Economic Journal - Friday, 6/29/2012

(As of 7:41 am pacific)

Happy day!!!  All is right with the world again.  It’s a ‘risk on’ day with buyers snapping up every investment with great vigor.  A European agreement which has seemed to stabilize the debt situation…at least until it collapses again anyway.  Europe definitely dominates the news, but there was some good domestic data with a positive Chicago PMI, a popular measure of manufacturing activity.  There was also some negative news concerning consumer confidence and a couple of troubling profit reports, most notably from Nike.  My best advice is to not get too excited about this.  The weekend may provide twists and turns again for Europe and it’s not likely a magic bullet will fix global problems immediately.  Watch for the great optimism of this market to fade slightly as the day wears on, but still leave us with a notable gain for the end of the quarter.  Oil, Gold, commodities…all up.  Down today?  Volatility and the dollar bigtime!  Have a great weekend!

Economic Journal - Thursday, 6/28/2012

(As of 10:04 am pacific)

The market is reacting negatively to the Supreme Court’s decision to uphold Obamacare under the argument of it being a tax measure.  The market looks at this as a negative in that it will cause employers to limit hiring and possibly lay off workers.  All other news is dwarfed by this huge development.  The dollar is up, while oil and gold are down.  I would expect a business as usual approach as the day wears on and that the market will recover some of its losses from what appears to be a kneejerk reaction to the Supreme Court’s decision.

Economic Journal - Wednesday, 6/27/2012

(As of 8:14 am pacific)

The market is casting off European worries again and focusing on positive economic data.  Pending housing starts surged and durable goods orders were up.  Gold is flat while oil is up slightly.  Most commodities are surging and the US dollar is mixed against other currencies.  I think that today’s gain will hold and possibly strengthen.  It appears that the bleak economic summer of 2012 may give way to a resurgent autumn for the US economy.  I am hopeful.

Economic Journal - Tuesday, 6/26/2012

(As of 7:10 am pacific)

The news in Europe today was not particularly good, with political squabbling about future coordinated financial direction.  But, as in previous weeks, the US markets tend to discount European news as the week rolls on.  Consumer confidence was down in the US, below expectations, but I consider this to be less of a leading indicator.  Home price data was good which, when coupled with the good housing starts data yesterday, shows that the real estate market is rebounding.  Gold is down, oil up slightly, and other commodities are mixed.  The dollar is mixed as well.  Volatility is down and I sense that the market is set to rebound mildly through the day.  I get the feeling it is going to be a quiet day.

Economic Journal - Monday, 6/25/2012

(As of 7:18 am pacific)

This morning’s market is all about Europe and it’s a bad day for Europe.  It seems a familiar story and if this week shapes up like the past few, we will likely see a moderation of losses as the day wears on.  There are some positive stories about real estate, while the Leading Economic Indicators were up last week.  On the negative domestic side, we have seen deterioration in the business and manufacturing indexes over the last week.  Interest rates are mixed, slightly up on short term and slightly down on long term, another indication that ‘Operation Twist’ is still in effect.  The FOMC extended this program last week as another attempt at monetary easing.  Oil is down while gold is up slightly as are most other commodities.  The US dollar is up against all except Japan’s Yen.

Economic Journal - Friday, 6/22/2012

(As of 7:24 am pacific)

Today’s market is experiencing a bounce from yesterday’s large drop.  The dollar is down slightly as are gold and commodities.  Volatility is down, the result of the bounce.  Europe is generally quiet, although the German Business Sentiment Index was at a two year low.  Moody’s downgrade of the major banks yesterday afternoon has had minimal effect on the banks, although I believe that as the day wears on we will see some deterioration in financials as a result of that downgrade.  I expect the market to attempt a recovery from yesterday’s loss, but in the end, I expect continued market weakness into the afternoon, and that the market will give up its gains as negative momentum gains traction.

Economic Journal - Thursday, 6/21/2012

(As of 7:47 am pacific)

The market is trending downward this morning as several economic reports disappoint.  US jobless claims fell slightly last week, but still remain near yearly highs.    Sales of existing homes in the US fell 1.5% in May but mostly due to an inventory shortage in lower-priced homes.  A number of preliminary gauges of manufacturing activity dropped around the world signaling a slowing in output.   In the US, the preliminary figures showed manufacturing activity grew at the slowest pace in 11 months.  The Philly Fed reported factory activity in the Philadelphia region fell to the lowest level in 10 months.  In Europe, manufacturing contracted at the fastest pace in 36 months, while a Chinese preliminary report showed manufacturing weakened to a 7 month low.   Commodity prices were hit hard, with gold and oil prices falling 1.5% as the dollar strengthened on Fed comments yesterday.  Coming out of a 2 day Federal Open Market Committee (FOMC) meeting, Fed Chairman Ben Bernanke indicated that the central bank would continue its bond buying program, known as Operation Twist, in an effort to keep longer term interest rates at historically low levels.  However, Bernanke refrained from making any indication that the Fed would conduct additional quantitative easing in the near future.  Investors were looking to the Fed to provide more liquidity to markets in the form of QE3.  Interest rates were lower and volatility was up slightly.

Economic Journal - Wednesday, 6/20/2012

 (As of 8:39 am pacific)

With the Federal Open Market Committee meeting today, an announcement is expected this afternoon and the markets are on pause right now, awaiting direction from the Fed.  Gold is down significantly, while oil is down slightly as are most commodities.  Interest Rates continue to trend down slowly.  Volatility is slightly up, but mostly flat.  Europe news is generally mild and not a player today so far.  The markets are down slightly, but it seems like mild profit taking after quite a run up over the last few days.   Things should remain quiet as we await Fed action.  It seems to me that we can expect some jawboning, and an extension of Operation Twist, which has been effective in lowering long term mortgage rates to historic lows thus far.  An extension, in my mind, would have a very marginal effect at this point, not like another quantitative easing program.  When the Fed tries to wean the economy and the markets off of quantitative easing…look out below!

Economic Journal - Tuesday, 6/19/2012

(As of 8:05 am pacific)

Housing starts jumped significantly although sales were down.  Gold is down slightly, oil up slightly and interest rates are down slightly.   It looks like a positive day today as positive economic reports trump Spanish yield worries.  Greece is stabilizing.  Microsoft introduced a new tablet to rival Apple’s Ipad.  Profit reports were mixed, with FedEx and Discovery down and Oracle beating estimates handily.   The dollar is down against all other currencies.

Economic Journal - Monday, 6/18/2012

(As of 7:50 am pacific)

The news of the new democracy or pro-austerity party winning in Greece was a positive, but already factored into the market.  The market opened down, but is drifting higher of some mild positive economic news.  One surprising element of the Greek election was the effect on volatility, which was down significantly this morning.  Oil and gold are down, probably because the dollar is higher.  Interest rates are stable.  One interesting and important thing that seems to have occurred as a result of Greek election uncertainty is that Central Banks have come together and recognized that coordinated efforts and even coordinated statements can have a preemptive effect on reactions of the markets to negative events.  I would expect to see more preemptive statements and actions in the future, which should dampen volatility brought on by European financial problems.

Big Weekend ahead for Greece...

US economic reports were awful this morning.  Consumer sentiment and industrial production were below expectations.  Everything is being masked right now by the Greek elections and the Central Banks statement that they will deal with it in a very positive way if they need to.  It is hard to know which way the market will steer after the Greek elections.  A vote against austerity (and a possible exit from the Euro) might cause a market decline, because Central Banks liquidity programs might already be factored into the markets.  A vote for austerity might see a market decline because Central Banks will not see as much need for liquidity and further easing.  I think, with that said, we need to focus on the data, as well as factors which might change the data.  The data is not good.  However expectations that the data will change are very positive because of lower oil and gas prices, as well as the continuing low interest rate environment for mortgages and corporate debt.  One significant negative is the end of ‘Operation Twist’, at the end of June.  The end of this ‘stimulus program’ should cause long term interest rates to rise.

Economic Journal - Friday, 6/15/2012

(As of 9:50 am pacific)

Stocks continued to rise in the US as investors shrugged off mostly disappointing economic data to focus on a report yesterday that claimed a global coalition of central bankers had discussed plans for action next week if needed following the much anticipated Greek elections this weekend.  In the US, industrial production weakened in May slipping 0.1% from April.  Economists expected  no change.  Manufacturing growth slowed in the New York area, as the Empire State index showed a sharp decline to a reading of 2.3 from 17.1 in May.  It was the lowest reading since November of last year.  The Empire State index is an important gauge of the health of the manufacturing sector.  A positive reading over 0 signals expansion.  Consumer sentiment also fell this month to the lowest level since December according to the University of Michigan/Thomson Reuters survey.   European stocks were up as well as Asian stocks as all attention is focused on what happens in the Greek elections over the weekend.  Oil prices slipped slightly and gold was up.  The US dollar was mixed but up against the euro while the US 10 yr. treasury yield dipped slightly to 1.58%.  The average 30 yr. mortgage rate remained incredibly low at 3.67% and volatility bounced around as investors are having a hard time predicting the impact Greek’s elections could have on next week’s market direction.

Economic Journal - Thursday, 6/14/2012

(As of 7:34 am pacific)

Europe is on the back burner.  Economic reports have not been good, but the lack of Europe news provides enough momentum to push the market higher.  Jobless claims were up and higher than expected.  The CPI was actually down .3%, but mostly due to the drop in gas prices.  Interest rates are up slightly.  Gold is down slightly, but mostly flat, like oil and other commodities.  Longer term mortgage rates continue downward as short term rates are slightly up, probably ‘Operation Twist’ coming into play again.  The Fed has done a remarkable job with ‘Operation Twist’, bringing 30 year mortgage rates under 3.75%.  The operation is set to end at the end of June so, barring an extension, long term mortgage rates should head up.  With Europe out of the news, my sense is that investors consider the US markets to be undervalued.

Economic Journal - Wednesday, 6/13/2012

(As of 7:37 am pacific)

Europe has drifted to the background again, but there is concern about Greek elections this weekend and whether austerity will win out over a potential Greek exit from the Euro.  I think that trading will be very cautious until that election is over.  A drop in retail sales seems like more of a good thing to me, but the market is reacting negatively.  Lower prices at the gas pump are the likely reason for the drop.  That’s not such a bad thing, and should free up dollars for increased consumer spending.  Inflation was shown to be well in check this morning.  Gold is up; oil is down, as are most other commodities.  Interest rates are down slightly, but pretty flat.  Volatility is up slightly.  Expect the market to be quiet through the rest of the week, with a slight positive momentum.

Economic Journal - Tuesday, 6/12/2012

(As of 7:59 am pacific)

It’s a quiet day on the markets.  Spain and Italy bond yields are worrying to investors.  Oil is up slightly.  Interest rates are still having an effect from Operation Twist, which ends in two weeks.  Gold is up slightly.  Commodities are generally down.  There doesn’t seem to be a pattern to the market.  It is just meandering, trying to find a course today.  There is not a lot of news today, so I don’t expect  much excitement.

Economic Journal - Monday, 6/11/2012

(As of 8:44 am pacific)

The National news media is once again out of touch with the real news as this weekend there were broad coverage of the Spanish Bank bailout and the negative implications of that. I looked at the markets futures and they were all up significantly as the global financial system was cheering the move. I expected the markets to be up big this morning and they were…for a short while anyway! Other reports from Europe including Greece and Italy rumors brought the market back to earth, and I expect a day of ups and downs and eventually a moderately up day as the markets eventually determine that the Spanish bank bailout trumps other Euro rumors and news. Oil is essentially flat, while gold is down moderately. The dollar is generally down. Volatility has come down from its highs to near level. Economic reports are very light today.

Economic Journal - Friday, 6/8/2012

(As of 11:23 am pacific)

More doubts about Europe and concern about the Chinese decision to lower to Bank Funds rate yesterday are making for a negative market.  There are no economic reports at this time.  Oil and Gold are down significantly.  The markets losses are mild.  The dollar is up against most currencies except the yen.  Volatility is down slightly.   It doesn’t appear to be a ‘risk off’ scenario, where hedge funds are deleveraging and selling everything.  It seems more like profit taking from this week’s huge rally, with some timid bulls continuing to buy.

Economic Journal - Thursday, 6/7/2012

(As of 9:03 am pacific)

China lowered interest rates by a quarter point, sparking a rally based on an expectation of loosened monetary policy to spur growth.  Bernanke is speaking in the US and so far his commentary has restrained markets.  The talk is that things are not that bad, growth is still moderate and there is little reason for further easing, but that they stand ready if needed.  The market is up moderately.  Oil is up and interest rates are up a small amount.  The dollar is down against all but Japan.

Economic Journal - Wednesday, 6/6/2012

(As of 7:58 am pacific)

It’s a risk on scenario as all asset categories are up.  ECB Banker Draghi indicated unlimited funds to banks are available for a period of time.  Thus liquidity is to be more plentiful and more leveraging is taking place.  Oil, gold and commodities are up significantly.  The dollar is generally down against all except the yen.  Interest rates are stable.  Productivity was down slightly, which is a negative going into the summer and another indication that the US economy is braking.

Economic Journal - Tuesday, 6/5/2012

(As of 8:34 am pacific)

 

 

It is a mild day on the markets.  Ignoring Europe and focusing on potential positive action by the G-7 nations, the market is rallying a small amount.  Oil is up slightly as is gold.  Interest rates are stable.  The ISM services index was better than expected, in expansion territory.  This is important because services represent 75% of US GDP.  Spain indicates it is having problems finding financing in world markets.  I think that the market is searching for any little bit of good news to stop this extreme downtrend we have seen over the last few weeks. 

Economic Journal - Monday, 6/4/2012

(As of 7:31 am pacific)

Today’s market action relates to trying to find stability after the crushing negative performance of Friday’s market.  Market open seemed to indicate minor conviction, but soon all indexes turned slightly negative.  Gold and oil were down slightly as well.  Interest rates continue to drop.  Volatility is stable, but slightly higher.  We think that the Federal Reserve Bank might come out with another round of economic stimulus shortly.  It is only a matter of time until the dramatic drop in the price of oil shows up at the gas pump, giving consumers a much needed break.  The oil drop should function similar to a tax cut and result in economic stimulation over the next few months.  Between historically low mortgage interest rates, a significant drop in gas prices, and a possible QE3 or 4 program (depending on how you classify ‘Operation Twist’) we don’t see this market swoon lasting for more than a few weeks.