Archive for ND&S Updates

Volatility Returns

September 29, 2014 

Last week saw a return of volatility in equity prices as the DJIA ended a week with triple digit moves every day. For the week, the DJIA declined 1% and the S&P500 had a loss of 1.4%. Investors are increasingly concerned about the possibility of slowdowns in China and Europe, Middle East tensions and when the Fed will raise interest rates.

In economic news the third reading for 2nd quarter GDP came in at 4.6% and consumer spending rose 0.5% in August. Growth in the third quarter appears poised to come in at more than 3%. Growth will have exceeded 3% for three of the past four quarters if that happens. This week look for the monthly jobs report on Friday. Current estimates are for an increase of 215,000.


“Excuses change nothing but make everyone feel better.”
-Mason Cooley

A Feeding Frenzy

September 23, 2014 

The 2014 Bull Market at least partially recovered its sea-legs last week, with the S&P rising 1.3% [producing an 8.8% year to date advance]. The Nasdaq recovered a more modest 0.3% [9.7% YTD], while the smaller-cap Russell 2000 declined a further 1.2% [-1.4% YTD].

Last week’s ND&S Update presented a list of potentially damaging upcoming events. So far at least, these developments have been collectively constructive. The Scottish independence campaign was rejected by 10%, which produced a collective sigh of relief. The Fed’s QE3 purchases were reduced to $15B/month [was $25B . . . and $85B two years ago] as promised, and the Fed continued to be vague about when the Fed Funds rate will be raised [this was better than recent pessimistic market speculation]. Note that the consumer prices report of a 0.2% monthly decline in consumer prices, “only” up 1.7% year/year, is consistent with the Fed’s stated game plan.

Finally, Alibaba came thru with the largest IPO of all time, raising $25B. This has produced a long list of wealthy early investors and many more private companies eager to take advantage of the wide-open IPO window.

Laissez les bons temps rouler.

The Fed, Scotland, ISIS, Russian Sanctions, and more … oh my!

September 16, 2014 

Another volatile week as tensions around the world tempered investors’ appetite for risk.

All major market averages lost ground for the week – the first weekly loss in the last five weeks. For the week, the Dow Jones Industrial Average finished at 16,987.51 to close the week lower by 0.87%. The broader-based S&P 500 closed at 1,985.54 for a decrease of 1.10% for the week. The Nasdaq Composite dropped by 0.33% to close the week at 4,567.60. International markets could not fight the tide as the Dow Jones Global (ex US) Index gave back 1.75% for the week. After last week’s losses, market averages are still higher for the year-to-date period with the Dow Jones Industrial Average up 2.5% and the NASDAQ ahead by 9.4%. The S&P 500 is showing higher year-to-date gains as it is up 7.4%. The 10-year Treasury sold-off to close the week at a yield of 2.61% … nervousness around the end of QE (in October) and the upcoming Fed meeting prompted investors in bonds to take some profits.

Economic news released last week was mixed – stronger showings in the U.S. for consumer credit, retail sales and consumer sentiment were offset by disappointing data overseas. Geopolitical tensions and sanctions have, no doubt, impacted economic growth around the world.

The week ahead is sure to provide investors with a bit of excitement and anxiety (what’s new?). The Fed meets on Tuesday and Wednesday, and investors will anxiously await their comments (no doubt, in true Fed-speak) regarding future monetary policy. Scotland’s vote on independence will surely impact markets, and investors around the world await the results of the September 18th vote. Lastly, Alibaba’s IPO on Friday will create some excitement in the markets.

I’m William Wallace, and the rest of you will be spared. Go back to England and tell them… Scotland is free!
– William Wallace

QSS – Get Used to It!

September 8, 2014 

To most investors the term QSS probably brings a major shrug, what is it?  Yet in recent years it has become a more closely followed economic indicator.  QSS is short for the Quarterly Services Survey and measures revenues for covered services industries.  QSS measures a surprisingly broad number of services- Utilities, Transportation, Information services, Finance and insurance, Real Estate, Administration and support, Education, Healthcare, Arts and entertainment, and Lodging.  A survey of approximately 18,000 services providers is taken.

QSS can have its calculation problems which impact the GDP report.  Government economists estimated a strong first quarter spending for healthcare based on Medicaid funding under the ACA.  After the QSS came out on June 11 the GDP had to be revised down to a – 2.9% contraction from a 1.0% drop.  It would seem the timing of the various reports could be better coordinated.   QSS is scheduled to be released 75 days following the end of each quarter.

It is anticipated that health care spending will show up as increasing in the second quarter, meaning that the GDP number might get a boost when the adjustment is made for QSS.  Stay tuned for further revisions in GDP.

“Yesterday is history, tomorrow is a mystery, today is God’s gift, that’s why we call it the present.”
-Joan Rivers

Mixed News

September 2, 2014 

Last week U.S.  stock and bond markets continued their August advance. The DJIA rose 0.57% and the S&P 500 rose 0.75% for the week and 3.2% and 3.8% respectively for the month of August. The bond market also advanced with U.S. treasuries returning 1.06% for the month and the U.S. ten year treasury ending the month with a yield of 2.347% near a 14 month low.

In economic news, the 2nd quarter GDP revision was reported at 4.2%. Also, CPI numbers for the month of July were 0.1% and only up 1.6% from a year ago giving the Fed further breathing room on when they might have to consider raising short term interest rates. On the negative side consumer spending continues to be sluggish with consumer spending in July declining 0.1% from June. Consumer spending is about two-thirds of the U.S. economy.

Also, personal income only rose 0.2% in July. The smallest monthly increase this year. As a result some forecasters reduced their GDP growth estimates  to mid 2% rates for the 3rd quarter.

This week the major economic news will be the monthly jobs report on Friday which is again expected to be over 200,000 jobs for the month.

” The key to a winning season is focusing on one opponent at a time.  Winning one week at a time.  Never look back and never look ahead.”
-Chuck Noll