Economic Journal - Wednesday, 6/17/2015

(As of 7:10 am PST)

Equity prices edged higher this morning as investors awaited a policy statement from the Federal Reserve later this afternoon. The FOMC concludes its two day policy meeting this afternoon, with investors expecting that the Fed will wait to raise short term interest rates until later this year. It’s an important moment for the Fed however, and any miscommunication or lack of communication from Janet Yellen on the timing of a rate hike could disrupt markets. It’s widely expected that the Fed will move rates later in the fall. The Fed statement will be released at 2 pm EST today followed by a press conference from Janet Yellen regarding the central bank's economic outlook. In overseas action, Asian markets finished the day on a mixed note, with the Shanghai composite index taking back some of yesterday’s steep losses. European stocks are down slightly as the lack of progress in the Greece debt negotiations persisted. Oil prices are higher with energy stocks leading S&P500 gainers ahead of a report on crude inventories later today. Gold is trading flat while interest rates are moving higher.  

Economic Journal, Tuesday, 6/16/2015

(as of 7:00 AM PST)

 

US stocks are attempting a positive about face this morning, bucking the down markets of Asia and Europe.  While housing starts failed to meet expectations, housing permits were much stronger than anticipated leaving investors wondering how the Federal Reserve will react tomorrow regarding interest rates.  Most analysts have concluded that interest rates will not be raised tomorrow but that October is a more likely target for Fed action.  With not much economic data flowing, Greece continues to provide drama while Russian aggression against Ukraine is once again starting to make headlines.  After a stinging few days of market declines, any sign of stabilization would be very welcome at this point.  In other markets, gold is giving up yesterday's gains while oil is slightly higher and interest rates have stabilized.

Economic Journal - Monday, 6/15/2015

(as of 7:10 AM PST)

 

Turmoil in international markets is spilling over to US indexes with markets down triple digits once again.  Both Asia and Europe are sustaining losses of as much as 2%, with a lack of progress in Greek financial negotiations being the main culprit.  Leaders of Greece are digging in against creditors that are demanding more austerity in state spending.  There is also fear of contagion in other European states with Italian and Spanish bond yields spiking.  In addition to the bad news from Europe there was an unpleasant surprise in US economic data with manufacturing falling hard last month, when markets were anticipating a recovery.  On the plus side, homebuilder sentiment was at a nine month high and well above expectations.  Oil is down on the assumption that slower economic growth will be a drag on demand, while gold is higher it what appears to be investors looking for a safe haven in a tough market.  Markets could turn abruptly to the positive side if there are positive developments on Greece, but it sure feels like that investors are looking for reasons to take profits in what seems to be a very frothy market.

Economic Journal - Friday, 6/12/2015

(as of 7:00 AM PST)

 

A big reversal today started yesterday afternoon.  Frustration on the lack of progress in the Greek financial talks is showing up in a big market downturn in Europe that has extended to a triple digit loss as the Dow opened this morning.  There is also a hint that there might be contagion risk from a Greek exit from the Euro with Italian and Spanish bond yields spiking.  The US dollar is on the rise pulling most commodities down including oil and gold.  Oil is getting hit especially hard since Saudi Arabia has increased oil production, trying to put more 'frackers' out of business and resolidify their dominance in energy markets.  Economic news is limited today and nothing market moving is on the wires yet.  Usually markets recover as the day wears on, but watch out for complacency and the potential for a hard fall.

Economic Journal - Thursday, 6/11/2015

(as of 7:10 AM PST)

 

International markets followed US markets higher reflecting yesterday's strong showing.  Optimism about a Greek financial bailout is adding to investor enthusiasm and positive US economic data in terms of a strong retail sails report is providing a catalyst to continue yesterday's rally.  There is a temporary respite from rising interest rates but the trend definitely seems upward with mortgage rates hitting an eight month high.  The possibility of a Federal Reserve rate hike seems much closer but, interestingly, markets have temporarily disconnected from the 'good news is bad news' scenario that we have seen over the last year.  Buyers are returning and the bulls again seem in control.  Oil and gold are down and the US dollar is much stronger against most foreign currencies.

Economic Journal - Wednesday, 6/10/2015

(as of 7:15 AM PST)

Investors are shrugging off worries of a future rate hike and stocks are up big to begin the day.  The US dollar is down against most foreign currencies and the price of oil and gold are benefitting, both up solidly as well.  International economic data has been generally upbeat with Europe's economy showing signs of recovery.  Asia stocks are mixed.  Problems continue to persist, but the market bears seem to be taking an early summer holiday, ignoring Greece, ignoring rising yields and also the foregone conclusion that the Federal Reserve will raise interest rates sooner than later.  One key data point with a 'good news is bad news' implication is the fact that wages in the US grew by 5% in the first quarter of 2015.  The Federal Reserve Bank has been looking at wage growth as a factor to determine when to pull the trigger of raising rates and this number points to a sooner than later rate hike strategy.  Therefore, we might see the market give up some gains as the day wears on since the reason for this morning's rally is somewhat of a mystery.

Economic Journal - Tuesday, 6/9/2015

(As of 7:15 am PST)

Wall Street opened down for the fourth straight session Tuesday as investors remained cautious over the prospects of a Federal Reserve rate hike later this year. Recent upbeat economic data, including Friday’s non-farm payrolls report has strengthened the case for a Fed rate hike sometime in 2015. The likeliness of a June hike has faded but an autumn hike is certainly on the table which has investors allocating capital in a more conservative manner heading into the summer months. Volatility overseas is also adding to uncertainty on Wall Street. Disappointing data out of China today led to a choppy session for Asian stocks. In Europe, stocks were on pace to record their sixth straight session of losses, the longest losing streak since December of last year. Worries over Greece and a US interest rate hike have European investors skittish. Germany’s DAX 30 index moved deeper into contractionary territory Tuesday, adding to the selling pressure. Data at home is light once again today. A report on wholesale inventories showed inventories rose 0.4% in April, while the JOLTS (Job Openings and Labor Turnover Survey) report showed job openings rising to 5.38 million in April compared to March’s 5.11 million. Interest rates are climbing today with the 10 yr. yield up to 2.45% while gold and oil prices are also higher. Based on today’s open it looks like we could be in for another volatile trading session.