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May 22, 2017 – Weekly American Wealth Review

By Weekly Newsletter

Weekly Letter

If there was any doubt whether Wall Street was taking its cues from Washington D.C. that should have been put to rest on Wednesday of this past week, when the Dow Jones Industrial Average closed 372 points, or 1.78 percent, lower on the day, following concerns that President Trump may have pressured former FBI director James Comey to end the investigation of Retired General Michael Flynn, after he had been fired.

Of course, this story-line may come and go as fast as the three-day news cycle. However, what worried investors is that the accusations being made by President Trump’s opposition, if proven true, could cripple the President’s ability to carry out his pro-business agenda, and even if not proven true could greatly slow it down. This would mean no fiscal stimulus to the U.S. economy later this year due to tax reform, and no repatriation of U.S. corporate dollars currently being held overseas in foreign banks. It would also mean the continuation of the current low interest rate environment.

Those areas of the stock market that are most sensitive to lower interest rates fell among the hardest sectors on Wednesday, namely financials and basic materials. Fearing that low interest rates would cut the potential profitability of banks, the Dow Jones U.S. Financial index declined 2.18 percent, where as fears of low inflation sent the value of the Dow Jones U.S. Basic Materials index down 2.15 percent on Wednesday.

Late Wednesday evening we learned of the appointment of former FBI director Robert Muller as special council to lead the investigation into Russia’s involvement in the 2016 U.S. election. Since investigations of this nature can go on from months to years, the appointment of a special council may let congress spend more time legislating and less time conducting investigations into similar matters. This should also help diminish investor’s concerns over the President and allow them to refocus on the legislative process.

Also, this past week we saw a shift to higher quality bonds, as investors ran to the safety of U.S. Treasury bonds. Investors are still expecting a roughly 90 percent probability that the Federal Reserve will raise interest rates when the FOMC meets on June 14th. However, in the short term, investors appear less concerned with inflation and more concerned with preservation until the current storm or concerns blows over. The type of stock market event like we saw this past week is typically short lived, similar to the fallout and recover shortly after the Brexit vote in June of 2016.

Sincerely,
Laif E. Meidell, CMT® AIF

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

Weekly Economic Update

CONSTRUCTION ACTIVITY SLOWED IN APRIL

Against expectations, both housing starts and building permits declined in the fourth month of the year. Newly released Census Bureau data shows a 2.5% retreat for permits and a 2.6% pullback for starts last month. The key factors: a 9.2% drop in starts for multi-family projects (which have declined for four straight months) and a 4.5% fall for single-family permits.1

INDUSTRIAL OUTPUT SURGES

Economists polled by Briefing.com expected industrial production to rise 0.3% in April, following a 0.4% advance in March. The number surprised to the upside – the Federal Reserve reported a 1.0% improvement.2

GOLD & WTI CRUDE STAGE MAJOR RALLIES

As both stocks and the dollar hit a rough patch last week, investors turned to commodities. Gold advanced 2.1% on the COMEX in five trading days, settling at $1,253.60 Friday. Oil gained a little more than 5% for the week to a Friday close of $50.33 on the belief that OPEC would extend its current production cut.3,4

STOCKS FINISH A CHOPPY WEEK LOWER

Wall Street took a plunge Wednesday on political concerns, then rebounded for two days. Still, all three major indices saw 5-day retreats. The Nasdaq Composite lost 0.61%; the Dow Jones Industrial Average, 0.44%; and the S&P 500, 0.38%. Friday, the big three settled as follows: Dow, 20,804.84; S&P, 2,381.73; Nasdaq, 6,083.70.5

THIS WEEK

On Monday, earnings results roll in from Agilent Technologies, America’s Car-Mart, Booz Allen Hamilton, Sportsman’s Warehouse, and Valspar. Tuesday, the April new home sales report complements earnings news from AutoZone, Container Store, Cracker Barrel Old Country Store, DSW, Intuit, Kirkland’s, Popeyes, Take-Two Interactive, and Toll Brothers. On Wednesday, existing home sales numbers appear along with minutes from this month’s Federal Reserve policy meeting and earnings from Advance Auto Parts, Chico’s FAS, Fred’s, GUESS?, HP, Lowe’s, Sears Holdings, and Williams-Sonoma. A new initial claims report arrives Thursday, plus earnings news from Abercrombie & Fitch, Best Buy, Burlington Stores, Costco, Dollar Tree, GameStop, Hormel Foods, Lions Gate, Medtronic, Shoe Carnival, and Toro. Friday offers the second estimate of first quarter GDP, the final May University of Michigan consumer sentiment index, data on April hard goods orders, and Q1 results from Big Lots.

May 15, 2017 – Weekly American Wealth Review

By Weekly Newsletter

Weekly Letter

Investors have had plenty of news to digest lately to include better than expected corporate earnings, solid U.S. economic news, and politics. However, even with all the positives in both the U.S. economy and corporations, Washington politicians and their policies are still what matters most to investors.

So far, many of the companies that have reported first quarter earnings have exceeded analyst’s expectations, but if you hadn’t noticed don’t feel bad, Wall Street doesn’t seem to be too focused on it either. Notice how the major market averages drifted sideways from mid-April until the end of May, while congress was on recess for two weeks, then briefly popped higher for a few days once congress returned to Washington D.C. and political news cycles resumed.

After being in the doldrums over the past week, stocks got a lift on Monday after Saudi Arabian and Russian energy minsters reaffirmed their commitment to extend production cuts to support oil prices. Previously, it was believed that to return the global oil supply to its five-year average, production cuts would only need to be carried out until the end of June of this year. However, thanks in part to rising U.S. production, on Monday OPEC leaders concluded that the production cuts will need to be extended until the end of the first quarter of 2018. U.S. crude oil prices rallied roughly 2.1 percent following the news, to its highest level in two weeks, while the Dow Jones U.S. Energy index gained 0.70 percent on the day.

Monday’s above average performance of U.S. small and mid-cap stocks opens the door for a market rally, at least for the short term, as the momentum of advancing to declining stocks turned positive for the first time in nearly two weeks.

Sincerely,
Laif E. Meidell, CMT® AIF

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

Weekly Economic Update

A SOLID RETAIL SALES READING

Americans bought more in April. The pace of retail purchases hastened by 0.4% last month, and the Bureau of Economic Analysis revised the 0.2% March retreat into a 0.1% gain. Headline retail sales were up 4.5% across the 12 months ending in April. Core retail sales rose 0.3% in the fourth month of the year.1,2

INFLATION PICKS UP AS SPRING ARRIVES

After falling 0.3% for March, the Consumer Price Index rose 0.2% last month. (The major factor: a 1.1% leap for energy costs.) This increase left annualized inflation at 2.2%. The core CPI (minus food and energy prices) advanced 0.1% in April. On the wholesale front, the Producer Price Index jumped up 0.5% in April, taking its year-over-year advance to 2.5%.1,2

A GAIN FOR A CONSUMER SENTIMENT INDEX

The University of Michigan’s monthly barometer of household sentiment rose 0.7 points in its preliminary May reading to a mark of 97.7. Its consumer expectations component advanced 1.1 points to a reading of 88.1.2

MAJOR INDICES RIDE THROUGH A MIXED WEEK

Earnings misses from big retailers weighed on the S&P 500, which declined 0.35% across five trading sessions to a 2,390.90 Friday close. The Dow Jones Industrial Average gave back 0.53% in the same time frame, ending the week at 20,896.61. The Nasdaq Composite, however, advanced 0.34% last week to 6,121.23. At the closing bell Friday, all three indices were up 2.1% or more for the month.

THIS WEEK

Monday, Cumulus Media presents Q1 results. Dick’s Sporting Goods, Home Depot, Jack in the Box, Red Robin, Staples, TJX Companies, Urban Outfitters, and Weibo announce earnings Tuesday, as investors also consider data on April industrial output, housing starts, and building permits. On Wednesday, the earnings parade features American Eagle Outfitters, Cisco, L Brands, Stein Mart, and Target. Thursday, Wall Street looks at the Department of Labor’s latest initial jobless claims numbers, the Conference Board’s April leading indicators index, and earnings from Alibaba, Applied Materials, Autodesk, Gap, Perry Ellis, Ralph Lauren, Ross Stores, Stage Stores, and Walmart. Earnings announcements from Campbell Soup, Deere, and Foot Locker arrive Friday.

May 8, 2017 – Weekly American Wealth Review

By Weekly Newsletter

Weekly Letter

The past week was mildly positive for markets. The jobs report showed that the U.S. economy created 211,000 jobs in April and unemployment dropped to 4.4%, the lowest rate since the middle of 2007. Oddly, we have yet to see strong wage or economic growth generally associated with this strong of an employment report.

The Federal Reserve held short-term interest rates steady at 0.75% to 1.00%. According to Bloomberg as of today, the Fed Funds Futures are currently showing a 100% probability of a rise in rate at their Junie 14, 2017 meetings. If there will be another raise in the remainder of the year still seems fairly mixed.

Internationally, the European Union negotiators are attempting to bump the Brexit Bill to $110 Billion. This is the amount that Britain would have to pay the EU to officially separate; this number started around $50 billion.

Also this week, Puerto Rico filed for court protection under a version of bankruptcy afforded by Congress last year, after failing to reach a deal with creditors. This could be an ugly process for bondholders as the implications could serve as a model for other struggling U.S. states like Illinois.

Sincerely,
Heidi A. Foster, CFP®

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

Weekly Economic Update

NEW DATA SHOWS MORE HIRING, LESS SPENDING

Unemployment hit a 10-year low in April as payrolls swelled with 211,000 net new jobs, a rebound from the meager gains of March. The Department of Labor’s monthly report showed the headline jobless rate declining 0.1% to 4.4%; the U-6 rate measuring underemployment was at 8.6%, falling 0.3%. The latest consumer spending report from the Department of Commerce was less impressive. Personal spending was flat in March, with personal incomes up 0.2%.1,2

ISM PMIS WENT OPPOSITE WAYS IN APRIL

America’s factory sector grew at a slower rate last month than it did during March, while the country’s service sector picked up its pace of expansion. The Institute for Supply Management’s April purchasing manager index dipped to 54.8 from its previous 57.2 mark; ISM’s non-manufacturing PMI rose 2.3 points in April to 57.5.2

FEDERAL RESERVE LEAVES RATES ALONE

As expected, the central bank left the benchmark interest rate in the 0.75-1.00% target range last week. The Federal Open Market Committee felt that the poor economic growth of the first quarter was likely “transitory,” and in its view, economic activity should “expand at a moderate pace” with “gradual” monetary policy adjustments. On May 5, Fed futures traders put the odds of a June rate hike at 79%.3,4

BLUE CHIPS TOP 21,000

The Dow Jones Industrial Average reached another milestone Friday, settling at 21,006.94 after rising 0.32% on the week. Slightly better 5-day performances were posted by the Nasdaq Composite (+0.88% to 6,100.76) and the S&P 500 (+0.63 to 2,399.29). Small caps lost 0.25% for the week – the Russell 2000 closed at 1,397.00 Friday. During the past five market days, the CBOE VIX retreated 2.31% to 10.57.5

THIS WEEK

Investors will keep an eye on France’s national election Monday, and review earnings from Sysco and Tyson Foods. On Tuesday, earnings roll in from Allergan, Discovery Communications, and Valeant Pharmaceuticals. Wednesday features earnings from Dillard’s, NetEase, Snap, Sotheby’s, Spectra Energy, Symantec, Wendy’s, and Whole Foods. Thursday offers the federal government’s latest reading on wholesale inflation, a new initial jobless claims report, and earnings from Kohl’s, Macy’s, and Nordstrom. April retail sales and consumer inflation data appear Friday, plus the University of Michigan’s initial May consumer sentiment index and earnings news fromJCPenney.

May 2, 2017 – Weekly American Wealth Review

By Weekly Newsletter

Weekly Letter

This newsletter is updated for one that contained dated information sent out last night.

Last week while generally positive for market returns was relatively flat. The past week was filled with economic information that was not compelling markets to move.

GDP for the quarter came in with growth of 0.7%, the slowest quarterly growth since the first quarter of 2014 when GDP contracted by 1.4%. The quarter did show strong non-residential business investment at 9.4%. The lack in GDP growth seems to be led by an absence of consumer spending, which came in at a paltry 0.3%, a number not seen since 2009.

Housing remained incredible strong. New home sales were up 5.8% in March with the average price moving up 7.5% to $315,000. New home sales are up 15.6% over last year, however it may be helpful to realize that this is still an annualized rate of 621,000, less than half of the height of the housing boom.

President Trump released a brief proposal on tax reform calling for simplifying the tax code by reducing the tax brackets, lowering tax rates and eliminating numerous deductions. His brief was one page long and rather short on details. It did call for reducing corporate taxes to 15%, in line with other nations. This should be beneficial for everyone as corporations don’t really pay taxes, they just pass them on to everyone who buys from them.

Sincerely,
Heidi A. Foster, CFP®

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

Weekly Economic Update

CONSUMER CONFIDENCE DIPS SLIGHTLY

The University of Michigan and Conference Board consumer confidence indices descended a little last month, but remained in great shape. The CB index displayed an April reading of 120.6, down from 124.9 in March. Slipping a point from its initial April mark, the Michigan barometer fell to 97.0.1

LATEST HOUSING DATA IS MOSTLY POSITIVE

New home sales rose 5.8% in March, the Census Bureau noted last week; headline sales were 15.6% improved from a year earlier. The latest 20-city S&P/Case-Shiller home price index (January) showed 5.8% average yearly house price appreciation, up from 5.6% in December. Pending home sales retreated 0.8% in March, the National Association of Realtors reported.1,2

FIRST QUARTER SAW LITTLE ECONOMIC GROWTH

According to the Bureau of Economic Analysis, America’s economy expanded at a pace of 0.7% in Q1, well below the 2.1% growth seen in Q4. Economists polled by MarketWatch had projected a 0.8% Q1 GDP reading.1

NASDAQ POSTS SIXTH WINNING MONTH IN A ROW

The tech benchmark added 2.32% this past week and 2.30% for April, shattering the 6,000 ceiling in the process. Upbeat earnings news and talk of corporate tax cuts also aided the S&P 500 – that index rose 0.91% for April, capping things off with a 1.51% weekly gain. How did the blue chips perform? The Dow advanced 1.34% on the month and 1.91% during April’s last five trading sessions. Friday, the big three settled like so: Dow, 20,940.51; Nasdaq, 6,047.61; S&P, 2,384.20.3,4

THIS WEEK

Monday, investors study March personal spending figures, ISM’s April factory PMI, and earnings from Edison International. Earnings announcements from Altria, Anadarko Petroleum, Apple, ConocoPhillips, Cummins, Gilead Sciences, Hilton Worldwide, MasterCard, Merck, PG&E, Pfizer, and Twenty-First Century Fox appear Tuesday. Wednesday, the Street considers the latest Federal Reserve policy statement, ISM’s March service sector index, the April ADP payrolls report, and earnings from Alibaba, Allstate, Estee Lauder, Facebook, Humana, Kraft Heinz, MetLife, Prudential Financial, Tesla, Time Warner, and Yum! Brands. Thursday offers a new Challenger job-cut report, initial jobless claims numbers, and earnings from Activision Blizzard, Anheuser-Busch, Berkshire Hathaway, Occidental Petroleum, and Viacom. March employment figures are out Friday, along with earnings from Cigna; also, Federal Reserve chair Janet Yellen speaks at Brown University in Rhode Island.

May 1, 2017 – Weekly American Wealth Review

By Weekly Newsletter

Weekly Economic Update

FED MAY WAIT LONGER TO TIGHTEN

March’s Federal Reserve policy statement provided less forward guidance than many investors expected. As anticipated, the word “patient” disappeared – but the Federal Open Market Committee also lowered its 2015 GDP forecast (to a range of 2.3-2.7%) and nearly halved its 2015 inflation projection (to a range of 0.6-0.8%). Seconding this weaker economic outlook, the Fed indicated it might wait until late 2015 to tinker with interest rates, altering the commonly held perception that a rate hike might be in store before Q2 ends.1

OIL PRICES RISE

Light sweet crude rose 3.9% on the NYMEX last week, settling at $45.72 Friday. It was the first winning week in five for the commodity, and a short-term decline in the dollar and lower U.S. rig counts helped. Gasoline advanced 2.0% on the NYMEX for the week, natural gas 2.2% and heating oil 1.2%.2

FEWER STARTS, BUT MORE PERMITS

The Census Bureau measured a 17.0% drop in groundbreaking for February, which took housing starts to a 13-month low. Declining builder sentiment, higher construction costs and fewer available parcels were all contributing factors. Building permits increased 3.0% last month; apartment permits jumped 18.3%.3

TERRIFIC WEEK FOR U.S. EQUITIES

A little dollar weakness, a rebound in energy prices, easing in Europe, the latest FOMC statement and pleasing corporate earnings all supported a 5-day rally. From March 16-20, the S&P 500 gained 2.66% to settle Friday at 2,108.06. The Dow and Nasdaq posted weekly gains of 2.13% and 3.17% on their way to respective closes of 18,127.65 and 5,026.42.4

THIS WEEK

Existing home sales figures for February appear Monday, courtesy of the National Association of Realtors. On Tuesday, February new home sales data arrives from the Census Bureau, and the Street also interprets February’s CPI, manufacturing PMIs for Japan and China and earnings from H.B. Fuller, Sonic and Steelcase. Wednesday brings durable goods data for February plus earnings from Pacific Sunwear, Paychex and Red Hat. In addition to the latest initial jobless claims report, Thursday also brings earnings from Accenture, Restoration Hardware, Lululemon Athletica, ConAgra Foods, GameStop, Fred’s Super Dollar and Scholastic. Friday, the University of Michigan publishes its final March household sentiment survey, the federal government’s final estimate of Q1 growth arrives, and Fed chair Janet Yellen speaks on monetary policy in San Francisco.

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.

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.

March 13, 2017 – Weekly American Wealth Review

By Weekly Newsletter

Weekly Letter

The state of Missouri is commonly known as the “Show-Me” state a nickname that is said to have come from a speech given in 1899 by Missouri’s U.S. Congressman Willard Duncan Vandiver. During his speech, he said, “I come from a state that raises corn and cotton and cockleburs and Democrats, and frothy eloquence neither convinces nor satisfies me. I am from Missouri. You have to show me.”

This past week marked the beginning of the Trump administration’s rollout of the American Health Care Act, which if eventually passed will replace the Patient Protection and Affordable Care Act, also known as Obamacare. The choppiness in the broad market this past week, almost appeared to be a reflection of the back and forth goings on in congress over the proposed healthcare bill. With the U.S. stock market riding high on campaign promises of major reform to both healthcare and tax laws, investors will be watching closely in the coming weeks to see how well congress can work together to pass a health care bill that will benefit the majority of Americans.

Like Missourian’s, investors are at the point of saying to congress, “You have to show me.” Should congress lack the will to work together on health care reform, this would cause a significant erosion in investor confidence and lower expectations that congress can pass a meaningful tax reform bill later this year. As of Thursday’s market close, investors appear to be in favor of the new health care bill, with the Dow Jones U.S. Healthcare Index up 0.11 percent over the past five trading days, versus the S&P 500 which has slipped 0.71 percent over the same period.

Health care companies only make up approximately 14 percent of the Standard and Poor’s 500, so the success or failure of congress to agree on a new health care bill will only directly impact a slice of the companies that make up the U.S. economy. Of course, most if not all American companies will be impacted in some way by any new healthcare law.

Though Washington D.C. is having more of an impact on the stock market lately than the Federal Reserve, this week’s FOMC meeting seems to be having an impact on the bond market lately. Currently, the Fed Fund Futures were predicting a 100 percent probability of a rate increase at the conclusion of the Fed meeting this Wednesday, and a 47.6 percent probability of another rate increase at their June meeting.

Recently bond investors have become increasingly nervous, such that over the past two weeks the ICE U.S. Treasury 7-10 Year Bond index has declined 1.73 percent, and the ICE U.S. Treasury 20+ Year Bond index has fallen 3.17 percent over the same period.

However, the fact that the stock market is holding together as well as it is in the face of rising short-term and long-term interest rates is a good sign. It also means that investors will be looking for positive news from both economic reports and from Washington, that suggests the U.S economy can continue to grow in a higher rate environment.

Sincerely,
Laif E. Meidell, CMT

Happy St. Patrick’s Day! We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

COMPANIES HIRED READILY IN FEBRUARY

U.S. firms added 235,000 net new jobs last month, and the latest Department of Labor employment report showed the largest growth occurring in the construction and education/health care sectors. The DoL also revised January’s job gains upward by 11,000 to 238,000. Payroll expansion has averaged 209,000 per month since December. The headline (U-3) jobless rate ticked down 0.1% to 4.7%, and the total (U-6) jobless rate, counting the underemployed, fell 0.2% to 9.2%.1

FED FUTURES MARKET: MARCH RATE HIKE A GIVEN

The CME Group’s FedWatch Tool, which tracks the prices of 30-day Fed Fund futures to get a bead on traders’ reactions to potential monetary policy moves, put the chance of a March 15 quarter-point interest rate hike at 93% Friday. The odds of another quarter-point move in June were put at 51%.2

OIL SLUMPS 9.1% IN A WEEK

During March 6-10, WTI crude had its worst week since November, retreating to a Friday close of $48.49 on the NYMEX. News of rising output and plentiful stateside inventory hurt prices. In other oil news, a billion-barrel crude reserve was just found in the Alaskan interior – the largest such discovery since the 1980s.3,4

STOCKS RETREAT, BUT JUST SLIGHTLY

As the bull market turned eight years old, the S&P 500 turned a bit south, losing 0.44% in five days. At the closing bell Friday, it stood at 2,372.60. The Nasdaq Composite also fell for the week, declining 0.15% to 5,861.73. The Dow Jones Industrial Average gave back 0.49% in the same interval, settling at 20,902.98 Friday.5

THIS WEEK

Monday, Del Taco and Jamba report Q4 results. The February PPI arrives Tuesday, along with earnings from Bon-Ton Stores, DSW, and Hostess Brands. Wednesday, investors worldwide react to the Federal Reserve’s latest monetary policy statement, plus the February CPI, February retail sales figures and earnings news from GUESS, Jabil Circuit, Oracle, and Williams-Sonoma. On Thursday, Wall Street reviews initial jobless claims, and the Census Bureau’s report on February construction activity; investors also consider earnings from Adobe Systems and Dollar General. The preliminary March University of Michigan consumer sentiment index appears Friday, complementing the Fed’s report on February industrial output and Q4 results from Tiffany & Co.