Archive for ND&S Updates
Stocks Up For a Third Week
October 20, 2015
Last week, stock prices rose for the third consecutive week on generally better than expected earnings reports and increasing doubts about whether the Fed will raise interest rates this year. For the week, the DJIA rose 0.8%, the S&P 500 was up 0.9% and the NASDAQ increased 1.2%. International equity markets also advanced for the week with the MSCI EAFE up 0.29% and MSCI EM advancing 0.71%. Treasury yields have remained subdued during this Fed uncertainty.
Investors have been expecting one of the worst quarters for corporate earnings in years. Analysts’ estimates are for a decline of 5.6%, but looking at companies that have reported so far, earnings are on track for a decline of 4.6%. Unexciting economic data during the week included retail sales -0.1%, industrial production for September -0.2% from August, and the Philadelphia Fed survey was -4.5 … lowering chances for an interest rate hike this year. This week, look for reports on housing starts and existing home sales and numerous earnings announcements.
“Three Rules of Work: Out of clutter find simplicity; From discord find harmony; In the middle of difficulty lies opportunity.” – Albert Einstein
Weekly Roundup … Upside Reversal
October 12, 2015
Markets finished nicely higher last for their best weekly performance in months. For the week, the Dow Jones Industrial Average finished at 17,084 to close up 3.72%. The broader-based S&P 500 closed at 2,015 for a gain of 3.26% for the week. The Nasdaq Composite closed the week at 4,830 as it added 2.61%. International markets were broadly higher as well. The 10-year Treasury closed the week at a yield of 2.099% (up 1.989% the prior week) as bonds gave back a little ground.
Markets got a lift from the release of the Fed’s minutes from their September meeting. The minutes seemed to confirm that the Fed will move very slowly in hiking rates (lower for longer). Crude oil prices jumped 8.98% last week despite U.S. crude inventories rising more than expected. Investors are hoping for increased production cuts that should support oil prices (we’ll see about that … worldwide demand is still sluggish, and more supply will likely come online from Iran and others). Geopolitical concerns in the Middle East could also temporarily prop-up prices, but we see prices ceding ground on supply/demand issues.
On the economic front, the U.S. trade deficit ballooned 16% in August to $48.3 billion from $41.18 billion in July. Imports grew 2.2% … a decent sign for healthy U.S. consumer spending. The Department of Labor reported initial jobless claims for the week ending October 3rd, and claims came in at 263,000 (below expectations of 274,000). No doubt, the labor market continues to be fairly resilient.
Third quarter earnings will be hot and heavy this week … buckle-up! So far, earnings have been relatively strong.
As always, we urge investors not to get caught up in the day-to-day noise of the markets. Instead, focus on long-term goals, and enjoy the beginning of fall.
“Far and away the best prize that life has to offer is the chance to work hard at work worth doing.” – Theodore Roosevelt
ND&S Weekly Update
October 5, 2015
10/5/2015
The markets experienced a seesaw week of trading to finish positive. For the week, the broader based S&P500 finished up 1.10% for the week while the DJIA closed up 1.00%. International markets also fared well as the MSCI EAFE and MSCI EM finished up 0.69% and 1.93% respectively. Interest rates moved quite a bit lower across the board as the 10yr US Treasury closed at a yield of 1.99% which was down from 2.17% the week prior.
Last week saw the conclusion on 2nd quarter earnings announcements. Results were solid for the most part with 61.5% of companies beating expectations, 36% falling short, and 2.5% reporting in-line. Economic data released last week was for the most part negative: U.S. exports of goods fell a seasonally adjusted 3.2% in August, marking a multi-year low … the Department of Labor reported initial jobless claims for the week ending September 16th were 277,000 (10,000 more than the week prior), and lastly on Friday, the Labor Department reported that the US added only 142,000 jobs compared to expectations of 200,000 in September while August’s numbers were revised downward. The employment numbers came as a surprise to many economists. Many economists now believe the Fed could now look towards a 2016 rate hike.
Last Wednesday marked the end of the 3rd quarter; the staff at ND&S is currently putting the finishing touches on our 3rd Quarter Client newsletter. Have a great week!
“Innovation distinguishes between a leader and a follower.” – Steve Jobs
The (Unexpected) Market Advance
October 26, 2015
The market continued its 4th Quarter advance, with the S&P500 rising 2.0% while the Nasdaq increased by 3%. This fourth consecutive week increase has restored positive year-to-date price advances of 0.8% and 6.2% respectively. In addition, dividends have added 1.7% to the S&P and ~1% to the Nasdaq so far this year.
This fourth quarter rally is facilitated by continued world-wide monetary ease [let’s hope that we don’t experience a devaluation war], low expectations for third quarter earnings reports [with plenty of upside when, and if, a company beats], and positive seasonality.
This cycle’s conundrum is a combination of unusually restrictive fiscal policy [how much GDP growth is lost to our large and growing regulatory bureaucracy?] and the Fed’s “lower for longer” monetary policy [at least we’ve gotten rid of QE]. However, the market is finally coming to realization that the Fed is pushing on a string. At this point, starting to gradually raise rates may actually help our economy. As this chart shows, the US consumer has long-lived liabilities [mortgages and auto loans] and short-term assets.
An increase in interest rates would start to provide a return on the ~$10 trillion on deposit [currently earning ~0%], thus increasing disposable income. This non-consensus thinking is further discussed in a recent Bloomberg article.
“Never accept ultimatums, conventional wisdom or absolutes” – Christopher Reeve