Monthly Archives

October 2016

Meidell: Stocks’ pattern could be inflation-based

By | Published Articles

Inflation concerns appear to be getting the blame for the stock market’s melancholy behavior the past few days.

During a speech in Berlin earlier this week, European Central Bank President Mario Draghi said he believed the ECB’s policy of lowering rates to record low levels and buying massive amounts of bonds had benefited the economy by “boosting consumption and investment and creating jobs.” Draghi went on to declare victory over deflation, stating that the ECB had “succeeded” in removing the threat of cascading prices and falling demand, after a recent report showed inflation rose 0.4 percent.

Stocks began the trading day in the green, but it didn’t take long for gains to turn into losses. Though the major moving averages vacillated in a narrow trading range again for most of the day, by the closing bell they were trading at their lows of the day, with the Standard and Poor’s 500 down 0.3 percent and Nasdaq Composite lower by 0.62 percent.

Investors seem to be connecting the dots that there are now more signs of inflation going which includes, in some cases, higher commodity prices. As a result, bond prices are falling this week — both in the U.S. and abroad — with the ICE U.S. Treasury 20+ Year Bond index down 1.78 percent over the past five trading days. Not surprisingly, dividend-paying stocks are declining as well, with the Dow Jones U.S. Real Estate index down 2.29 percent on Thursday alone.

This week, we are seeing a large inflow of money into Treasury Inflation Protected Securities (TIPS) Bonds. For all those investors who may have been lured to take on more risk in exchange for higher interest rates, this might be a wake-up call.

The top-performing bonds this week are indicative of investors anticipating higher interest rates, led by the Barclays 1-3 Month U.S. Treasury Bill Index, unchanged over the past five trading days.

Economic Update

By | Weekly Newsletter

Investors seem to be pleased with the results so far this earnings season, as we saw on Tuesday, as stocks rose following better than expected earnings news from several well-known blue chip companies. The major market averages gapped higher at the opening bell, then held onto their gains throughout the day with the Standard and Poor’s 500 higher by 0.62 percent and the Nasdaq Composite gaining 0.85 percent on Tuesday.

However, investors now have several macro events to consider beyond just quarterly earnings. In addition to the presidential election just three weeks away, investors are considering the next interest rate move from the Federal Reserve, and looking for greater clarity on the Brexit. In the short term, favorable earnings reports that would have previously driven stock prices higher may have less of an effect until the uncertainty of the election is over, or the Federal Reserve meeting in December or both.

Back in 2013, just knowing the Federal Reserve was planning to cut financial stimulus sent the bond market into a tailspin, with bond prices falling and interest rates rising. Though some are anticipating such an event prior to the next rate increase, the bond market seems less nervous this time around. This could be due in part to recent comments by Fed vice-chairman Stanley Fischer; who at the beginning of the week said that variables such as “weak growth prospects, an aging population, poor investments and a slowing growth trend overseas,” were impeding raising interest rates.

Commodity prices got a lift on Tuesday, as the U.S. Dollar stabilized on the idea that interests would not go much higher in the short term.

Sincerely,
Laif E. Meidell, CMT

We hope that you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

RETAIL SALES JUMP 0.6%

This September gain was impressive – minus auto sales, the advance was still 0.5%. In August, both headline and core retail sales fell 0.2%. While consumers bought more last month, they were less confident earlier this month – the University of Michigan’s initial October consumer sentiment index fell 3.3 points to 87.9.1

INTEREST RATES MAY SOON RISE

The minutes from September’s Federal Reserve policy meeting affirmed what some investors suspected. One, last month’s decision not to raise the federal funds rate was a “close call.” Two, the Federal Open Market Committee expects to make a move “relatively soon.” Last month, 74% of economists responding to a Wall Street Journal survey thought the central bank would raise rates in December.2

PRODUCER PRICE INDEX UP 0.3%

A 2.5% advance in energy prices became the biggest factor in September’s PPI gain. The headline PPI rose 0.7% in the 12 months ending in September.3

STOCKS PULL BACK AS EARNINGS SEASON BEGINS

During five choppy trading days last week, the Dow Jones Industrial Average retreated 0.56% to 18,138.38; the S&P 500, 0.96% to 2,132.98; and the Nasdaq Composite, 1.48% to 5,214.16. The CBOE Volatility Index closed at 16.00 Friday, up 18.69% for the week.4

THIS WEEK

Monday, Wall Street looks at earnings from Bank of America, Celanese, Del Taco, Hasbro, IBM, J.B. Hunt, Lennox International, and Netflix, plus numbers on September industrial output. On Tuesday, BlackRock, Domino’s Pizza, Goldman Sachs, Harley-Davidson, Intel, Johnson & Johnson, Philip Morris, Yahoo!, Regions Financial, UnitedHealth, and W.W. Grainger join the earnings parade, and the September CPI arrives. Abbott Labs, American Express, BB&T, Citrix, eBay, Mattel, Halliburton, Morgan Stanley, Northern Trust, Seagate, St. Jude Medical, SuperValu, U.S. Bancorp, and United Rentals all report earnings Wednesday; investors will also consider September data on housing starts and building permits, and a new Federal Reserve Beige Book. Thursday offers earnings from Alaska Air, American Airlines, BoNY Mellon, Dunkin’ Brands, E*TRADE, Fifth Third, IMAX, Invacare, Microsoft, Nucor, PayPal, PulteGroup, Quest Diagnostics, Schlumberger, Union Pacific, Verizon, and Walgreens Boots Alliance; reports on initial jobless claims and September existing home sales also appear. Friday, the key earnings reports come from General Electric, Honeywell International, McDonalds, Parker Hannifin, SunTrust, and Whirlpool.

10-17-16

10-11-2016 Weekly American Wealth Review

By | Weekly Newsletter

The major market averages were given a boost on Monday led by energy stocks, after Russian President Vladimir Putin said he would support international efforts to put a cap on oil supplies and hoped OPEC producers would come to an agreement on appropriate production curbs at their next meeting in November. U.S. crude oil lurched higher following the news, to close up 2.71 percent at $51.15 per barrel, the highest close since June of this year. The Standard and Poor’s 500 rose 0.46 percent and the Nasdaq Composite gained 0.69 percent, as the Dow Jones U.S. Energy index led the broad stock market gaining 1.64 percent on the day.

Investors received uneventful news on the U.S. economy last Friday, after the non-farms payroll report showed that fewer jobs were created during the month of September than expected, with only 156,000 jobs created. The employment report is a key indicator of the strength in the U.S. economy, and is heavily relied upon by the Federal Reserve to determine our countries monetary policy.

The deceleration in the rise of interest rates over the past two days suggests investors believe the probability the Federal Reserve will raise interest rates in November has diminished. In the meantime, the likelihood of a rate increase in December is now 69.2 percent according to the Fed fun futures. As we get closer to the December FOMC meeting, there is a greater chance that bonds and dividend paying stocks will start to underperform.Today is the start of quarterly earnings season with the first major corporations releasing their third quarter results before this morning’s opening bell. Though there are fewer economic reports due out this week, investors are looking forward to the FOMC minutes due out this Wednesday, to get a sense of the Feds discussion on interest rates during last month’s meeting.

Sincerely,
Laif E. Meidell, CMT

We hope that you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

HIRING PICKED UP IN THE THIRD QUARTER

Employers added 156,000 net new jobs to their payrolls in September, the Department of Labor stated Friday. The August gain was revised up to 167,000, so monthly job growth averaged 192,000 in Q3, improved from 146,000 in Q2. The unemployment rate ticked up to 5.0% in September; the U-6 underemployment rate remained at 9.7%. Yearly wage growth reached 2.6%, with the average hourly wage rising six cents to $25.79.1,2

ISM INDICES SHOW A SEPTEMBER REBOUND

America’s manufacturing sector grew again last month; the Institute for Supply Management’s factory PMI improved to 51.5 in September, recovering from its recessionary August mark of 49.4. The Institute’s non-manufacturing PMI surged north 5.7 points last month, rising to 57.1.2

OIL & GOLD PRICES HEAD IN OPPOSITE DIRECTIONS

On Friday, gold closed down at $1,251.90 on the COMEX, falling about 5% for the week. Light sweet crude advanced just over 3% last week, closing at $49.81 on the NYMEX Friday, even after a 1.3% loss during the trading week’s last session.3

STOCKS END THE WEEK SLIGHTLY LOWER

The numbers contained within Friday’s jobs report did not exactly spark a rally, so the S&P 500 settled at 2,153.74, losing 0.67% for the week. The Nasdaq Composite and Dow Jones Industrial Average both descended 0.37% across five trading days to respective Friday closes of 18,240.49 and 5,292.40.4

THIS WEEK

Monday is Columbus Day. Wall Street will be open for business, but federal government offices and banks will be closed. Tuesday, a new earnings season starts with results from Alcoa, Barracuda Networks, and Fastenal. Wednesday, the Federal Reserve releases minutes from its September monetary policy meeting, and CSX Corp. announces Q3 earnings. Thursday’s earnings parade includes results from Delta Air Lines, Winnebago, and Wynn Resorts; a new initial jobless claims report also arrives. Fed chair Janet Yellen speaks on Friday in Boston about the economic recovery; Wall Street will consider her comments, along with the preliminary October University of Michigan consumer sentiment index, September retail sales numbers, the September PPI, and earnings from Citigroup, JPMorgan Chase, PNC, and Wells Fargo.

Meidell: Stock market not surging or ceding ground

By | Published Articles

Due to their lack of upward progress since mid-July, the major market averages look as though they have hit the ceiling. However, as we saw on Wednesday, the market averages aren’t giving up much ground either, as stocks rallied to recover nearly all of the losses earlier in the week. Though the Standard & Poor’s 500 rose 0.43 percent and the Nasdaq Composite gained 0.50 percent, not all sectors of the market were a winner on Wednesday. This was particularly true of dividend-paying sectors like utilities and real estate.

It was the ninth negative day in a row for the Dow Jones U.S. Utilities index, which slid another 0.28 percent, and the fifth negative day in a row for the Dow Jones U.S. Real Estate index, which fell 1.93 percent on Wednesday.

Just two months ago, the utilities, real estate and telecommunications sectors were among the top performers of the year, but recent declines in these sectors over the past few weeks have brought them back to Earth. Though some blame overvaluations of the sectors for their latest losses, concerns over higher interest rates are beginning to filter their way back into the markets as well. This could be seen in falling bond prices in both the U.S. and Europe after a media report discussed the probability that the European Central Bank could begin scaling back its quantitative easing program before it is scheduled to end next March. The potential impact of rising interest rates is certainly something to be closely followed.

On Wednesday, the U.S. crude oil price continued higher, closing at $49.70 per barrel after the weekly EIA petroleum status report indicated a 3.0 million-barrel decline in inventory levels. There was additional good news on the economy from the ISM non-manufacturing index for September coming in a 57.1, well above consensus and the prior month’s reading of 51.4. Any reading of 50 or above indicates expansion. Of course, investors are most interested in the September U.S. employment report due out on Friday.

The top-performing countries for the week appear to be getting a boost from rising commodity prices such as crude oil. At the front of the pack of this week’s leaders is the MSCI Norway IMI index, gaining 3.88 percent over the past five trading days, followed by the MSCI All Argentina index, up 3.71 percent over the same period.

Reno Gazette Journal, 10-6-2016

Meidell: Market off to halting start in October

By | Published Articles

Stocks began the new month on Monday with little enthusiasm, as the major market averages gave back a portion of last Friday’s gains. Maybe it was British Prime Minster Theresa May’s comments on Sunday that took wind out of the market’s sales, when she said the U.K. would start separating itself from the European Union by the end of March. Many have wondered what shape the Brexit would take, but so far the intent seems to be for what some are calling a “hard Brexit” or, in other words, a clean break. Though the major market averages attempted to recover some of their losses in the last hour of trading, by the closing bell the Standard & Poor’s 500 was off 0.33 percent and the Nasdaq Composite had slipped 0.21 percent.

On Monday, investors learned that the manufacturing sector of the U.S. economy expanded for the month of September with the ISM Manufacturing Index gaining over 2 points to 51.4. This was a welcome relief after the August manufacturing index contracted, due to an unexpected decline in new orders, and sent the index below 50 to 49.4. It takes a reading of 50 or above to indicate expansion. Some of the highlights of the September report were new orders gaining 6 points to 55.1, production up 1.4 points to 52.8 and export orders, which held firm at 52.0.

In other economic news, motor vehicle sales also improved during September, gaining 4.7 percent to a 17.8 million annualized rate. This higher-than-expected growth in auto sales is solid evidence that the U.S. economy was strong during the month of September, as sales of North American-made models grew by 6.0 percent 14.2 million. Strong auto sales are typically a reflection of a healthy jobs market, something we expect to hear more about this Friday when the September employment report is released.

This week’s top commodities tended to be energy-related after receiving a boost from last week’s OPEC meeting, where talk of capping oil production seemed to be getting some traction among oil-producing nations. For the week, the top-performing commodities were led by the S&P GSCI Lead index, up 7.65 percent over the past five trading days, followed by the S&P GSCI Crude Oil index, higher by 6.26 percent over the same period.

10-4-2016 Weekly American Wealth Review

By | Weekly Newsletter

Stocks began the new month on Monday with little enthusiasm, as the major market averages gave back a portion of last Friday’s gains. Maybe it was British Prime Minister Theresa May’s comments on Sunday that took wind out of the markets’ sales, when she said the U.K. would start separating itself from the European Union by the end of March. Many have wondered what shape the Brexit would take, but so far the intent seems to be for what some are calling a “hard Brexit” or in other words a clean break. Though the major market averages attempted to recover some of their losses in the last hour of trading, by the closing bell, the Standard and Poor’s 500 was off 0.33 percent and the Nasdaq Composite had slipped 0.21 percent.

On Monday, investors learned that the manufacturing sector of the U.S. economy expanded for the month of September with the ISM Manufacturing Index gaining over 2 points to 51.4. This was a welcome relief after the August manufacturing index contracted, due to an unexpected decline in new orders, and sending the index below 50 to 49.4. It takes a reading of 50 or above to indicate expansion. Some of the highlights of the September report were new orders gaining 6 points to 55.1, production up 1.4 points to 52.8, and export orders which held firm at 52.0.

In other economic news, motor vehicle sales also improved during September gaining 4.7 percent to a 17.8 million annualized rate. This higher than expected growth in auto sales is solid evidence that the U.S. economy was strong during the month of September, as sales of North American made models grew by 6.0 percent to 14.2 million. Strong auto sales are typically a reflection of a health jobs market, something we expect to hear more about this Friday when the September employment report is released.

Sincerely,
Laif E. Meidell, CMT

We hope that you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

NO ADVANCE IN CONSUMER SPENDING

Personal spending was flat in August even as personal incomes rose 0.2%. These numbers from the Department of Commerce fell short of expectations: economists polled by MarketWatch had forecast a 0.2% gain in both categories. In other news linked to consumer spending, the federal government revised second-quarter GDP up to 1.4% in its third estimate; it had previously put Q2 growth at 1.1%.1

HOUSEHOLD CONFIDENCE IMPROVES

September brought a big jump in the Conference Board’s closely watched consumer confidence index, which rose 3.0 points to 104.1. The University of Michigan’s consumer sentiment index ended September at 91.2, up from 89.8 at the end of August; the main factor in that gain was an improved outlook among higher-income households.1,2

NEW HOME SALES DIP 7.6%

This housing indicator tends to be very volatile, and this August retreat follows a 13.8% July advance. The median new home price was down 5.3% in August from a year earlier, the Census Bureau noted. Looking at other real estate data, the July edition of the 20-city S&P/Case-Shiller home price index showed a 5.0% annual increase in existing home values, ticking down from 5.1% in June; the National Association of Realtors said that pending home sales fell 2.4% in August.1,3

MINOR GAINS IN A WEEK OF MAJOR UPS & DOWNS

The last week of September saw the three major U.S. equity indices advance. The Dow Jones Industrial Average rose 0.26%; the S&P 500 gained 0.17%; and the Nasdaq Composite added 0.12%. The September 30 settlements: Dow, 18,308.15; S&P, 2,168.27; Nasdaq, 5,312.00.4

THIS WEEK

Monday offers ISM’s September manufacturing PMI and quarterly results from The Container Store. Tuesday, Wall Street considers earnings from Darden Restaurants and Micron Technology. On Wednesday, ISM releases its September service sector PMI; ADP issues its September payrolls report; data on August factory orders appears; and Constellation Brands, Monsanto, and Yum! Brands announce earnings. In addition to a new initial jobless claims report, Thursday brings the latest Challenger job-cut data and Q3 results from Ruby Tuesday. Friday, the focus turns to the Department of Labor’s September jobs report.

Market Review


Pat Meidell, Laif Meidell and Heidi Foster are Registered Representatives with and offer securities through M.S. Howells & Co., member FINRA/SIPC. Investment advice is offered through American Wealth Management, a registered investment advisor and a separate entity from M.S. Howells & Co. A portion of this material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 – marketwatch.com/economy-politics/calendars/economic [9/30/16] 2 – sca.isr.umich.edu [9/30/16] 3 – latimes.com/business/la-fi-new-home-sales-20160926-snap-story.html [9/26/16] 4 – markets.wsj.com/us [9/30/16] 5 – bigcharts.marketwatch.com/historical/default.asp [9/30/16] 6 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [9/30/16] 7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [9/30/16]