Honeywell (HON)

STOCKS DOWN ON MIXED ECONOMIC/EARNINGS REPORTS

Stocks opened lower this morning as investors strain to digest quarterly earnings & economic reports. The Dow is currently down 123 pts and the SPX is down .3%. Financials and consumer staples are in the green, but most everything else is down.

Here’s a quick look at earnings announcements. Morgan Stanley (MS) is flat after reporting better than expected revenue and earnings; the wealth management business stood out. United Health (UNH) is down 2.8% after reporting better than expected second quarter results and boosting its 2019 profit outlook. Netflix (NFLX) fell 11% after reporting only 2.7 million new subscribers compared with Wall Street forecasts closer to 5 million. Danaher (DHR) is up 1.4% after reporting revenue & earnings slightly ahead of estimates. Honeywell (HON) surged 2% even though second quarter revenue fell slightly short of Wall Street forecasts. Investors felt management executed very well despite a weak global economic environment.

CNBC’s latest “Rapid Update” survey shows that economists believe the US economy is tracking to 1.8% growth in the second quarter, and 2% in the third quarter. That’s roughly equivalent to what the Federal Reserve calls long-term potential growth. Reporter Steve Liesman notes the gap between that figure and the Trump Administration’s goal of 3%, and says achieving that goal would require a boost in capital spending by Corporate America. Unfortunately, the trade war with China is clearly restraining capital spending. So while the US economy achieved about 3% growth last year, don’t expect that this year or next.

The Index of Leading US Indicators (LEI) fell in June, suggesting the 6-month outlook for the US economy is softening. This index is actually a set of 10 different economic indicators designed to predict economic conditions. The primary reasons for the drop were weakness in orders for manufacturing equipment and also building permits. It’s important to note that the index isn’t predicting recession, but the US economy has definitely lost some momentum over the last year. The LEI is 1.6% higher than it was a year ago, and that’s on the low end of the 8-year trend.

China’s economy grew by 6.2% in the second quarter of 2019. That sounds pretty strong, but it’s not. The truth is that growth has been decelerating in China for decades. Part of that trend is natural, due to the law of large numbers. But more recently, growth has slowed due to the trade dispute with the US and also slower economic growth in Europe, a major trading partner to China. Government stimulus, mostly debt-fueled , is being thrown at the problem. But Bloomberg notes that total corporate/household/government debt now equals 300% of China’s annual economic output. While the economy is growing at 6.2%, total debt is growing at an unsustainable 11%. This report, by the way, emboldened President Trump to announce that the US and China are no closer to a trade deal despite ongoing negotiations.


*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.

RETAIL SALES REBOUND

Stocks opened higher this morning (Dow +100 pts; SPX +.13%). Real estate and utilities are catching a bid after a rough week. Industrials are also in the green after Honeywell’s (HON) earnings report. On the other hand, healthcare stocks continue to slide due to political risk. Popular health insurer UnitedHealth (UNH) is down 27% from its December high. Commodities are mixed; copper continues to climb (+1.4%) but oil and iron ore are flat. WTI crude oil is hovering around $63.60/barrel. Bonds are trading higher today as yields tick lower. The 10-year Treasury yield fell back to 2.56%.


*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 20, 2017

Stocks gapped up at the open this morning (Dow +119 pts; SPX +.38%). The cyclicals (banks, transports, semiconductors) are leading the way. The defensives (consumer staples, real estate, utilities) are in the red. This is largely the result of some very encouraging earnings announcements. The VIX Index backed down to 9.8. Bonds are selling off again. The 5-year Treasury yield is up around 2.0% for the first time since mid-March. The 10-year Treasury note yield is up around 2.38%.


*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 9, 2017

Stocks opened little changed this morning (Dow & SPX flat). Utilities, semiconductors and gold miners are all up about half of a percent. On the other hand, retailers are down over 1% and banks are down about .5%. The VIX Index continues to hover around 10, suggesting continued low volatility in the near term. Commodities are mixed. Copper is trading higher on the day and is up nearly 20% so far this year. WTI crude oil is up slightly to trade around $49.40/barrel. US fixed income markets are closed for the Columbus Day holiday. But I’d point out that the 5-year Treasury yield, 1.96%, is now at a 6-month high. And on Friday, the 10-year yield ticked up to 2.36%, a three-month high. After Friday’s job market report, it seems all but certain that the Federal Reserve will hike interest rates in December. 


*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.

April 21, 2017

Stocks are mixed in early trading (Dow flat; SPX -.1%). Traders are exercising caution in front of the French election. Not surprisingly, utilities and gold miners are in the green. But for the most part, individual stocks are responding to their respective earnings announcements (see below). The VIX Index is up around 14.5 but VIX May futures are trading at 14.3. The fact that traders don’t expect a huge spike in volatility suggests a benign outcome for the French election. WTI crude oil is down around $50.50/barrel and most other commodities are down as well. Bonds are slightly higher in price, lower in yield. The 5-year and 10-year Treasury yields are currently at 1.75% and 2.22%, respectively. Those yields are hovering around 5-month lows. 


*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 24, 2016

Stocks opened higher this morning (Dow +79 pts; SPX +.3%). Tech is by far the best performing sector, up .9% but gains are pretty broad-based across retailers, transports, banks, media, chemicals, and even some biotechs. The VIX Index is down to 13 and VIX November futures are trading down to 15. So volatility expectations are coming down a bit. WTI crude oil is down modestly, to $49.75/barrel. That’s dragging on the energy sector this morning. Baker Hughes says US oil exploration companies added 11 oil rigs in the last week; the rig count has been climbing for the last several months. Bonds are selling off a bit as yields continue to march higher. The 5-year Treasury is currently at 1.27% and the 10-year is at 1.76%. 


*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 7, 2016

Stocks opened modestly lower (Dow -26 pts; SPX -.2%). Utilities, financials and energy sectors are up very slightly but everything else is lower. WTI crude oil is trading slightly lower, near $50.20/barrel. The Bloomberg Commodity Index is up .5% this morning on gains in copper, gold. Bonds are mostly unchanged. The 5- and 10-year Treasury yields are hovering around 1.28% and 1.75%, 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.