Economic Journal - Friday, 1/31/2014

(As of 7:55 am PST)

 

Stocks are sharply lower this morning with US market indexes on pace for their worst January since 2010.  The selling came amidst several disappointing earnings reports and fears over deflation in Europe.  Despite positive consumer spending data, which showed consumers spent more in December than forecast, markets continued to slide.  Disappointing consumer sentiment in January and a drop in the Chicago PMI added to the downward pressure.  Some big earnings misses also grabbed headlines. Most notably was yesterday’s miss from Amazon in the after market.  The Seattle-based company reported sales rose by 20% during the holiday season, but the number was just shy of analysts forecasts.  And… as we often see during earnings season, if you don’t beat you get beat up.  That’s exactly what happened to Amazon.  Shares are down 8.5% this morning.  Gold isn’t adding much diversification, with the precious metal only up $3 per oz.  Interest rates are lower on a “flight to safety” and the US dollar is up.  It’s definitely a risk off day with stocks heading toward the single worst month since May 2012.

Economic Journal - Thursday, 1/30/2014

(as of 7:25 AM PST)

There was a sigh of relief as the markets opened positive this morning.  While opening gains have been shrinking, there is a remembrance of the strong positive momentum from last year.  The US GDP number came in at a solid 3.2% growth rate.  The biggest concern today was how markets would react to the further reduction of the Federal Reserve’s tapering program.  The bank reduced its government bond buying from 75 billion to 65 billion.  The reduced liquidity has been wreaking havoc on some emerging global economies.  US home sales continued to show weakness in December, down over 8%.  With most of the data we are seeing coming in negative, the positive market returns are a pleasant surprise and likely indicate that the market has been oversold over the last few days.  Gold is taking a beating this morning on taper concerns, while oil is up moderately.  Today is a big day for earnings announcements and they will likely dictate market direction as the day wears on.

Economic Journal - Wednesday, 1/29/2014

(As of 7:20 am PST)

 

Stocks are down after enjoying a short break yesterday as investors looked ahead to the Fed decision and also fears of Turkey and other emerging market economies.  Late Tuesday, the Turkish central bank announced an aggressive interest rate hike in an attempt to shore up the Turkish lira which has been on a slide since the beginning of January.  The immediate boost from the policy change was short-lived however.  Stocks in Europe and the US rose as did the Turkish lira, but since have come tumbling down.  European markets are in the red to the tune of 1%, while US indexes are also lower by 0.5%.  The emerging market selloff which caught headlines last week after China’s disappointing slowdown has now bled over into currency risks which are adding to the negative sentiment.  Add to the mix uncertainty about the Fed’s taper decision to come later today and you have a recipe for market volatility.  Sure enough the VIX (market fear gauge) is up 12% today.  Mixed corporate earnings from names like Boeing, Yahoo, and Dow Chemical are also hitting headlines today.  Gold is higher by 1% and the US dollar lower as interest rates continue to slide with the 10 yr. looking to break through 2.70%.  Looks like another volatile trading session today.

Economic Journal - Tuesday, 1/28/2014

(As of 7:15 am PST)

 

After another disappointing day on Wall Street yesterday it appears the bleeding may have stopped, at least temporarily, as stocks regained momentum at the opening bell this morning.  The Dow is leading the way with near triple digit gains as the Nasdaq and S&P500 are also higher.  A disappointing durable goods report briefly stalled stocks but wasn’t enough to derail the upward momentum.  Orders for durable goods slipped unexpectedly in December as orders for aircrafts and autos dragged.  Orders for core capital goods also fell, marking the 4^th decline in 6 months.  A strong report on consumer confidence surprised to the upside boosting markets.  Shares of Apple plummeted in the after market as the iPhone maker cast a disappointing earnings outlook despite beating Wall Street’s quarterly estimates.  Apple shares are down 8% in early trade.  Upbeat results from other big names like Ford, Pfizer, and DuPont softened the blow from Apple and have kept the major indexes afloat.  Asian markets finished lower and Europe is higher heading into the final hour of trading.  Gold is down 1% and oil up 2%.  Interest rates are bouncing around.  The 10 yr. treasury yield was up on the day, then swung lower after the durable goods report.  Rates are nearly flat now.  There is still a lot of global uncertainty, but the market for now at least, have come up for air. Volatility could stick around as the focus now turns to the Fed and its policy meeting tomorrow.

Economic Journal - Monday, 1/27/2014

(As of 7:25 am PST)

 

Markets are mixed this morning as investors continue to sort out global equity conditions after last week’s selloff.  Indexes fell sharply last week after disappointing data from China spurred a selloff in emerging markets and a flight to safety caused a liquidation of stocks around the world.  This morning’s tone is cautious.  After dropping 550 points or 3.25% on the Dow in the past 5 days, some analysts are saying the correction is just getting started and that we could see another 5%-10% drop.  Upbeat results from Caterpillar have kept the Dow afloat this morning as the “bellwether” company beat earnings estimates for the 4^th quarter.  New home sales for December fell 7%, but 2013 was the best year for sales in 5 years.  Earnings continue to trickle in this week, but the main focus will be on the Federal Reserve which is expected to announce its next step in its taper program later this week.  Economists are calling for an additional $10 billion per month reduction in the Fed’s bond purchase program, bringing the monthly total to $65 billion.  In other markets, Asia finished deeply in the red following Friday’s selloff on Wall Street.  European markets are mixed.  Gold is lower and oil higher while the dollar has regained slightly.  Interest rates are flat but are noticeably lower from last week’s flight to safety which pushed treasuries higher. Expect market volatility to persist as we move into the thick of earnings season and investors sort out mixed data to find direction.

Economic Journal - Friday, 1/24/2014

(As of 7:20 am PST)

 

Stocks are continuing to slide in the early-going Friday sending global equities, particularly emerging markets, into the red for the second straight day.  All 3 major US indexes are lower as investors continue to digest the disappointing results from China’s manufacturing report and what the slowdown could mean for global capital markets.  Concerns over the implications of the Federal Reserve taper and prospects of future rate hikes have money managers scratching their heads on the direction for markets in 2014.  Risk aversion has set in thus far, as emerging market stocks have taken the brunt of the selling.  “Safe-haven” assets such as treasury bonds and gold are higher for the second straight day while the US dollar fell sharply yesterday and is down slightly today.  Some decent quarterly earnings reports from big US names weren’t enough to buoy stocks, but are worth noting.  Microsoft and Starbucks both reported earnings beats sending shares higher by 3%.  Proctor & Gamble, Kimberly-Clark, and Bristol-Myers Squibb are also higher on good earnings.  With this morning’s drop, the Nasdaq is now trading near flat on the year while the Dow and S&P 500 are down year-to-date.  It’s too early to tell if this is the “correction” many analysts are calling for this year, but an unwind of sorts from multi-year highs would not be unexpected for this richly valued market.

Economic Journal - Thursday, 1/23/2014

(As of 7:25 am PST)

 

Global equities are taking a tumble on disappointing PMI data out of China and the US.  China’s preliminary “flash” reading of manufacturing PMI fell to a 6 month low in January surprising investors and muddying the waters of global growth outlook for 2014.  The index, which measures the activity in the manufacturing sector fell below 50, from 50.5 to 49.6 indicating activity actually contracted in January.  The weak report immediately sent waves of selling throughout global markets.  Asian indexes finished down and European markets are all in the red.  US indexes are also lower by nearly 1% on the China news.  A “flash” reading of US manufacturing didn’t help matters.  The US markit flash PMI fell to a 3 month low, still recording growth but at a slower pace.  Other data was not enough to pull stocks back from their steep declines.  US jobless claims came in flat last week, while a report on leading economic indicators rose slightly.  A report on housing showed US existing home sales rose 1% in December rounding off 2013 as the highest total sales year in 7 years.  Earnings continue to trickle in with McDonalds reporting flat results while Southwest Airlines reported a bottom line beat.  Rates have fallen sharply as treasuries soared in a flight to safety.  Gold also is rallying on the global equity decline.  It looks like the China news will take the headlines today as 2014 continues to struggle to get out of the red.

Economic Journal - Wednesday, 1/22/2014

(As of 7:25 am PST)

 

Earnings reports are driving markets today causing some sectors to perform better than others.   A few names worth noting include United Technologies which reported a 29% drop in profits but provided a higher guidance for 2014 which investors applauded.  Shares of Freeport-McMoRan fell early after an earnings miss while shares of Coach also fell 8% on falling profits.  Dow component, IBM, is down 3% after poor quarterly revenues and a disappointing earnings outlook.  IBM’s performance has the blue chip Dow Jones trading lower than the S&P and Nasdaq.   Netflix and eBay are scheduled to report after the bell this afternoon.  Gold prices are lower as Morgan Stanley added to the negative sentiment on the precious metal, cutting its 2014-2015 price target by 12%. Asian markets turned in another strong day with most indexes in the green.  European markets are mixed.  Treasury prices dropped as interest rates rose slightly and the US dollar traded flat.  With little data to trade on, expect direction to be earnings dependent this week and market action to be back and forth.

Economic Journal - Tuesday, 1/21/2014

(As of 7:25 am PST)

 

Stocks are moving higher in early trade as investors looked to upbeat earnings and China news for direction.  Some big names have reported early this morning including Dow components Verizon, Travelers, and Johnson & Johnson before the opening bell.  Verizon beat earnings estimates, rising in pre-market trade before falling 1.5%.  Travelers Insurance posted record profits in the 4^th quarter also beating analysts estimates.  Johnson and Johnson also beat on profits.  Despite the strong results, the 3 Dow stocks traded lower after the opening bell, causing the index to lag the Nasdaq and S&P500.  A lack of economic data in the US had investors looking overseas to developments in China.  News that China’s central bank has injected liquidity into large commercial banks reassured investors, sending Asian markets higher as well as most European indexes.  Gold is flat and oil higher while interest rates are unchanged.  It’s a very light week for new economic data which means we’ll be locked in to earnings announcements and other global news that may impact markets.   

Economic Journal - Friday, 1/17/2014

(As of 7:25 am PST)

 

Markets opened lower this morning with heavyweights Intel and UPS offering disappointing guidance that weighed on indexes.  Intel shares fell 4% in pre-market trade after the chipmaker reported semi-decent earnings but provided disappointing revenue guidance for 2014.  UPS also cut its 2013 guidance citing inclement weather and “unprecedented” online holiday shopping.  Shares of UPS were down 2%.  A flood of economic reports also hit the wires this morning giving investors plenty to chew on heading into the holiday weekend.  Industrial production grew 0.3% in December, in line with expectations, as manufacturing and mining output advanced.  Construction on new US homes slowed by 9.8% in December, but not enough to dent the annual growth seen in 2013 which was the strongest in six years.  Building permits, a sign of future demand, fell 3% in December but kept its annual pace the highest since 2007.  Lastly, the Univ. of Michigan/Reuters Consumer Sentiment report showed an unexpected drop in sentiment in January.   Interest rates and the US dollar are higher and gold is also moving up.  All in all, it’s been a back and forth week with conflicting data making it difficult for market direction to firm up.  The stock market will be closed on Monday for Martin Luther King Jr. Day, but trading will resume Tuesday with some big names like IBM, Johnson & Johnson and Verizon set to report.  Have a great holiday weekend!

Economic Journal - Thursday, 1/16/2014

(As of 7:20 am PST)

 

Stocks are retreating after a two day rally which saw the S&P500 post a record close yesterday.  Sentiment has turned negative this morning after some disappointing earnings results from Citigroup and Best Buy.  Citigroup missed analyst expectations leading the decline for financial stocks, while Best Buy shares dumped 30% after reporting an unexpected 0.9% decline in comparable sales and casting a disappointing outlook.  A decent report on jobless claims and the consumer price index wasn’t enough to turn stocks around.  A strong reading from the Philly Fed manufacturing index showed manufacturing activity picking up in January, ahead of analyst expectations.  International markets are taking cues from the US.  Europe is off of a 6 year high while Asian markets closed mixed.  Gold is up $5 per oz. to $1243 while oil trades flat.  Treasuries are higher as interest rates ticked lower. After the two best trading days of 2014 it appears today’s market is taking a breather.

Economic Journal - Wednesday, 1/15/2014

(As of 7:30 am PST)

Stocks are off to another great start as economic data and upbeat earnings results from Bank of America added to sentiment.  Bank of America’s 4^th quarter earnings beat analyst expectations and shares rose over 3% topping financial stocks.  Shares of Apple also propped up equity markets in early trade after the Chairman of China Mobile announced the recent deal with Apple would be cooperative and reported that millions of iPhones have already been ordered by customers.  Economic data has also been positive this morning.  The Empire State manufacturing index rose sharply in January, well above analyst expectations and to the highest level seen since May 2012.  The Empire State index is often a good indicator of broad manufacturing activity throughout the industry.  The producer price index rose for the first time in 3 months as well.  International stocks are adding to the positive tone today.  Stocks in Europe advanced for the 4^th consecutive day and Asian markets also closed higher.  Optimism was spurred by a fresh economic growth forecast from the World Bank which lifted its outlook to a 3.2% rate world-wide in 2014.  Gold is slipping while interest rates moved higher with more money moving into riskier equities.

Economic Journal - Tuesday, 1/14/2014

(As of 7:20 am PST)

US equities are up at the start of Tuesday's trade, recovering from yesterday's selloff that saw the Dow Jones Industrial Average shed 179 points, the worst trading day since September. An upbeat retail sales report for December sent markets higher at the start. A closer look however, has some analysts and growth forecasters worried.  Retail sales rose 0.2% in Dec. beating expectations.  Excluding lackluster auto sales results, retail sales would have been up 0.7%. Downward revisions to October and November sales tempered the overall quarter and sent annual growth lower.  2013 was the worst year for retailers since 2009.  In company news, shares of Intel are up 2% on an analyst upgrade as big banks JP Morgan and Wells Fargo reported mixed earnings results. Interest rates are ticking up as treasuries declined on the positive trade.  Gold is flat and oil higher.  International markets are lower with Asian markets following yesterday's selloff in US markets.  2014 is off to a slow start as the taper and last weeks disappointing jobs report weigh on investor minds.  Expect market direction to firm up as earnings season picks up.

Economic Journal - Monday, 1/13/2014

(as of 7:30 AM PST)

The market indexes have turned slightly positive going into the second hour of trading today.  Oil and gold are also meandering around flat line, trying to find direction in a day that is lacking much in the way of economic data.  Most of the news and analysis continues around Friday’s bizarre employment report, which showed a big surprise of almost no job growth for the prior month.  Prior indications and projections indicated that a large growth in employment was expected.  Also surprising was the drop in the unemployment rate, a contradiction which has occurred in the past due to labor participation, but was still very unusual.  Markets are still trying to digest this dichotomy and seem very uncertain this morning.  Consolidation and profit taking are likely to be prime drivers until corporate earnings or other significant economic data emerges.

Economic Journal - Friday, 1/10/2014

(As of 7:10 am PST)

 

It’s quite a surprising start for Wall Street this morning.  Investors were greeted at their desks this morning by an unexpectedly low jobs number that caught markets off guard.  According to the Labor Dept., just 74,000 jobs were added to the private sector in December.  It was the smallest increase in over 3 years and well below the 193,000 increase forecasters were expecting.  The unemployment rate plunged unexpectedly as well from 7.0% to 6.7%, due in large part to nearly 347,000 Americans dropping out of the labor force.  The stock market initially reacted in its recent “bad news is good news” fashion before stalling out and reversing course.  Despite the surprisingly low figure, one month worth of data is not likely to dissuade the Federal Reserve from its taper plans which will begin this month.  Gold is up 1% on the negative jobs report and interest rates dropped sharply with the 10 yr. treasury falling from 2.97% to 2.88%.  In other news, earnings season is “officially” underway as Alcoa reported an earnings miss after the bell yesterday.  The market is struggling to find direction with this jobs number, as sentiment has turned negative for the time being.  As we get this jobs number behind us, expect a return to fundamentals with earnings season driving market action for the next several weeks.

Economic Journal - Thursday, 1/9/2014

(As of 7:15 am PST)

 

Jobless claims data and news out of Europe have pushed stocks higher early.  Jobless claims fell to the lowest level in 5 weeks, to a seasonally adjusted 330,000 last week.  The monthly average of new claims also fell by 9,750.  Tomorrow’s nonfarm payrolls report will give investors a clearer picture of hiring, but all in all labor market conditions are showing signs of strength.  Also propping up stocks early was some news out of Europe.  The European Central Bank and the Bank of England left their monetary policies unchanged and reiterated their stance on keeping interest rates low for the foreseeable future.  Markets initially shot higher on the news but have slowly given back some of the day’s gains.  Gold and oil are flat with the precious metals’ 2014 outlook being slashed by Bank of America Merrill Lynch by 11% to $1,150 an ounce.  Interest rates and the US dollar are also flat.  The mood is a cautious one going in to earnings season with former Dow component, Alcoa, kicking things off after today’s closing bell.

Economic Journal - Wednesday, 1/8/2014

(as of 7:30 AM PST)

A strong piece of economic data seems to be the catalyst for today’s early market drop.  A robust report on the creation of private sector jobs sent Treasury yields higher and markets lower because of the perception that economic stimulus might be coming to an end sooner than later.  International markets were mixed last night.  Gold continues its downward drift.  The price of gold seems to also be intertwined with the economic stimulus plan.  A withdrawal of stimulus means less financial liquidity, which dampens speculation, in precious metals and other volatile areas of investment.  Oil is up slightly on a decrease in inventory levels, but there is a feeling that a glut of oil supply, much of it from US sources, will continue to pressure oil to the downside.  Earnings season is almost upon us and it may set the tone for stock market action in the next month or two.  For the meantime, negative sentiment is the order of the day as the markets attempt to consolidate after last year’s big rally.

 

 

Economic Journal - Tuesday, 1/7/2014

(As of 7:20 am PST)

 

Stocks are rebounding from yesterday’s losses with the S&P500 looking to snap a 3 day losing streak.  Economic data is very light today.  A report on the US trade balance has caught some attention however.  According to the Commerce Department, the US trade deficit dropped to $34.3 billion in November from $39.3 billion in October, to the lowest level seen in 4 years.  The drop can mostly be attributed to strong US exports which have climbed 5% over the past year.  The booming energy industry is benefitting the US on both sides as demand for foreign oil is slowly declining and oil exports are picking up.  The market was surprised by the trade balance report and forecasters are reconsidering the impacts on GDP growth in 2014.  International markets look strong with good news out of Europe. Gold is down $10 per barrel while oil is up slightly.  Interest rates are treading water with the 10 yr. treasury yield hovering just below 3%.  The new year is in full swing with 2013 returns in the rear-view mirror.  Earnings season, Fed minutes, and a jobs report, all on tap for this week, will help provide some clear guidance for the first month of 2014.

Economic Journal - Monday, 1/6/2014

(as of 7:10 AM PST)

Trading is getting back to normal.  New York is digging out of its massive snowstorm and traders are returning from holiday.  There is a decidedly negative sentiment.  After a brief opening rise, markets are giving back gains in a hurry.  The NASDAQ is taking the brunt of losses, with Apple, Twitter, Netflix, among others, showing moderate declines.  Asia markets took a hit last night from some negative data out of China.  Europe is stronger on some positive economic news from Italy and Spain.  Gold and oil are both up marginally.  Eyes are now on the upcoming earnings season.  Earnings projections have been reduced significantly from prior estimates.  Revenues are expected to be flat with some improvement in earnings, due in large part by the financial sector.  After a big run-up last year, markets might be poised for a consolidating correction.

 

Economic Journal - Friday, 1/3/2014

(as of 7:05 AM PST)

It should be a quiet, low volume trading day.  A huge snowstorm in New York City will keep many traders home.  Market indexes were recovering slightly after the worst fall in two years yesterday.  Oil continues its downward slide into the New Year and Gold continues into a two day rally after a dismal showing in 2013.  Interest rates are stable, but there is definite upward pressure with the reduction of government bond buying starting to affect rates.  Look for the markets to find direction on Monday, when most serious traders are back to work. 

Economic Journal - Thursday, 1/2/2014

(As of 7:25 am PST)

 

Stocks are sharply lower in the first trading session of 2014.  Disappointing data out of China has halted a screaming market that finished 2013 at record heights.  Chinese manufacturing growth decelerated in December according to China’s official Purchasing Managers’ Index (PMI).  A similar report from HSBC showed manufacturing growth slipping as well in China.  The negative sentiment carried across the seas from Asian markets into Europe and selling greeted the US market at the open.  Some disappointing headlines in the US added to the pressure.  Jobless claims fell just slightly, and the ISM manufacturing index slipped as well.  In corporate news, Apple shares are down 1.25% after being cut to “market perform” from “outperform” by Wells Fargo.  Shares of Twitter have recovered today, up 2% after tumbling nearly 20% in a two-day slide.  Gold is trading back over $1200/oz. with the precious metal adding $20 today, or 1.5%.  Interest rates are lower as safe haven treasuries found some upside today.  Volume is still fairly light as many traders are still on vacation, however expect things to get back to “normal” next week as 2014 gets underway.