Expectations are high that a compromise will be in place by Thursday’s deadline but investors are watching nervously.  Gold is rebounding from last week’s large losses and oil continues on its downward path.  Interest rates are stable.  There are no significant economic reports out this morning, so action will be driven by earnings reports and headlines out of Congress today.

 

Economic Journal - Friday, 10/11/2013

(as of 7:10 PST)

 

The dramatic shift in market sentiment is still evident in today’s morning action.  It appears that a resolution of the debt ceiling and a reopening of the US Government after a budget compromise will happen today. Unfortunately, at least for the debt ceiling issue, it is a short term solution, bound to continue to cause headaches into the winter months.  Gold and oil are getting hammered today, both continuing a string of declines over the last week.  Markets are continuing to rally, but are mostly digesting yesterday’s huge market jump.  Attention is likely to focus now on when the Federal Reserve will begin tapering its government and mortgage bond buying.  For the time being investors can breathe a little easier.

 

Economic Journal - Thursday, 10/10/2013

(As of 7:17 am PST)

 

A bit of a relief rally has come in to the markets today as lawmakers showed signs of moving closer to a deal that would avoid a US default.  Stocks jumped at the open after slight gains yesterday as investor optimism grew.  For the first time since the government shutdown began 10 days ago, President Obama is scheduled to sit down with House Republicans today at the White House to discuss proposals on a budget solution.  Also swirling around Capitol Hill are rumors that House Republicans have come up with a short term fix of raising the debt ceiling for 6 weeks, allowing more time for budget negotiations.  A report on jobless claims showed claims surging last week from 308,000 to 366,000 partially due to the shutdown but mostly impaired by computer miscues in California.  Either way, markets seem to be sidestepping the report and cheering the progress in Washington.  So far earnings have been fair with only a few companies reporting so far.  If an agreement is struck in the coming days and earnings are decent as we hit the meat of the calendar, expect markets to rally from these current prices.  Still a long way to go, but today is providing a glimmer of hope (at least from the markets point of view).

Economic Journal - Wednesday, 10/09/2013

(as of 7:20 PST)

 

The appointment of a new Federal Reserve Bank is the big news today.  Vice-Chair Janet Yellen has been picked to replace Ben Bernanke and is expected to continue his easy money policies.  While this should be a positive for the market, the news is overshadowed by the stalemate between President Obama and Speaker of the House Boehner and the continuing government shutdown coupled with the rapidly approaching debt ceiling deadline.  Momentum is very negative with most markets marching downward.  Gold is off significantly as is oil.  The International Monetary Fund has lowered global growth forecasts, citing the troubles in Washington, DC.  Earnings season kicked off yesterday, but earnings are not expected to be a big lift to markets this time around.  There may be more pain in the forecast.

 

 

Economic Journal - Tuesday, 10/8/2013

(As of 7:15 PST)

 

The stalemate continues in Washington, DC.  Republican lawmakers have painted themselves into a corner and can’t find a way out without losing face.  Markets are listless but watchful.  Concerns are mounting because this episode is becoming less about political wrangling and more about exposing the debt and spending problems which plague the US Government.  Markets are down slightly but action is very limited on most fronts.  Gold is up slightly along with oil.  On a bright note, mortgage interest rates have been dropping though the crisis and the 30 year rate stands near 4.25%, a great improvement for home buyers and a sure boost to the real estate market and home builders.  International markets are taking their cue from the US dilemma.  Volatility continues to surge as uncertainty is the order of the day.

 

Economic Journal - Monday, 10/7/2013

(As of 7:19 am PST)

 

Political drama continued in Washington over the weekend as lawmakers grappled over the US government shutdown and debt ceiling crisis.  Stocks are getting pummeled to start this morning, with the Dow off 125 points and the Nasdaq and S&P500 inching toward 1% losses.  Suspense picked up over the weekend as House Speaker John Boehner pushed for broader talks on the federal deficit before bringing up new bills that would reopen the government and increase the debt limit.  The standoff has pushed into its second week with the shutdown going on its 7^th consecutive day.  The deadline for hitting the debt limit is just 10 days away.  If members of Congress cannot agree to a deal to raise the debt limit, the US will default on its debt for the first time in history.  Shutdown fears and talks of default are impacting global markets as well as the US.  Asian markets were lower early today while Europe also is seeing broad market losses.  Gold is providing some support (up 1%) as the ‘taper talk’ has played second fiddle for most of the last 2 weeks.  Economists are now saying the taper (the Fed’s slowing of bond purchases) may not come until December or even early next year.  Interest rates and the US dollar are slightly lower.  Expect market volatility to stick around or increase the next two weeks or until an agreement is reached.

Economic Journal - Friday, 10/4/2013

(As of 7:17 am PST)

 

Stocks wobbled near the unchanged line to start but are inching higher as investors remained cautious heading into the 4^th day of the government shutdown.   House Speaker John Boehner and senior Republicans showed some flexibility Thursday afternoon in their efforts to reopen the government.  Boehner signaled the need to confront the debt ceiling issue urging Republican House members that it must be raised.  There’s still a long ways to go before a deal is reached but markets seem to be holding up surprisingly well with the volatility index lower today after spiking previously.  Normally, investors would be trading today on the US nonfarm payrolls jobs reports but due to the shutdown, the Labor department is unable to release it.  A lack of data has markets cautious but steady this morning.

Economic Journal - Thursday, 10/3/2013

(as of 7:05 PST)

 

It is a quiet day with stocks drifting lower this morning on the continuing US Government shutdown.  The Republican fringe element in the House of Representatives is digging in to an untenable argument, trying to create political power where none exists.  Jobless claims were up slightly, but still near a post-recession low. Gold is down after yesterday’s strong rally while oil is near unchanged, but under downward pressure.  The market is surprisingly stable despite the downward drift of the last few days.

 

Economic Journal - Wednesday, 10/2/2013

(as of 7:30 PST)

 

Power hungry members of Congress are relishing their might while casting aside the better interests of the nation as the US Government continues into its second day of partial shutdown.  The ho-mum reaction of the markets yesterday is in sharp comparison to today’s reality check.  The Dow is down triple digits and other indexes are following.  It still feels as if reactions are somewhat muted in that the volatility is still in line with normal market activity.  Employment data came in very soft this morning and a prior period’s data was revised downward.  International economies appear to be on the rebound, but their markets are also taking cues from the mess in Washington, DC.  Gold is on the rebound after a sharp selloff yesterday.  Oil is up a small amount after a week of declines.  Interest rates have drifted downward over the last few days as ‘taper talk’ is off the table at this point.  One gets the feeling that key Republican players in the House of Representatives have made their point and that negotiations will now pickup and that a short term fix will follow in short order.  

Economic Journal - Tuesday, 10/1/2013

(As of 7:20 am PST)

 

Markets seem to be taking the news of a US government shutdown in stride this morning as US indexes opened higher while ‘safe havens’ such as US treasuries and gold were lower.  US lawmakers failed to reach an agreement on a federal budget late last night causing the first US government shutdown in 17 years.  The shutdown means temporary unpaid leave for hundreds of thousands of federal employees all across the nation.  Although many believe the gridlock in Washington will be short-lived the economic impacts could be significant.  The next, and arguably more important piece of the financial debate on Capitol Hill, is the debt ceiling.  If the shutdown impedes Congress’ ability to raise the debt ceiling by October 17th the US would default on its debt.  The result of a US default would be devastating for the global economy.  Several economic data reports due out today have been delayed as a result of the shutdown.  Friday’s jobs report issued by the Labor Department will also be delayed if the government is not re-opened by then.  With very little data to trade on, expect market gains to deteriorate as the day goes on and investors weigh the ramifications of what’s happening in Washington.