Economic Journal - Monday, 11/30/2015

(As of 7:10 am PST)

US stocks opened cautiously flat Monday as investors returned from the long Thanksgiving holiday weekend. It looks to be a busy week with a full batch of economic data due out including Friday’s jobs report which will be the last before the Fed’s December policy meeting. A speech from Fed Chair Janet Yellen will highlight the middle part of the week, while a policy meeting from the ECB Thursday will keep market participants anxiously awaiting to see if the central bank delivers on further stimulus measures. Investors will be looking at retail stocks today and tomorrow as sales numbers trickle in from the holiday weekend although early consensus is that Black Friday sales this year were weaker than expected. Today’s economic data is disappointing as a report on Chicago PMI showed business activity falling back into contractionary territory in November. A report on pending home sales nudged higher in October after two consecutive months of declines. International markets are mixed today. Oil prices are higher ahead of an important OPEC meeting Friday. Gold and other precious metals are also up slightly. It’s an important week for markets this week and barring any downside surprises on the data front, all signs point to a December Fed rate hike which, in our opinion, could lead to a year-end rally. 

Economic Journal - Friday, 11/27/2015

(as of 7:30 AM PST)

 

It is a very quiet morning with most investors taking the day off.  There was widespread relief that terrorism seemed to take a holiday as well with no major terrorist events reported on Thanksgiving. A plunge in China's Shanghai market is the big international news. The often volatile index was off over 5%, but European and US markets ignored the turmoil.  Gold and oil are down again as commodities continue to be sold off on continuing dollar strength.  We might see a negative spillover to Monday's market opening with serious investors evaluating the China action, but all appears quiet today.

Economic Journal - Wednesday, 11/25/2015

It’s been a quiet holiday shortened week and today looks the same as the markets have opened slightly higher. Investors will have plenty of economic data to digest before heading into the holiday weekend and the early releases contain some promising news. U.S. orders for long-lasting durable goods made a comeback in October to show its first increase in three months and the number of people who applied for unemployment claims were lower than expected. Also included in the early reports were personal income and spending which were in line with expectations. All of these reports point toward a growing economy and a more than likely increase in interest rates by the Fed in December. Oil surged yesterday nearly 2.7% to $42.91 per barrel but is erasing most of those gains in early trading this morning. In spite of continued high alerts in security and the news of the Russia fighter jet shot down over Syria, all of the European indices finished the day strong. The markets are closed tomorrow and are open for a half day on Friday. Have a great Thanksgiving weekend!

Economic Journal - Tuesday, 11/24/2015

( as of 6:50 AM PST)

 

Investor attention shifted sharply overnight, from Federal Reserve Bank fretting, to serious geopolitical drama with the news that Turkey had shot down a Russian fighter which had violated its airspace and ignored Turkish warnings.  The pilots ejected, but were reportedly killed by Syrian opposition fighters on the ground.  Russia President Putin has called the Turkish action a 'stab in the back' and an extreme rise in tensions over the Syrian war has erupted.  European markets took the brunt of the news, falling moderately while US markets are fairly calm in spite of the turmoil.  Stock indexes in the US are carrying losses of under one half percent, not bad given the large run-up of the last week.  In economic news, US GDP for the third quarter was adjusted upward to 2.1% from 1.5%, a nice surprise for investors.  The resilience of investors is impressive in light of the negative news on the world scene and interest rate projections, and it bodes well for a continuation of this early Santa Claus rally.  Oil and gold have both spiked higher on the startling Syrian war news.

Economic Journal - Monday, 11/23/2015

(as of 7:05 AM PST)

 

Markets search for direction this morning after last week's surprise surge.  Most are quiet with little data out to provide traders a call to action.  Europe indexes are mixed with their focus on dealing with the existing terrorist threat, while Asia shows little action one way or another.  The existing home sales report was down and slightly below expectations, but still an improvement from last year with underlying data showing strength.  A report that S&P 500 profits were down 25 billion dollars this last quarter, led mostly by energy, is sure to keep a lid on any bullish moves.  With a dearth of data expect the focus to be on December's upcoming rate hike decision.  History shows that investors hate this kind of uncertainty and with stocks selling at a lofty forward price to earnings ratio, it would be no surprise to see a pullback in this holiday shortened week. Oil is down modestly, as abundant supplies push the price of a barrel towards $40.  That's great for gas prices going forward, but a real negative for energy companies.  Gold continues to struggle, down another one half percent on the day.  

Economic Journal - Friday, 11/20/2015

(As of 7:15 am PST)

Stocks continue to push higher Friday with the major US benchmarks on track to notch their seventh weekly gain in eight weeks. Investors have been reacting positively to the sentiment out of the Federal Reserve that the economy can handle an interest rate hike next month. Dow component Nike Inc. is helping to fuel today’s rise after the athletic apparel maker announced yesterday a two-for-one stock split in addition to a 14% increase to its quarterly dividend and approval of a $12 billion share repurchase program. The bullish trend is the story globally today as well. European markets responded favorably to European Central Bank President Draghi announcing that the ECB will do what it can do to raise inflation while most Asian indexes ended overnight in the green. There are no economic reports due out today leaving investors with only a speech from St. Louis Fed President James Bullard and some positive earnings reports from Foot Locker and Abercrombie & Fitch to digest. Oil continues its move downward, nearing the $40 per barrel mark while gold has opened the day trading up. Interest rates are down while the US dollar is higher.

Economic Journal - Thursday, 11/19/2015

(As of 7:05 am PST)

On Wednesday, the Dow closed up 1.4% following the release of the Federal Open Market Committee’s (FOMC) minutes from their October meeting. The tone of the minutes reflected a consensus from members that the economy was strong enough to handle an increase in interest rates when the committee meets in December. The markets responded to the FOMC minutes with a surprise mini rally up to the closing bell. Today stocks are struggling to find footing for another rally. Early economic news is pointing in a positive direction however. A Labor Department report on jobless claims showed the number of people applying for jobless benefits declined last week while a positive reading on the Philadelphia Fed Index showed manufacturing activity picking up pace in November after contracting in October. European markets have rebounded following the tragic events in Paris this week and Asian markets are tracking higher on news that China’s central bank cut lending ratings. Oil continues its downward spiral while gold is trading up in early trading.

Economic Journal - Wednesday, 11/18/2015

(As of 7:25 am PST)

After a choppy day yesterday that finished on a flat note, the markets have opened higher today in advance of minutes from the Federal Reserve and data on the U.S housing market. Ongoing headlines related to the aftermath of the Paris terrorist attacks have the world on alert. An overnight raid in Paris left two dead and several injured, while two Air France airliners headed for Paris were grounded due to security threats. Investor nerves were on edge throughout Europe with most indexes in the red heading toward the session’s close. A busy economic calendar provided some welcome distractions for markets at home. Mortgage applications jumped over 6% in the latest week. October housing starts declined 11% in October, below analysts’ estimates, while building permits (a sign of future demand) rose 4.1%, ahead of expectations. The focal point today will be on the release of the FOMC minutes from the October meeting which will more than likely confirm that an increase is imminent when the committee convenes again in December. Oil is trending upward in early trading and continues to be a market driver while gold is down.

Economic Journal - Tuesday, 11/17/2015

(As of 7:05 am PST)

US stock prices opened slightly lower following yesterday’s surprise rally which resulted in every US sector finishing with at least 1% gains on the day. A rally in oil prices yesterday helped lift stocks into the close, while investors also welcomed the optimism not expected in Monday’s session following the tragedy that unfolded in Paris over the weekend. Tuesday’s open reflects the feeling that perhaps yesterday’s buying was a bit overdone. Data is light this morning, although October’s Consumer Price Index showed prices increased 0.2% in October, in line with expectations. Core CPI, which excludes the volatile food and energy sectors, also increased 0.2%. The CPI data is good enough to keep a December rate hike on the table, which is perhaps another reason the market opened to the downside this morning. A report on industrial production showed production declining just slightly in October while capacity utilization came in as expected. Overseas, Asian markets finished mostly higher following yesterday’s rally on Wall Street, while shares of European stocks are also looking to a strong close as European investors bet on the ECB loosening up its monetary policy. Oil is giving back a good part of yesterday’s gains, trading slightly below $41 per barrel while gold is also down in the early going. Interest rates are inching higher today.

Economic Journal - Monday, 11/16/2015

(As of 7:25 am PST)

Friday marked the end one of the worst weeks we’ve seen in the markets in the last couple of months with the S&P500 declining 3.6% for the week. As we headed into the weekend, watching our investments seemed irrelevant as the world grappled with another senseless loss of life at the hands of a coordinated terrorist attack in Paris. Monday’s open was a choppy one with markets looking for direction in light of the events that occurred over the weekend. The sad reality is that the effect of Friday’s event on the markets may be minimal given the unfortunate fact that these occurrences are becoming far too frequent. European markets proved resilient in Monday’s trading as expectations grew surrounding the ECB and further stimulus measures in the coming weeks. The only economic report today is out already with the Empire State Manufacturing report showing declines in the New York Fed region for the fourth consecutive month. Oil prices are up .6% to $41.00 per barrel. This bump can be linked to heightened geopolitical concerns after the Paris attacks. Gold is up in early trading. Markets are wrestling with a lot of contending issues as we near year-end including lackluster economic data, weak earnings reports in the retail and energy sectors, slumping commodity prices and the potential of an interest rate rise in December. Expect heightened volatility, at least for today, but likely throughout the remainder of the week.

Economic Journal - Friday, 11/13/2015

(as of 7:00 AM PST)

 

Retailers had a hard time holding on to customers this last quarter.  Ugly revenue and profit results in the sector are pulling down stock indexes this morning.  Most notable was Nordstrom which took a 20% hit in its stock price when it missed profit projections badly.  The index of retail sales saw an increase of a meager .2%, below analysts expectations,  but ahead of last months negative number. On the positive side, the Producer Price Index (PPI) declined again indicating inflation numbers are well in check and adding an additional argument against a December rate hike.  Oil continues to be a drag, with a barrel of WTI (West Texas Intermediate) dropping to near $40 per barrel.  That's a plus for the consumer but a problem for the energy sector which is taking another big hit.  The dollar continues its relentless rise against other global currencies putting a dent in precious metals prices and other commodities.  Interest rates are well in check, but creeping slightly higher on fear of a December rate hike.  Too much downside pressure from retailers and energy is likely to weigh on markets going forward today in what could be another dismal performance.

Economic Journal - Thursday, 11/12/2015

(As of 7:00 am PST)

Stocks opened firmly to the downside with volume picking up as traders returned from yesterday’s Veterans Day holiday. Negativity set in early as investors keyed in on several Federal Reserve speakers scheduled to speak today. With earnings season virtually over with, the market’s obsession has returned to the timing of the Fed’s first interest rate hike. Last week’s jobs report has all but solidified the case for a December rate hike, but the lack of certainty will make the next few weeks very interesting. Adding to the downward pressure today is a selloff in energy stocks as a report on crude oil supplies showed a surprise spike in supplies. Oil prices tumbled nearly 3% in the early going following yesterday’s 3% decline. In overseas developments today, Asian markets finished mixed while European stocks sold off following Wall Street’s decline and further comments from ECB President Mario Draghi on policy measures the central bank is considering. Gold is not offering much safe haven support today, with the precious metal trading flat, while interest rates traded down slightly.

Economic Journal - Wednesday, 11/11/2015

(as of 7:00 AM PST)

 

It should be a quiet day, a holiday for many...Veterans Day.  The bond market is closed while equity markets have normal hours, although many traders are taking the day off.  Markets are flat this morning with little data of significance being released today.  China's economic numbers are weak and indicate that we have yet to see the worst of the slowdown in their massive economy.  Asia markets shrugged off the negative news, seeing it as a very positive for more economic stimulus to come.  European markets are modestly higher.  While US markets are close to unchanged, there is a sense that momentum is shifting to the plus side after a rough start to the month.  Arguments continue to surface about December's possible interest rate hike though it looks likely given last week's strong employment numbers.  Oil is to the downside with a large supply buildup and gold continues its lengthy decline in spite of a falling dollar. 

Economic Journal - Tuesday, 11/10/2015

(as of 7:30 AM PST)

Monday was a tough day in the markets.  All major indexes were down 1% plus, pushing the Dow and S&P 500 negative for the year.  Some analysists are concerned that investors are steering clear of stocks in fear of a December rate hike and that this trend looks a lot like what we saw in August and September. This morning’s activity reflects a continuation of that negative sentiment. The economic calendar is light with little data to move markets. Global markets followed the U.S. overnight, most of them in the red. Europe is also exhibiting weakness with political issues in Portugal weighing on markets. Oil is trading up in the early going while gold is down. With profit reports winding down and little economic data, attention is being focused on the Federal Reserve’s big December rate hike decision and history shows us that investors have been very cautious in this type of environment.

Economic Journal - Monday, 11/9/2015

(As of 7:20 am PST)

US stocks opened lower Monday after six consecutive weeks of gains, as market participants reacted to Friday’s strong jobs report. Friday’s surprise report, which showed a whopping 271,000 jobs added in October, has increased the prospect of a Fed rate increase in December with analysts now predicting a 70% probability of such an event occurring. Interest rates soared on Friday and are continuing their uptrend today on the speculation of a near term rate hike. The 10 yr. US treasury yield is trading at 2.36% today after trading below 2% just three weeks ago. China made headlines overnight as weak trade data caught Asian investors by surprise. Chinese exports fell nearly 7% year-over-year in October, while imports fell a shocking 18%. The weakness had speculators predicting that Chinese authorities may introduce new stimulus measures to strengthen the Chinese economy. The Shanghai composite index rallied 1.5% Monday. European markets have been on a slow decline all day. It appears the rate hike talk has heated back up and may be the excuse the market was looking for to take some profits after a spectacular performance in October.

Economic Journal - Friday, 11/6/2015

(as of 6:45 AM PST)

 

The mild opening of US stock markets this morning belies the vibrancy and volatility of underlying investment categories.  The jobs report was a blowout number.  271,000 jobs were created, far above analyst estimates of 160,000.  The unemployment rate dropped to 5%, a number not seen in many years, and, to top it off, wages are finally growing, up by .4% as part of that same report.  The US dollar is soaring, interest rates are smartly higher and commodities are getting punished by the strengthening dollar.  Stock investors are unsettled by the news however, since the strength of the economy almost assures that the Federal Reserve will start its long awaited program of cranking up interest rates in December.  It's the old 'good news is bad news' theme since more economic stimulus is definitely off the table and deleveraging of stock market investments might create a wave of selling as a result.  For today, however, it is more likely that buyers will return to the market based on this overwhelmingly positive news as interest rate fears subside as the day wears on.

Economic Journal - Thursday, 11/5/2015

(As of 7:15 am PST)

After closing out its first down day in over a week yesterday, the markets have opened today with modest gains as investors respond to mixed earnings reports and data on weekly jobless claims and productivity. Facebook leads the way on the earnings front with a strong report that caused its shares to move upward while Whole Foods and Qualcomm declined on less than stellar reports. The markets are still digesting Fed Chairwoman Janet Yellen’s speech yesterday where she strongly hinted of a possible rate hike in December. In global news, most European indexes are higher despite disappointing factory data out of Germany. This updraft is likely due to a conditioned response lately of bad news leading to the European Central Bank bolstering stimulus measures before year end. Asian markets finished the day on a mixed note. The expectation of a rate hike here at home has affected the Treasury yield curve, where the 2-year note yield jumped to its highest level since 2011. The big news due out at the end of the week is the non-farm payrolls report due out tomorrow which could likely have an impact on markets as the week closes out. Both gold and oil are lower in early trading.

Economic Journal - Wednesday, 11/4/2015

(as of 7:20 AM PST)

The economic news today is mixed with a potential slowdown in the labor market but better news for exports. A report on private-sector employment from ADP showed that 182,000 job were created last month, less than forecast, while September gains were revised down. The U.S. trade deficit fell in September. The improvement in the deficit in September was due to imports being $4.2 billion less than August imports and exports increasing by $3 billion. Much of the import decline was because of declining purchases of foreign oil, a low number not seen in years.  Global news saw China’s stock market soar over 4% on a better than expected Services Report for October. The last of the earnings reports are coming in mixed. Notable reports saw disappointing news from US Steel, while Tesla and Time Warner both topped earnings expectations. Investors will have their eyes on additional economic data throughout the day and a large slate of Fed officials speaking today, highlighted by Fed Chair Yellen, who will be at a House Financial Services Committee hearing at 10am ET speaking on bank regulation and supervision. Gold is trading up today after heavy losses in yesterday’s trading while oil is down modestly.  US stock indexes are trading down today after an initial positive boost.  A strong ISM services report is likely attract more buying as the day wears on setting the stage for a continuation of the three day winning streak.  The ISM services index is a strong indication of domestic economic activity since services represent 75% of GDP. 

Economic Journal - Tuesday, 11/3/2015

(As of 7:00 am PST)

U.S. stocks opened the day flat after a stellar day yesterday. On Monday, markets brushed off weak manufacturing data while responding to positive earnings reports with a strong surge higher. Yesterday’s rally pushed the Dow into positive territory for the year while the S&P 500 hit its highest level since August which almost seems impossible given the recent doom and gloom days of summer. Today could see some pullback and profit taking if the early trading is any indicator of what lies ahead. Market drivers on the reporting front are Sprint whose shares fell 9% in premarket after reporting a larger loss than expected. Conversely American Eagle Outfitters gained 7% after its earnings forecast was better than the previous quarter. Earnings reporting will be winding down the balance of the week. Economic news is light today with a report on September factory orders due out later this morning followed by a report on auto sales later this afternoon. International markets were mixed with Asia participating in some of yesterday’s rally on Wall Street, while Europe is down slightly ahead of a speech from ECB President Mario Draghi. Gold is down another 1% today, while oil is up over 1%.

Economic Journal - Monday, 11/2/2015

(as of 6:45 AM PST)

 

It's a good start to November on US markets with stocks higher on solid economic data.  The October ISM number, a key indicator of economic activity was down slightly, but above analyst expectations and showing slight economic growth at 50.1.  Anything above 50 indicates expansion. Construction spending for September was strong, and well above market expectations. On international markets, Asia was down heavily with Chinese arrests for insider trading making investors in that country very nervous.  Europe, on the other hand, is eyeing a possible economic stimulus program and most indexes are strongly to the plus side.  Good GDP and economic data in Europe are adding to investor enthusiasm.  Earning season in the US is starting to wind down.  There are a few big reports due out this week, but analysts will soon be looking to potential holiday sales and 4th Quarter projections to set market direction.  Gold continues to slump while oil is down as well.