Economic Journal - Wednesday, 10/7/2015

(As of 7:15 am PST)

Markets have resumed ‘rally mode’ today after taking a breather on Tuesday, as the S&P500 snapped a five day winning streak. Stocks are higher across the board as energy companies led the way on higher crude oil prices. Oil prices are up 2% this morning to nearly $50 per barrel after a report from the American Petroleum Institute showed weekly inventories declining by 1.2 million barrels in the latest week. Oil prices have been on a surge lately, up 9% in October, while rallying nearly 30% from their August low. The rise in oil has lifted some energy names recently, helping to buoy stocks in the midst of otherwise disappointing economic data. International markets are also participating in today’s rally with Asian and European indexes up across the board. The Bank of Japan kept its monetary policy unchanged Wednesday, but speculation remains high that the central bank could ease policy before its October 30 meeting. European stocks are higher with energy shares leading all sectors. Gold is flat today while interest rates ticked up slightly.

Economic Journal - Tuesday, 10/6/2015

(As of 7:05 am PST)

Stocks opened today’s session slightly higher after yesterday’s rally which saw the S&P500 record its fifth consecutive day of gains – its longest winning streak of the year. With another light data day on the schedule today, investors are taking a bit of a breather ahead of the unofficial kickoff of Q3 earnings season which starts tomorrow. The big story in the recent run-up in stocks has been the resetting of expectations surrounding the Federal Reserve’s timing of its first rate hike in 10 years. Prior to Friday’s jobs report, expectations were that the Fed would likely raise rates by the end of 2015. With the jobs report capping off a recent string of weak economic data, many are now calling for the rate hike to be pushed back to 2016 (hence the market rally over the past few days). Whatever the case, we are about to head into a season which historically has proven to be the best period for stock gains (November-April). It would not surprise us at all to see a year-end rally, especially if company earnings exceed expectations. As mentioned earlier, data is light today although a report on the US trade deficit showed the deficit widening in August as a strong dollar reduced exports to the lowest level in three years. In international news, Asian markets finished the day mostly higher on rumors that Japan’s central bank may pursue additional monetary easing measures at its meeting next week. European stocks are higher across the board following yesterday’s optimism on Wall Street. Gold is up nearly 1% today, while oil is surging nearly 2.5% in the early going. Interest rates are near flat with the 10 yr. treasury yield stabilizing around 2.05%.

Economic Journal - Monday, 10/5/2015

(As of 7:15 am PST)

Stocks are rallying across the globe Monday, with US equities extending their gains from Friday. The stock market’s reversal Friday was the biggest in 4 years, as investors re-evaluated their expectations of a Federal Reserve rate hike on the heels of a surprisingly weak jobs report. It seems the market’s expectation heading into this week is for rates to remain near the zero bound for the remainder of 2015. Asian markets began the new week on a positive note as investors picked up where Wall Street left off on Friday. An economic downgrade from the World Bank of China also helped to lift Chinese stocks as investors speculated future stimulus programs. European indexes are soaring across the board today. Gold and oil prices are higher today while interest rates are up slightly. It’s too early to tell if this rally will last or if it can be attributed to short-covering and market momentum as many strategists are today suggesting. However, with earnings season unofficially kicking off this week, some positive reports may be enough to spark a year-end rally.

Economic Journal - Friday, 10/2/2015

(As of 7:05 am PST)

 

US stocks opened to the downside Friday, as investors took in a surprisingly disappointing jobs report. According to the Labor Department’s non-farm payrolls report, the private sector added 142,000 jobs in September, well below the consensus estimate of 200,000. Worse yet, downward revisions to jobs gains in July and August suggest that labor market conditions weakened throughout the summer. Today’s weak jobs report has reignited the debate as to when the Fed is going to raise interest rates. Prior to today’s report, many were calling for an October rate hike (including several Fed officials), however now it seems questionable if 2015 is even a reasonable target for the Fed to hike rates. Once again, a pattern of uncertainty is emerging. In overseas actions, most Asian markets finished the day higher, with Hong Kong’s Hang Seng index leading the way with a 3% gain on the day. European stocks traded in the green most of the session but have turned lower after the US jobs report was released. Gold is getting some safe haven support, rallying 2% on the day, while oil prices are down slightly. Interest rates are plummeting this morning with the 10 yr. treasury yield falling below 2% to 1.91% as investors sought the safety of the US treasury. With what looks like another week of losses all but certain, let’s hope that the unofficial start of Q3 earnings season next week will provide some relief to this worn out market.

Economic Journal - Thursday, 10/01/2015

(as of 7:30 AM PST)

The new quarter has started on a quiet note.  Yesterday's rally did little to heal the wounds of a brutal September for the markets.  Today's mild losses at the opening are actually encouraging given a nearly 2% gain yesterday.  If indexes can maintain near unchanged that would be a real positive.  Economic data is mostly negative on the domestic front.  The ISM manufacturing index was at its lowest level in two years although still in an expansion mode while jobless claims were up by 10,000, but still in an acceptable range.  Weak global growth seems to be taking a toll on what looked like a vibrant US economic recovery just a couple of months ago.  Oil is up big, up over 3% while precious metals are flat.

Economic Journal - Wednesday, 9/30/2015

(As of 7:15 am PST)

US equities are up to start Wednesday’s session, as investors digested mixed global data on the last day of the third quarter. Despite today’s opening move higher, markets remain on pace to record their worst quarter since 2011. The S&P500 enters today’s session down -2.5% for the week and -8.7% for the quarter. A strong report on Chinese consumer sentiment kicked things into gear early. Despite a fractured stock market, Chinese households are more optimistic than they’ve been in over a year according to the report. The sentiment number sent Asian markets rallying overnight with optimism spilling over into the European and US open. On the home front, economic data is mixed today. According to payroll processor, ADP, the private sector added 200,000 jobs in September, slightly better than expected. Friday’s non-farm payrolls report will give us a better picture of labor market conditions but for now the ADP report is helping to sustain the market’s opening gains. On a more disappointing note, manufacturing activity in the Chicago region fell into contractionary territory in September, as production fell to the lowest level since July 2009. Despite the negative report the markets are holding on to early gains, probably due to technical buying and end of quarter “window-dressing” from mutual fund managers. Gold is down 1% today, while oil prices are up slightly.

Economic Journal - Tuesday, 9/29/2015

(As of 7:15 am PST)

Markets are seesawing around the unchanged line Tuesday, a day after the S&P500 tumbled 2.6% to reach its lowest level since August 24. Global growth concerns sent a wave of selling pressure throughout equity markets Monday with investors caught up in a sea of red to start the week. Asian and European stocks took a beating yesterday, as did US stocks and commodity prices. About the only thing that was up Monday, was volatility, as investors grappled with further weakness in China as well as the issues facing Catalonia’s quest for independence in Spain. Today, markets seem indecisive in their direction (at least in the opening hour of trade). Economic data is light today although a report on US home prices showed prices rose 0.6% in July, in line with expectations. In other news, Goldman Sachs cut its year-end forecast for the S&P500 to 2,000 from 2,100 citing weakness throughout the global economy. Overseas, most Asian indexes finished lower with Japan’s Nikkei notching a 4% decline on the day. European markets are also down for the second consecutive day. Gold and oil prices are up slightly. It’s a tough call on where the market heads from here. With earnings season winding down, there’s not much good news to pull sentiment to the upside until October’s FOMC policy meeting. Expect heightened volatility to stick around until then.