Economic Journal - Friday, 10/30/2015

(As of 7:05 am PST)

Markets inched higher at the open of Friday’s trading session, but are now meandering near the unchanged line as investors sifted through mostly positive earnings reports and a mixed batch of economic data. Earnings from Chevron, ExxonMobil and Starbucks all met or exceeded expectations helping to set the tone early. Economic data is mixed today with a report on personal income and spending falling short of expectations in September. Consumer spending rose 0.1%, the smallest amount since the start of the year, as consumers spent less at the pump due to another significant drop in oil prices. On the positive side, business activity as measured by the Chicago PMI, surged in October, rising from contraction territory in September back to the highest level since January. In other important news, the Senate passed a budget bill early Friday that would avoid a government shutdown and raise the debt ceiling. International markets are lower heading into the weekend, perhaps on news that the Bank of Japan has decided to leave its monetary policy unchanged. Gold and oil prices are down slightly while interest rates are inching higher. Heading into today’s session the S&P500 is up nearly 9% in the month of October – the best month for stocks in 4 years. It wouldn’t be a surprise to see some consolidation activity in the coming weeks, however the case for a year end Santa Claus rally still looks plausible.

Economic Journal - Thursday, 10/29/2015

(as of 7:15 AM PST)

Wednesday proved to be an eventful day in the markets following the Federal Reserve’s announcement that they would hold on increasing interest rates. There was an initial sell-off after the announcement but then the markets rebounded significantly before the closing bell as investors appeared to embrace the news. In early trading today, both the Dow and the S&P 500 are down in what seems to be a profit taking move. Economic news is mixed this morning. On the positive side, the four week moving average for initial claims fell below 260,000 for the first time since 1973 for the week ending October 24. Conversely, the GDP report showed that the U.S. economy slowed to an annual growth rate of 1.5% in the third quarter, down from 3.9% in the spring. The decline was due mostly to a smaller buildup in warehouse inventories, so its market impact was not significant. Oil is up almost 1% following yesterday’s 6% rally, while gold is trading down heavily in reaction to a potential Fed rate hike in December. Overall October has turned out to be very promising so far. Both the Dow and The S&P 500 are up nearly 9% for the month.  

 

Economic Journal - Wednesday, 10/28/2015

(as of 6:50 AM PST)

 

Today's markets are continuing a pattern we have seen over the past several sessions.  Indexes are mixed, but treading close to breakeven across the board.  The big event after yesterday's market close was Apple reporting that it had once again surpassed estimates on revenue and profit.  Investors took a ho-hum approach and bid the stock up a mere 2%.  The good, but not great, report from Apple was just not enough to live up to the hype that Apple usually generates.  Another big tech component, IBM, continues to be affected by reports of an SEC investigation.  Today the Federal Reserve Committee is expected to keep interest rates unchanged and provide guidance that a rate hike may be put off to next year.  Any surprise by the Fed of a more aggressive posture might send stocks broadly lower.  Asia is mostly down while European markets are up modestly across the board.  Today's big winner so far is gold, up $15 an ounce due mostly to a weaker US dollar.  Oil is also on the rebound, up over 1%. 

Economic Journal - Tuesday, 10/27/2015

(As of 7:20 am PST)

Tuesday is off to a slow start as slumping oil prices, mixed earnings reports and weak economic data weighed on stocks. It’s a busy day on the earnings front, with most reports coming in mixed so far. Investor attention will be focused throughout the day on Apple, which reports after the bell today. In addition to a torrent of earnings reports early, markets have had a batch of poor economic news to contend with. Durable goods declined 1.2% in September marking the second consecutive monthly decline as softness in manufacturing activity weighed on the report. In other disappointing news, US consumer confidence fell in October more than economists expected. In overseas action, news is light with Asian and European markets mixed on the day. A decline in oil prices is adding to the downward pressure today as oil dropped over 2% to just under $43 per barrel. Gold is flat while interest rates are moving lower on the safe-haven play. 

Economic Journal - Monday, 10/26/2015

(As of 7:15 am PST)

The markets open up the week rather flat in anticipation of a mid-week meeting of the Federal Open Market Committee as well as a full slate of earnings reports that will include Apple. Most experts don’t believe that the Fed will make a policy change so the meeting will likely not be as market moving as past meetings have. The continuation of earnings reporting will be the big story this week. Markets in Asia finished on a positive note in overnight trading after the announcement last week that the People’s Bank of China cut interest rates. It was the sixth rate cut in less than a year for China’s central bank, which has some investors more worried about the underlying economic problems China faces rather than the stimulus it continues to provide.  Economic data is light today with a report on new-home sales showing sales fell 11.5% in September – the lowest rate in 10 months. Oil is down 1% today while gold is up slightly. After four straight weeks of gains, it wouldn’t be a surprise to see some profit taking in the lead up to Wednesday’s Fed meeting.

Economic Journal - Friday, 10/23/2015

(As of 7:20 am PST)

After an impressive 300+ point rally on Thursday for the Dow, the markets opened Friday on an equally positive trend. Yesterday’s surge was fueled by the European Central Bank’s report that there would be more stimulus before the end of the year. Today’s updraft is being fueled by positive earnings reports from Google’s Alphabet Inc., Amazon and Microsoft who all reported after the bell Thursday. Those reports have pushed the tech-heavy Nasdaq up to a 2% gain in early trading. Overnight, China continued the theme of more stimulus. The People’s Bank of China didn’t just hint of stimulus, it actually provided it. The PBOC cut its one-year lending rate to 4.35%, and its one-year deposit rate to 1.50% while lowering the required reserve ratio for qualifying institutions.  The surprise stimulus announcement from China sent Asian and European markets soaring into the weekend while adding fuel to an already positive rally on Wall Street. Earnings will continue to drive today’s action with little economic data in store. With this week’s rally, the S&P500 has recovered most of this summer’s losses and returned to positive gains for the year. As we head into a historically optimistic time of the year for stocks, it wouldn’t be a surprise to see this rally pick up steam.

Economic Journal - Thursday, 10/22/2015

(As of 7:25 am PST)

US markets are rallying today after two consecutive days of mild losses, as investors sifted through a deluge of earnings reports as well as digested fresh comments from European Central Bank President Mario Draghi, that the central bank stands ready to provide additional stimulus measures to the fledgling European economy. European markets are leading the charge higher with the broad indexes up over 2% heading into the final hour of trade. US investors traded the European news higher prior to the opening bell, while mixed earnings seemed to be overlooked in light of the European stimulus announcement. An upbeat earnings report from McDonald’s provided some lift early, however mixed reports from 3M, Under Armour and Caterpillar could weigh on the indexes as the day wears on. Some big names reporting after the bell today include Amazon, Pandora, AT&T, Microsoft, and Google’s spinoff Alphabet Inc. The anticipation of these reports may influence late day trading as investors jockey to adjust positions ahead of those reports. Economic data is light today, although a report on jobless claims showed the 4-week average of claims falling to a near 40 year low. Oil prices are up 1% to just under $46 per barrel, while gold is trading flat on the day. Interest rates are flat with the 10 yr. treasury yield hovering around 2.00%. It’s nice to see a strong rally early on today, but it wouldn’t be a surprise to see gains dissipate as the day wears on.

Economic Journal - Wednesday, 10/21/2015

(As of 7:25 am PST)

After opening the week with two relatively flat days, the markets have started Wednesday on a positive note. The updraft seems to be in response to some positive earnings reports as the earning season kicks into full gear. In the good news category, GM has gotten a big boost after beating profit and revenue projections and both Biogen and Boeing reported better than expected third quarter results. On the flip side, Yahoo reported disappointing sales and Chipotle posted a profit miss and their shares are in danger of the biggest ever percentage sell-off. Another big batch of earnings reports will post later today. Oil is the other news maker today ahead of a meeting of OPEC members and non-members and the latest U.S. supply data. Any recovery of oil prices faces obstacles of more supply from Iran and weak demand in China. Oil prices have fallen close to 10% from their October high. Weekly inventory data from the Energy Information Administration will be released later this morning and will have some market-moving influence. Gold is currently trading down while interest rates are noticeably up this morning with the 10 Year U.S. Treasury up 1.8%.

Economic Journal - Tuesday, 10/20/2015

(As of 7:20 am PST)

Earnings announcements are dominating the headlines Tuesday as investors sifted through a mixed batch of reports this morning. Nearly 20 companies are set to report today as Q3 earnings season hits its peak this week. Harley Davidson kicked things off ahead of the opening bell with a disappointing profit miss that sent the stock tumbling more than 10%. Shares of Travelers Cos., United Technologies and Verizon are all seeing gains early in the session after reporting earnings ahead of forecast. Earnings announcements from Chipotle, Yahoo and Discover Financial are all expected after the closing bell today. More than 100 companies are set to report earnings this week, with the market bracing for a flood of news. Economic news is light today although a couple reports on housing are grabbing some attention. Housing starts for September rose to an 8 year high as construction of new homes rose 6.5%. However, building permits, a sign of future demand, fell 5% in September. Overall, housing demand remains strong. In overseas action, Asian markets finished Tuesday’s session mixed while European indexes look set to close with modest losses. Gold, oil and other commodities are ticking higher as are interest rates. With the Federal Reserve in its “blackout period” now, unable to speak directly to its interest rate policies until its Oct 27-28 meeting, expect market action to be driven mostly by earnings.

Economic Journal - Monday, 10/19/2015

(As of 7:20 am PST)

US stocks opened down slightly on Monday as investors digested disappointing Chinese GDP data along with a mixed batch of earnings. China’s economy grew by 6.9% in the third quarter, falling below Beijing’s target of 7% for the first time since 2009. It was widely expected that China would report sub 7% growth for Q3, with the official consensus forecast calling for 6.8%. So, a slightly better than expected report actually muted the market’s reaction a bit. Asian stocks were mixed across the board while European indexes are also trading mixed heading into the final hour of the session.  Weak corporate earnings are also weighing down markets this morning. Morgan Stanley shares fell 5% as the bank missed estimates on earnings and revenue. Shares of Halliburton are down as well after disappointing third quarter results. With a light economic data calendar this week, activity will certainly be driven by earnings with more than 20% of S&P500 companies set to report this week. Some notable names include Microsoft, Amazon, Google, McDonald’s, Verizon, Chipotle, and AT&T. Expect market action to be sector-specific as earnings results drive this week’s trade. Lastly, regarding other markets today – oil prices are down nearly 2% on oversupply concerns while gold is down slightly. Interest rates are flat.

Economic Journal - Friday, 10/16/2015

(As of 7:10 am PST)

Today marks the end of a week that saw the Dow Jones Industrial Average snap a 7 day win streak with a mid-week selloff followed by a rally that brought the major indices to their highest levels since August. This back and forth trend makes it difficult to predict how the week will end especially since there isn’t much fundamental ground for any of these movements to stand on. The prevailing thought that continues to drive this upward trend is the sentiment that the Fed won’t raise interest rates before the end of the year. But as we have said before, the premise of this decision is built on bad economic data. Third quarter earnings reports are for the most part supporting the bad economic news theme. Companies like Mattel, WD-40 Company, W.W. Grainger and Kansas City Southern all missed their estimates while Wynn Resorts, General Electric, Honeywell and Schlumberger were all in-line or topped estimates. The one thing all of these companies managed to have in common is that not one of them reported a year-over-year increase in revenue. It’s a light reporting day with reports on industrial production and job openings due out later today. Oil prices are up today following a down day yesterday based on news that there was a large addition to U.S. crude stockpiles last week which is a sign that the global oversupply of crude isn’t going away. Gold is down slightly in early trading.

Economic Journal - Thursday, 10/15/2015

(As of 7:05 am PST)

US stocks opened to the upside this morning after a down day yesterday which saw the Dow finish with 1% losses as a weak forecast from Wal-Mart Stores pulled down the blue-chip index. Today’s positive momentum began overnight in Asia as Chinese markets led the way with 2% gains. News of reform plans, a potential merger deal between two large Chinese shipping companies, and rumors of future stimulus supported the Chinese stock market rally which sustained itself most of the day. The buying continued into the European open with most indexes tracking toward 1% gains on the day. Economic data in the US is mixed today. Jobless claims fell 7,000 last week to 255,000 marking the lowest level since 1973 as less people applied for unemployment benefits. The monthly average for claims fell to 265,000, also a multi-year low. The consumer price index fell -0.2% in September, matching expectations, as a further drop in gasoline prices led the decline. Excluding the volatile food and energy sectors, “core” CPI rose 0.2%. Lastly a report on manufacturing activity in the New York region, showed activity contracting in October, but at a slower pace than last month. In other economic news, several Federal speakers will be hitting the microphones today throughout the country as investors will be watching closely for any comments or clues as to the timing of the Fed’s interest rate hike. Earnings continue to trickle in today, with reports from Netflix and Goldman Sachs coming up short of expectations while Citigroup and United HealthCare beat estimates. There’s a lot going on today it seems, with plenty of positive and negative news that could keep us in a tight back and forth range for awhile.

Economic Journal - Wednesday, 10/14/2015

(As of 7:25 am PST)

The Dow Jones Industrial Average ended a 7 day winning streak yesterday and may be headed in the same direction today if early trading is any indication. At least that’s what it should do if logic prevails given some of the global economic news that is out there today. News from China continues to be negative.  Weaker than expected inflation data including a 5.9% year-over-year decline in China’s producer price index sent most Asian markets south overnight. Today’s U.S. economic calendar hasn’t produced much uplifting news either. Producer prices declined 0.5% in September which was caused by the drop in energy prices, indicating inflation remains relatively tame. On the flip side, retail sales increased 0.1%. Earnings continue to come in mixed this week. JPMorgan Chase and Intel both reported lower than expected earnings, while Bank of America and Delta reported better than expected results. Oil is trading slightly lower and gold is up slightly in what looks like a back and forth day.

Economic Journal - Tuesday, 10/13/2015

(As of 7:10 am PST)

We’re off to a slow start today with the major US indexes opening in the red as the Dow Jones Industrial Average fights to keep alive a 7 day winning streak – its longest of the year. Disappointing Chinese trade data is to blame for today’s weak open. China’s exports and imports fell in September signaling that weak global demand continues to impact the world’s second largest economy. Third quarter growth data is set to be released next week for China, with many analysts projecting that China could fall short of its 7% target for the year. Today’s data sent most Asian markets into the red, with European stocks also falling across the board. Data is light on the home front as investors traded down the China report while looking for bright spots on the earnings front. Shares of Johnson and Johnson rose in pre-market trading as the company reported better than expected earnings. Molson Coors Brewing Co. is surging 12% to lead all S&P500 companies today as news of an Anheuser-Busch takeover of SABMiller PLC spread throughout the beer-making industry. Earnings announcements from Intel and JPMorgan Chase will be closely watched after the bell today. Gold is trading flat today, while oil is up slightly. Interest rates are down slightly as investors sought the safety of the US treasury. 

Economic Journal - Monday, 10/12/2015

(as of 7:00 AM PST)

 

Expect a day of light trading with many investors taking the day off for the quasi-holiday of Columbus Day.  Stock markets are open while the Treasury markets are closed.  Don't expect much movement one way or another.  International markets were mixed with Asia closing strong and Europe slipping as the day wears on.  In  a mega merger, Dell computer is purchasing data storage giant EMC, in one of the largest tech acquisitions on record.  In unrelated news, pharmaceutical leader Lilly is taking a beating, down over 10%, after abandoning one of their potential blockbuster drugs.  Oil and gold are both higher in early going.  Earnings season kicks into full gear later this weak and prospects are not encouraging.  It will be difficult for markets to continue to rally unless company earnings far exceed current projections.

Economic Journal - Friday, 10/09/2015

(as of 7:00 AM PST)

The markets have opened up to begin Friday and are on pace to have the biggest weekly gain of 2015. As we expected, the release of the minutes for the September 16-17 FOMC meeting has provided some fuel for the current upward trend we are seeing right now. The committee reported that inflation data has yet to support a 2015 rate hike and that it will likely continue through the rest of the year which would cause them to follow the zero interest rate policy for now. It’s a light day on the economic news front but the kick off to the earnings season will more than likely be another needle mover as we end the week. Early reports don’t point to a stellar earnings season as Alcoa came up shy of third quarter estimates and they also reported that they are cutting production growth forecasts for their China business. Oil is also grabbing some market attention as it has crossed over the $50 per barrel threshold. The surge in oil prices is boosting the energy sector as it is up 13% since the start of October. Gold is following suit with the rest of the market today and is trading up in early trading.

Economic Journal - Thursday, 10/8/2015

(As of 7:15 am PST)

Markets are down to start Thursday’s session, as the Dow Jones Industrial Average looked to snap a four day winning streak. There’s little data out today to influence the morning’s selling pressure. What we’re likely seeing is some profit taking and consolidation activity after the recent run-up in stocks. International markets opened mixed with Asian stocks mostly down on the day, although China’s Shanghai index bucked the trend, finishing up nearly 3% after a five session holiday. Believe it or not, that was a disappointment for overseas investors, as many expected the Chinese markets to rally further to keep pace with the gains in global markets over the past several days. European markets are up slightly heading into the final hour of trading. As mentioned previously, economic data is light today, although a report on jobless claims showed the number of people filing for unemployment benefits fell 13,000 to 263,000 last week – the lowest level since mid-July. Later this afternoon the Fed will release the minutes of its recent September FOMC meeting. Investors will be looking for clues as to why the central bank decided to delay its interest-rate hike and also what the Fed’s outlook is for the remainder of 2016. Lastly, the unofficial kickoff of Q3 earnings season begins after the closing bell today, as aluminum-maker Alcoa gets set to announce their earnings. An upside surprise would be a nice way to start what otherwise is expected to be one of the weakest earnings seasons in years.