Economic Journal - Friday, 5/31/2013

(As of 7:10 am PST)

 

When can good news be bad news?  The Chicago PMI number, a key measure of economic activity, came in higher than expectations and showing good positive expansion.  It is another indication that ‘main street’ is continuing to recover.  But if recovery looks too robust, it is a danger to future quantitative easing by the Federal Reserve.  Markets have come to rely on easy money Fed Policy for growth in the last few years and as the stimulus is withdrawn there will certainly be withdrawal pains in the form of market volatility and negativity.  Gold was down along with oil this morning as the dollar strengthened against most other currencies.  Interest rates are stable, holding at monthly highs.  Asia markets were mixed and Europe is down after a string of negative economic reports.  Look for a mildly volatile market today with worries about Quantitative Easing reductions pushing markets lower at the end.   

Economic Journal - Thursday, 5/30/2013

(As of 7:15 am PST)

 

Despite some mildly negative news on the US economic front and another volatile down day in Japan, US markets are surprisingly strong this morning.  Fears of the Fed reducing economic stimulus anytime soon are waning and Japan’s push into aggressive monetary easing are making for a continuing easy money go-go philosophy for investors.  Japan’s pension funds are eying a switch from bonds to equities giving markets even more optimism.  It looks like a good day all around in US markets.  Gold is up over 1% on a weakening dollar, while oil is continuing its weekly decline after reports showed an increase in supplies higher than expectations.  One fly in the ointment is the interest rate on mortgages, which is rapidly approaching 4% on a thirty year loan.  This may dampen the real estate recovery a bit, but it is important to note that even at 4% rates are still extremely low compared to other periods of time.  Optimism is the order of the day and will likely carry markets even higher.

Economic Journal - Wednesday, 5/29/2013

(As of 7:07 am PST)

 

Worries about problems associated with winding down US economic stimulus programs are weighing on markets this morning.  Signs of the types of turbulence which might arise are reflected in the rise of the yield on the 10-year bond, which has jumped from 1.7% to 2.15% in a little over a week.  Mortgage rates are also rising sharply, with the 30 year now over 3.75%.  The OECD, Office of Economic Development, has lowered its estimate of global growth rates, increasing downward pressure on the stock market.  Gold is up slightly and oil is down.  The US currency is also down against other global currencies, reversing its strong showing of the last few weeks.  Expect this uncertainty to continue to rattle markets as the summer progresses.

Economic Journal - Tuesday, 5/28/2013

(As of 7:19 am PST)

 

Markets are rallying this morning after investors returned from a long holiday weekend to some surprisingly positive US data.  The Dow is surging 200 points while the Nasdaq and S&P are also up 1.5%.  Keying off gains in Europe and Asia, investors were optimistic after a report on housing showed signs of a broader housing market recovery.  The S&P/Case-Shiller Index showed home prices rose 10.9% in March compared with a year ago, marking the highest year over year growth rate since April 2006.  The index measures home prices in the nation’s 20 largest cities.  All 20 cities saw year over year improvements for the 3^rd consecutive month.  Adding to the positive news, US consumer confidence rose to a 5 year high in May, beating market expectations.  Markets across Asia and Europe were also in the green.  Gold prices are slipping on a strengthening dollar.  After a tough session Friday which saw Wall Street close for its first weekly loss in over a month, markets appear to be settling in to a nice rally to start this holiday shortened week. 

Economic Report - Friday, 5/24/2013

(As of 7:18 AM PST)

 

The markets are in the doldrums in spite of an upbeat durable goods report this morning.  Gold and oil are down slightly and the US dollar is mixed.  Overnight, the Japanese stock market recovered some of the large losses of the prior session.  It is shaping up to be a quiet day on the markets going into the 3 day Memorial Day weekend.  The dominant issue for investors seems to be how and when the Fed will exit the Quantitative Easing program, a program which has contributed mightily to market gains over the last few years.  Markets may recover their losses today, but the overhang of this critical issue might make for a negative and sluggish summer season.

On a personal note, it was 35 years ago this Memorial Day that a jet fighter crashed on takeoff, slamming into an apartment complex in Tacoma, Washington.  To view a video of the event go to www.millerfinancial.biz and click on ‘Memorial Day Miracle’. 

Economic Journal - Thursday, 5/23/2013

(As of 7:25 PST) 

 

A shock from a Japanese stock market drop has investors on edge this morning.  The Nikkei Index dropped 7% in a very short period of time sending investors to the sidelines.  Conflicting indications from the US Federal Reserve bank has also added to uncertainty about when quantitative easing will be cut back.  A bad manufacturing number from China rounded out a trio of negative events and the Dow index started the day down triple digits with the Nasdaq and S&P 500 Index following suit. US economic data has soothed investors to a degree and markets are recovering slightly as volatility settles out.  US home prices were up significantly year-to-year and new home sales were up and ahead of expectations.  In addition, jobless claims were down, and ahead of expectations, indicating that the US economic recovery remains on track, although less than robust.  Oil is down nearly 2% in reaction to international data and gold is up on safe-haven buying.  Interest rates on the 30 year mortgage have surged nearly a quarter of a percent in recent days, which may dampen home sales and refinance numbers in the future.  The Japanese stock market drop is a reminder that negative events are always lurking and when markets go up too fast, they can quickly reverse.  But today’s negative US market reaction is probably overdone and, at least for today, we will likely see a rebound as US economic data provides a needed lift.

Economic Journal - Wednesday, 5/22/2013

(As of 7:16 am PST)

 

Markets are cautiously optimistic in early trade with all eyes on Federal Reserve Chairman Ben Bernanke as he gets set to testify before the Joint Economic Committee this morning.  Bernanke’s testimony, his first since February, will hope to provide clarity around the Fed’s strategy to exit its $85 billion per month asset purchase program.  The consensus as of late is that the Fed will continue to proceed with its easing program, known as QE3, while monitoring signs of inflationary pressure or an improvement in the labor market as indicators of when to exit its bond buying.  That hasn’t stopped several Fed officials from saying they believe the Fed should begin tapering its bond buying immediately.  The market has gotten used to “easy money” and increased liquidity over the past few years.  Any signs that the Fed’s programs may be coming to an end would likely result in a market selloff.  European stocks slipped with investors cautious ahead of Bernanke’s testimony.  Asian markets were mixed with the Nikkei rallying 1.60%.  Gold is higher today by 0.5% on a weakening dollar, while oil prices fell dramatically after an unexpected rise in inventories.   We’re keeping our eyes on Bernanke’s testimony as he was just sworn in around 7:10 am PST.

Economic Journal - Tuesday, 5/21/2013

(As of 7:25 am PST)

 

Markets have started with modest gains this morning.  Earnings have been mixed on the few reports left to come out this quarter.  Asia and Europe are steady, but economic data from Europe continues to lag and it becomes more and more apparent that Europe will not pull out of recession anytime soon.  Gold is on the down side of a roller coaster run, giving back most of yesterday’s gains.  Oil has drifted down a bit, but is surprisingly resilient in the face of large inventories and limited demand. Look for some significant downward pressure on the price of oil over the next few weeks.  Interest rates are creeping up and the US currency is stronger, in anticipation of a reduction in QE3, the Fed’s mortgage buying program.  In general, expectations seem to be far ahead of reality in terms of our economic recovery and the economic data supporting it.  As we press on into the summer doldrums expect a market pull back as investors assess marginal economic data. 

Economic Journal - Monday, 5/20/2013

(As of 7:18 am PST)

 

It’s a quiet day today with earnings season winding down and a lack of significant economic reports.  One report, from the Chicago Fed, showed slowing economic activity across the nation, down slightly from the prior month.  Gold continues its slide of the last two weeks, down $10 per ounce while oil looks like it will break its winning streak, down as well.  Markets are slightly to the negative, but solid, considering the strong May rally we have seen.  Asian markets were up strongly overnight but reports of an economic slowdown in China are creating some anxiety. Europe is somewhat muted.  It looks like today might be a day of profit taking and consolidation with investors looking for the next catalyst to propel indexes to new record highs.

Economic Journal - Friday, 5/17/2013

(As of 7:25 am PST)

 

Two positive economic reports are supporting buying this morning.  The preliminary reading of the University of Michigan/Thomson Reuters consumer sentiment index for May jumped to 83.7 from 76.4 in April, beating forecasts and surprising investors.  Secondly, a report on 10 leading economic indicators showed improvement in April, bouncing back 0.6% after falling in March.  The market seems strong today despite a back and forth week which included disappointing economic data and conversation about the winding down of the Fed’s bond-buying policies.   Events that would normally cause selling pressure were for the most part ignored this week as markets continued to drift higher.  Gold received a beating this week tumbling almost 5%.  The US dollar strengthened this morning to its strongest level in 3 years on speculation of QE coming to an end.  A strengthening dollar is bad for dollar-denominated commodities including gold.  Europe is looking strong today and most Asian markets finished up.  With May half over, the normal “sell in May, go away” adage may have to wait until next year, as the market eyes a fourth straight week of gains. 

Economic Journal - Thursday, 5/16/2013

(As of 7:18 am PST)

 

Another data rich morning has investors struggling to find direction.  Jobless claims surged last week with 32,000 new people filing for unemployment benefits, bringing the jobless claims figure to a 6 week high.  Housing starts fell 16.5% in April, led by a big drop in apartment building construction.  Building permits, a sign of future demand in housing, rose 14.3% however.  Consumer prices fell for the second straight month and the inflation rate for the past 12 months fell to 1.1% in April from 1.5% in March.  Little evidence exists of inflationary pressure, which is good for the Fed’s interest rate policies and for consumers.  Markets were hovering around the unchanged line, until the Philly Fed index was released showing a negative reading in May.  The Philly Fed measures manufacturing activity in the Philadelphia region.  Any reading below 0 indicates more companies are contracting than growing.  After notching its highest closing level since 2008 yesterday, Europe’s key benchmark index moved lower Thursday.   Asian markets ended the day mostly higher, while Japan’s Nikkei finished lower despite positive economic data.  Gold continued its tumble from yesterday, down 1% as the dollar strengthened.  Interest rates took a dive with the 10 yr. treasury rate dropping to 1.88%.  Economic reports have generally been disappointing this week, but that hasn’t deterred investors from taking these markets to new heights.

Economic Journal - Wednesday, 5/15/2013

(As of 7:18 am PST)

 

The seesaw week for stocks continues as markets begin the day lower after a nice rally yesterday.  A slew of economic data swayed investors to the downside as markets etched new record highs in yesterday’s session.  The Empire State Manufacturing survey fell into negative territory in May, an unexpected contraction and well below economist’s forecasts.  Industrial production also fell 0.5% in April, while February and March were downwardly revised.  Wholesale prices fell in April led by a decline in the price of gasoline and vegetables.  Stripping out the volatile food and energy sectors, core wholesale prices ticked higher by 0.1%.  The Federal Reserve monitors the core prices as an inflation indicator.  The low inflation pressure is a positive sign for markets, as it gives the Fed more room to keep interest rates low.  Lastly, a positive report for housing showed home builders confidence rising in May after 3 straight months of declines.  Internationally, Asian markets rallied on the heels of Wall Street’s gains yesterday.  Europe is mixed as investors digested disappointing GDP data from France and Germany.  France reported GDP contracted 0.2% in the 1st quarter, the 3rd contraction in 4 quarters.  Germany said Q1 GDP growth was 0.1%, well below the 0.3% estimate.  The Euro declined to a 6 week low against the dollar.  Gold and oil prices are lower and treasury prices rose sending rates lower.  Investors have plenty to digest this morning, but the tone so far seems like a negative one. 

Economic Journal - Tuesday, 5/14/2013

(As of 7:23 am PST)

 

The market is snapping back after yesterday’s losses.  Data is light today but included a Labor Department report that showed import prices fell 0.5% in April.  Also, an index that measures optimism among small businesses rose in April after falling in March.  The tone in the market is generally positive today as investors needed a day to shake off fears of the Fed’s exit strategy from its bond buying program.  Speaking in Stockholm today, Philadelphia Fed President Charles Plosser reiterated his views that the Federal Reserve should consider its strategy to slowdown asset purchases by the end of the year.  Plosser was quoted directly about the Fed's bond buying in a Wall Street Journal article released late Friday that had investors in a tizzy over the weekend.  Plosser remarked today that he expects US unemployment to be near 7% by the end of the year.  In company news, Yahoo is getting a boost after an analyst raised its price target on the stock, and Sony shares are up 10% after an influential hedge fund manager urged Sony’s Chief that the company ought to be broken up.  Internationally, Asian markets finished the day mostly lower and Europe is on the rebound after a positive report on industrial production showed production rising 1% in the Euro-Zone in March.  Oil prices are lower today as the International Energy Agency (IEA) said strong oil production in the US is expected to outpace demand from emerging economies.   Gold prices are also slightly lower on the day.

Economic Journal - Monday, 5/13/2013

(As of 7:25 am PST)

 

Markets hit a bit of a speed bump this morning after etching new record highs last week.  A Wall Street Journal article released Friday spooked investors, suggesting that Fed officials have mapped out a plan to exit the central bank’s $85 billion per month bond buying program. It shouldn’t come as a surprise that the Fed is preparing its exit strategy; however the article has caused investors to fear it may be sooner rather than later.  Analysts don’t expect liquidity to dry up anytime soon, citing the Fed’s key economic indicators, the unemployment rate and inflation, as targets that appear to be a long way off.  Equity selling was cooled after a positive report on retail sales showed sales rose 0.1% in April, exceeding expectations.  Internationally, most Asian markets finished the day lower, with Japan bucking the trend on a continued weakening of the yen.  European stocks are trending lower.  Commodities are lower and the US dollar is higher on the Fed rumor.  It’s a “data-rich” week with reports on retail sales, CPI, industrial production, manufacturing, housing, and consumer sentiment giving investors plenty to chew on as earnings season winds down.

Economic Journal - Friday, 5/10/2013

(As of 7:24 am PST)

 

US stocks are inching higher as investors contemplate generally positive overseas trade with remarks on risk by Fed Chairman Ben Bernanke in Chicago this morning.  As we write this, Bernanke has moved into the Q&A portion of his presentation at a banking conference in Chicago, where the central bank chairman has for the most part spoken out on the Fed’s processes of monitoring risk.  Bernanke noted that the Fed is keeping an eye on “excessive risk-taking” as investors reach for yield in this low interest rate environment.  Referring mostly to the credit market, Bernanke said the Fed is monitoring the relationship between asset prices and fundamentals and the risks associated with certain assets if another crisis ensued.  Bernanke was not expected to comment on the Fed’s current bond-buying program (known as QE3), but with low inflation and a stagnant unemployment number it’s not expected that the Fed will unwind its easy money policies anytime soon.  In international news, Asian markets rallied with the Japanese Nikkei closing nearly 3% higher on the day.  Japanese stocks surged as the US dollar climbed above the psychologically important 100-yen level.  The strengthening dollar hit the price of gold, with gold losing $44/oz., or roughly 2.9%.  Oil prices were also down over 2%.  For the most part it’s been a quiet week, but expect a pickup in activity next week as several reports on retail sales, manufacturing, and housing are due out.

Economic Journal - Thursday, 5/9/2013

(As of 7:19 am PST)

 

Markets are lower this morning despite positive data on the jobs front.  The Labor Department reported that jobless claims fell slightly to 323,000 in the week ending May 4.  Economists expected claims to rise to 335,000.  The drop brought claims to the lowest level since January 2008 and helped ease concern over the pace of layoffs due to the sequester and other government cuts.  If the trend continues we likely could see a strong jobs number for May.  In international news, most Asian markets were lower on the day.  Chinese government data showed China’s consumer price index rose 2.4% in April from the year-ago period causing concern over inflation which would likely mean the halting of additional easing measures.  Wholesale prices fell sharply however and most analysts believe inflation pressure is quite low, at least in the short term as the increase remained below the government’s 2013 target of 3%.  Australia surprised with a stronger than expected jobs report which sent the Australian dollar surging on speculation of the next central bank interest rate decision.  European markets fell back on the Chinese inflation data but are slowly recovering as the day progresses.   Gold and oil are both down over 0.5% while interest rates are nearly unchanged.  We’ve traded in a tight range most the week as economic reports have been light. 

Economic Journal - Wednesday, 5/8/2013

(As of 7:10 am PST)

 

It’s another quiet day on the markets with the S&P and Nasdaq trading flat while blue chips in the Dow are down slightly.  International markets looked strong for a third consecutive day.  Asian markets finished higher across the board.  China reported a trade surplus with improvements to both imports and exports after previously reporting a deficit.  In Europe, markets are higher by 0.5% while regional economic data is light.  US markets are neutral as investors reach for news.  It is a very light week for economic data and thus difficult to gain direction for top-down investors.  On the earnings side, Walt Disney shares are off by 1.5% after reporting an earnings beat, while Whole Foods is surging, up nearly 8.5%, after beating estimates.  Gold has recovered most of yesterday’s losses, up 1.25% and oil is up slightly.

Economic Journal - Tuesday, 5/7/2013

(As of 7:12 am PST)

 

Markets are higher for the second straight day on mostly positive international news.  Australia’s central bank announced a surprise rate cut to its policy interest rate, a form of stimulus that surprised investors and trimmed early losses in Australia.  Asian markets finished higher with the Japanese Nikkei up 3.6%, closing at a multi-year high.  Chinese markets were cautious ahead of a slew of economic data due out tomorrow.  In Europe, markets appear strong to the upside as bank stocks are leading the way on positive earnings reports.  At home, markets are inching higher as the Dow crossed over the 15,000 mark once again.  The US dollar is weakening and interest rates are up.  Gold is down over 1% while oil prices are trading flat.  With central bank action continuing to surprise across the globe, investors seem set to continue bidding up this market. 

Economic Journal - Monday, 5/6/2013

(As of 7:05 am PST)

 

Markets are taking a pause this morning after a week which saw US stock indices soar to record highs.  An extremely light economic data calendar this week may give investors reason to evaluate positions and realign portfolios after the market’s recent run up.  News is very light today.  Asian markets are taking their cue from Friday’s US jobs data, and are up.  The Japanese markets were closed for holiday.  European trade is light with the Stoxx 600 flatlined and London markets closed for holiday.  The Nasdaq and S&P are slightly up while the Dow is trading lower.  Apple shares are up 2%, helping to carry the Nasdaq.  Gold is higher by 0.5% and oil is down 0.5% while interest rates are flat.  It appears it’s going to be a quiet day on the market as investors catch their breath after last week’s surge.

Economic Journal - Friday, 5/3/2013

(As of 7:10 am PST)

 

It’s all smiles today with most indexes opening to new record highs.  The new jobs figure came in at its highest level since 2008 and revisions from prior months provided an even stronger glimpse of the strength of the recent economic recovery.  Oil is up and gold is down.  The US currency is falling hard against most other currencies with investor risk appetite very high.  Interest rate yields are on the rise.  It looks like a great day for the bulls today amidst very positive economic data.  The only negative is that the need for more economic stimulus is on the wane and markets have become so reliant on easy money policy that there could be market pain as QE3 is rolled back.  But not today!  It’s all systems go!

Economic Journal - Thursday, 5/2/2013

(As of 7:10 am PST)

 

After a 1% selloff in markets yesterday, stocks are getting a bit of a bounce this morning on a surprise US jobs report and policy announcement from the European Central Bank.  The number of people who filed for unemployment benefits dropped by 18,000 to 324,000 last week the Labor Department announced today.   Claims are at their lowest level since January 2008, but may reflect seasonal oddities rather than an improving labor market.  The month after Easter generally is more volatile for claims.  In any case, the surprise number helped prop up markets in early trading.  In other economic news, the US trade deficit narrowed in March, led by a sharp decline in oil imports.  The shrinking deficit will likely help Q1 GDP as analysts were not projecting the sharp decline in their initial estimates.  In Europe, ECB President Mario Draghi announced earlier today a much anticipated interest rate cut, taking additional accommodative measures after recent data has shown Europe continues to be mired in recession.  In Asia, markets finished the day down.  Commodity prices are turning around with gold up 1.5% and oil higher by 0.67%.  Interest rates are mostly flat, but continue near historic lows.  The average 15 yr. mortgage rate hit a record low today of 2.56%.   

Economic Journal - Wednesday, 5/1/2013

(As of 7:05 am PST)

 

It is a troubled market this morning.  A commodities collapse in gold and oil and most other areas is putting investors on edge.  Troublesome economic reports from Asia, including anemic PMI data from China is adding to investor tension and it appears we are heading for a solid down day.  Federal Reserve minutes are due out today and there is worry that talk of a reduction in economic stimulus later in the year might add to market losses as investors see the Bernanke ‘put’ being reduced and risk becoming more of a factor.  Things can change dramatically in this market with rosy scenarios coming up thorns at times.  It has been a great run in 2013 thus far and now might be a good time to take some profits.