Economic Journal - Wednesday, 6/1/2016

(As of 7:25am, PST)

The markets have welcomed June in with a thud. In the early going the Dow is down 75 points and the S&P500 if off nearly a half a percent. On Tuesday, the S&P500 fell 7 points with eight of the ten sectors trading lower. This is a big week of economic data reporting and investors are taking a cautious approach as the news rolls out. Most of the data here in the U.S. has been positive and has pointed to a stronger economy in the second quarter. The downside to positive news is that it points toward potential rate hikes later this year by the Federal Reserve and investors are trying to decide if that is a good thing. Fresh economic news out this morning is the ISM manufacturing index which reported an increase in May.  The ISM index is formulated from a survey of purchasing managers and is helpful in giving insight on the health of the nation’s manufacturing activity. Auto and Truck sales for the month of May will be reported later in the day. The big news this week will be on Friday when the U.S. jobs report rolls out. Oil is trading lower today ahead of an OPEC meeting on Thursday. The news wasn’t much better overseas with most indices in Europe and Asian trading in the red.

Economic Journal - Tuesday, 5/31/2016

(as of 7:10 AM PST)

Conflicting economic data this morning has investors befuddled and markets split.  Consumer spending is the bright spot with its 1% increase the largest since 2009.  Inflation is showing signs of life, creeping up to .3%, which is actually perceived to be a good thing by most economists.  On the down side of the news was consumer confidence, which dropped to its lowest point since December of last year, and the Chicago PMI, a key measure of industrial activity in the Midwest, which slipped into contractionary territory.  In international news, Asian markets have registered solid gains overnight while Europe is mostly down, but mildly so.  Testimony by Janet Yellen, Federal Reserve Chair, seems to indicate that another interest rate increase is coming sooner than later and that perception is likely suppressing any response from the positive side of the data.  Gold continues to slump while oil is finding support around the $50 per barrel mark.  Expect the threat of higher interest rates to keep markets depressed as the week progresses.

Economic Journal - Friday, 5/27/2016

(as of 7:00 AM PST)

Markets are holding steady this morning after a week that has been a pleasant surprise for investors.  It seems that early in the week investor sentiment was so negative and short sellers were so exposed, that a surprise rally sent bear market strategists running for cover, trying to avoid excessive losses.  With short sellers adding to buying pressure stocks continued their upward trajectory with indexes up almost 2% going into Friday's closing session.  There has been a definite shift in expectations from the Federal Reserve in that an interest rate hike seems much more likely in June based upon positive economic data on the US economy.  But markets have shrugged off interest rate fears putting much more emphasis on signs of a robust economic recovery in the US.  The dollar is continuing to rally against most foreign currencies which is putting downward pressure on oil prices and precious metals.  After rallying to over $50 per barrel this week, oil is giving back some gains today.  Gold has been a victim of a strengthening US dollar, giving back a good chunk of its strong year to date gains.  International markets have been pretty quiet, seeming to be in a consolidation mode, after following the US markets higher this week.

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Economic Journal - Thursday, 5/26/2016

(as of 7:20 am, PST)

Stocks seem to be cooling off after a two day run that saw the Dow post gains of 359 points and the S&P500 notching its highest close since April 27. Sellers seem to be dominating the early trading today as all of the major indices have opened in the red.  There has been some good economic news out the last couple of days that could keep the rally going as the day goes on. Orders for durable goods rose in April led by a higher demand for new cars, trucks and commercial jets and the labor market continues to be strong as a report on weekly jobless claims fell to a one-month low. There was a drop in business spending that may be a cause for concern suggesting that the manufacturing sector may not be as robust as analysts would like to see. Oil continues to be a market driver during this rally as it topped $50 per barrel for the first time in six months. The gains yesterday and today are being fueled by a report released by the U.S. Department of Energy on Wednesday which showed a 4.2 million barrel reduction in oil inventories. Experts had expected a drop but nothing near that level. Investors are still digesting the last of the earnings reports and the results today have been mixed from companies like HP, Inc. and Costco. Asia has continued to follow the lead of the U.S. markets with most indices trading in the green overnight with the European indices mixed. 

Economic Journal - Wednesday, 5/25/2016

(as of 7:10 AM PST)

After marking the best single session showing in nearly three months, can the equity markets avoid the recent trend of giving it all back the next day? So far it looks favorable that the trend might shift as both the Dow and S&P500 are showing impressive gains in early trading. Yesterday ended with the Dow up 1.2% and the S&P500 up 1.4%. Investors seem to be viewing the potential of an interest rate hike by the Fed in June is an indication of a strong U.S. economy. Other factors that may be fueling this surge are oil prices. Oil is approaching $50 per barrel on news from an industry group that reported a larger decline in inventories than expected. More oil data is due out at 7:30 PST when the Energy Information Administration reports on petroleum inventories. Investors seem to be shrugging off a report that revealed the nation’s trade deficit widened in April as imports increased faster than exports. The recent shift toward equities has weighed heavy on gold and the dollar. Both are lower today in early trading. In news around the world, most Asian markets closed higher and European stocks are advancing. 

Economic Journal - Tuesday, 5/24/2016

(as of 7:20 AM PST)

Buyers have returned to US markets in a big way, sending shares up 1% to start the day.  Bellweather tech giant Microsoft is leading the way with positive results from its new software marketing plan.  Even more surprising is the fact that investors are ignoring strong hints of a June interest rate hike.  It has been a long time since we have seen stock prices decouple from interest rate fears like we are seeing today.  New home sales came in very strong and well above expectations, adding to investors enthusiasm.  Asia markets were mixed overnight while Europe is also up big in late trading.  Precious metals are off while oil is slightly to the upside.  Investors seem to think that an aggressive Federal Reserve interest rate hike is an indication that the US economy is much stronger than previous data has portrayed.

Economic Journal - Monday, 5/23/2016

(As of 7:15 am PST)

Comments from two voting members of the Fed this morning have markets backpedaling from their Friday highs. Boston Fed President Rosengren and St. Louis Fed President Bullard separately made statements that left the door open for a June rate hike. As we’ve witnessed throughout the entire month of May, the market seems set to trade in a range bound pattern with little conviction on the part of buyers or sellers to drive pressure in either direction. With earnings season winding down, we’re likely to remain in this pattern for the next couple of weeks with investors highly focused on Fed remarks and US economic data that could influence June’s rate decision. Speaking of data, the calendar is empty today with a report on new home sales set to be released tomorrow. Oil prices are slumping today, down over 1% to $47.90 per barrel on oversupply worries. Gold prices are down while the US dollar index is inching higher. In overseas action, Asian markets finished the day mixed while Europe is heading towards a negative close.

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