Economic Journal - Monday, 6/8/2015

(As of 7:20 am PST)

Stocks are continuing to show signs of weakness Monday as the major US benchmarks opened slightly lower to start the week. Coming in to Monday, the S&P500 stood at its lowest level since early May after enduring two consecutive weeks of losses. With an empty data calendar Monday, investors remained concerned over the timing of the Federal Reserve’s first rate hike as Friday’s robust jobs report strengthened the case for a sooner than later Fed decision. In overseas action Monday, things are not much better. Asian indexes finished the day on a mixed note with the Shanghai index continuing its remarkable rally despite downbeat trade data out of China. European markets are markedly lower as investors continued to fret over the Greek debt situation while the German DAX 30 index officially slipped into a defined correction adding to investor concerns. Gold prices are up slightly while oil is down. The 10 yr. treasury yield is down slightly to 2.37% after soaring last week. It’s a ‘risk-off’ day today with plenty of uncertainty leading markets to trade range-bound. We may see this trend continue for the rest of the week and the remainder of the summer months.

Economic Journal - Friday, 6/5/2015

(as of 7:15 AM PST)

 

Investors are conflicted this morning.  A strong employment report shows that the US economic recovery is starting to flex its muscles.  New jobs grew by 280,000, crushing analyst estimates of 225,000.  In addition there was positive movement of wage growth which is an indicator that economists had been looking for to confirm the strength of the US economy.  Yet markets are down to start the day, adding to yesterday's large decline.  It seems ever more clear that today's great reports confirm that an interest rate hike is right around the corner.  This fact is wreaking havoc on bond and currency markets.  The dollar is soaring in anticipation of higher interest rates while bonds are getting crushed.  After an initial broad market decline, markets have recovered somewhat.  Investors like what they see, but the fear of higher interest rates has them very tentative.  It is a rehash of the old 'good news' is 'bad news' scenario that we have seen over the last few months.  International markets are down as well, excepting Shanghai, which continues its amazing upward run.  Gold and oil are down this morning.  A stronger dollar usually pushes commodity prices downward, and a decision by OPEC to maintain oil production at thirty million barrels a day in spite of large supply overhanging energy markets is adding to downward pressure.  Expect oil prices to continue to deteriorate barring some international event.  It should be a volatile day to end the week with fear and uncertainty leading the way to a negative conclusion.

Economic Journal - Thursday, 6/4/2015

(As of 7:25 am PST)

US equities started Thursday’s trading markedly lower following Europe’s course as volatility in the European bond market picked up yesterday. Higher inflation rates in Europe and comments yesterday from ECB President Mario Draghi regarding volatility in the region, sent panic throughout the bond market.  Yields on the 10-year German bund jumped to the highest level of the year yesterday sending bond prices tumbling in the afternoon. The sell-off in bonds sent money flowing out of riskier assets this morning across Europe. Stocks are down across the board heading into the final hour of trading on the European exchanges. In the US, investors are following the Europe story closely while also setting up for tomorrow’s non-farm payrolls report. As for economic data today, reports were mixed. Jobless claims for last week fell to 276,000 from 284,000 in the prior week, while a report on Q1 productivity fell -3.1%, in line with expectations. Gold and other precious metals are down as is the US dollar as the euro continued its recent winning streak. Expect volatility to stick around for the remainder of the day as markets gear up for an important data day tomorrow.

Economic Journal - Wednesday, 6/3/2015

(as of 7:10 AM PST)

 

Markets opened higher this morning on mixed economic data and optimism that a deal might be reached to fend off a Greek bond default.  The ADP employment report came in slightly above expectations with a very healthy projection of private job growth.  While the report is market moving at times, it has often shown to be unreliable as an indicator.  The ISM services index came in showing solid growth, but showing a decrease from last month,and somewhat below expectations.  The ISM services data point is important because services represent 75% of US economic output.  In other international news, the China ISM services index was up as well, another positive as China tries to transition from an economy so dependent on manufacturing.  Europe markets are up moderately as economies throughout the region appear to be improving (excepting Greece). The dollar continues to lose ground to other currencies while interest rates are up.  Both oil and precious metals are struggling, notching small loses to start the day.  Barring a breakthrough on Greek negotiations it is hard to see markets maintaining current gains given other economic stories.

Economic Journal - Tuesday, 6/2/2015

(as of 7:00 AM PST)

 

It's a rocky road to start the day on US equity markets.  Stocks are giving up yesterday's muted gains as volatility around the world seems to be surging.  Asian markets were mixed with Shanghai still on fire and most other markets down.  Europe is struggling with the Greek financial scenario again.  Questions remain as to whether Greece can make some heavy duty debt repayments to the IMF this month and there are tense and see-saw negotiations going on between European leaders on how to handle a Greek default.  The US dollar index is down markedly, sending the price of most commodities upward, including both gold and oil.  Interest rates are climbing this morning and a negative pall seems to be settling in.  In economic data, factory orders fell again for the eighth time in nine months, but the report did not appear to be moving markets.  It could be a difficult day for stocks as investors grapple with lofty stock valuations. 

Economic Journal - Monday, 6/1/2015

(As of 7:25 am PST)

Stocks opened the week on a mixed note Monday as investors digested consumer economic data in a lead up to Friday’s non-farm payrolls report. Consumer spending was flat in April while personal incomes ticked up, mostly in line with expectations. In a separate report, manufacturing activity rose more than expected in May with the ISM manufacturing index rising from a reading of 51.5 in April to 52.8 in May. International headlines are catching investors eyes as well this morning. Weak manufacturing data in China sent Chinese stocks soaring overnight as investors speculated over future stimulus programs from the Chinese central bank. The Shanghai Composite index soared 4.71% Monday. In Europe, the Greek debt drama rages on. Greece continues to work on a deal with its creditors as Friday’s deadline for the country’s first debt repayment of $327 million is due. Expect volatility to pick up in Europe as the week wears on. Gold and other precious metals are up today while oil prices are flat after surging Friday. The US dollar is up slightly while interest rates are flat.