Economic Journal - Tuesday, 5/31/2016

(as of 7:10 AM PST)

Conflicting economic data this morning has investors befuddled and markets split.  Consumer spending is the bright spot with its 1% increase the largest since 2009.  Inflation is showing signs of life, creeping up to .3%, which is actually perceived to be a good thing by most economists.  On the down side of the news was consumer confidence, which dropped to its lowest point since December of last year, and the Chicago PMI, a key measure of industrial activity in the Midwest, which slipped into contractionary territory.  In international news, Asian markets have registered solid gains overnight while Europe is mostly down, but mildly so.  Testimony by Janet Yellen, Federal Reserve Chair, seems to indicate that another interest rate increase is coming sooner than later and that perception is likely suppressing any response from the positive side of the data.  Gold continues to slump while oil is finding support around the $50 per barrel mark.  Expect the threat of higher interest rates to keep markets depressed as the week progresses.

Economic Journal - Friday, 5/27/2016

(as of 7:00 AM PST)

Markets are holding steady this morning after a week that has been a pleasant surprise for investors.  It seems that early in the week investor sentiment was so negative and short sellers were so exposed, that a surprise rally sent bear market strategists running for cover, trying to avoid excessive losses.  With short sellers adding to buying pressure stocks continued their upward trajectory with indexes up almost 2% going into Friday's closing session.  There has been a definite shift in expectations from the Federal Reserve in that an interest rate hike seems much more likely in June based upon positive economic data on the US economy.  But markets have shrugged off interest rate fears putting much more emphasis on signs of a robust economic recovery in the US.  The dollar is continuing to rally against most foreign currencies which is putting downward pressure on oil prices and precious metals.  After rallying to over $50 per barrel this week, oil is giving back some gains today.  Gold has been a victim of a strengthening US dollar, giving back a good chunk of its strong year to date gains.  International markets have been pretty quiet, seeming to be in a consolidation mode, after following the US markets higher this week.

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Economic Journal - Thursday, 5/26/2016

(as of 7:20 am, PST)

Stocks seem to be cooling off after a two day run that saw the Dow post gains of 359 points and the S&P500 notching its highest close since April 27. Sellers seem to be dominating the early trading today as all of the major indices have opened in the red.  There has been some good economic news out the last couple of days that could keep the rally going as the day goes on. Orders for durable goods rose in April led by a higher demand for new cars, trucks and commercial jets and the labor market continues to be strong as a report on weekly jobless claims fell to a one-month low. There was a drop in business spending that may be a cause for concern suggesting that the manufacturing sector may not be as robust as analysts would like to see. Oil continues to be a market driver during this rally as it topped $50 per barrel for the first time in six months. The gains yesterday and today are being fueled by a report released by the U.S. Department of Energy on Wednesday which showed a 4.2 million barrel reduction in oil inventories. Experts had expected a drop but nothing near that level. Investors are still digesting the last of the earnings reports and the results today have been mixed from companies like HP, Inc. and Costco. Asia has continued to follow the lead of the U.S. markets with most indices trading in the green overnight with the European indices mixed. 

Economic Journal - Wednesday, 5/25/2016

(as of 7:10 AM PST)

After marking the best single session showing in nearly three months, can the equity markets avoid the recent trend of giving it all back the next day? So far it looks favorable that the trend might shift as both the Dow and S&P500 are showing impressive gains in early trading. Yesterday ended with the Dow up 1.2% and the S&P500 up 1.4%. Investors seem to be viewing the potential of an interest rate hike by the Fed in June is an indication of a strong U.S. economy. Other factors that may be fueling this surge are oil prices. Oil is approaching $50 per barrel on news from an industry group that reported a larger decline in inventories than expected. More oil data is due out at 7:30 PST when the Energy Information Administration reports on petroleum inventories. Investors seem to be shrugging off a report that revealed the nation’s trade deficit widened in April as imports increased faster than exports. The recent shift toward equities has weighed heavy on gold and the dollar. Both are lower today in early trading. In news around the world, most Asian markets closed higher and European stocks are advancing. 

Economic Journal - Tuesday, 5/24/2016

(as of 7:20 AM PST)

Buyers have returned to US markets in a big way, sending shares up 1% to start the day.  Bellweather tech giant Microsoft is leading the way with positive results from its new software marketing plan.  Even more surprising is the fact that investors are ignoring strong hints of a June interest rate hike.  It has been a long time since we have seen stock prices decouple from interest rate fears like we are seeing today.  New home sales came in very strong and well above expectations, adding to investors enthusiasm.  Asia markets were mixed overnight while Europe is also up big in late trading.  Precious metals are off while oil is slightly to the upside.  Investors seem to think that an aggressive Federal Reserve interest rate hike is an indication that the US economy is much stronger than previous data has portrayed.

Economic Journal - Monday, 5/23/2016

(As of 7:15 am PST)

Comments from two voting members of the Fed this morning have markets backpedaling from their Friday highs. Boston Fed President Rosengren and St. Louis Fed President Bullard separately made statements that left the door open for a June rate hike. As we’ve witnessed throughout the entire month of May, the market seems set to trade in a range bound pattern with little conviction on the part of buyers or sellers to drive pressure in either direction. With earnings season winding down, we’re likely to remain in this pattern for the next couple of weeks with investors highly focused on Fed remarks and US economic data that could influence June’s rate decision. Speaking of data, the calendar is empty today with a report on new home sales set to be released tomorrow. Oil prices are slumping today, down over 1% to $47.90 per barrel on oversupply worries. Gold prices are down while the US dollar index is inching higher. In overseas action, Asian markets finished the day mixed while Europe is heading towards a negative close.

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Economic Journal - Friday, 5/20/2016

(As of 7:20 am PST)

Stocks are turning around Friday as mid-week selling pressure looks to have momentarily subsided. Fears of a June interest rate hike, which had markets in a tizzy earlier in the week, are being shrugged off Friday as market strategists re-evaluated several macro risks that may impact the Fed’s path forward on raising rates. The U.K. referendum in June and the US election this fall are two events being referenced that may put the brakes on the Fed’s interest rate increases. Whatever the case, we may also be seeing a relief trade Friday, as some commentators are looking at how well the market held up this week despite the renewed hawkishness from the Fed. Today is an options expiration day, also known as ‘quadruple witching’ which opens the door for some intraday swings on elevated volume and volatility. If the market holds on to these early session gains we’d be looking at a 0.3% weekly gain for the S&P500, remarkable considering the selling pressure earlier in the week. In overseas action today, most of the broad indexes are higher. Gold and oil are lower today while the US dollar and 10 yr. treasury yield ticked higher. 

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Economic Journal - Thursday, 5/19/2016

(As of 7:20 am PST)

It’s been a busy couple of days on the economic news front and investors are trying to sort out the implications. Yesterday, the markets reacted negatively to the release of the Federal Open Market Committee minutes from their last meeting. The minutes hinted that policy makers are ready to normalize rates as early as June. This news erased some early session gains yesterday and both the Dow and S&P500 closed mostly flat for the day. Also weighing on stocks is a drop in oil prices which fell due to a stronger dollar and an unexpected increase in U.S. crude inventories. On the positive side of the news front, the labor market still looks strong as the number of Americans who applied for unemployment benefits in mid-May fell by 16,000 to 278,000. Worth noting on the earnings calendar are reports from Walmart and Cisco. Walmart is currently up over 8.5% after beating forecasts and Cisco was a big winner with their upbeat report. European stocks are lower today amid news of an EgyptAir plane vanishing from the radar and Asian stocks were mostly in the red overnight.

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Economic Journal - Wednesday, 5/18/2016

(As of 7:15 am PST)

After an impressive gain by the major indices on Monday, the markets yesterday gave most of those gains back. Today is off to a rocky start as investors are bracing for a release from the Federal Reserve later this morning of minutes from their April meeting which may hint of a rate hike in June. Several Fed officials spoke yesterday and provided enough concern to keep investors cautious.  Recent positive economic news has been pointing toward the Fed being more hawkish toward raising rates in June. June seems to be a focal point for investors as another key event will be the OPEC meeting which will more than likely set the direction for future price movements of oil. Earnings season is winding down and results this week have been overshadowed largely by the narrative surrounding the Fed’s interest rate path. Today’s reports came from Target and Lowe’s with results that were mixed. On the international front, Europe struggled after news showed that the Eurozone may be slipping into deflation and Asia was mostly in the red.

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Economic Journal - Tuesday, 5/17/2016

(As of 7:15 am PST)

Markets are giving back some of yesterday’s gains after economic data on inflation and the housing market recovery caused some market participants to begin fretting over a Fed rate increase. Consumer prices jumped in April to their highest level in more than three years stirring up debate today about the Fed’s path towards its next rate increase. Reports on the housing market were also positive. Housing starts rose in April more than expected, while building permits (a sign of future demand) also ticked higher indicating the housing market remains strong. Oil prices have cooled a bit after surging yesterday but continue to trade over $47 per barrel. Apple Inc. is also trading flat today after rallying over 3% yesterday on news that Warren Buffet’s Berkshire Hathaway purchased 9.8 million shares in the first quarter. The stock, which has struggled of late, helped lead a tech rally that sent the Nasdaq and the other major benchmarks soaring yesterday. It’s a quiet news day on the international scene. Asian markets finished the day mostly higher while European stocks look set to close with modest losses. Precious metals are up while the dollar index is down slightly.

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Economic Journal - Monday, 5/16/2016

(As of 7:05 am, PST)

In the early going on this Monday morning, the markets are shrugging off disappointing economic news here at home and around the world and are trying to kick off this new week with some positive results. Currently, the Dow is up 57 points and the S&P500 is trying to avoid a fourth consecutive losing session trading up 6.5 points. The bad news in the U.S. came from the Empire State general business-conditions index which revealed a sharp decline from this month to last month. In April, the reading was a positive 9.6 and this month came in at -9. This weak showing lends itself to the Fed staying put on raising rates next month. In China, the economic news continues to disappoint. China’s industrial production and investment readings came in below expectations for April. This news seemed to weigh heavier on the European markets as they were mostly in the negative overnight while the Asian markets are mostly positive. Oil is experiencing a rally this morning after Goldman Sachs reported that the oversupplied market has likely switched to a deficit. All of this news seems to be a backdrop for investors with the main focus coming later in the week when the minutes from the Federal Reserve’s April policy meeting will be released. There are no noteworthy earnings reports this week. All eyes continue to be on market driver Apple whose shares rose sharply this morning after an announcement that Warren Buffet’s Berkshire Hathaway invested 9.8 million shares during the first quarter. This shot in the arm for the largest market cap company may translate to a shot in the arm for the rest of the markets.

Economic Journal - Friday, 5/13/2016

(As of 7:15 am PST)

It’s been a back and forth week for US markets this week. Entering Friday’s session, the S&P500 is up 0.3% for the week, while the Dow is down 0.1% and the Nasdaq is flat. We had some big moves mid-week as the Dow scored its biggest percentage gain in two months Tuesday, only to have those gains erased Wednesday as downside pressure crept back in. Yesterday’s session bounced all around ultimately to finish flat on the day. Today we’re seeing a similar pattern emerge. Markets are bouncing around the unchanged line despite some surprisingly positive economic data which may ultimately propel stocks to the upside later in the day. April retail sales increased 1.3% month-over-month marking the biggest gain in over a year. The gains were fueled by a 3.2% increase in auto sales and a 2.2% in gas station sales, with gains also seen throughout most of the sector. A strong retail sales report will translate into improved Q2 GDP forecasts, a positive for the market on the whole. Reports on the Producer price index showed prices were up a meager 0.2% in April, indicating inflation remains subdued. Lastly on the data front, consumer sentiment soared as the latest reading from the University of Michigan’s index moved 7.6% in May hitting its highest level in nearly a year. In other news, oil is being weighed down today on comments by Russia’s energy minister that indicated the oil market has a long ways to go before balancing out. Crude prices were down over 1% to $46 per barrel early Friday. International markets are mixed today with most of Asia limping into the weekend with losses while European stocks turned to the upside in their final hour of trading with positive gains across the board. In summary, the market appears content to hover near these current levels in a tight range trade for the foreseeable future. With earnings season winding down, and some big market moving events on the horizon (OPEC meeting and FOMC meeting in June) there’s not much conviction to propel things higher at this point. 

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Economic Journal - Thursday, 5/12/2016

(As of 7:10 am, PST)

On Wednesday the markets gave back most of their Tuesday gains on disappointing earnings reports from retailers which are often a barometer of consumer confidence. Both the Dow and the S&P500 closed out yesterday near the same level that they opened on Monday. The seesaw trend for the week continues today with the markets opening in positive territory. Holding investors’ attention today are rising oil prices following an International Energy Agency report that global demand was better than expected in the first quarter. Oil is currently nearing $47 per barrel which is boosting energy stock shares. There was some disappointing news on the labor front today with initial weekly jobless claims reaching a 14 month high of 290,000. The claims data may be pushing the markets higher on the belief that this adds to the continuing storyline of slowed economic growth which may keep the Fed more dovish when they meet in June to decide on interest rates. More Fed interest will continue as the day rolls on with three Fed officials scheduled to speak at various locations around the world today. Markets in Asia and Europe were mixed overnight. Gold and silver continue to trade in positive territory.

Economic Journal - Wednesday, 5/11/2016

(As of 7:15am, PST)

On the heels of the best percentage gain in two months, both the Dow and S&P500 have opened trading today in the red. Yesterday was a stellar day with the major indices up over 1.3% spurred mostly by higher crude oil prices but today in the early going the markets are giving back some of those gains. The drivers today are poor earnings reports by some big players, Walt Disney Co., Macy’s Inc., and Staples Inc. Disney is the biggest loser of the Dow components while Staples is leading S&P500 shares lower with a 20% drop on its earnings miss. It’s a light day of economic news with a report on crude inventories due out later in the session. Investors will also get federal budget data for April later today. Results overseas were mixed with Europe mostly in the red while markets in Asia were also mixed. Both Gold and Silver are seeing some gains today trading up 1% and 2.5% respectively.

Economic Journal - Tuesday, 5/10/2016

(As of 7:25am, PST)

U.S. Stocks are headed in a positive direction this morning riding an uptick in oil and responding to some developments overseas. Currently the Dow is up over 150 points and the S&P500 is trading up nearly 15 points. Oil and the energy sector are giving the markets some momentum due to relief in the oversupply from outages in Canada and Nigeria. The wildfires in Canada have reduced production by nearly 1.6 million barrels a day which in turn is pushing oil prices higher. Economic news from China overnight was better than the disappointing trade news that pushed the markets around the world lower yesterday. China’s inflation data was reassuring because it didn’t get worse. The Consumer Price Index remained unchanged year-over-year in April and the Producer Price Index in April compared favorably to the decline that was seen in March. This news turned the tide for the Asian markets overnight which were dismal coming out the weekend. In Europe, a group met to discuss the Greece bailout and the news is that there may be hope of some debt relief for Greece. All of the major markets in Europe are currently trading in positive territory. The earnings season is winding down and investors don’t seem to be paying much attention to the results at the moment. The results yesterday were mixed with Gap reporting a miss along with an impressive report from Hertz Global. 

Economic Journal - Monday, 5/9/2016

(As of 7:15 am PST)

US markets are inching higher Monday despite disappointing news out of China overnight. Chinese stocks dropped sharply overnight after downbeat trade data painted a gloomy picture for the world’s second largest economy. Perhaps, more concerning were circulating reports that China’s central bank may begin drawing back from its aggressive monetary policy. The weak data hit the Shanghai composite index with a -2.8% drop with most of Monday’s selling pressure limited to China’s markets. Japan’s Nikkei actually posted positive gains on the day while most indexes throughout Europe were on track to finish higher. In the US, market action is a bit subdued today. The economic calendar is empty with most traders focusing on upcoming speeches from several Federal Reserve officials. Friday’s non-farm payrolls report disappointed which has some market participants speculating now on the timing of the Fed’s next rate hike move. Commodities are down today with oil prices capping gains from Friday while the US dollar strengthened. 

Economic Journal - Friday, 5/6/2016

(As of 7:15am, PST)

As we close out this first week of May, it’s looking like the “Sell in May and go away” trend is continuing to play out. After what looked like a mild recovery yesterday that ended up flat for most of the indices, today the markets are headed in the same direction and looking to close out the week with five straight negative sessions. Fueling the negative sentiment today is a weaker than expected jobs report. Companies slowed down hiring in April, adding only 160,000 jobs which fell short of expectations and the unemployment rate remained unchanged at 5%. This weaker than expected jobs report may set up the “bad news is good news trade” that we talked about yesterday causing the Fed to further delay interest rate hikes this year. That sentiment doesn’t seem to be driving investors in the early going but we will have to wait and see as the day goes on. Oil is down this morning after trading higher yesterday with investors closely watching the news of the wildfire burning in Canada’s oil-sands district. Markets oversees seem to be responding negatively to the uncertainty in the U.S. jobs outlook with most indices in Asia and Europe in the red. 

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Economic Journal - Thursday, 5/5/2016

(As of 7:20 am PST)

US stocks opened with gains Thursday recovering some of yesterday’s losses while looking to record their first positive session in three days. Surging oil prices helped to lift stocks early and offset otherwise disappointing economic data. Oil rallied nearly 4% to $45.40 per barrel as wildfires in Canada’s oil sands region disrupted output in the area. Economic data is light but weak today. Jobless claims rose to 274,000 from 257,000 last week, rising to their highest level in 5 weeks. The data comes just a day after a weak reading on private sector payrolls and lower worker productivity. As we get set for tomorrow’s non-farm payrolls report there’s a feeling we may see a “bad news-good news” trade creep back in to the narrative of May’s trading month. Weak labor data may further delay the Federal Reserve’s interest rate hikes this year, putting the Fed in a tight spot for its June meeting. Perhaps we’re seeing a bid up in stocks today on that speculation. In any event, tomorrow’s payrolls report will be highly scrutinized. Across the globe, equity performance was mixed. Asian markets were mostly lower while European markets were marginally higher. Precious metals are on the rise as is the US dollar which is showing strength in recent days.

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Economic Journal - Wednesday, 5/4/2016

(As of 7:10 am PST)

“Sell in May and go away” is playing out right under our noses as US equity markets continue to feel pressure in their first week of trading in the new month. Stocks fell to their lowest level in three weeks yesterday, dragged down by disappointing manufacturing data in China and slumping oil prices. Energy prices have stabilized today, but the recovery in oil has not translated into equity gains in the first hour of the session. Instead, worries over weak US economic data are weighing on stocks. Let’s look at the data. The ADP employment report for April showed 156,000 private sector jobs were added, well below the 200,000 expected. The report is often viewed as a pre-cursor of Friday’s non-farm payrolls report, a data set that the Federal Reserve monitors closely. A report on US productivity showed weakness as well, with productivity falling to a 1% annualized rate in the first quarter, marking the fourth drop in six quarters. On the bright side, factory orders rose 1.1% in March, while activity in the services sector picked up in April, both reports beating expectations. Rounding out today’s deluge of data was a report on the US trade balance which showed the trade deficit shrinking in March to its lowest level in more than a year. All in all, today’s data continues to paint a muddied picture of an economy that is growing at a slow pace. International markets are struggling as well today with Asia closing with red across the board, while European stocks slumped amidst a raft of disappointing earnings results. Gold prices are lower today while interest rates and the US dollar are on the rise.

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Economic Journal - Tuesday, 5/3/2016

(as of 7:00 AM PST)

It is almost as if you can hear the wheels of the global economic growth engine slowing down today and the markets are not liking the sound.  A weak manufacturing report out of China, massive layoffs as a result of low oil prices in Saudi Arabia, a reduction in analyst expectation of GDP growth here in the US and weakness in Europe: no report by itself a major market mover but, combined creating a negative pall over stock markets today.  Most US indexes are down by 1% at the start.  Oil is also weaker, adding to investor pessimism.  Precious metals are holding steady.  With most significant corporate earnings reports already in, attention is shifting to the overall economic scenario going forward.  Based on future corporate profit projections it looks like stocks are a bit pricy and there is little in the way of financial stimulus to juice the markets at this time.  It could be a rough day for stocks.  

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Economic Journal - Monday, 5/2/2016

(As of 7:25 am PST)

It’s a new month and a new week and investors are hoping there will be new life in the markets after last week’s sell-off. The month of April closed out with the Dow and S&P500 slightly up for the month while the Nasdaq Composite was down due to weaker than expected earnings from Apple and Intel. This week will feature some second-tier earnings reports along with some important economic data. The big economic news will come at the end of the week with a report on the April jobs data. Already out today is a gauge of manufacturing activity for the month of April. The report showed activity to be below both the prior month and the projected consensus. The markets don’t seem to be having too much negative reaction to the report with both the Dow and S&P500 up slightly to start the day. It is a quiet day overseas with most Asian markets and the London market closed for a holiday. There will be interest in China tomorrow at the opening after a poor report over the weekend showed weakness in China’s manufacturing activity. Oil is under some pressure this morning after several days of run up prices. Gold is continuing to climb near new highs for the year. As we enter the month of May, it wouldn’t be a surprise to see some consolidation activity especially after the market’s spectacular run since mid-February.

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