Economic Journal - Friday, 8/31/2012

(As of 8:00 am pacific)

 

The market is rallying this morning as Fed Chairman Ben Bernanke in a much anticipated speech said he and the Fed are open to using more quantitative easing if needed to help stimulate the stagnating US economy.  In a volatile morning that saw the Dow open up 1%, gains were trimmed at the start of Bernanke’s speech then rallied back to day highs after the Chairman left the door open on more easing.  Although specific action has not been taken just yet, the Chairman’s comments were what the market seemingly was looking for out of this week.  In economic news, a report on manufacturing out of Chicago, known as the Chicago PMI, fell in August slightly below estimates.  The gauge which tracks manufacturing activity still remained in slight expansionary levels.  A report on consumer sentiment rose slightly.  European shares were up on the day as the focus now turns to the European Central Bank’s meeting next week, where investors expect more action to be taken by the ECB to further stimulate the euro-zone economy and tackle the debt crisis.  Asian markets closed lower ahead of Bernanke’s speech today, taking a cautious tone in to the weekend.  Oil and gold are rising this morning, while the US dollar is down.  Interest rates are down and volatility, after swinging up in the first hour of trading, is back down.  The market is seeing a bit of a relief rally today after the prior day’s losses.

Economic Journal - Thursday, 8/30/2012

(As of 7:27 am pacific)

 

Stocks are accelerating to the downside this morning as economic reports are fueling global growth concern and investors seem antsy ahead of Fed Chairman Ben Bernanke’s speech tomorrow.  In the US, the number of people applying for jobless claims was unchanged last week.  Claims have hovered at the same level for the past 5 weeks, showing signs that the labor market is sputtering.  On a positive note, consumer spending rose in July, for the biggest monthly increase since February and personal income also rose for the 3^rd straight month.  Falling gas prices in the month of July most likely aided in putting extra spending dollars in the pockets of taxpayers.  The reports weren’t enough for stocks as reports out of Europe and Asia sent markets retreating.  Economic sentiment throughout the euro-zone fell to a 3 yr. low and German unemployment edged up ahead of expectations.  Asian stocks saw a sharp selloff today as well, as Japan’s retail sales turned negative in July, falling 0.8% from a year prior.  It was the first drop since November 2011.  Commodity prices also weighed on the markets with oil down and gold flat.  The US dollar is mixed this morning and interest rates continue to fall as investors are flocking to the safety of the treasury today.  The mood seems to have changed in the market ahead of tomorrow’s Fed conference.  Expectations are changing for Fed Chairman Ben Bernanke to announce any plans for new stimulus programs.  With weakening global growth, the debt crisis in Europe, and the fiscal cliff looming, many are expecting Bernanke to hold on to taking action until we really need it. 

Economic Journal - Wednesday, 8/29/2012

(As 0f 7:27 am pacific)

 

The market continues to range trade this morning, swinging between slight gains and losses.  Investors continue to remain complacent ahead of Friday’s Fed meeting shrugging off economic reports today that were positive.  The Commerce department revised its growth estimate for the second quarter reporting GDP climbed at a 1.7% annualized rate, up from an initial estimate of 1.5%.  Another positive report out of the housing sector showed that pending home sales for existing homes rose 2.4% in July, well ahead of the consensus estimate of a 1% rise and the best reading since April 2010.  The housing market continues to show signs of recovery.  European news was quiet today, with stocks slightly lower as investors also await Friday’s Fed meeting.   Hurricane Isaac made landfall late last night in New Orleans registering as a category 1 hurricane.  Pummeled by torrents of rain and wind gusts up to 85 mph, New Orleans residents and officials are expecting some flooding in parts of the city and surrounding areas, but damage is minimal compared to the devastation brought by Hurricane Katrina exactly seven years ago.  Oil rose yesterday on worries over the unknowns of Isaac, but today concern over increased supply inventories are causing oil prices to drop.  Gold is down slightly and the US dollar is up.  Interest rates bumped up slightly as treasury prices fell and volatility is slightly higher.  We expect similar trading patterns until Friday, where Bernanke and the Fed will be on close watch for signs of further stimulus.

Economic Journal - Tuesday, 8/28/2012

(As of 7:30 am pacific)

 

The market is lower today as European news dominates a strong US housing report.  Home prices rose 2.3% in June for the largest back-to-back monthly gains in nearly a decade.  We’ve been seeing some strong reports in the past few months that indicate the housing market has perhaps finally hit bottom.  Sales are up, building permits are rising, and now home prices are picking up as well.  It wasn’t enough however to bring confidence to the market as another report showed consumer confidence in the US fell to a 10 month low.  With higher gas prices, unchanged jobless rates, and flat incomes, consumers are less confident in the recovery of our economy.  Europe was back in the news today as a report showed Spain’s recession is deepening.  Spanish GDP contracted at a faster pace than expected in the 2^nd quarter and year over year.  Concerns over the global economic slowdown were heightened after Japan’s government cut its economic forecast today for the first time this year.  The announcement dragged Asian and European markets lower.  The US dollar is mixed, while oil is up and gold is down.  Interest rates are down.  Markets are having a difficult time finding direction at home today as investors consider today’s housing report, the kickoff of the Republican convention today in Tampa, and the frightening prospect of tropical storm Isaac making landfall later this afternoon.

Economic Journal - Monday, 8/27/2012

(As of 7:30 am pacific)

 

The Dow and S&P are trading lower this morning with the Nasdaq hanging on to slight gains with Apple carrying the index.   Shares of the tech giant are up over 2% in early trading after a Federal Court ruling Friday awarded Apple over $1 billion in damages due to a patent infringement from rival Samsung.  Economic news is light this morning with no reports due out today but then picking up later in the week with the Case-Shiller Home Prices Index as well as reports on personal income and spending.  The week caps off with the Fed’s annual economic conference in Jackson Hole, Wyoming on Friday with investors looking to the meeting for signs of stimulus action.  What could make the largest economic impact this week is tropical storm Isaac which is headed toward the Northern Gulf Coast expected to make landfall near New Orleans on Tuesday.  Oil traders are keeping a close eye on the storm as 10% of the rigs in the Gulf have already been evacuated and over 24% of oil production has been taken offline.  The region accounts for nearly 44% of US oil refining capacity.  Prices of oil are down this morning.  Gold is flat and the US dollar is mixed.  Interest rates continue to drift back down and volatility is up this morning.  We should start to see volume pick up throughout the week and into early September as traders return from vacation and central bank meetings come under full spotlight.

Economic Journal - Friday, 8/24/2012

(As of 7:15 am pacific)

 

What do you do when an economic report doesn’t reflect reality, such as the durable goods report?  Analysts and reporting agencies are reporting this very differently this morning.  It was up 4.2%, a very strong showing, but down .4%, its worst showing since last November after stripping out the volatile transportation sector.  Airplane orders were up 54%, while autos were up 13%.  All else looked pretty weak.  I would say either scrap the report or revamp it, without airplane orders.  The markets seem a bit confused as well, starting with a mildly negative reaction, but trying to push forward after a couple of down days.  Oil is up slightly, while gold is seeing some profit taking and a small loss.  The dollar is generally up and mortgage interest rates are drifting back down to historically low levels.  I would say that the market, although devoid of many traders as the last couple of weeks of summer wind down, will solidify today and show more strength as the day wears on.

Economic Journal - Thursday, 8/23/2012

(As of 7:20 am pacific)

 

Stocks are lower this morning as several global economic reports paint a gloomier picture than we’ve seen the past few weeks.   Manufacturing activity continues to contract in China and throughout Europe, making future monetary easing measures more likely.  Stocks in Asia responded positively to more talks of Beijing stimulus, while European shares fell as the data pointed to a likely recession in the 3^rd quarter.  Stocks are down in the US as investors considered yesterday’s  Fed meeting release along with new jobs numbers reported this morning that showed jobless claims rose by 4,000 last week.  The Fed’s meeting minutes from its July meeting showed an active discussion around another round of stimulus, known as QE3.  There is a lot of expectation in the market right now for more stimulus, and it seems each day’s direction is predicated on how likely that stimulus will be.  Dragging down tech stocks today is blue-chip Hewlett Packard.  The computer maker reported its deepest loss ever and analysts slashed guidance.  The dollar is down and interest rates are down this morning as commodities are up with gold surging over 1.5%.  Today looks like another opportunity for investors to take profits after a nice run up the past few weeks.

Economic Journal - Wednesday, 8/22/2012

(As of 7:05 am pacific)

 

We are revisiting Greece this morning.  Market reaction is a shadow of what is was a year ago on negative news from Greece but it is still enough to drag the market down on a quiet day of trading.  Japan’s exports took a dive, sending Asian markets lower. The US dollar is up strongly driving commodity prices higher in general.  Gold is flat and oil is down a small amount.  Mortgage rates continue to show small increases and have been doing so for a couple of weeks, driving rates up from historic lows by one quarter to three eights of a percent.  The refinance window is closing for some people, but interest rates are still low enough to spur buyers and keep the positive home start numbers we have seen recently.  Dell computer came out with a sour profit report and a dim view of future growth.  Negative momentum is building following a significant rally over the last couple of weeks.  Complacency is a very dangerous thing in the stock market and we are seeing a lot of it.  Watch out for a sneaker wave of negative selling that intensifies.

Economic Journal - Tuesday, 8/21/2012

(As of 6:49 am pacific)

The market is popping this morning with what seems to be a risk on scenario.  The dollar is falling, while oil and gold are up significantly, as are most commodities.  Interest rates are rising slightly.  News from Europe has been mostly positive.  One profit report of note shows Best Buy with a 90% drop in profits and a suspension of future profit projections.  The stock is down 10%.  There are no significant economic reports today and trading will likely continue to be very thin as the slow August trading activity continues.  Look to the market to hold onto early gains since there is little going on that will offset the initial positive momentum.

Economic Journal - Monday, 8/20/2012

(As of 7:09 am pacific)

No economic reports of significance today.  Europe is quiet but there’s a sense that negative momentum is settling in.  The markets are quiet; slightly to the negative, but close to unchanged.  Oil and gold are both down a small amount.  The US dollar is mostly up.  It should be a quiet week, with few economic reports and a large number of traders on vacation.

Economic Journal - Friday, 8/17/2012

(As of 7:15 am pacific)

Yesterday’s market breakout to the upside seemed to signal a shift in momentum.  Market bulls seem to be in charge at this point.  As the earnings season winds down, there have been some solid surprises on the plus side which have added to gains.  Oil is down slightly on reports that the strategic petroleum reserve might be tapped.  It feels as if the Obama administration is learning from central banks that ‘talking into the market’ without action can be almost as effective as the action itself.  I don’t expect the strategic reserve to be tapped because it would look politically motivated, which it would be.  While yesterday’s gains added life to a boring August, I still think that mundane market action will prevail.  The dollar is up slightly as are longer term interest rates and most commodities up slightly. Consumer confidence numbers came in higher than expected and leading economic indicators were up .4%.  It appears we are headed for another positive day.

Economic Journal - Thursday, 8/16/2012

(As of 7:30 am pacific)

It’s a similar start to trading today as the market continues its lackluster week.   The markets are trading in a narrow range again this morning with stocks swinging between modest gains and losses.  Some positive reports continue to indicate that the housing market is recovering.  Housing starts slipped slightly in July, but building permits for new construction rose to 4 year highs, indicating the housing recovery still has some legs going in to the second half of the year.  The number of people applying for jobless benefits edged up slightly in the most recent week, but the 4 week average, which smooths out seasonal oddities, fell to its lowest level since late March.  Jobless claims are hovering in the 360,000-370,000 range, levels still considered very high.  The Philly Fed manufacturing report showed activity slipped this month.  Europe is quiet today, practically mirroring the trading patterns seen on Wall St.  It is eerily quiet throughout global markets.  Volumes are thin, and investors seem undecided on which direction the market is going.  With lots of activity scheduled for September with central bank policy meetings, investors seem content to ride out this quiet August before taking action.  Oil and gold are flat today and the dollar is mixed.  Interest rates on the 10 year treasury are down.  It looks to be another quiet day today.

Economic Journal - Wednesday, 8/15/2012

(As of 7:17 am pacific)

It’s a far cry from August 2011 when the stock market was extremely volatile as Congress debated the debt ceiling limit.  Instead of markets marked by huge advances and declines, we are seeing a period of calm, with a slight upward momentum, but generally trading in a very narrow range.  Today is shaping up as another very quiet day.  A negative report from the Empire State Index has been offset by a flat CPI report and an industrial capacity utilization report which showed a .6% increase.  The Homebuilder’s Index rose to its highest level in five years and is carrying the market right now. Oil is down slightly and gold is up slightly.  The dollar index is up a small amount as the dollar is mixed.  Mortgage interest rates are trending down again.  A couple of companies, Staples and Deere, warned of a difficult market ahead.  I expect the market to continue to trade in a very narrow range.

Economic Journal - Tuesday, 8/14/2012

(As of 7:30 am pacific)

A reminder that inflation is not dead.  Wholesale prices rose by half a percent, due in large part to the drought that has reduced global crop yields.  It appears the Fed has resumed bond purchases, as mortgage rates have dipped again, but the ten year bond yield is up slightly.   Oil is up while gold is down and the dollar is up moderately.  The market is showing some real strength.  Volatility is at a five year low.  Retail sales were greater than expected. My sense is that a strong undercurrent is building in the market and another positive economic report such as home sales or employment could trigger a significant rally.  Europe had some mildly positive news, but is generally quiet which is good for US markets.

Economic Journal - Monday, 8/13/2012

(As of 6:54 am pacific)

It is very quiet today. No economic reports of significance.  Some news out of Europe shows Greek GDP down significantly, but above expectations.  There is little market reaction.  There is some merger and acquisition activity.  Gold is down slightly, while oil is up slightly.  Interest rates are down slightly, while the dollar is mixed.  It looks like a mid-summer day with more people focusing on vacationing than investing.  No reaction to the GOP Vice-President selection, Paul Ryan. 

Economic Journal - Friday, 8/10/2012

(As of 7:05 am pacific)

Bears are looking for a reason to pounce and today’s news of diminishing growth for China seems to be fuel for the flame.  Markets are down moderately, but I expect losses to mount as profit taking ensues.  It has been a nice run over the last couple of weeks, and while the economic news is not that bad and could easily shift by mention of a Chinese stimulus plan, my sense is that investors have been looking for a reason to pullback and will find it in today’s economic numbers.  Gold is slightly higher, while oil is lower.  The dollar is up against most currencies and interest rates are slightly higher.  Watch for negative momentum to mount in a still very slow market.

Economic Journal - Thursday, 8/9/2012

(As of 7:09 am pacific)

Summer doldrums continue today.  There is some mild, but not exciting economic data; slightly lower jobless claims and a reduction in the balance of trade deficit.  Generally upbeat news is keeping the market very solid.  Growth concerns out of China are a plus/minus.  Decelerating growth is not good for a global economy, but the thought of more Chinese economic stimulus has traders excited.  Gold is flat while oil is up slightly.  The dollar is generally up and interest rates are up slightly.  Expect a quiet day with generally positive momentum.

Economic Journal - Wednesday, 8/8/2012

(As of 7:23 am pacific)

It feels like a tired market today as the previous day’s gains are being digested.  Summer doldrums are making for a very mild day.  There is activity on selected stocks based upon earnings or analysts upgrades.  One economic report showed US productivity up 1.6%, higher than expected and, unrelated, another Fed governor chimed in on further quantitative easing, indicating that no more easing is required.   Those types of statements suck liquidity out of the markets, just as yesterday’s comments (exactly opposite) create liquidity.  Hence we have a slightly down market which feels more positive than it is.  The dollar is mixed, mortgage rates are trending higher and gold is up.  Oil is up slightly upon supply concerns after a significant rally over the last couple of weeks.  While positive momentum is picking up, it would not surprise me to see a day of mild profit taking.

Economic Journal - Tuesday, 8/7/2012

(As of 7:15 am pacific)

The stock market broke out of its Monday slump streak and the positive momentum is continuing into today’s market action.  It looks like a risk on scenario as a Fed Banker has given a boost toward another large Quantitative Easing (QEIII) package.  I don’t see that happening, but the mere suggestion is juicing the markets to levels not seen since the beginning of the year.  Oil is up, gold is up and most commodities are up as the US dollar falls, reflecting an increased risk appetite among investors.  Interest rates are up slightly.   No news out of Europe is good news.  This rally has legs.

Economic Journal - Monday, 8/6/2012

(As of 7:30 am pacific)

This morning’s continuation of the huge rally of the last two trading days will be difficult to hold.  There are no economic reports out today.  News from Europe is muted.  A couple of names are in the news.  Knight Capital looks to have been rescued this weekend, but stock holders are paying a hefty price as the stock has dropped another 25%.  Best Buy has a buyout offer whereby its founder wants to take it private.  Although the stock is up, the offer is being looked upon with skepticism since the financing is not yet in place to complete the deal.  Still, the stock is up 18%.  Gold is up slightly, oil down slightly while most other commodities are down.  The dollar is up against most currencies.  Mortgage rates are drifting slightly higher.  Look for stocks to drift lower, but there is a good chance that momentum will end a long streak of down Mondays.

Economic Journal - Friday, 8/3/2012

(As of 7:30 am pacific)

Stocks rallied back as the risk trade appears to be on after a rough day yesterday.  The markets never could fully recover yesterday after disappointment set in over remarks made (or lack of) by European Central Bank President Mario Draghi.  Investors were hoping the central banker would have provided more specific details on measures to aid in the debt crisis, but were left with seemingly more questions and frustration.  The markets turned red and never could fully recover.  Today is a different story however, as US economic reports seemed to provide confidence to investors looking for any sort of good news.  US nonfarm payrolls were better than expected with the economy adding 163,000 jobs in July, however the unemployment rate ticked up slightly, perhaps due to some seasonal oddities.   Another report showed that activity in the services sector picked up slightly in July, better than expectations.   News is quiet in Europe today with rumors coming out of Spain that the government may soon request aid from the ECB’s rescue funds.  Stocks are surging throughout most of Europe. Commodities are higher today with oil up over 4% and gold up as well.  The dollar is down and interest rates are drifting higher.  Volatility is low in early trading as the market has so far greeted both of these reports with optimism after a week filled with negative news.  If we’re able to hold these levels today, the S&P will end flat for the week. 

Economic Journal - Thursday, 8/2/2012

(As of 6:46 am pacific)

Less than reassuring words from ECB Bank Draghi Chairman have impacted markets this morning. All markets are down moderately.  A large trading error from Knight Trading a moderately sized brokerage firm has severely impacted that stock, with a drop of 70% in two days. The company is seeking other capital sources, which means that without some intervention the firms continued existance might be in question.  The word is that Knight may have lost as much as $440 million in an erroneous trading technical glitch.  Gold and oil are down, while the dollar is mixed. Interest rates are up slightly.  It could be a rocky day today in the markets.

Economic Journal - Wednesday, 8/1/2012

(As of 7:45 am pacific)

A quiet Europe is a positive today, overcoming some mildly negative domestic economic reports and providing slight positive momentum in what is shaping up as a calm day.  Gold is down and oil is up.  The lightly regarded ADP Employment report was better than expected.  The ISM, a manufacturing gauge was in negative territory for the second month, a bit disconcerting.  The dollar is mixed and interest rates are slightly up.   Attention is on the Federal Reserve which will wrap up its two day meeting this afternoon.  Little is expected in the way of policy changes.