FOMC

POST FED MEETING HANGOVER

Stocks opened lower this morning (Dow -104 pts; SPX -.58%). There is a bit of pouting among traders in the wake of yesterday’s Fed meeting (see below). Interest rates are rising, and that means bank stocks are up and utilities & real estate are down. Commodities are mostly lower in early trading. Copper has lost about 5% over the last two days. WTI crude oil tumbled more than 3% today to trade around $61.30/barrel. US oil stockpiles are at a two-year high while the volume of US production is at record levels. Bonds are falling in price as a result of the Fed meeting. The 10-year Treasury yield snapped back to 2.55%. Apparently, some traders had positioned with the expectation that the Fed would discuss cutting interest rates in the near future. That seems terribly misguided but appears to have been the case.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

September 26, 2018

September 26, 2018

The major stock market averages opened higher this morning (Dow +49 pts; SPX +.24%). Consumer discretionary, healthcare and telecom sectors are leading the way (+.7%). Strangely enough, financials are sagging in front of the Federal Reserve’s interest rate announcement later this afternoon. In addition, energy and materials sectors are in the red. The dollar is trading slightly higher and commodities are mostly lower. WTI crude oil is back under $72/barrel. Gold is down .5% today and 8% so far this year. Despite a likely interest rate hike later today, the bond market is holding its own. The 5-year and 10-year Treasury yields are hovering at 2.98% and 3.09%, respectively.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

March 22, 2018

Stocks opened sharply lower this morning (Dow -366 pts; SPX -1.3%) on trade war fears. It looks like the SPX wants to re-test its recent correction low. The tech sector is under pressure again today (-2%) as a result of Facebook’s (FB) user account data leak incident, which made its way back into headlines on Monday. Traders are using this as an excuse to take profits across the entire sector. Make no mistake, fundamentals are in the back seat today and traders are taking the lead. That’s why volatility is exploding so quickly. Everything could turn on a dime, however, so don’t be surprised if stocks end the session in the green. Most sectors are down over 1% in early trading. Only consumer staples, real estate and utilities are in the green. European markets are poised to close down about 2% and Asia was mostly lower overnight. Emerging markets stocks are getting hammered (-3%). WTI crude oil is down 1% to $64.50/barrel. Bonds are performing well as yields plunge. The 5-year and 10-year Treasury note yields are hovering around 2.61% and 2.81%, respectively.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

November 30, 2017

Stocks gapped up at the open, reversing yesterday’s decline and setting new highs. The Dow is currently up 181 pts and the SPX is up .67%. The energy sector is rebounding about 1% after a 5% correction earlier this month. Semiconductors are also up 1% after suffering a 5.7% drop over the last few days. Interestingly, European and Asian stock markets were down overnight. And the VIX Index (Dec. futures contract) is trading up near 11.5. The dollar is weaker against a basket of foreign currencies today, mostly due to Euro & Pound strength after Brexit negotiators made constructive progress toward a split. Commodities are mixed; WTI crude is trading up around $57.70/barrel. OPEC meets today in Vienna. Bond yields are slightly higher on the day. The 5-year Treasury yield is up to 2.11% and the 10-year is now at 2.39%.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

October 13, 2017

Stocks gapped up at the open (Dow +30 pts; SPX .17%). Most sectors are in the green as earnings announcements track better than expected. Tech, materials and energy are leading the way. Only healthcare, telecom and utilities are in the red. Commodities are mostly higher on the day and oil is trading up 1% to $51/barrel. Bond prices are modestly higher again today as yields sag. The 5-year Treasury yield is back down around 1.91% and the 10-year yield is back down to 2.29%.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

May 3, 2017

Stocks opened this morning (Dow -65 pts; SPX -.35%). Nine of eleven sectors are lower in early trading, led by real estate and materials (down 1%). Banks are one of the few groups trading up at the moment. The dollar is a bit stronger and commodities are lower. That probably has something to do with the Fed policy meeting today. We’ll get an announcement around 2pm EST. WTI crude oil opened down .5% but quickly turned around and is now up .5% to $47.70/barrel. Bonds are mostly unchanged this morning. The 5-year Treasury yield is 1.83% and the 10-year is trading at 2.29%. With the move in the dollar and real estate, one would think bond yields would be higher. Anyway, given the soft economic data we’ve had over the past six weeks, it’s surprising capital markets would be moving as if they expect a hawkish announcement from the Fed today.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

May 2, 2017

Stocks opened mixed this morning, without direction. The Dow and S&P 500 are currently flat. Gold miners are up over 1% in early trading, whereas banks, semiconductors and biotechs are struggling. The Financials sector has now given up nearly all its year-to-date gains. Both emerging markets and developed foreign stocks are up on the day. The VIX Index is up a bit to trade around 10.2, which is still extremely low. Commodities are mostly lower. Oil is down again to trade around $48.60/barrel. Bonds are slightly higher in price, lower in yield. The 5- and 10-year Treasury yields are trading at 1.83% and 2.31%, respectively. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

March 13, 2017

Stocks opened lower this morning (Dow -48 pts; SPX -.13%). Gold miners and semiconductors are in the green in early trading, but just about everything else is flat-to-down. Interestingly, Europe is poised to close higher and Asia was up overnight. In fact, year-to-date, most of the world’s equity markets have enjoyed a synchronized rally. WTI crude oil is down slightly to trade around $48.30/barrel. Oil is sitting at 3-month lows due to higher US drilling activity and inventories. Oilfield services provider Baker Hughes (BHI) says the number of active drilling rigs has risen for 8 straight weeks. Bonds are mostly unchanged this morning. The 5-year Treasury yield is hovering around 2.11% and the 10-year Treasury is trading at 2.59%. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

December 15, 2016

Stocks Climbed yet again in today's session (Dow +60 pts; SPX +.39%). Financials led the way, up 1% after yesterday’s Fed announcement (see below). WTI crude oil opened lower but reversed course to trade up over $51/barrel. Bonds are selling off again. The 5-year Treasury yield is trading up to 2.09% and the 10-year is up to 2.60% (2+ year high).

The SPX and Dow are now up 6% and 8.7%, respectively since the election. The Nasdaq is up 5.2%. In the same period, the financial sector is up over 18% while the utilities sector is down 1.8%. So lots of dispersion. 

Wells Fargo (WFC) has been found in violation of the Dodd-Frank Act’s “living will” regulation. Last April, the Federal Reserve rejected the bank’s living will plan, along with Bank of America’s, Bank of New York Mellon’s, State Street’s and JP Morgan Chase’s plans. Since then, all but Wells Fargo have corrected deficiencies. The living will is essentially a plan to break up or dissolve large financial institutions in the case of another dire financial crisis. As a consequence, Wells Fargo is now temporarily banned from setting up international business units or acquiring non-bank financial services companies. The bank is scheduled to re-submit a revised living will plan by the end of March. What exactly is deficient about the current plan is hard to understand. Regulators said Wells has problems with the way it organized various “legal entities” and also with its method of sharing services between business units. The stock was down yesterday, but closed up 1% today. 

Yesterday, the Federal Reserve’s Open Market Committee (FOMC) decided to raise its short-term policy interest rate by .25% to .50%. Here are the main takeaways from Fed Chair Janet Yellen’s subsequent press conference: 
The GDP outlook is improved very slightly but she says we're still in for another two years of ~2% economic growth. She expects the unemployment rate to fall further to 4.5% by the end of 2017. And inflation will begin to accelerate from 1.5% today to 1.9% at the end of 2017 to 2.0% at the end of 2018. She now expects the Fed to raise short-term interest rates to about 1.4% by the end of 2017 and to 2.1% at the end of 2018. So putting it all together, the Fed expects a really tight job market, rising inflation, rising interest rates, and sort of disappointing economic growth. If you believe Mrs. Yellen, the outlook is not terribly encouraging; she characterizes it as “highly uncertain." In the aftermath of the announcement, the 10-year Treasury yield spiked to 2.56%, the highest since September 2014.

Retail sales disappointed in November, decelerating a bit to 3.8% y/y growth. I would note that still puts the growth rate at the higher end of the range we’ve seen over the past 2 years. Retailers apparently saw some weakness after two very strong months. Auto sales fell but restaurants and furniture sales improved. Despite the disappointment, Barron’s says “much of this report is constructive and won’t likely be holding down expectations for the holiday shopping season.” 

The Consumer Price Index (CPI)—a closely watched gauge of retail inflation—accelerated to 1.7% y/y growth in November from 1.6% in the prior month. The so-called “core” rate of inflation, which excludes food & energy, held steady at 2.1% y/y growth. Overall inflation levels are very tame but two areas are concerning: rent and medical costs. Rent for primary residence is up 3.9% y/y and medical care costs are up 4% y/y. And within that medical care category, health insurance inflation is 6%!. 

Improving economic data has pushed the Citigroup Economic Surprise Index up to +37. This is a gauge of trending strength in the economy, measuring whether economic data are coming in ahead or behind economists’ expectations. The index fell to -55 last winter but has staged a strong recovery.

Jim Paulsen of Wells Capital Management says the current market environment reminds him of the 1985-1988 time period. Weak economic growth, negative y/y corporate earnings, and poor investor sentiment reigned for a while, but those trends turned around the market was able to stage a huge rally. He cites the following positive factors: 
-    Earnings growth is now trending in the right direction
-    GDP growth is improving
-    Trump “pro-biz hope” could be stimulative
-    German and Japanese bonds yields are off of zero rates
-    Confidence in the recovery is taking hold

Mr. Paulsen believes stocks will lead bonds and cyclical sectors will lead the stock market. This could go on for a while before the rally “runs out of gas against higher rates.”


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

July 28, 2016

Stocks opened modestly lower this morning (Dow -77 pts; SPX -.2%). The Nasdaq is flat. Technology (led by FB, AAPL, V, GRPN, TWTR) and utilities are the only sectors in the green at the moment. Telecoms, energy, biotechs and transports are down the most. The dollar is a bit weaker on the day and most commodities are higher (iron ore, copper). But oil continues to slide; WTI crude oil is trading below $42/barrel. This is a problem for the stock market. Bonds are modestly lower on the day. The 5-year Treasury yield is hovering around 1.1% and the 10-year is at 1.52%. Yesterday, the Federal Reserve’s Open Market Committee (FOMC) declined yet again to raise its short-term policy interest rate. However, the FOMC’s statement was a bit more positive on economic conditions. The bond market continues to believe the Fed will not raise rates this year.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.