Monthly Archives

January 2017

Meidell: The extremes of earnings season

By | Published Articles

Earnings season can be a time of feast and famine, as companies announce their earnings and investors respond with either an outpouring of exuberance that at times mirrors a Super Bowl victory, while at other times can resemble the disdain of an angry mob. These oversized moves in stock prices can also have an effect on the stocks indexes of which they are members. This usually explains why the major market averages can at times disagree with one another on a given day.

This was the case on Tuesday as the Dow Jones Industrial Average fell 0.54 percent while the Nasdaq Composite held on to a slight gain of 0.02 percent, as a couple of leading financial companies that make up the Dow suffered above average losses on the day.

Most U.S. market averages began the day trading in negative territory but by the closing bell were solidly in the green. Despite the Dow’s poor performance on Tuesday, U.S. small company stocks finished higher with the Russell 2000 small company index gaining 0.70 percent.

If there was one event that stood out during the day it was President Trumps’ meeting with leading U.S. drug manufacturers on Tuesday. After telling the drug manufacturers a few weeks ago that they were “getting away with murder” due to high prices, this time he seemed to adopt a softer tone. During the meeting Trump backed away from the idea that the U.S. would be setting drug prices and reinforced his plan to lower taxes, speed up regulatory approval and help protect drugmakers from foreign countries able to charge less because U.S. consumers pay higher prices. In return Trump maintained that the companies needed to relocate there manufacturing plants to the U.S.

Not surprisingly health care and biotechnology stocks received a boost following the news with the Dow Jones U.S. Heath care index up 1.54 percent and the Nasdaq Biotechnology index higher by 2.84 percent on the day. Tuesday’s gains also shifted health care stocks into the top position for the week with the Dow Jones U.S. Health care index gaining 1.98 percent over the past five trading days, followed by the Dow Jones U.S. Utilities index rising 1.57 percent over the same period.

Meidell: Markets reacting to White House actions

By | Published Articles

If there was any doubt that the stock market rally was following both policy expectations and news coming from the new White House administration, the markets’ response Monday should put those doubts to rest.

Stocks gapped lower at the opening bell, after a tumultuous weekend news cycle that saw President Trump’s executive order to restrict immigration from seven countries, among other things.

Though still finishing lower on the day, the major averages went on to recoup roughly half their early losses, with the Standard and Poor’s 500 declining 0.60 percent and the Nasdaq Composite falling 0.83 percent by the closing bell.

Most investors have been anxiously awaiting the new administration’s economic promises — such as tax reform — but after this weekend’s events, might be realizing that they will have to exercise more patience than expected.

A large number of companies will be reporting their quarterly earnings this week, which will give investors a better sense of the strength of the U.S. economy. On Wednesday, following the FOMC meeting, the Federal Reserve will release its guidance on interest rates. Though there is little chance the Fed will raise interest rates at this time, investors will be listening for any changes to the Fed’s expectation of raising interest rates roughly three times later this year.

For the week, only a select few commodities finished in positive territory, with the top-performing commodities led by the S&P GSCI Platinum index, up 1.38 percent over the past five trading days, followed by the S&P GSCI Lean Hogs index, higher by 0.66 percent. Most commodities finished the week in negative territory, with the largest losses seen in the wheat market.

January 30, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

If there was any doubt that the U.S. stock market was following both policy expectations and news coming from the new White House administration, the markets response on Monday should have put some of those doubts to rest. Stocks gapped lower at the opening bell, after a tumultuous news cycle over the weekend, following President Trump’s executive order to restrict immigration from seven countries and temporary suspend the refugee program for four months, among other things.

Roughly 90 minutes into the trading day the major market averages reached their low point for the day as selling subsided. Though still finishing lower on the day, the major averages went on to recoup roughly half over their early losses, with the Standard and Poor’s 500 declining 0.60 percent by the closing bell. The new administration has been hard at work its first week in office making good on its campaign promises, but Monday’s declines in the stock market is a reminder that it won’t always be smooth sailing for the Trump Team.

Most investors have been anxiously awaiting the new administration’s economic promises such as tax reform, but after this weekend’s events may be realizing that they will have to exercise more patience than they expected.

A large number of companies will be reporting their quarterly earnings this week, which will give investors a better sense of the strength of the U.S. economy. On Wednesday of this week, following the FOMC meeting, the Federal Reserve will release its guidance on interest rates. Though there is little chance the Fed will raise interest rates at this time, investors will be listening for any changes to the Fed’s expectation of raising interest rates roughly three times later this year.

Sincerely,
Laif E. Meidell, CMT

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

Weekly Economic Update

HOUSEHOLD SENTIMENT GAUGE RISES AGAIN

The University of Michigan’s Index of Consumer Sentiment gained 0.4 points from its preliminary reading this month to reach a final January mark of 98.5. That represents a 12-year peak for the index, which stood at 92.0 in January 2016.1,2HOME SALES

FELL IN DECEMBER

Given costlier mortgages, rising prices, and tight inventory, the December retreat for resales was not surprising. The National Association of Realtors said that existing home sales slipped by 2.8% last month. New home sales dropped 10.4%, but the Census Bureau stated that they increased 12.2% for 2016, marking the best year for new home buying since 2007.3

FIRST ESTIMATE OF Q4 GDP: 1.9%

If that Department of Commerce appraisal holds, it will mean that the economy grew just 1.9% for all of 2016, contrasting with 2.6% expansion in 2015. Hard goods orders fell 0.4% in December, but rose 1.7% minus defense orders.2
DOW TOPS 20,000, STOCKS REGAIN MOMENTUM
Leaving some mid-January doldrums behind, the major indices rallied nicely last week. The Dow advanced 1.34% to 20,093.78; the Nasdaq Composite, 1.90% to 5,660.78; and the S&P 500, 1.03% to 2,294.69. The CBOE VIX “fear index” finished the week down at 10.53.4

THIS WEEK

Monday offers reports on December personal spending and pending home sales. The Conference Board’s monthly consumer confidence index and a new Case-Shiller home price index appear Tuesday, along with earnings from Aetna, Aflac, Ally Financial, Anadarko Petroleum, Apple, Chubb, Coach, Eli Lilly, ExxonMobil, Harley-Davidson, MasterCard, Nucor, Pfizer, Sprint, Under Armour, UPS, U.S. Steel, Valero Energy, and Xerox. Wednesday, the Federal Reserve wraps up a policy meeting, ADP’s January payrolls report and ISM’s January manufacturing PMI arrive, and Allstate, Altria, AmeriGas, Ameriprise Financial, Anthem, Avery Dennison, Celanese, Energizer Holdings, Exelon, Facebook, Ingersoll-Rand, MetLife, Pitney Bowes, and Symantec all announce earnings. Thursday’s earnings parade includes results from Amazon, Amgen, Callaway Golf, Chipotle, Cigna, ConocoPhillips, Coty, Estee Lauder, GoPro, Hanesbrands, International Paper, Motorola Solutions, Parker, Philip Morris, Merck, Ralph Lauren, Ryder, Sirius XM, SkyWest, Snap-On, and Visa; also, Challenger issues January job-cut data, and new initial claims figures are released. Investors consider the January ISM services PMI and January hiring figures Friday, plus earnings from AutoNation, Clorox, Hershey, Phillips 66, Regis, and Weyerhaeuser.

Meidell: Markets react positively to Trump’s plans on infrastructure and trade

By | Published Articles

The major market averages looked as though they were ready to begin their next leg higher on Tuesday, after news from the Whitehouse suggested the president was taking steps to open the way for new infrastructure projects. President Trump began the day on Tuesday signing an executive action that revives the two oil pipeline projects, Keystone XL and Dakota Access, that were put on hold by the prior administration. The President said he intended to streamline the permit process for infrastructure projects, and that pipelines built in the U.S. were to be built using U.S. produced steel.

Later, during a meeting with executives of U.S. auto manufacturers, President Trump said he would make it easier to build manufacturing plants here in the U.S. by expediting environment reviews for manufacturers. Ford’s CEO Mark Fields said he was “very encouraged by the President and the economic policies that he is forwarding” to include the “withdrawal from TPP”, and that as an industry they were “excited to work with this administration to create a renaissance in American manufacturing.”

With all the talk about building going on, Wall Street took its cues from the Whitehouse lifting the Dow Jones U.S. Basic Materials index higher by 2.87 percent making it the top performing sector on Tuesday. Not surprisingly, the second top performing sector was the Dow Jones U.S. Industrial index up 1.19 percent on the day.

All in all, it was a solid performance among the major market averages with the Standard and Poor’s 500 rising 0.66 percent, to close at a new all-time high, and the Nasdaq Composite gaining 0.86 percent. Though still off its highs, the Russell 2000 small company index advanced 1.59 percent Tuesday, and indication that the buyers are still enthusiastic about this market.

President Trump’s meeting schedule with both business and labor leaders the past couple of days appears to be created a change of tenor in the stock market. For now, investors look as if they are trying to get ahead of Trump’s pro-growth agenda, which can be seen by this week’s top performing sectors. In the No. 1 spot for the week is the Dow Jones U.S. Basic Materials index up 3.89 percent over the past five trading days, followed by the Dow Jones U.S. Consumer Goods index higher by 1.93 percent over the same period.

January 23, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

Investors value a sense of predictability and security, but no new presidential administration comes to the White House with enough transparency to eliminate all concerns from investors’ minds. This was the case this past weekend as well, as investors watched the reception of our 45th president from his inauguration last Friday, to the dust up between the Trump administration and the media over the weekend, followed by his much anticipated first executive orders.

As the Trump administration hit the ground running on Monday, investors were no doubt thinking about the pace of change that would be coming from the White House, and how it may affect not only the U.S. economy but other economies around the world. The major market averages traded lower at the opening bell, with caution and concern being the overarching tone for both the stock and bond markets on Monday.

However, as coverage of President Trump’s meetings on Monday were released, first, with top U.S. CEO’s, then later with top union leader’s, that concern seemed to dissipate while lifting the stock market into the close.

As the pollical fever in Washington de-escalates in the coming weeks, investors will return to their focus to earnings season which still has a few weeks left. Many analysts still have high expectations for this earnings season, with some forecasting 4th quarter earnings growth of 32 percent. This rate of growth has not been seen since 2010 when the economy was still rebounding from the financial crisis.

Sincerely,
Laif E. Meidell, CMT

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

Weekly Economic Update

LARGEST INFLATION ADVANCE IN 5 YEARS

The Consumer Price Index rose 2.1% in 2016, marking its greatest annual gain since 2011. During 2015, consumer prices only increased by 0.7%. December saw a 0.3% rise for the headline CPI and a 0.2% gain for the core CPI (which excludes food and energy costs). The core CPI gained 2.2% last year.1

MUCH MORE GROUNDBREAKING IN DECEMBER

Cold had little impact on residential construction as 2016 ended. Housing starts advanced 11.3% last month and rose 5.7% for the year. Single-family starts declined 4.0% in December, but they still improved 3.9% in 2016. Building permits were down 0.2% last month and posted a yearly gain of 0.7%.2

GOLD GOES BACK ABOVE $1,200

The yellow metal rose 1.84% week-over-week to settle Friday at $1,210.00 on the COMEX. (Silver ended the week at $17.12.) On the NYMEX, oil ended up at $52.33 as Wall Street rang its closing bell Friday, retreating 0.19% week-over-week.

MAJOR INDICES DRIFT LOWER

Stocks retreated last week, but just slightly. Across four trading days, losses trimmed the Dow Industrials by 0.30%, the S&P 500 by 0.15%, and the Nasdaq Composite by 0.32%. Friday’s settlements: Dow, 19,827.25; Nasdaq, 5,555.33; S&P, 2,271.31.

THIS WEEK

On Monday, Halliburton, McDonalds, and Yahoo! report Q4 results. December existing home sales numbers arrive Tuesday, complementing earnings from 3M, Alibaba, Capital One, Corning, D.R. Horton, Discover, Fifth Third Bancorp, Johnson & Johnson, Kimberly-Clark, Lockheed Martin, Seagate Technology, Stryker, Texas Instruments, Travelers, and Verizon. Wednesday’s earnings parade features Abbott Labs, AT&T, Boeing, Briggs & Stratton, Brinker International, Dolby Labs, Citrix, Freeport-McMoRan, eBay, Norfolk Southern, Qualcomm, Raymond James, Rockwell Automation, United Rentals, W.W. Grainger, and Western Digital. New initial claims data appears Thursday, plus December new home sales figures and earnings from Alphabet, Biogen, Bristol-Myers Squibb, Caterpillar, Celgene, Comcast, Dow Chemical, E*TRADE, Ford, Intel, JetBlue, Microsoft, Northrop Grumman, PayPal, Praxair, PulteGroup, Quest Diagnostics, Raytheon, Regis, Royal Caribbean, Sherwin-Williams, Southwest Airlines, Stanley Black & Decker, and Starbucks. Friday offers the first estimate of Q4 GDP, December durable goods orders, the final January University of Michigan consumer sentiment index, and earnings from Chevron, American Airlines, Colgate-Palmolive, Honeywell, NextEra Energy, and Whirlpool.

Meidell: Markets may be in Holding Pattern

By | Published Articles

The Dow Jones Industrial Average declined for the fifth day on a row on Thursday, with investors in what appears to be a holding pattern prior to the presidential inauguration. Though the major market averages traded marginally higher for the first 30 minutes of the trading day, the averages spent the remainder of the day in negative territory. For U.S. large company stocks it was an uneventful day with the Standard & Poor’s 500 shedding 0.36 percent and the Nasdaq Composite losing 0.28 percent by the markets close. However, liquidity in the stock market has been drying up as we get closer to the inauguration, such that U.S. smaller company stocks continued to erode on Thursday with the Russell 2000 index falling 0.94 percent.

This week’s rising political tensions in Washington, D.C., may be playing a part in the stock market’s recent hesitation, so the lack of liquidity in stocks could change by next week. One sign that investors are cautious and not fearful heading into the inauguration is the recent decline in bond prices. When investors are nervous about the future, money tends to move into high quality bonds. However, for the second day in a row bond prices have declined, changing their short term trend to officially downward, with the ICE 20+Year U.S. Treasury Bond index falling 0.69 percent on the day.

This week the top performing area of the bond market has a common theme and that is foreign bonds. Investments in foreign currencies get a boost when the U.S. dollar falls in value like it did this week. For the week, the top performing bond index was the Citi International Inflation Linked Securities index up 0.34 percent over the past five trading days, followed by the S&P/Citigroup International Treasury Bond index Ex-US higher by 0.25 percent over the same period.

Reno Gazette-Journal, Jan. 19, 2017

Meidell: Markets may be in holding pattern

By | Published Articles

The Dow Jones Industrial Average declined for the fifth day on a row on Thursday, with investors in what appears to be a holding pattern prior to the presidential inauguration. Though the major market averages traded marginally higher for the first 30 minutes of the trading day, the averages spent the remainder of the day in negative territory. For U.S. large company stocks it was an uneventful day with the Standard & Poor’s 500 shedding 0.36 percent and the Nasdaq Composite losing 0.28 percent by the markets close. However, liquidity in the stock market has been drying up as we get closer to the inauguration, such that U.S. smaller company stocks continued to erode on Thursday with the Russell 2000 index falling 0.94 percent.

This week’s rising political tensions in Washington, D.C., may be playing a part in the stock market’s recent hesitation, so the lack of liquidity in stocks could change by next week. One sign that investors are cautious and not fearful heading into the inauguration is the recent decline in bond prices. When investors are nervous about the future, money tends to move into high quality bonds. However, for the second day in a row bond prices have declined, changing their short term trend to officially downward, with the ICE 20+Year U.S. Treasury Bond index falling 0.69 percent on the day.

This week the top performing area of the bond market has a common theme and that is foreign bonds. Investments in foreign currencies get a boost when the U.S. dollar falls in value like it did this week. For the week, the top performing bond index was the Citi International Inflation Linked Securities index up 0.34 percent over the past five trading days, followed by the S&P/Citigroup International Treasury Bond index Ex-US higher by 0.25 percent over the same period.

Meidell: Yellen’s comments lift Wall Street’s mood

By | Published Articles

After beginning the day on a down note, the major market averages appeared to be headed for another unenthusiastic day leading into the presidential inauguration. In fact, for most of the day the major averages saw little changes as investors held their cards close the vest, revealing little about their market bias. However, with an hour left to go in the trading day investors tuned in to listen to the prepared speech of Federal Reserve Chairwoman Janet Yellen before the Commonwealth Club in San Francisco.

In her speech Yellen indicated that the U.S. was in for a “nasty surprise down the road” if it delays too long in continuing to raise interest rates. She went on to say that it “makes sense” to raise interest rates “a few times a year” and that she sees rates rising to about 3 percent by the end of 2019. Though two percent is the Fed’s current inflation target, three percent is the rate she referrers to as the longer-run neutral rate.

Yellen shared that the rate increase in December was a reflection of the Fed’s confidence that the economy will continue to grow. However, according to the Fed the expected growth rate in the U.S. would be, “significantly slower than the post-world war two average”.

Yellen’s comments appeared to lift the mood on Wall Street as investors bought the dip, boosting the market averages higher. By the closing bell, the Standard & Poor’s 500 had risen 0.18 percent and the Nasdaq Composite gained 0.31 percent on the day. Conversely, the Fed President’s comments had a negative effect on bond prices sending the ICE U.S 20+ Year Treasury Bond index down 1.28 percent while lifting shares of financial companies.

This week’s leading countries appeared to be a result of short term rebounds off their recent lows. The top performing countries were led by the MSCI Turkey Investable Market index up 7.23 percent over the past five trading days, followed by the MSCI Chili Investable market index higher by 3.95 percent.

January 18, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

After the long holiday weekend, U.S. investors awoke on Tuesday to geopolitical news out of the U.K. as British Prime Minister Theresa May laid out plans for avoiding a “Hard Brexit” from the European Union. Investors around the globe appeared to take comfort in her speech where she said, “We are leaving the European Union but we are not leaving Europe.” In her plan, she promised to put the final deal to vote in both Houses of Parliament, and said that she would be working toward a “bold and ambitious free-trade agreement” with the EU that would include partial membership in the EU customs union and continued tariff-free trade during the “implementation phase” of the new plan.

As Mrs. May gave her speech the British pound rose roughly 2.9 percent against the U.S. Dollar, the largest one day gain for the currency since 2008.

Here in the U.S., investors appear to be growing more cautious as the U.S. presidential inauguration get’s closer, with U.S. markets flattening out this week. Previously, the stock market has rallied into inauguration day, and this year the stock market still has a couple of days left if it chooses to push higher.

However, this Presidential election has been anything but usual, so its probably wise not to assume that the stock market will behave the same way this time around. This would mean that the major market averages could go against tradition of falling off some once the inauguration is past, and potentially rally next week. Such a move higher next week would really catch a lot of investors off guard.

Sincerely,
Laif E. Meidell, CMT

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

Weekly Economic Update

RETAIL SALES RISE 0.6%

All of this December gain can be attributed to increased car buying and gasoline purchases; in fact, retail sales were flat with those two categories removed. Analysts surveyed by MarketWatch had projected a 0.8% December advance. Census Bureau data shows that online sales rose 13.2% in 2016, while department store sales fell 8.4%.

CONSUMERS MAINTAIN OPTIMISM AS 2017 BEGINS

The University of Michigan’s preliminary January consumer sentiment index was little changed from the final December edition – just a tenth of a point lower at 98.1. In January 2016, the index was at 92.0. The current conditions component of the index reached 112.5, its highest mark since 2004.3

PRODUCER PRICES CLIMB AGAIN

After heading north 0.4% in November, the Producer Price Index advanced another 0.3% in December, perhaps hinting that an extended period of minimal wholesale inflation is now history. The December increase left both the headline and core PPI up 1.6% year-over-year.1

A GOOD WEEK FOR TECH SHARES

Across January 9-13, the Nasdaq Composite added 0.96% to settle at 5,574.12. Wall Street’s other two major indices went red for the week – the Dow Jones Industrial Average shed 0.39%; the S&P 500, 0.10%. Friday, the Dow settled at 19,885.73; the S&P, at 2,274.64.4

THIS WEEK

Wall Street observes Martin Luther King, Jr. Day Monday – U.S. stock and bond markets are closed. Morgan Stanley and UnitedHealth Group announce earnings Tuesday. On Wednesday, Federal Reserve chair Janet Yellen speaks about monetary policy goals in San Francisco, the December CPI and a new Fed Beige Book appear, and investors examine earnings from Charles Schwab, Citigroup, Fastenal, Goldman Sachs, Netflix, Northern Trust, Raymond James, and U.S. Bancorp. Earnings from Alaska Air, American Express, BB&T, Celanese, IBM, J.B. Hunt, Nautilus, and Union Pacific arrive Thursday, along with new data on initial claims, housing starts, and building permits; that night, Janet Yellen talks about the U.S. economic outlook in a California speech. Friday is Inauguration Day: federal offices in Washington, D.C. and its vicinity are closed, but Wall Street is open for business as General Electric, Regions Financial, Schlumberger, and SunTrust Banks present earnings.

Meidell: U.S. investors grow cautious

By | Published Articles

After the long holiday weekend, U.S. investors awoke on Tuesday to geopolitical news out of the U.K. as British Prime minister Theresa May laid out plans for avoiding a “Hard Brexit” from the European Union.

Investors around the globe appeared to take comfort in her speech where she said, “We are leaving the European Union but we are not leaving Europe.” In her plan she promised to put the final deal to vote in both Houses of Parliament, and said that she would be working toward a “bold and ambitious free-trade agreement” with the EU that would include partial membership in the EU customs union and continued tariff-free trade during the “implementation phase” of the new plan.

As May gave her speech the British pound rose roughly 2.9 percent against the U.S. dollar, the largest one day gain for the currency since 2008.

Here in the U.S., investors appear to be growing more cautious as the U.S. presidential inauguration gets closer, with the Standard & Poor’s 500 slipping 0.30 percent and the Nasdaq Composite falling 0.63 percent on Tuesday. Previously, the stock market has rallied into inauguration day, and this year the stock market still has a couple of days left if it chooses to push higher. It was clear that some investors were shifting to the safety of bonds and dividend-producing stocks on Tuesday with the ICE U.S. 20+ Year Treasury Bond index up 1.05 percent and the Dow Jones U.S. Real Estate index as higher by 0.67 percent on the day.

However, this presidential election has been anything but usual, so its probably wise not to assume that the stock market will behave the same way this time around. This would mean that the major market averages could go against tradition of falling off some once the inauguration is past, and potentially rally next week. Such a move higher next week would really catch a lot of investors off guard.

This week the top performing sectors showed the conservative mindset of investors led by the Dow Jones U.S. Utilities index up 1.90 percent over the past five trading days, followed by the Dow Jones U.S. Consumer Services index higher by 1.04 percent over the same period.