Archive for ND&S Updates
NDS Weekly Commentary (4/23/18) – Earnings Season Kicks-Off
April 23, 2018
Equities pushed higher last week, boosted by commodity strength and stronger-than-expected earnings. With a little under 20% of S&P 500 companies reporting so far, Q1 earnings have for the most part come in ahead of estimates. Quarterly earnings were expected to grow roughly 18% year-over-year. 172 S&P 500 constituents are scheduled to report this week which includes GOOGL, FB, MSFT, and AMZN. We continue to expect earnings to be strong relative to expectations.
For the week, the DJIA closed higher by 0.46% while the broader-based S&P 500 moved up 0.54%. Smaller US Companies also performed well with the Russell 2000 finishing higher by 0.94%. International equities were mixed with developed (MSCI EAFE) up 0.53% and emerging markets (MSCI EM) down 0.13%. Bonds struggled for the week with the Barclays US Aggregate down 0.62% or the week. Yields rocketed higher with the 10yr US Treasury closing at a yield of 2.94%, up from 2.82% the week prior. Oil(WTI) moved higher for the week as it closed at 68.37/bbl.
Economic data was generally positive for the week – Retail sales rose 0.6% m/m, exceeding expectations; Housing starts increased 1.9% month over month in March, which was well ahead of estimates; Industrial production rose 0.5% m/m; Jobless claims for the week came in at 232,000, which continues to underscore a strong labor market. Volatility should remain elevated this week due to a number of economic releases, in addition to an onslaught of company earnings releases. Let’s make it a good week!
“Try to be like the turtle- at ease in your own shell.” – Bill Copeland
Weekly Commentary (4/16/18) – Markets Push Higher on Easing Trade Fears
April 16, 2018
Stocks pushed nicely higher last week as fears of a trade war with China receded. President Xi made conciliatory comments alluding to a possible agreement between the United States and China. First quarter earnings kicked-off last week as most major banks reported better-than-expected earnings.
For the week, the DJIA gained 1.8% while the S&P 500 finished higher by 2.0%. Developed international markets also pushed ahead as the MSCI EAFE index closed up 1.5% for the week. Emerging markets added-on 0.7% for the week. Despite the ‘correction’ experienced in early February, the DJIA is down only 0.87% for the year-to-date period while the S&P 500 is off just 0.10% for the same period. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week relatively flat. As a result, the 10 YR US Treasury closed at a yield of 2.82% (up 5 bp from the previous week’s closing yield of 2.77%). Gold prices pushed higher by $12.90 to close at $1,344.80/oz. Oil prices advanced 8.6% last week as oil closed at $67.39/bbl (up $5.33 for the week over conflicts on the Arabian Peninsula and in Syria).
The week ahead has a number of economic releases – Retail Sales, NY/Philly Fed manufacturing surveys, Housing starts, Industrial production and Jobless claims. First-quarter earnings reports will continue as we expect earnings to be relatively positive versus expectations … quarterly earnings are expected to grow roughly 18% year-over-year. Strong fundamentals should continue to outweigh the negative headlines that seem to never end.
As always, we plan to look through the day-to-day news and focus on longer-term objectives. Investors should stay the course and stick close to their long-term asset allocation targets.
“Politics is such a torment that I advise everyone I love not to mix with it.” – Thomas Jefferson
Weekly Market Commentary (4.9.17) – Trade Spat
April 9, 2018
Stocks remained volatile last week as rhetoric between US and Chinese officials increased over trade and tariffs. After China retaliated with $50 billion of tariffs on American imports (mostly in the agricultural space), President Trump instructed his trade officials to consider $100 billion of additional tariffs. In positive trade news, it appears the US, Canada, and Mexico are close to agreeing on a revamp of NAFTA with hopes of a preliminary deal expected as soon as this week. Although nothing is certain, the increasing threats have increased market volatility in the short-term.
For the week, the DJIA declined 0.67% while the broader-based S&P 500 declined 1.35%. The Russell 2000 declined 1.04% as smaller US companies should be a little more immune to trade spats due to more domestic focus. International equities were mixed for the week with the MSCI EAFE up 0.50% and MSCI EM off 0.73%. Rates drifted slightly higher last week with the 10yr Treasury closing at a yield of 2.77%, up from 2.74% the week prior. Gold rallied on Friday to finish the week flat while oil declined to $62.06 a barrel.
We expect the global economic expansion to continue and are likely in the midst of a late-cycle correction for the market. Despite the recent trade spat, the underlying economy seems healthy as evidence from last week’s strong jobs report and ISM and Markit’s manufacturing PMI readings which showed the sector is continuing to expand. We don’t anticipate the recent trade spat to break into a global trade war. However, volatility will likely continue as earnings season will kick off this week with 7 S&P 500 companies reporting. We suggest investors stick close to policy targets and rebalancing where necessary.
“For every complex problem there is an answer that is clear, simple, and wrong.” – H.L. Mencken
NDS Weekly Commentary (4.2.18) – Volatility Continues
April 2, 2018
Markets rallied last week, but not enough to produce positive returns for the 1st quarter. Markets had a volatile week, rallying big on Monday only to sell off during the middle of the week, before bouncing back on Thursday. For the week, the S&P 500 and the DJIA were up 2.05% and 2.42%, respectively. The Russell 2000, representative of smaller US companies, rose 1.56%. International equities were mixed with developed international increasing 1.08% and emerging market stocks declining slightly by 0.01%. Fixed income had positive returns for the week as the rate on the 10 year U.S. Treasury dropped from 2.82% to 2.74% … this despite economic growth being revised last week to 2.9% in the 4Q18, up from a 2.5% reported last month. Year-to-date, the U.S. fixed income aggregate index finished the 1st quarter down 1.46% as yields have moved higher across the board … the yield on the 10yr Treasury started the year at 2.40%.
Last weeks rally was not enough to overcome the correction earlier in the quarter. Volatility remains elevated with the VIX hovering around 22.5 on Thursday. Over the past 3 months, the S&P 500 experienced 6 trading days of +/- 2% moves as opposed to 2017, where we had no such moves. The S&P 500 was down 0.8% for the 1st quarter (first negative quarter since 2015) as investors dealt with trade tensions, higher interest rates and firming inflation. Developed international equities were also down 1.4% for the quarter. The one bright spot was emerging markets with a 1.5% return. We do expect increased volatility to continue in 2018, and the best way to manage the bumps is with a well-diversified portfolio.
“Success is never final, failure is never fatal. It’s courage that counts.” – John Wooden
Earnings Reports Look Good
April 30, 2018
Stocks mostly lost ground last week; seemingly pressured by interest rates as the 10Yr U.S. Treasury crossed the “psychological” 3.0% barrier early in the week for the first time since January 2014. For the week, the DJIA and NASDAQ lost 0.62% and 0.36% respectively while the S&P 500 was essentially flat. Internationally, equities also declined as the MSCI EAFE was down 0.21% and MSCI EM was off 1.01%. Last week, value stocks outperformed growth stocks as technology and financials lagged the index, but the worst performing sectors were industrials and materials. After briefly hitting 3.0%, the 10 year U.S. Treasury finished the week at 2.96%.
In economic news, 1st quarter U.S. GDP growth was reported at 2.3% beating estimates of 2.0%. The data showed that while consumer spending had been weak, business investment and exports picked up the slack. Manufactured durable goods orders increased 2.6% in March easily beating expectations and are now up 8.7% year-over-year. This week look for reports on pending home sales, vehicle sales and the monthly jobs report.
The tax plan voted into law for 2018 has certainly added to the corporate bottom-lines. More than half the S&P 500 companies have now posted 1st quarter earnings, and earnings are forecasted to grow 23% year-over-year. In addition, revenues are up 8.8% surpassing estimates of a 7.6% rise. The 20%+ profit growth is this cycle’s peak rate, which might explain the market’s insipid response … probably as good as it gets as analysts are projecting earnings to grow 10% in 2019. Almost 200 S&P 500 companies are expected to report in the week ahead.
“Failure will never overtake me if my determination to succeed is strong enough.” – Og Mandino