Economic Journal - Wednesday, 7/31/2013

(As of 7:20 am PST)

 

US stocks opened higher as investors digested a slew of economic data ahead of the Federal Reserve’s latest policy decision.  The US economy expanded in the second quarter with US GDP growth coming in at 1.7%.  Growth was aided by consumer spending and was better than economists’ expectations of a 1% gain.  GDP for Q1 was revised down from 1.8% to 1.1% however.  The economy continues to muddle along as growth has remained below 2% for three straight quarters.  In other economic news, Chicago PMI, also known as the business barometer, edged up in July although slightly lower than expectations.  Lastly, payroll processor ADP reported the private sector added 200,000 jobs in July.  The ADP number is strong, but as we’ve seen in the past, is less reliable than Friday’s US non-farm payrolls report.  In company news, it’s worth noting that shares of Facebook have climbed above their IPO price for the first time since going public in May of last year.  Overseas trade is choppy.  European markets have been back and forth most of the day as investors are cautious going into the Fed’s policy decision later today.  Asian markets are also lower ahead of the news.  A policy statement is due out from the Fed at 2 pm EST today.  Investors will be paying close attention to any signs of the Fed reducing its assets purchase and if so, when that “tapering” will happen.  The “tapering” talk has dominated headlines for the past 6 months and today’s policy statement will have investors glued to the television. 

Economic Journal - Tuesday, 7/30/2013

(As of 7:13 am PST)

 

Markets are rebounding from yesterday’s losses as corporate outlooks improve.  Corporate earnings continue to roll in with several companies, including Aetna, raising their 2013 outlooks today.  Economic reports also bolstered stock prices early with the Case/Shiller 20-city composite index rising 2.4% in May, bringing the year-over-year gain on the US home prices gauge to a 12.2% increase.  Stocks maintained their gains despite a decrease in consumer confidence in July.  The index that measures confidence among consumers fell from 82.1 in June to 80.3 in July.  Most Asian markets rebounded today as well.   Japan’s Nikkei rose 1.5% on a weakened yen, snapping a 4-day losing streak for the index.  Chinese stocks were also higher.  European trade has been choppy on the day as mixed earnings downplayed an upbeat consumer confidence report out of Germany.  Commodities are down with oil continuing to decline to under $104 per barrel and gold is off by $10 per oz.  Interest rates are also down with the 10 yr. treasury yield at 2.58%.  Investors are looking to tomorrow’s Fed statement on interest rates as the key event of the week.  Speculation on when the Fed will taper its bond purchases remains the central question of the market.

Economic Journal - Monday, 7/29/2013

(As of 7:30 am PST)

 

Markets are turning lower to start the week.  A report on pending home sales slipped off its six year peak as rising mortgage rates have slowed the pace of sales.  The economic data calendar is full this week with reports on consumer spending, PMI, construction spending, and non-farm payrolls jobs report all due out.  Also on tap is a monetary policy statement due out by the Federal Reserve on Wednesday.  It appears investors are cautious ahead of this week’s events after markets have seen a sharp run up for the month of July.   Asian markets saw big declines while Europe is seeing slight gains in the final hour of trading.  Oil is down and gold continues to inch higher, up $8 per oz.  Expect some consolidating to take place this week, especially in the front half leading up to the Fed’s policy statement on Wednesday.

Economic Journal - Thursday, 7/25/2013

(As of 7:28 am PST)

 

It’s another mixed start for stocks with the Dow in the red, while the Nasdaq and S&P are inching higher.  The Commerce Dept. reported this morning that US durable goods orders rose 4.2% in June, for the third straight month of gains.  Also, orders for May were revised upward from 3.7% to 5.2%.  The positive activity signals strength in the manufacturing sector of the economy.  Jobless claims rose 7,000 to 343,000 last week, however average claims over the most recent month (a more reliable figure) fell 1,250 to 345,250 showing signs that the labor market is maintaining.  Earnings reports continue to drive markets.  Facebook is leading tech gains with shares up 27% as the social network reported better than expected earnings on Wednesday that blew away analyst estimates.  General Motors, Dow Chemical, and Xerox were other big names that reported strong earnings.  Asian markets finished lower on weak company earnings, while investors were also disappointed in the size and scope of the Chinese stimulus package announced on Wednesday.  Europe followed suit with most indexes in the red.  Gold prices are higher by 0.5% while interest rates continue to tick higher.  It appears another quiet day is in order with earnings driving market direction. 

Economic Journal - Wednesday, 7/24/2013

(As of 7:15 am PST)

 

It’s a back and forth morning for stocks with earnings driving market direction again.  Stock futures were higher going into the open after positive earnings from Apple and Boeing.  Apple beat expectations on the bottom line and shares are up 4% this morning, carrying the Nasdaq higher.  Early gains were pared after Caterpillar reported disappointing earnings.  The global equipment maker reported a drop in Q2 profits and lowered its outlook.  Shares of CAT are down 1.9% and pulling the Dow down with it.  Other big names reporting include AT&T, who reported slipping profits after the bell yesterday, and Ford who posted better than expected earnings.   In economic news, a flash reading of the PMI manufacturing report showed activity picking up in July to the highest level in 4 months.  Also, a housing report showed new US home sales rose 8.3% to an annual rate of 497,000 in June, marking the highest level in 5 years.  International markets are mixed with most Asian markets closing lower after disappointing data out of China which showed a preliminary reading of manufacturing activity slipping in July.  Europe is enjoying a nice trading session after upbeat manufacturing reports out of France, Germany and the euro-zone.  Gold is notching higher, while oil is down 0.5%.  Interest rates jumped this morning with the 10 yr. treasury moving back up to 2.58%.  We’re in the thick of earnings season, with the tone so far a positive one for stocks, however the outlook for earnings in the second half of the year is cause for concern and investors seem to be taking a cautious stance today.

Economic Journal - Tuesday, 7/23/2013

(As of 7:26 am PST)

 

Earnings are driving the market this morning with some sectors being hit more than others.   Several big names have reported so far this morning.  DuPont, Texas Instruments, and Lockheed Martin reported strong earnings which beat expectations.  UPS Q2 profits fell, as did Valero Energy’s with both stocks getting hit.  Also, Freeport McMoRan and Radioshack reported disappointing earnings results that missed estimates.  Investors are keying in on two big names to report after the bell today, Apple and AT&T.  Analysts are projecting another drop in earnings for Apple, citing continued pressure on the iPhone 5. Investors are being cautious on Apple, with shares down 1% ahead of the announcement.  Overseas, markets saw some positive action today.  Asian markets closed in the green led by a jump in Chinese stocks after government leaders committed to supporting economic growth through restructuring measures.  Also, the Nikkei was higher after Japan upgraded its view of the economy for the 3^rd consecutive month.  The pro-growth China news spilled into Europe with positive momentum taking hold for markets.  Gold prices dropped this morning after recording the largest 1 day gain in over a year yesterday.  Interest rates rose ahead of a treasury auction and the US dollar inched higher.  It’s an earnings driven day with Apple’s report after the bell an important event that may set the tone for tomorrow’s trade. 

Economic Journal - Monday, 7/22/2013

(As of 7:24 am PST)

 

Stocks are off to a slow start on Monday with the Nasdaq and S&P500 etching slight gains while the Dow is slightly lower.  McDonald’s is holding back the blue-chip index, as one of world’s largest restaurant chains reported disappointing earnings results for Q2.  In other earnings news, Kimberley-Clark beat on earnings but missed on revenues, while oilfield-services firm Halliburton reported slipping profits.  Economic data is light today, although one report showed existing home sales fell 1.2% in June, while median home prices rose 13.5% from the year-ago period to $214,200.  The housing recovery continues to show tremendous signs of growth, causing some analysts to toss around the idea of a new housing bubble, although prices still remain well below their 2006 peak.  Rising mortgage rates are likely causing the slowdown in existing home sales.  In international news, Asian markets finished higher after election results in Japan which are being viewed as favorable to the future of financial markets.  European markets are mixed.   Gold is rallying today on a falling dollar, with the precious metal rising over 2.5%.  Interest rates are slightly lower as treasury prices rose.  It’s a quiet week on the data front, with reports on durable goods and consumer sentiment due out later in the week.

Economic Journal - Friday, 7/19/2013

(As of 7:25 am PST)

 

After a record week on the stock market investors are taking profits in a data light session on Friday.  There are no major economic reports on the calendar today.  Poor earnings from some big names are sending stocks lower.  In the after-market yesterday, Microsoft and Google reported disappointing results on revenue and earnings.  Shares of Microsoft are down 9% while shares of Google are down 3.7%.  The two tech giants are dragging the tech heavy Nasdaq down with them, with the index down nearly 1%.  Shares of Chipotle are up 6.5% topping the S&P500 as Q2 earnings beat analysts expectations.  International markets are taking profits as well, with most of Asia closing in the red and Europe lower going into the final hour of trading.  Gold continues its march up along with oil.  Treasury prices also moved higher as investors sold stocks.  Expect a down day today as traders lock in gains and rebalance portfolios after two weeks of solid returns. 

Economic Journal - Thursday, 7/18/2013

(As of 7:30 am PST)

 

Stocks are rising this morning with the Dow Jones and S&P 500 already hitting intraday record highs.  Today kicks off day 2 of Ben Bernanke’s testimony before Congress on US economic conditions and the Fed’s monetary policies.  The Chairman did not provide any new information in his testimony yesterday, however he did indicate that a plan for tapering the Fed’s bond purchases is not set in stone.  Big Ben will be discussing the Fed’s interest rate policy today with the Senate Banking Committee.  Positive economic reports are propelling markets higher today.  Jobless claims fell 24,000 in the recent week to the lowest level since May, better than expected.  The Philly Fed manufacturing survey surprised to the upside, surging to its highest level since March 2011, while analysts expected a slight decline.  Lastly, a report on leading economic indicators remained unchanged.  Asian markets closed mixed with the Japanese Nikkei up 1.3% on a weakening yen.  The Shanghai Composite index fell 1% as China’s finance minister said late Wednesday that the Chinese government was not likely to use fiscal stimulus this year.  In Europe, stocks are moving up.  Commodities are higher with gold up $5 and oil continues to surge up over 1% to $107.60.  The recent rise in oil is a negative for the US consumer as it means higher gas prices at the pump and less discretionary dollars to be used for other goods and services.   Look for a positive day on the markets, with earnings announcements impacting certain sectors more than others.

Economic Journal - Wednesday, 7/17/2013

(As of 7:30 am PST)

 

Markets are drifting higher this morning after trading flat in early trading.  Ben Bernanke is set to give his semi-annual testimony before Congress this morning on the overall state of the economy.  In prepared remarks, Bernanke said that tapering of the Fed’s bond buying program is not on a preset path.  The Chairman’s remarks are sending stocks higher as investors view the Fed’s flexibility as a good sign that “easy-money” will likely continue.  In other news, a report on the housing market showed new housing starts fell 9.9% in June, the lowest level since August 2012.  Building permits, which are a sign of future demand, fell 7.5% in June, the steepest decline since June 2011.  Some analysts are concerned that the sharp rise in mortgage rates may slow the housing recovery, while others see the rise in rates as spurring more buyers to rush into the market.  The recovery has been noticeable over the past year, with home prices beginning to pick up in most regional markets.  In earnings related news, the big report today came from Bank of America, who reported a 63% jump in profits in the second quarter.  The stock is up 1.25% on the news.  International markets were keying in on the Bernanke testimony today.  Asian markets were choppy and Europe is higher.  Gold is up and oil is down slightly.  Rates continue to slip with the 10 yr. yield down to 2.47%.  Bernanke’s testimony is overshadowing all other financial news today, with market direction dictated by the Chairman’s remarks.

Economic Journal - Tuesday, 7/16/2013

(As of 7:14 am PST)

 

Stocks are slightly lower this morning but continue to trade at record highs amid several earnings reports. Some big names reported Q2 earnings this morning including Goldman Sachs, whose second quarter net income doubled, far exceeding expectations. Johnson & Johnson beat on revenues, and lifted its full-year earnings guidance while Coca Cola reported declining revenues for Q2. On the data front, industrial production rose 0.3% in June, stronger than expected. Consumer prices also rose in June, led by housing, food, and gasoline prices. Core CPI (which is used by the Federal Reserve to measure inflation) advanced 0.2% in June. Finally, a report on the housing sector showed homebuilder confidence in July rising to the highest level in more than 7 years. Stocks recovered early losses after the housing report was released. In international news, Asian markets finished mostly higher following Wall St. gains from Monday. Europe is down after a report out of Germany showed economic sentiment declining. Gold prices are inching back, up another 0.5% to $1290/oz. while interest rates are slightly lower. At these market tops, investors seem cautiously optimistic, taking a “buy on the dips, sell on the rips” approach as earnings and Fed policy dictate market direction.

Economic Journal - Monday, 7/15/2013

(As of 7:15 am PST)

 

Equity markets are looking to add to record highs set on Friday, opening with slight gains.   Economic reports for the US showed manufacturing in the New York region expanded to a 5 month high, while retail sales rose a less-than-expected 0.4%.   On the earnings side, Citigroup reported a Q2 profit of $4.2 billion, up 42% from a year ago, and much better than expected.  The earnings calendar is full this week with reports coming from Yahoo, Intel, and IBM to name a few.   In international news, China’s economic growth slowed to 7.5% in the second quarter, but growth matched expectations.   Chinese retail sales rose 13.3% in June, better than expected.  The reports helped send stocks higher with the Shanghai composite up nearly 1%.  Japanese markets were closed today for holiday.  European stocks climbed after the Chinese data and are holding on to gains at the end of the session.  Gold continues to climb, adding another .5% or $7 to $1285/oz.  Interest rates are slightly lower.  Early trade is tight around the unchanged line as investors consider mixed economic data with a big earnings week ahead.    

Economic Journal - Friday, 7/12/2013

(As of 7:15 am PST)

 

Markets couldn’t be more flat today as investors digest yesterday’s historic market rise.  Gold, oil and all domestic indexes are near flat line.  The consumer confidence report was slightly lower but solid.  Big banks Wells Fargo and JP Morgan announced earnings that beat expectations. It is possible that investors will take some money off the table in a profit taking mode and that we may give back a part of yesterday’s rally.  But there is no doubt that positive momentum is strong as a result of Ben Bernanke’s assuring comments on Wednesday afternoon.

Economic Journal - Thursday, 7/11/2013

(As of 7:25 am PST)

 

Big Ben has done it again.  At a conference in Boston yesterday afternoon, Bernanke indicated that the Federal Reserve would continue down its path of maintaining financial stability by keeping interest rates low for the foreseeable future.  After 2 months of “tapering talk”, Bernanke’s 180 degree turn caught markets by surprise sending stock and gold futures roaring in the after-market yesterday.  Today’s open saw the Dow up triple digits, the S&P trade through a record high, and gold rebound by 3%.  Although nothing new was said, Bernanke’s message was aimed to reassure a wobbly market that the Fed would continue to provide financial stability to markets as a part of its dual mandate of promoting maximum employment and low inflation.  Big Ben signaled that the Fed wouldn’t rush to raise rates even after the employment target of 6.5% was hit.  Bernanke’s message has sparked a risk on trade with all major sectors rallying today.  Asian markets finished with huge gains and Europe is higher as well.  The chairman’s remarks sent treasury prices higher with the yield on the 10 yr. falling to 2.58%.  All other news is being overshadowed by Bernanke’s remarks and it appears a day of strong market gains is at hand.

Economic Journal - Wednesday, 7/10/2013

(As of 7:17 am PST)

 

It’s a quiet start on Wall Street as investors await release of the Fed’s recent FOMC minutes.  Economists and investors will be scouring the minutes from the June 18-19 meeting, looking for clues on the Fed’s tapering timeline and its process for unwinding its large scale asset purchase program, known as QE3.  After release of the minutes, Fed Chairman Ben Bernanke will be speaking at a conference for economists on the history of the Federal Reserve.  After the conference Bernanke will be holding a Q&A, where his own monetary policies will likely be front and center.  In international news, Asian markets finished mixed after a report on Chinese trade data showed an unexpected decline in Chinese exports.  European markets are lower ahead of the Fed’s minutes.  Gold continues to trickle up, adding 0.5% while interest rates are also higher, with the 10 yr. treasury yield at 2.66%.  It looks to be a quiet morning, with all 3 market indexes looking to hang on to multi-session winning streaks.

Economic Journal - Tuesday, 7/9/2013

(As of 7:10 am PST)

 

Earnings season kicked off yesterday.  Alcoa was the first responder and came in with a solid report and provided optimistic expectations for the future.  While that report was not stellar, it did provide a base that investors liked and powered the markets forward this morning.  International markets are moving up as well.  Worries over Fed policy are on the back burner for the time being, but we expect news later in the week to throw some water on what seems like an overheated scenario.  There is little data coming out today so optimism is likely to prevail and sustain the strong opening.  Oil is down slightly and gold is pushing into the second day of a strong bounce back rally.  Interest rates are stabilizing after surging yesterday.  

Economic Journal - Monday, 7/8/2013

(As of 7:18 am PST)

 

The jobs report from Friday pushed market indexes up robustly in Friday’s quiet trading, and the momentum has carried over with enthusiastic investors continuing the strong buying this morning.   The US economy is definitely on the upswing.  Interest rates are rising in conjunction with the positive momentum, with traders moving more money from the bond market to the stock market.  Gold is enjoying a strong day, while oil is pulling back after running up to over $100 per barrel.  It looks like another solid day of market gains. 

Economic Journal - Friday, 7/5/2013

(As of 7:25 am PST)

Equity markets are marching higher this morning on the heels of a positive jobs report.  The Labor Dept. reported early this morning that the private sector added 195,000 jobs in June, better than the 155,000 expected. The unemployment rate was unchanged at 7.6%.  Analysts views on the report are mixed. Some say the steady unemployment rate bodes well for the Fed to extend its bond purchase program, while others expect tapering to begin as early as September. Market reaction to the report is difficult to read today, with volumes light as many traders are off for the holiday weekend. However, if the movement in the bond market and gold prices are any indication, it appears the market believes the Fed will move earlier rather than later.  Treasury prices dropped sending yields higher, while gold is down 3%. Gold has had a record run since the start of central bank stimulus programs. A QE wind down is not good for the precious metal (at least in the short term).  International markets are mixed with Asia finishing higher and Europe down after a choppy trade.  Expect a quiet day with activity picking up Monday as traders return to the desk and earnings season kicks off.

Economic Journal - Wednesday, 7/3/2013

(As of 7:25 am PST)

 

It’s a data packed morning on Wall Street with trading ending at 1 pm EST today ahead of tomorrow’s Independence Day holiday.  Futures traded lower this morning before a slew of data hit the wires, which helped stocks pare early losses.  Jobs data surprised, with ADP reporting that private sector employment increased by 188,000 from May to June, exceeding expectations.  Jobless claims (people filing for unemployment benefits) fell last week by 5,000.  As we’ve seen in the past, the ADP data can be slightly exaggerated in either direction and less reliable than the Labor Department’s non-farm payrolls report, which is due out Friday.  A strong jobs report Friday could have a negative effect on markets, as an improving economy means less stimulus from the Fed.  Other reports today showed the US trade deficit widened by 12.1% in May and a report on the US services sector showed slower growth for June.  Volatility is up today on international news.  Asian markets finished on a lower note on weak data out of China.  Europe is choppy as investors worry over a collapse of Portugal’s government after a recent exit of two cabinet members.  Oil continues to surge, up over $101.50 per barrel as the turmoil in Egypt rages on.  Gold prices are creeping higher today.  Expect choppy trading to continue in this action packed shortened session. 

 

 ***US markets will be closed tomorrow for Independence Day and will re-open on Friday.  Have a safe and happy 4^th of July!***

Economic Journal - Tuesday, 7/2/2013

(As of 7:25 am PST)

 

Solid US economic data reversed an early negative open for markets.  European turmoil was evident at the beginning of trading, but was quickly overcome by a good factory orders report showing growth of 2%.  Auto sales also came in strong.  The US currency was broadly higher against most other currencies because global investors are sensing that the US economic recovery is far ahead of other regional economies.  Gold is down slightly after strong gains yesterday and oil continues to surge upward.  The upward trend in oil is sure to spill over to higher gas prices as the summer rolls on.  Interest rates can’t seem to shake the effects of Federal Reserve discussions on when Quantitative Easing will start to taper, although mortgage rates have dropped slightly in the last week.  Expect a quiet day of trading with many key players on the sidelines in this holiday shortened week.

Economic Journal - Monday, 7/1/2013

(As of 7:18 am PST)

 

Markets are rallying to start the 3^rd quarter with all three major indexes up over 1%.  US markets got a lift in early trade on positive data out of Europe and Japan.  Euro-zone manufacturing activity improved to a 16 month high, but still remained in contractionary territory.  Asian markets were mixed as Chinese manufacturing slowed, but a Japanese survey showed a sharp improvement in sentiment among large businesses.  The Nikkei rose 1.28% as the yen weakened against the dollar.  Wall St. gains are strengthening after a report on ISM manufacturing improved in May and a report on construction spending showed an increase as well.  In company news, shares of Apple are up nearly 2.5% after Raymond James upgraded the stock.  After shedding 14% in June, gold is enjoying a nice start to the quarter, up 1% on the session.  It looks like a positive day is in the making but expect volatility to return to the markets in this holiday shortened week as investors look to Friday’s jobs report for signs of the Fed’s next policy move.  Weaning markets off the Fed’s asset purchase program will continue to be the main storyline in the 3rd quarter.