Economic Journal - Tuesday, 11/10/2015

(as of 7:30 AM PST)

Monday was a tough day in the markets.  All major indexes were down 1% plus, pushing the Dow and S&P 500 negative for the year.  Some analysists are concerned that investors are steering clear of stocks in fear of a December rate hike and that this trend looks a lot like what we saw in August and September. This morning’s activity reflects a continuation of that negative sentiment. The economic calendar is light with little data to move markets. Global markets followed the U.S. overnight, most of them in the red. Europe is also exhibiting weakness with political issues in Portugal weighing on markets. Oil is trading up in the early going while gold is down. With profit reports winding down and little economic data, attention is being focused on the Federal Reserve’s big December rate hike decision and history shows us that investors have been very cautious in this type of environment.

Economic Journal - Monday, 11/9/2015

(As of 7:20 am PST)

US stocks opened lower Monday after six consecutive weeks of gains, as market participants reacted to Friday’s strong jobs report. Friday’s surprise report, which showed a whopping 271,000 jobs added in October, has increased the prospect of a Fed rate increase in December with analysts now predicting a 70% probability of such an event occurring. Interest rates soared on Friday and are continuing their uptrend today on the speculation of a near term rate hike. The 10 yr. US treasury yield is trading at 2.36% today after trading below 2% just three weeks ago. China made headlines overnight as weak trade data caught Asian investors by surprise. Chinese exports fell nearly 7% year-over-year in October, while imports fell a shocking 18%. The weakness had speculators predicting that Chinese authorities may introduce new stimulus measures to strengthen the Chinese economy. The Shanghai composite index rallied 1.5% Monday. European markets have been on a slow decline all day. It appears the rate hike talk has heated back up and may be the excuse the market was looking for to take some profits after a spectacular performance in October.

Economic Journal - Friday, 11/6/2015

(as of 6:45 AM PST)

 

The mild opening of US stock markets this morning belies the vibrancy and volatility of underlying investment categories.  The jobs report was a blowout number.  271,000 jobs were created, far above analyst estimates of 160,000.  The unemployment rate dropped to 5%, a number not seen in many years, and, to top it off, wages are finally growing, up by .4% as part of that same report.  The US dollar is soaring, interest rates are smartly higher and commodities are getting punished by the strengthening dollar.  Stock investors are unsettled by the news however, since the strength of the economy almost assures that the Federal Reserve will start its long awaited program of cranking up interest rates in December.  It's the old 'good news is bad news' theme since more economic stimulus is definitely off the table and deleveraging of stock market investments might create a wave of selling as a result.  For today, however, it is more likely that buyers will return to the market based on this overwhelmingly positive news as interest rate fears subside as the day wears on.

Economic Journal - Thursday, 11/5/2015

(As of 7:15 am PST)

After closing out its first down day in over a week yesterday, the markets have opened today with modest gains as investors respond to mixed earnings reports and data on weekly jobless claims and productivity. Facebook leads the way on the earnings front with a strong report that caused its shares to move upward while Whole Foods and Qualcomm declined on less than stellar reports. The markets are still digesting Fed Chairwoman Janet Yellen’s speech yesterday where she strongly hinted of a possible rate hike in December. In global news, most European indexes are higher despite disappointing factory data out of Germany. This updraft is likely due to a conditioned response lately of bad news leading to the European Central Bank bolstering stimulus measures before year end. Asian markets finished the day on a mixed note. The expectation of a rate hike here at home has affected the Treasury yield curve, where the 2-year note yield jumped to its highest level since 2011. The big news due out at the end of the week is the non-farm payrolls report due out tomorrow which could likely have an impact on markets as the week closes out. Both gold and oil are lower in early trading.

Economic Journal - Wednesday, 11/4/2015

(as of 7:20 AM PST)

The economic news today is mixed with a potential slowdown in the labor market but better news for exports. A report on private-sector employment from ADP showed that 182,000 job were created last month, less than forecast, while September gains were revised down. The U.S. trade deficit fell in September. The improvement in the deficit in September was due to imports being $4.2 billion less than August imports and exports increasing by $3 billion. Much of the import decline was because of declining purchases of foreign oil, a low number not seen in years.  Global news saw China’s stock market soar over 4% on a better than expected Services Report for October. The last of the earnings reports are coming in mixed. Notable reports saw disappointing news from US Steel, while Tesla and Time Warner both topped earnings expectations. Investors will have their eyes on additional economic data throughout the day and a large slate of Fed officials speaking today, highlighted by Fed Chair Yellen, who will be at a House Financial Services Committee hearing at 10am ET speaking on bank regulation and supervision. Gold is trading up today after heavy losses in yesterday’s trading while oil is down modestly.  US stock indexes are trading down today after an initial positive boost.  A strong ISM services report is likely attract more buying as the day wears on setting the stage for a continuation of the three day winning streak.  The ISM services index is a strong indication of domestic economic activity since services represent 75% of GDP. 

Economic Journal - Tuesday, 11/3/2015

(As of 7:00 am PST)

U.S. stocks opened the day flat after a stellar day yesterday. On Monday, markets brushed off weak manufacturing data while responding to positive earnings reports with a strong surge higher. Yesterday’s rally pushed the Dow into positive territory for the year while the S&P 500 hit its highest level since August which almost seems impossible given the recent doom and gloom days of summer. Today could see some pullback and profit taking if the early trading is any indicator of what lies ahead. Market drivers on the reporting front are Sprint whose shares fell 9% in premarket after reporting a larger loss than expected. Conversely American Eagle Outfitters gained 7% after its earnings forecast was better than the previous quarter. Earnings reporting will be winding down the balance of the week. Economic news is light today with a report on September factory orders due out later this morning followed by a report on auto sales later this afternoon. International markets were mixed with Asia participating in some of yesterday’s rally on Wall Street, while Europe is down slightly ahead of a speech from ECB President Mario Draghi. Gold is down another 1% today, while oil is up over 1%.

Economic Journal - Monday, 11/2/2015

(as of 6:45 AM PST)

 

It's a good start to November on US markets with stocks higher on solid economic data.  The October ISM number, a key indicator of economic activity was down slightly, but above analyst expectations and showing slight economic growth at 50.1.  Anything above 50 indicates expansion. Construction spending for September was strong, and well above market expectations. On international markets, Asia was down heavily with Chinese arrests for insider trading making investors in that country very nervous.  Europe, on the other hand, is eyeing a possible economic stimulus program and most indexes are strongly to the plus side.  Good GDP and economic data in Europe are adding to investor enthusiasm.  Earning season in the US is starting to wind down.  There are a few big reports due out this week, but analysts will soon be looking to potential holiday sales and 4th Quarter projections to set market direction.  Gold continues to slump while oil is down as well.