Monthly Archives

August 2017

Meidell: Markets seem optimistic despite disappointments

By | Published Articles

Given the disappointments caused by Congress over the past two weeks, its 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 health care sector, but because the event itself would serve as a litmus test for how well President Donald 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 before the scheduled House vote on the new health care 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 & Poor’s 500 index 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, William Dudley, president of the Federal Reserve Bank of New York, 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. 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 percent. 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 stocks market, and a lack of direction out of Washington keeping stock prices from going much higher.

August 14, 2017 – Weekly American Wealth Review 

By | Weekly Newsletter

Weekly Letter

In recent weeks, the Trump administration has become increasingly outspoken about North Korea’s advances in nuclear weapons technology, setting a clear shift away from the prior policy described as “strategic patience.” Both U.S. and foreign stocks were under pressure last week as tensions between North Korea and the U.S. rose.

Though investor fears spiked last Thursday, following a volley of words between the Trump Administration and North Korean leadership, those fears subsided over the weekend, as other countries, such as China, have stepped up to apply additional pressure on North Korea. Between last Friday and Monday of this week, the major market averages have recovered most of last Thursday’s losses, as investors continue to buy the dips.

With congress on vacation for the month of August and daily trading volume seasonally below average, we don’t expect the major averages to do much more this month than hold onto their gains.

Sincerely,
Laif Meidell, CMT

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

Weekly Economic Update

TAME INFLATION PERSISTS

Can the Federal Reserve justify another interest rate hike in the second half of 2017? Given weak inflation pressure, maybe not. The central bank has set a 2% yearly inflation target, but the Consumer Price Index rose only 0.1% in July, resulting in a 1.7% year-over-year gain. Core consumer prices rose 0.1% for a fourth consecutive month in July, so annualized core inflation was also at 1.7%. The Producer Price Index fell 0.1% last month; analysts polled by Briefing.com expected a 0.2% rise.1,2
ANALYSIS: EARNINGS GROW AT A 10% PACE
More than 90% of companies in the S&P 500 have now reported second-quarter results. FactSet, the respected financial analytics firm, now projects a blended earnings growth rate of 10.2% for the S&P 500 for the second quarter, along a with 5.1% blended sales growth rate. S&P component firms generating less than 50% of their sales outside the U.S., however, are set to record 14.0% blended earnings growth and 6.0% blended revenue growth.3

THE PRICE OF GOLD RISES

At Friday’s close, the yellow metal hit a 2-month high of $1,294.00 on the COMEX as investors looked away from equities. Gold gained 2.3% on the week.4

TURBULENCE FOR WALL STREET

Diplomatic tensions sent stocks lower last week. Across August 7-11, the Dow Jones Industrial Average declined 1.06% to 21,858.32; the S&P 500, 1.43% to 2,441.32; the Nasdaq Composite, 1.50% to 6,256.56. Volatility certainly came back: the CBOE VIX jumped 53.44% to end the week at 15.39.5

THIS WEEK

On Monday, Cumulus Media and Sysco report quarterly results. Tuesday brings July retail sales numbers and earnings from Advance Auto Parts, Agilent, Coach, Dick’s Sporting Goods, Home Depot, TJX, and Urban Outfitters. On Wednesday, minutes from the July Federal Reserve policy meeting appear; Wall Street will also interpret a report on July housing starts and building permits and earnings news from Cisco, L Brands, NetApp, Stein Mart, and Target. Fresh reports on initial jobless claims and industrial production roll in Thursday, complemented by earnings from Alibaba Group, America’s Car-Mart, Applied Materials, Bon-Ton Stores, Gap, Ross Stores, Sportsman’s Warehouse, Stage Stores, and Walmart. Friday, investors consider earnings from Deere & Co. and Estee Lauder and the preliminary August consumer sentiment index from the University of Michigan.

August 7, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

For the first week of August, the stock market muddled along with investors generally showing a lack of enthusiasm to push prices up or down. Though financial stocks enjoyed a brief flurry of buying early in the week, even that fizzled out as inflation fears subsided. Except for Thursday, trading volume on the New York Stocks Exchange was below the daily average over the past year, an indication that investors are sitting on their hands for now.

Unless you have been traveling outside the U.S. lately, you may not have noticed that the U.S. dollar has been in decline since the start of the year. Weakness in the dollar has given a boost to foreign stocks so far this year, but that tide may be turning, at least for now. The U.S. dollar has recently found support at its two-year low and should attempt to rally, even if the dollar resumes its decline later this year.

Sincerely,
Laif Meidell, CMT

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

Weekly Economic Update

LATEST JOBS REPORT BRINGS GOOD NEWS

U.S. payrolls swelled with 209,000 net new workers in July, according to the Department of Labor. That beat the 183,000 estimate by analysts surveyed by Reuters. About 53,000 of the hires were at restaurants and bars, with another 49,000 in the professional and business services category. While yearly wage growth remained at 2.5%, the headline jobless rate ticked back down to 4.3%. The U-6 rate (which includes the underemployed) stayed at 8.6%.1

A MEAGER GAIN IN CONSUMER SPENDING

The 0.1% June advance reported by the Department of Commerce matched the (low) expectations of economists surveyed by MarketWatch. Consumer incomes were flat in June; the same group of forecasters thought they would improve 0.3%. Personal spending had increased 0.2% in May, with income up 0.3%.2

ISM & PMI SHOW CONTINUED BUSINESS GROWTH

In June, both purchasing manager indices at the Institute for Supply Management were above 57. Their July readings were lower, but still indicated significant sector expansion as both numbers were well above 50. The manufacturing PMI fell 1.5 points to 56.3, and the service sector PMI dropped 3.5 points to a mark of 53.9.3

BLUE CHIPS TOP 22,000

In a mixed week for the major Wall Street indices, the Dow Jones Industrial Average seized the headlines. It reached a new milestone, thanks to its 5-day advance of 1.20%, settling Friday at 22,092.81. The S&P 500 finished the week at 2,476.83, adding 0.19%; the Nasdaq Composite fell 0.36% to settle at 6,351.56 Friday.4

THIS WEEK

Avis Budget Group, CBS, Marriott International, and Tyson Foods post earnings Monday. Andeavor, CVS Health, Dean Foods, Discovery Communications, GoDaddy, Green Dot, Hertz Global, Hostess Brands, Icahn Enterprises, Lions Gate, Michael Kors, Monster Beverage, Norwegian Cruise Line, Priceline, Ralph Lauren, Sunoco, TripAdvisor, Valeant Pharmaceuticals, Vivint Solar, and Walt Disney Co. present earnings news on Tuesday. Crocs, Kelly Services, Live Nation, Office Depot, Planet Fitness, Real Goods Solar, Starwood Hotels & Resorts, 21st Century Fox, Weibo, and Wendy’s offer earnings Wednesday. On Thursday, the July PPI and a new initial claims report arrive, plus earnings from Blue Apron, Brinker International, Camping World, Kohl’s, Macy’s, Nordstrom, Nvidia, and Snap. On Friday, the July CPI appears, and JC Penney reports Q2 results.