Economic Journal - Friday, 2/28/2014

(as of 7:10 AM PST)

February is set to end with a flourish, extending a solid rally that erased all of January's losses and has most indexes positive for the year.  It's old news versus new news this morning.  A revised GDP growth report from last quarter shows that the economy grew much less than expected.  The new news was from the Chicago PMI report, a key reading of current industrial activity.  That report came in very strong indicating robust growth in that particular region.  The new news is winning the day.  It is helped by the fact that the S&P 500 Index broke through what has long been thought to be a key technical level.  That Index is trading at all time highs.  The US dollar is down against most other currencies while interest rates are mixed.  Oil and gold are both trading down fractionally.  Today seems to be the day when technicians, those who study graphs and trends to make investment decisions, will win the day and propel the markets to new highs.

Economic Journal - Thursday, 2/27/2014

(as of 7:20 AM PST)

 

It looks like a difficult day for markets.  Economic data is coming in mildly negative and political tensions are rising globally.  In a market that seems poised for a pullback this is a prescription for a day of profit taking.  Ukraine is the key political hotspot.  A battle between supporters of the east and the west have the country in a state of chaos.  Russian military exercises on its border have the rest of the continent on edge.  China has radically shifted the direction of its currency trajectory.  The Chinese currency has broken out of its strengthening trend of the last few years and is falling, in large part due to Chinese Bank intervention.  A falling Yuan might help China reverse the fall it has experienced in exports.  Markets are generally down across the globe, although fear induced trading is not a factor.  Gold and oil are near unchanged.   Expect a rocky day on the investment front.

Economic Journal - Wednesday, 2/26/2014

(As of 7:20 am PST)

 

Markets teetered at the open as investors awaited data on home sales and later in the day speeches from two Federal Reserve presidents.  At 7 am PST, the government released data that showed new-home sales rose 9.6% in January, the fastest pace in 5 years and a surprise to most economists.  December sales were upwardly revised as well adding to the strength of the report. Headwinds such as rising mortgage rates and unusually cold weather have not impacted the recovery like many thought. Markets reacted positively to the report but have since come back off their early morning highs and remain in a choppy trade.  In other news, virtual currency Bitcoin continues to claim headlines after the sudden and unexpected closure of one the currencies largest exchanges, Mt. Gox, earlier this week.  The recent drama has called into question the viability of the currency as a long-term alternative to government issued currencies.  Asian markets finished the day mixed, while Europe is lower.  Gold has shed $11/oz. to $1332 while oil prices are inching higher.  The 10 yr. treasury yield has dipped below 2.7% while the US dollar index is up.  As the S&P500 flirts with another record close, it remains to be seen how long this February rally will last. 

Economic Journal - Tuesday, 2/25/2014

(as of 7:20 AM PST)

Weakness is creeping into markets this morning.  A drop in consumer confidence and a slightly negative report on home prices has added to investor nervousness that started in international markets.  China and Europe are both weaker.  Reports that the European Union growth rate might lag into 2015 seem to be a negative on US markets.  Chinese manufacturing numbers are also making investors nervous.  Gold started out lower, but has since recovered; while oil is giving back some of its large rally of the last couple of weeks, down over 1%.  Interest rates have fallen slightly.  One gets the feeling that a risk off scenario is developing, whereby sellers are in control of most investment assets, although it has not yet had a major impact on today’s trading. 

 

Economic Journal - Monday, 2/24/2014

(as of 7:05 AM PST)

Markets are up this morning on global economic optimism.  There is no significant data coming out today, however there is some activity relating to mergers that might be influencing the market.  An article over the weekend speculated that merger and acquisition activity might provide the boost needed to propel stock indexes to new highs.  The dollar is mixed against other currencies but up slightly overall.  Gold is up moderately and oil is holding on to slight gains.  Natural gas maintains its rally mode with the threat of more cold weather approaching the Northeast.  The US Treasury is selling $109 Billion in debt today, so it will be a good test in investor appetite for US bonds, especially in light of the continuing taper by the Federal Reserve.  A lack of data today could limit gains and a bout of profit taking should not come as a surprise in light of the significant gains we have seen in February.

Economic Journal - Friday, 2/21/2014

(as of 7:10 AM PST)

It looks like a quiet day.  Stocks opened near unchanged and there is very little movement in most markets.  Momentum that has been in play over the last two weeks would lead to the assumption that stocks will drift up as the day progresses.  Gold is up slightly, oil is down a bit and interest rates are near unchanged.  The standout in the international markets overnight was the Nikkei, a Japanese index.  It was up 2.9%, with other Asian markets mixed.  The lone key data report today was housing starts, which were down 4.9%.  Most analysts are ignoring this continuation of weak data from January, attributing the weakness to winter storms that pummeled the east coast throughout much of the month.

Economic Journal - Thursday, 2/20/2014

(As of 7:25 am PST)

 

Stocks are see-sawing this morning as markets sifted through a handful of disappointing economic reports out of China and the US.  Stocks retreated in the afternoon yesterday after minutes from the latest Federal Reserve policy meeting revealed some dissension among Fed members of when short term rates would rise.  Markets were met with more disappointment at today’s open as several economic reports hit the wires.  China’s flash manufacturing PMI for February came in lower than expected, dropping to a reading of 48.3 from 49.5, a seven month low and still in contractionary territory.  Markets in Asia finished the day lower.  In the US, a mixed bag of data kept the tone cautious early.  Jobless claims fell slightly from 339,000 to 336,000.  February’s flash manufacturing PMI surprised to the upside rising to 56.7 from 53.7, hitting a 4 year high.  The Philly Fed report painted a conflicting view of manufacturing, with the index dropping in January to -6.3 from 9.4, the first negative reading in over 8 months.  In company related news, shares of Tesla soared after the bell yesterday as the company topped earnings estimates.  Gold, oil and other commodity prices are lower as the US dollar inches up.  Interest rates are also higher.  The back and forth trade could give way to more selling pressure later today as most data fell short of expectations. 

Economic Journal - Wednesday, 2/19/2014

(as of 7:10 AM PST)

 

An early turnaround has most markets positive, after an initial opening that pointed to a day of profit taking.  Economic data was mostly negative, led by housing starts, which fell by 16% in January, well below analyst expectations.  The producer price index (PPI) came in at a low rate that shows inflation continues to be held in check.  Gold is down slightly after a big surge over the past week, while oil is close to unchanged.  The US dollar index is slightly positive.  Most market indexes have made an amazing comeback after the disappointment of January.  International markets are mixed. Data points to the fact that China is becoming a seller of US Treasury bonds, having redeemed almost 50 billion, from its record holdings of 1.25 trillion dollars.  There is some concern about who will pick up the slack of US Treasury purchases with the Federal Reserve reducing its asset purchases, along with its biggest buyer China.  Interest rates continue to hold well in check despite this note.

Economic Journal - Tuesday, 2/18/2014

(As of 7:15 am PST)

 

After being closed yesterday for President’s Day holiday, US equity markets opened lower Tuesday being dragged down by disappointing economic data.  Manufacturing activity in the New York region slowed in February by more than analysts anticipated.  The Empire State index slipped but remained in positive territory after surging to almost a 2 year high in January.  The index is widely regarded as a good indicator for overall manufacturing conditions.  Another report on housing showed that homebuilder confidence plunged in February, dropping to the lowest level in 9 months, as builders cited pessimistic sales trends including the severe winter weather conditions seen around much of the nation.  Earnings continued to trickle in with the most notable report coming from Coca-Cola as the beverage company reported disappointing earnings which sent the stock lower by almost 3%.  International markets are mixed with most Asian markets closing higher while Europe is moving lower heading into the final hour of trade.  Gold is higher by nearly 1.5% while oil is also up 1%.  Interest rates are down as is the US dollar index.  Expect a back and forth day as markets struggle to find direction around some disappointing data points today.

Economic Journal - Friday, 2/14/2014

(as of 7:10 AM PST)

Consumer confidence numbers came in higher than expected and boosted markets after a somewhat negative opening.  Economic data seemed out of sync this morning and appears to have analysts confused on the direction of the US economy.  Industrial production was down for January and revised down for prior months, seeming to contradict Federal Reserve data that indicated expansion.  With consumer confidence being a somewhat lagging indicator, expect the boost to the stock market to be temporary from this reading.  With the underlying weakness of the economy shown by the weak industrial production numbers, expect markets to revert to the negative.  Profit taking might also come into play, accelerating the pullback.  Gold is up big this morning, over 1%, while oil has fallen from its $100 per barrel level.  Interest rates are steady.  Monday is President's Day and US stock markets will be closed.

Economic Journal - Thursday, 2/13/2014

(as of 7:10 AM PST)

Markets were data driven to start the day, down smartly at the open.  Retail sales numbers came in very weak and jobless claims were up.  Since the open, however, losses have been cut and indexes are mixed, with the Nasdaq actually slightly to the positive.  A merger of two cable giants was big news overnight.  Comcast is buying Time Warner in an all-stock deal.  Corporate profits were somewhat disappointing yesterday, but investors are brushing aside negative news for the most part.  Oil and gold are both near unchanged while interest rates are up moderately.  It will be a struggle today, but the positive momentum built up over the last few days might carry indexes higher.

Economic Journal - Wednesday, 2/12/2014

(As of 7:20 am PST)

 

Stocks opened higher looking to extend their recent rally to five days as many are now calling the correction over.  Yesterday’s optimism has spilled over into early trading after an upbeat outlook from St. Louis Fed President James Bullard who called for 3% or better growth in 2014.  Markets cheered Bullard’s comments a day after embracing new central bank Chairwoman Janet Yellen.  In a prepared testimony before lawmakers yesterday, Janet Yellen reiterated her accommodative stance toward monetary policy and reassured markets of her plans to keep interest rates low for the time being as the Fed continues to taper its bond purchases.  Yesterday’s testimony was perceived by markets as the official “passing of the torch” between Yellen and predecessor Ben Bernanke, and by all accounts it couldn’t have gone any smoother.  International markets are higher after the Bank of England gave an encouraging report on the UK economy and China reported better than expected trade data.   Gold is higher by 0.25% while oil is up over 1% to $101 per barrel.  Interest rates are higher as is the US dollar.  The underlying sentiment is that the January correction is over, the economy is improving and that although we likely won’t see a repeat of 2013, market conditions remain bullish.

Economic Journal - Tuesday, 2/11/2014

(As of 7:25 am PST)

 

Markets opened higher this morning as Federal Reserve Chair Janet Yellen testified on the state of the economy before lawmakers.  The first ever central bank Chairwoman presented a dovish tone in her remarks, reiterating her stance on keeping interest rates low for the foreseeable future.  In the first 30 minutes of trading markets are liking what they hear from Yellen.  It’s a light data calendar today.  A report on wholesale inventories climbed 0.3% in December while another report showed job openings ticked down to 3.99 million in December.  Earnings keep coming in as well.  Shares of Omnicom and Sprint beat earnings expectations with the stocks rising 3% and 6 % respectively.  CVS Caremark shares rose 2% after posting better than expected earnings.  Big decliners included ConAgra Foods which fell over 5% after cutting its 2014 fiscal outlook.  Broad international indexes are higher with commodities also rising.  The US dollar index is down slightly while interest rates ticked up.  Although the market has recovered some of its January losses there’s still a cautious tone of uncertainty that has money managers lacking conviction.  We could be in a tight trading range for the next couple of days/weeks barring any surprising news.

Economic Journal - Monday, 2/10/14

(As of 7:30 am PST)

 

Stocks are mixed to start the second week of February with both the Dow and S&P500 slightly lower as shares of Apple help to lift the Nasdaq.  After a see-saw week last week that saw the major indexes ultimately finish with gains, many analysts are calling the “correction” over.  We’ll see after this week’s earnings and testimony from new Fed Chair Janet Yellen, if the market is really done with its selloff.  International stocks are mixed as most Asian indexes followed Friday’s rally on Wall Street.  European markets are also mixed  as investors weighed disappointing factory data out of Italy and France with positive corporate results.  Gold is higher by $11 per oz. as oil edges up to nearly $100 per barrel.  Interest rates are back and forth and the US dollar is flat.  There’s a cautious mood on the markets ahead of tomorrow’s testimony from Janet Yellen.  The Fed seems persistent in its plans to continue tapering its bond purchases, but the first of Yellen’s semi-annual monetary policy testimonies will certainly be under much scrutiny.  Expect markets to hug the unchanged line most of the day.

Economic Journal - Friday, 2/7/2014

(As of 7:30 am PST)

 

Stocks are headed higher for the second straight day despite a disappointing nonfarm payrolls report (at least on the surface).  According to the Labor Dept. the US economy added 113,000 jobs in January, up from a dismal 75,000 in December but well below the expected 180,000.  The market has dug deeper into the report, choosing to look at some positive indicators.  For one, the unemployment rate dropped from 6.7% to 6.6%, the lowest since October 2008.  The participation rate rose from 62.8% to 63.0%, while the U-6 (the broadest measure of unemployment) dropped as well.  Gains in construction and manufacturing were also strong.  As the Federal Reserve continues its taper program, one could argue we could see a rise in stocks as the taper signals the central banks confidence in the economic recovery.  International markets are higher following yesterdays surge on Wall Street.  Gold is higher while interest rates and the dollar index are lower.  Expect market gains to deteriorate as the day wears on, but there's a sentiment now that the "correction" may be coming to an end.

 

***Due to inclement weather in the Portland-Metro area our offices will be closed today, 2/7/2014.  For our readers who live locally, be safe and stay warm.  Have a great weekend.***

Economic Journal - Thursday, 2/6/2014

(As of 7:20 am PST)

 

Equity markets are higher this morning with the Dow up over 100 points.  Investors cheered a surprising jobless claims report before the opening bell that showed applications for unemployment benefits fell 20,000 last week to 331,000.  Other economic data showed US productivity grew 3.2% in the 4^th quarter, just shy of analysts estimates.  However, the past two quarters recorded the highest growth since 2009. Lastly, the US trade deficit climbed by 12% in December in large part due to lower sales of heavy goods like airplanes and business equipment.  A bright spot was the continued strength in the US oil industry as oil exports hit a record high of $13.5 billion.  Overseas action was also positive with Asian markets finishing the day mixed, while European markets applauded the ECB’s move to keep interest rates low.  In earnings related news, shares of Twitter plummeted after their first public earnings report failed to meet expectations.  Shares were down 20% to open this morning.  Gold is down slightly today while interest rates are higher.  Fears still remain over the implications of the Federal Reserve taper on global markets but in the short term it appears the markets are trying to find their footing again.

Economic Journal - Wednesday, 2/5/2014

(as of 7:25 AM PST)

It seems hard for markets to maintain positive momentum.  Up days have yet to follow through to a second day which leads one to believe that the positives are no more than bounces from the beat down of previous sessions.  Today’s economic data includes the ISM report for domestic services.  Services comprise 75% of our total economic output, so it is an important indicator.  The reading today came in at a vibrant reading of 54.  Anything above 50 indicates positive growth.   A second piece of data is the ADP private employment report.  It came out weak, showing only 175,000 jobs were created.  The ADP report is followed by analysts, but is often found to be out of step or inaccurate as an indicator of total employment trends.  Gold is up a small amount today. Oil is also up mildly.  Interest rates continue down, with mortgage rates hitting their lowest point in months.  Expect the ISM report to provide the spark that will help the market to its first two day winning streak of the year.

 

Economic Journal - Tuesday, 2/4/2014

(As of 7:20 am PST)

 

Markets are recovering slightly after yesterday’s pummeling saw the Dow shed over 300 points on the worst trading day since last June.  It’s very quiet data-wise today, with a report on US factory orders showing orders slipping 1.5% in December. Earnings have been mixed as well today.  Positive reports from Michael Kors, Pfizer, Yum Brands, and JCPenney have helped certain sectors.  The other big headline is Microsoft’s naming of its new CEO.  Satya Nadella, who has a long history with Microsoft, will take the helm for the software giant.  Microsoft shareholders saw the move as positive bidding up shares by nearly 1%.  Global markets continue to show signs of weakness.  Asian markets finished the day lower while European markets struggled only to catch a lift when US markets opened in the green.  Emerging market fears led by a slowdown in growth in China are the driving forces behind the market’s uncertainty at this point.  The wind-down of central bank support is one of the main reasons we’re seeing this volatility.  Suffice it to say, the Fed has determined to stay the course on their taper plans, perhaps signaling the US economy has more stability than the markets believe.  This could be a good thing for markets in the long term.

Economic Journal - Monday, 2/3/2014

(as of 7:27 AM PST)

It’s a new month, but the same pattern as stocks take another turn for the worse.  The Dow is down triple digits after some negative economic data.  The January ISM, an important measure of manufacturing activity fell from 56 to 51.  A reading above 50 indicates expansion, but the data was well below market expectations.  Housing construction also was weak.  Gold is surging with investors looking for investment alternatives to a stock market that continues to be caught up in a wave of negative momentum.  Interest rates are falling, which is a surprise to most analysts, since the tapering of government bond purchases was expected to drive rates up.  Apparently, there is such a push to the safe haven of the US dollar that it is resulting in lower yields.  We appear to be in the long awaited correction that has been anticipated for a some time.