Monthly Archives

April 2017

April 24, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Economic Update

EXISTING HOME SALES HIT A 10-YEAR PEAK

Rising 4.4% for March, resales surpassed expectations – analysts polled by Reuters projected a gain of 2.5%. The National Association of Realtors said that sales were 5.9% improved from a year before, and that put them at their best level since February 2007, even with existing home inventory 6.6% slimmer than in March 2016.1CONSTRUCTION ACTIVITY WANES
Department of Commerce data showed a 6.8% reduction in housing starts in March. Even with that fall, starts were up 9.2% in 12 months. Building permits rose 3.6% last month, resulting in a 17.0% annualized increase.2

LIGHT SWEET CRUDE SLIDES 7% IN 5 TRADING DAYS

WTI crude settled at $49.62 Friday, 7.4% below where it had closed a week earlier. One influence was a Baker Hughes report showing that the number of active rigs had increased for a fourteenth consecutive week.3

STOCKS END CHOPPY WEEK HIGHER

Five days of rollercoastering ultimately sent the S&P 500 to a 0.85% weekly gain. The Dow Jones Industrial Average and Nasdaq Composite respectively advanced 0.46% and 1.82% in the same stretch. At Friday’s close, the Dow settled at 20,547.76; the S&P, at 2,348.69; and the Nasdaq, at 5,910.52.4

THIS WEEK

Monday, earnings arrive from Coach, Express Scripts, Halliburton, Hasbro, Kimberly-Clark, Newmont Mining, and T. Rowe Price. The Conference Board’s April consumer confidence index, the February S&P/Case-Shiller home price index, and March new home sales data appear Tuesday, along with earnings from 3M, AT&T, Baker Hughes, Biogen, Capital One, Caterpillar, Chubb, Coca-Cola, Eli Lilly, Fifth Third, Freeport-McMoRan, McDonald’s, Northern Trust, Novartis, and Xerox. On Wednesday, the earnings lineup includes Alaska Air, Amgen, Anthem, Boeing, Credit Suisse, Dr. Pepper Snapple Group, Equifax, GlaxoSmithKline, Hershey, Ingersoll-Rand, Norfolk Southern, O’Reilly Auto Parts, PepsiCo, Procter & Gamble, Rockwell Automation, State Street, and T-Mobile. Earnings from Alphabet, Amazon, American Airlines, Comcast, Dow Chemical, Expedia, Ford Motor Co., MGM Resorts, Microsoft, Parker-Hannifin, Southwest Airlines, Under Armour, and Western Digital all roll out Thursday, complementing reports on initial jobless claims and March durable goods orders and housing contract activity. Exxon Mobil, General Motors, Phillips 66, UBS Group AG, and Weyerhaeuser issue earnings news Friday, as investors also consider the federal government’s first estimate of Q1 growth and the University of Michigan’s final April consumer sentiment index.

April 17, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

It seemed easier for investors when they could just focus on big ideas like healthcare and tax reform, and the benefits they would bring to the U.S. economy. Since the start of the year, Wall Street has been taking its cues from Washington, D.C., but the tempo of Washington has changed since the healthcare bill failed to gather enough support in the house of representatives a few weeks ago, and foreign policy has taken center stage.

Investors began the year with a bounce in their step, on hopes that President Donald Trump’s policies would provide the stimulus necessary for the U.S. economy to achieve escape velocity and break free of the low-growth mode it’s been in over the past nine years. However, this past week it felt more like investors were driving around on flat tires, as stock prices erratically bumped and swerved into the closing bell on Thursday.

Though the past week was the start of earnings season, with several companies exceeding expectations, investors finished the shortened trading week on Thursday the most pessimistic they have been all year. This could be seen in the price of the Standard & Poor’s 500’s one month volatility index on Thursday, reaching price levels that haven’t been seen since last November in the days leading up to the presidential election. It should be noted that high volatility readings can also be an indication that the stock market is close to a short-term bottom, when nervousness is the highest.

Some could argue that a lot has changed the past two weeks, as investors witnessed the president, still in his first 100 days, make retaliatory missile strikes in Syria while dining with the Chinese president, and leaving it up to military leadership to use the largest non-nuclear bomb in an aggressive airstrike in Afghanistan. Still, some investors may be trying to wrap their head around the idea that although candidate Trump appeared to be soft on Russia and hard on China, in the last two weeks Trump appears to have become hard on Russia and soft on China.

Trump seems to be showing a level of flexibility that few anticipated, and investors will need to adjust to the new administration’s bold way of doing business.

Though the stock market slipped this past week, the bond market has shown strength with investors pushing high quality bonds prices higher (and interest rates lower). To the surprise of many, bond prices have been in an uptrend for over a month, and sending the message that there are no concerns of reflation at this time. Trump’s comments this past week that the U.S. dollar is getting too strong sent the dollar into a short decline. If Trump gets his wish of a weaker U.S. dollar, contrary to candidate Trump’s rhetoric, it would mean that interest rates would remain low as well.

Though it would be easy for any president to get distracted by all the issues going on overseas, to keep stock investors happy Trump needs to quickly put his economic agenda back on the table and in the public eye. This means continuing to find ways to compromise and move forward with health care reform. If the Trump administration can do that, then investors will likely step back into the market and provide support near the current price levels.

Sincerely,
Laif E. Meidell, CMT

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

Weekly Economic Update

PRICES DECLINE IN MARCH

In March, the Consumer Price Index retreated for the first time in 13 months. Its 0.3% dip left annualized consumer inflation at a moderate 2.4%. Fuels, autos, and groceries have all become less expensive recently, according to Bureau of Labor Statistics data. Core consumer prices were up 2.0% in the year ending in March. The Producer Price Index fell just 0.1% in March, with the yearly PPI gain left at 2.3%.1,2

RETAIL SALES FALL

March’s 0.2% decrease followed a 0.3% pullback in February. The silver lining? Minus gas and vehicle sales, retail sales were up 0.1% last month. Core retail sales were flat for March.2

AN IMPROVEMENT FOR CONSUMER SENTIMENT

Rising to an initial April reading of 98.0, the University of Michigan’s consumer sentiment index improved 2.1 points from its final March level. The index’s current conditions component increased 2.0 points to an outstandingly high 115.2.2

A VOLATILE WEEK FOR STOCKS

Selling outweighed buying during this past, abbreviated market week. Across four trading days, the S&P 500 fell 1.12% as U.S. investors considered both corporate earnings and global tensions. The Nasdaq Composite’s weekly losses were slightly deeper at 1.21%; the Dow Jones Industrial Average declined only 0.97%. Friday’s settlements: Dow, 20,453.25; Nasdaq, 5,805.15; S&P, 2,328.95.3,4

THIS WEEK

Earnings from Celanese, DISH Network, J.B. Hunt, and Netflix appear Monday. Tuesday, investors review earnings from Bank of America, Charles Schwab, Citrix, Goldman Sachs, Harley-Davidson, IBM, Johnson & Johnson, Kinder Morgan, UnitedHealth, W.W. Grainger, and Yahoo!, along with data on March housing starts, building permits, and industrial output; also, Facebook’s F8 conference begins. Earnings announcements from Abbott Labs, American Express, BlackRock, CSX, eBay, Kaiser Aluminum, Morgan Stanley, Qualcomm, TD Ameritrade, and U.S. Bancorp emerge Wednesday, plus a new Federal Reserve Beige Book. On Thursday, the earnings parade includes Alliance Data, American Airlines, BB&T, BONY Mellon, Briggs & Stratton, D.R. Horton, E*TRADE, GATX, Imax, KeyCorp, Mattel, Nucor, PPG, Philip Morris, Sherwin-Williams, Snap-On, Travelers Companies, Unilever, Verizon, and Visa. March existing home sales figures are out Friday, along with earnings from General Electric, Honeywell International, Rockwell Collins, Schlumberger, Stanley Black & Decker, and SunTrust Banks.

Meidell: Trump’s shifts shake investors

By | Published Articles

It seemed easier for investors when they could just focus on big ideas like health care and tax reform, and the benefits they would bring to the U.S. economy. Since the start of the year, Wall Street has been taking its cues from Washington, D.C., but the tempo of Washington has changed since the health care bill failed to gather enough support in the house of representatives a few weeks ago, and foreign policy has taken center stage.

Investors began the year with a bounce in their step, on hopes that President Donald Trump’s policies would provide the stimulus necessary for the U.S. economy to achieve escape velocity and break free of the low-growth mode it’s been in over the past nine years. However, this past week it felt more like investors were driving around on flat tires, as stock prices erratically bumped and swerved into the closing bell on Thursday.

Though the past week was the start of earnings season, with several companies exceeding expectations, investors finished the shortened trading week on Thursday the most pessimistic they have been all year. This could be seen in the price of the Standard & Poor’s 500’s one month volatility index on Thursday, reaching price levels that haven’t been seen since last November in the days leading up to the presidential election. It should be noted that high volatility readings can also be an indication that the stock market is close to a short-term bottom, when nervousness is the highest.

Some could argue that a lot has changed the past two weeks, as investors witnessed the president, still in his first 100 days, make retaliatory missile strikes in Syria while dining with the Chinese president, and leaving it up to military leadership to use the largest non-nuclear bomb in an aggressive air strike in Afghanistan. Still, some investors may be trying to wrap their head around the idea that although candidate Trump appeared to be soft on Russia and hard on China, in the last two weeks Trump appears to have become hard on Russia and soft on China.

Trump seems to be showing a level of flexibility that few anticipated, and investors will need to adjust to the new administration’s bold way of doing business.

Though the stock market slipped this past week, the bond market has shown strength with investors pushing high quality bonds prices higher (and interest rates lower). To the surprise of many, bond prices have been in an uptrend for over a month, and sending the message that there are no concerns of reflation at this time. Trump’s comments this past week that the U.S. dollar is getting too strong sent the dollar into a short decline. If Trump gets his wish of a weaker U.S. dollar, contrary to candidate Trump’s rhetoric, it would mean that interest rates would remain low as well.

Though it would be easy for any president to get distracted by all the issues going on overseas, to keep stock investors happy Trump needs to quickly put his economic agenda back on the table and in the public eye. This means continuing to find ways to compromise and move forward with health care reform. If the Trump administration can do that, then investors will likely step back into the market and provide support near the current price levels.

April 10, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

The U.S. stock market was a bundle of nerves this past week as prices chopped up and down, day after day, driven by headlines that included the U.S. economy, the Federal Reserve, and geopolitical events. Though the news was generally positive on the direction of the U.S. economy, investors displayed their nervousness as they bought high quality Treasury bonds early in the week, driving interest rates lower, even in the face of inflationary news.

On Monday, the ISM Manufacturing Index reported a March reading of 57.2. (Any reading of 50 or above indicates expansion in the manufacturing sector.) Though this was five tenths below the February reading, the first slowing in seven months. The report showed new orders had the second strongest reading since December. Likewise, export orders were robust, up four points for the month to 59.0, the highest reading since November 2013. Finally, backlog orders gained a half a point to 57.5, a level that was last seen in March of 2014, and last exceeded in April of 2011.

Signs of continued strength in the U.S. economy turned investors’ attention to the possibility of a reflation trade, meaning higher interest rates, later this year. Those concerns were confirmed on Wednesday when the March FOMC meeting minutes disclosed discussion among committee members to wind down the Feds $4.5 trillion balance sheet of bonds. The Fed purchased the bonds as part of its quantitative easing measures following the Great Recession, in order to keep interest rates low as the U.S. economy recovered. The Fed’s first step will be to discontinue reinvesting the interest on the bonds later this year, followed by a phase-out of its holdings in Treasury and mortgage-backed bonds.

Conflicting jobs numbers kept investors guessing this past week, first with the ADP employment report released on Wednesday showing 263,000 private payrolls added during March. Then Friday’s non-farm payroll report indicated only 98,000 jobs were added during the month. With most analysts expecting the Category 3 storm that hit the Northeast in mid-March to lower this month’s employment report, investors decided to throw out the higher than expected ADP employment numbers and accept the lower report.

Also released on Friday, was the unemployment rate for March which fell two tenths to 4.5 percent. This is the lowest unemployment reading since April 2007, and has some analysts looking for signs of wage inflation. Low unemployment readings like these suggest that the U.S. economy is near full employment, such that employers would need to pay higher wages, either to attract employees, or offer longer workweeks. However, for the month, hourly earnings only increased by 0.2 percent, while year-over-year is higher by 2.7 percent. The average work week dipped one tenth to 34.3 hours, likely caused by the bad weather.

Finally, investors waded through geopolitical risks that began with a chemical attack by Syrian President Bashar al-Assad against a rebel-held town in his own country, killing women and small children. This was followed by a U.S. air strike Thursday night against the Syrian air base that carried out the deadly mission.

If there was a silver lining to this past week, it was that the stock market remained relatively buoyant as investors digested the implications of the week’s news. On the other hand, the U.S. stock market’s stagnation over the past month and a half is causing some impatient investors to question whether there is more upside left in the tank. Growing pessimism is a bullish sign for the stock market, if and when investors can find a reason to become buyers again.

Sincerely,
Laif E. Meidell, CMT

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

Weekly Economic Update

COMPANIES ADDED FEWER WORKERS IN MARCH

Just 98,000 net new jobs were created last month, and some analysts think Winter Storm Stella may have held hiring back. Even so, the Department of Labor’s latest employment report showed the U-3 jobless rate decreasing 0.2% to 4.5%; the broader U-6 rate fell 0.3% to 8.9%. The big factor in both declines: 326,000 people leaving the ranks of the unemployed. If all this seems incongruous, consider that the Bureau of Labor Statistics compiles data from two separate surveys: one focusing on payroll growth; the other, on the employment status of individuals.1

STRONG EXPANSION FOR SERVICE, FACTORY SECTORS

Another month, another wave of growth for industry and retail businesses – this was the tale told by the two purchasing manager indices at the Institute for Supply Management. For March, ISM’s service sector PMI came in at 55.2; its factory PMI, at 57.2. The services PMI lost 2.4 points from its February mark; the factory PMI, 0.5 points. Still, these readings were well above the crucial 50 level.2

FED MAY START TO REDUCE ITS BALANCE SHEET

According to the minutes of the March Federal Reserve policy meeting, most Federal Open Market Committee members believe that the central bank should begin shrinking its vast portfolio of mortgage-backed securities and Treasuries later in 2017. The minutes noted that whether the FOMC decides to phase out or halt reinvestments, the shift in balance sheet policy “should be communicated…well in advance of an actual change.”3

STOCKS MOVE SLIGHTLY LOWER

Wall Street’s three major equity indices pulled back a bit last week. Over five days, the Dow ceded just 0.03% to 20,656.10. But the S&P 500 (closed at 2,355.54) and Nasdaq (closed at 5,877.81) took deeper respective losses of 0.30% and 0.57%. The Russell 2000 slipped 1.54% for the week to 1,364.56; the CBOE VIX “fear index” rose 4.04% to 12.87.4

THIS WEEK

On Monday evening, Federal Reserve chair Janet Yellen discusses monetary policy at the University of Michigan. Bank of the Ozarks reports Q1 results Tuesday. Earnings from Delta Air Lines, Fastenal, and Pier 1 Imports arrive Wednesday. On Thursday, the Q1 earnings season gathers steam, with Citigroup, JPMorgan Chase, PNC Financial Services Group, and Wells Fargo all reporting; apart from that, the March Producer Price Index, the preliminary April University of Michigan consumer sentiment index, and a new initial claims report also appear. Friday brings March retail sales figures and the March Consumer Price Index.

April 3, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

Given the disappointments caused by congress over the past two weeks, it’s somewhat surprising the major market averages are holding up as well as they are.

A little over a week ago, Americans watched as Republican lawmakers in the House of Representatives failed to meet their own deadline to repeal and replace the Affordable Care Act, also known as Obamacare. Wall Street was particularly interested in the event not only because of its potential impact on the healthcare sector, but because the event itself would serve as a litmus test for how well President Trump and the Republican congress would work together to accomplish the President’s major campaign promises during his term.

U.S. stocks suffered their largest decline in over five months, two days prior to the scheduled House vote on the new healthcare bill, as it became evident that the bill lacked the necessary votes to pass. Investors had every right to be disappointed and interpret the Republican House’s inability to work together as a preview of what to expect in the future. The tax reform bill, expected to go before congress later this year, is the real stimulus package that investors are interested in, and what’s generally believed to be creating most of the optimism seen in the stock market.

Surprisingly, investors appeared to overcome their disappointment relatively quickly, with the Standard and Poor’s 500 building a base over the next four days, as investors used the dip as a buying opportunity. This was followed by a multi-day rally this past week that has regained a significant portion of the prior week’s losses. Though Republican lawmakers have clearly stumbled in some investors eyes, it does not appear that they have fallen.

Fortunately, there has been plenty of positive economic news this past week to shore up investor optimism. This included favorable comments from a Federal Reserve President and better than expected U.S. economic news.

Last Thursday in a prepared speech given in Sarasota, Florida, Federal Reserve President William Dudley said, “While there is still considerable uncertainty about fiscal policy and its potential contribution to economic activity, it seems likely that it will shift over time to a more simulative setting.” He went on to say, “Consequently, it appears that the risks for both economic growth and inflation over the medium term may be shifting gradually to the upside.” That’s “Fed Speak” for the economy is getting stronger. The Mr. Dudley’s comments are distinctly more optimistic than a year ago when he along with other Fed officials felt the risks were to the downside, due to weak economic growth and diminishing inflation forecasts.

This past week, investors learned that pending home sales for the month of February rose by 5.5. Additionally, during the fourth quarter GDP rose by 2.1 percent, beating estimates, and personal consumption gained 3.5 percent, also above expectations.

At the moment, both stock and bond indexes appear to be trading sideways, with favorable economic news putting a floor under the stock market, and a lack of direction out of Washington keeping stock prices from going much higher.

Sincerely,
Laif E. Meidell, CMT

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

Weekly Economic Update

PERSONAL SPENDING SLOWS

Consumers apparently chose saving over spending in the second month of the year. Last week, a Department of Commerce report noted only a 0.1% gain for personal spending in February. That happened even with personal incomes rising 0.4%, nearly matching the 0.5% January advance. In other news concerning personal spending, the Bureau of Economic Analysis raised its estimate of fourth-quarter GDP to a final reading of 2.1% from the previous 1.9%.1

HOUSEHOLDS MAINTAIN THEIR OPTIMISM

The Conference Board’s much-watched consumer confidence index came in at 125.6 for March, soaring 9.5 points to a level unseen since December 2000. Economists polled by Reuters expected the index to descend slightly to 114.0. Losing 0.7 points from its preliminary March result, the University of Michigan’s household sentiment index remained high at 96.9.1,2

A BOOST FOR PENDING HOME SALES

Housing contract activity increased 5.5% in February by the estimate of the National Association of Realtors, more than reversing January’s 2.8% decline. The latest S&P/Case-Shiller 20-city home price index (January) showed a 0.2% seasonally adjusted monthly gain and a 5.7% year-over-year improvement.1

A GREAT QUARTER ENDS WITH GAINS

The past five trading days left the three major indices higher: during March 27-31, the Nasdaq Composite advanced 1.42%; the S&P 500, 0.80%; and the Dow Jones Industrial Average, 0.32%. The quarter-ending settlements: Dow, 20,663.22; Nasdaq, 5,911.74; S&P, 2,362.72. Of the three, only the Nasdaq had a winning March, but the year-to-date column in the table below confirms the strength of the first quarter.3

THIS WEEK

Monday, the Institute for Supply Management releases its March manufacturing PMI. A report on February factory orders appears Tuesday. Wednesday, investors consider minutes from the March Federal Reserve policy meeting, the latest ISM service sector PMI, a fresh ADP payrolls report, and earnings from Bed Bath & Beyond, Monsanto, Rite Aid, and Walgreens Boots Alliance. The March Challenger job-cut report and new initial claims figures arrive Thursday, along with earnings from CarMax, Constellation Brands, Fred’s, Ruby Tuesday, and WD-40. The Department of Labor issues its March employment report on Friday.