Economic Journal - Monday, 2/29/2016

(As of 7:15am, PST)

 

As we head into the last trading session of February, the markets are trying to find some traction that could lead to the first positive month in 2016. As of Friday, the S&P500 is on track for a .4% gain for the month of February while the Dow Jones Industrial Average is on pace for near 1% gains. For a change of pace, oil isn’t the dominating factor impacting the markets today. The story that investors are digesting today is out of China. Overnight, the People’s Bank of China cut its reserve-requirement ratio for the nation’s banks. Although most of the Asian markets had already closed prior to the announcement, the S&P500 futures market reacted with a 17 point rally after the news. Nothing like a fresh stimulus package for the world’s second largest economy to wake up investors around the world. The big economic news this week is on Friday when the monthly jobs report is posted. The only economic data out today is the January reading of U.S. pending home sales and that report was mostly positive showing that sales were up 1.4% in January. Oil prices are up 1.5% today while gold and other precious metals are also higher.

Economic Journal - Friday, 2/26/2016

(As of 7:20 am PST)

An uptick in the price of oil for the second session in a row, a GDP report that showed economic growth and a global stock rally has put the U.S. markets in a good mood as trading opens on Friday. All of this, after a session on Thursday that saw oil prices turn higher for no reason other than some old news which sent the S&P500 above its 50-day simple moving average and the Dow soaring nearly 1.3%. Today’s GDP report wasn’t overwhelmingly positive but it did give the markets a boost. The second estimate indicated fourth quarter GDP increased at an annual rate of 1% versus the consensus estimate of 0.7%. In other economic news, the U.S. inflation rate in the past 12 months doubled to 1.3% in January. This brings inflation closer to the Federal Reserve’s 2% target potentially raising the odds of another interest-rate increase. This news has darkened the otherwise good mood in the markets and momentarily brought the Dow into negative territory. Around the globe, all major indices in Europe were up nearly 2% as were all of the Asian markets. There’s lots of news for investors to chew on which could make the day pretty volatile.

Economic Journal - Thursday, 2/25/2016

(As of 7:15 am PST)

It’s been a back and forth week for US equities. Stocks opened Thursday’s session on a mixed note following a late day rally Wednesday which saw the broad indexes reverse sharp losses earlier in the day. Oil prices turned higher late in the session after an inventory report came in weaker than expected, carrying stocks higher into the close. So far today, markets are struggling to find direction bouncing around the unchanged line as investors sifted through mixed economic data while waking up to a very disappointing day in China. Let’s start with the data. Durable goods orders came in stronger than expected showing orders jumped in January by the largest amount in 10 months. Shipments of non-defense capital goods ex-aircrafts were down however, which is the only data point that feeds into the GDP from the durable goods report. This is likely why the market has mostly shrugged off the strong headline number today. In other economic news, jobless claims rose in the prior week from 262,000 to 272,000, slightly worse than expected. Overseas, Asian markets finished the day mostly lower following a sharp selloff in China’s Shangai composite index which caught most investors by surprise. The Shanghai composite fell 6.4% Thursday – its worst single session in two months – over concerns of liquidity. The selling in Asia had little to no effect on the European trade, which is seeing gains over 2% across the board today. In commodity land, gold and precious metals prices are down slightly today, while oil appears pressured to the downside with 2% losses upon this writing. Interest rates are down while the US dollar is up slightly. It’s another bizarre start to a trading day, with little evidence to suggest whether we end up higher or lower today. 

Economic Journal - Wednesday, 2/24/2016

(As of 7:20am, PST)

As we kick off this Wednesday morning, the same story exists that has existed for the past several months – as oil prices go, so go the markets. Have you heard that one before? A search for headlines and other economic drivers this morning has come up short again and the oil story continues to be the driver. This morning, crude oil is down almost 3.5% following a report from the American Petroleum Institute that was bearish and a statement from Saudi Arabia’s oil minister that a production cut isn’t happening. This is the second day of bearish oil news and the markets are following oil to the negative. It played a part in yesterday’s sell-off as the Dow was off nearly 1.5% and the S&P500 was down 1.4% nearly erasing Monday’s gains. Today, we are seeing the same trend with both of the major indices showing all red in early trading. Unfortunately, it’s a light day on the economic reporting front to distract investors. A report on new home sales hasn’t provided much for investors to sink their teeth into. Sales of new homes plummeted 9.2% to a seasonally adjusted annual rate of 494,000 in January. January’s figure was the lowest since October and missed forecasts of a 520,000 annual rate. This poor report won’t turn the tide on what we are seeing today and in fact may add to the negative sentiment.

Economic Journal - Tuesday, 2/23/2016

(As of 7:15am, PST)

 

After an impressive showing yesterday which saw the Dow up 229 points and the S&P up over 1.4%, the markets have opened slightly lower as oil has peeled back gains this morning in early trading. Today, investors have a slew of economic reports to digest led by the Case-Shiller Home Price Index for December. The 20 city composite was steady in December showing that 10 of 20 cities experienced an increase in prices. Overall, home prices increased 5.7% over the last 12 months. Other economic reports due out later this morning include the Consumer Confidence report for February and the Existing Home Sales report for January. The recent economic reports have been relatively positive but the downside of that is that the market may have to start contending with some shifting rate hike expectations. A couple of strong earnings reports out this morning will have some impact on the Dow. Dow component Home Depot (HD) announced a 17% increase in its quarterly dividend which has the home improvement retailer up over 3% which will lend some support to the broader market. In news around the world, Germany’s market had a tough day after a weaker than expected Business Climate report and most of the markets in Asia finished lower in overnight trading.

Economic Journal - Monday, 2/22/2016

(As of 7:15 am, PST)

 

Oil made another big move upward this morning and the markets are responding favorably once again to the ups and downs of the commodity. Oil is up over 6% to over $31 per barrel on news that Baker Hughes reported a decline in oil rigs Friday. The gain in oil has prompted gains in energy sector stocks here in the U.S. and across Europe. In early trading, both the Dow and S&P 500 are up nearly 1.25% as were most European and Asian markets over night. Last week was the first week of the year where the major indices posted gains for the week. Although oil will more than likely be the major market driver once again, there will be a slew of economic news this week to keep investors occupied. Some of the important data points that will be reported as the week rolls along are consumer confidence, existing home sales, new home sales, initial claims, durable goods orders, the second estimate of Q4 GDP and personal income and spending. If oil continues to rebound and the other economic reports are positive, it will be interesting to see how the Fed responds in regards to raising interest rates at its upcoming March meeting.