Archive for ND&S Updates
NDS Market Update (7/23/18) – Markets Struggle for Direction
July 24, 2018
Last week, stock prices ended little changed as major indexes struggled to move higher. In spite of upbeat earnings reports, uncertainty around trade and monetary policy rose, as white house criticism of the Fed for raising interest rates, weighed on stock and bond markets. The S&P 500, and the DJIA were up 0.04% and 0.2%, respectively, and the NASDAQ declined .07%. U.S. bonds were off 0.27% for the week, as the yield on the 10 U.S. Treasury note rose to 2.90%. Foreign stocks were mixed as the MSCI EAFE index closed higher by 0.63% while emerging markets declined 0.44%.
Investor attention will turn to earnings this week as one third of S&P 500 companies are due to report. Major companies such as Alphabet, Boeing, Coca Cola, Facebook, Amazon and Exxon Mobil are scheduled to announce results. The quarter should mark another strong showing for corporate earnings growth because of tax reform and a strong underlying economy. In economic news, reports are due on existing-home sales, durable goods orders, and the advance estimate for 2nd quarter GDP. Analyst estimates are calling for durable goods to be up 3.1% and a reading of 4.2% for GDP.
“We live in a rainbow of chaos.” – Paul Cezanne
NDS Weekly Commentary (7.16.18) – The Troll Under the Bridge
July 16, 2018
Last week, surging shares of technology companies once again sent the NASDAQ to a record high. The index finished 1.79% for the week and is now up 14% year-to-date. Both the S&P500 and the DJIA rose last week 1.55% and 2.32%, respectively.
After the White House announced it would assess 10% tariffs on additional $200 billion of Chinese goods, the market dipped. Shares rallied on strong corporate earnings reports and expectations to close out the week. International equities also were positive with developed markets returning 0.16% and emerging 1.71%.
Firming inflation and low unemployment has supported the Fed’s case for gradually increasing short-term rates to keep inflationary pressures in check. The Fed has lifted rates twice this year and have penciled in two more increases by year’s end. The 10yr US Treasury remained stable at 2.8%.
We are pleased with JP Morgan Chase (JPM) and Citigroup (C) both reporting second quarter earnings that beat analyst estimates. JPM’s profit rose 18% and C’s 16%, which are great results given revenue from interest margins have been in question due to the flattening interest rate yield curve.
We continue to recommend diversifying portfolios, insulating the effects of higher interest rates and capturing profits in overvalued holdings while selectively taking advantage of dividend growth opportunities. So far, decent mid-year results despite rate hikes, tariffs, trade wars, and the price of oil surging 60% over the last 12 months.
“Success is a journey, not a destination. It requires constant effort, vigilance and reevaluation…” – Mark Twain
Weekly Commentary (7/9/18) – Markets Move Higher on Strong Jobs Report
July 9, 2018
Stocks ended last week mostly higher on good economic news despite increased rhetoric surrounding tariffs. The holiday-shortened week saw the Purchasing Managers’ Index jump to 60.2% (ahead of expectations for 58.5%). The Commerce Department reported on Tuesday that new orders for manufactured goods increased in May for the third time in four months. Friday was a big day as the Labor Department reported that the economy added 203,000 jobs in June (above consensus of 195,000 jobs). 601,000 workers reentered the workforce in June causing the unemployment rate to tick higher to 4.0% (up from last month’s reading of 3.8%). Also, April and May employment numbers were revised higher. A stronger economy is being felt across the board.
For the week, the DJIA gained 0.8% while the S&P 500 finished higher by 1.6%. Developed international markets finished in the black as the MSCI EAFE index moved up 0.6% for the week. Emerging markets finished lower by 0.68% on the trade rhetoric. Small-cap stocks, represented by the Russell 2000, jumped 3.1% on the week as small-cap stocks are mostly immune to trade wars. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week up slightly (+0.2%). As a result, the 10 YR US Treasury closed at a yield of 2.82% (down 3 bps from the previous week’s closing yield of 2.85%). Gold prices ticked higher by $3.00 to close at $1,208.60/oz. Oil prices dropped $0.35 last week as oil closed at $73.80/bbl.
The week ahead has a few important economic releases – Consumer Credit, Consumer Sentiment, NFIB Small Business Survey and the PPI/CPI. In addition to economic releases, we expect to see the beginning of 2nd quarter earnings releases.
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. The weather is getting better … make an effort to get outside and smell the roses!
“People only see what hey are prepared to see.” – Ralph Waldo Emerson
NDS Weekly Commentary 7.2.18 – Happy 4th!
July 2, 2018
Markets remained volatile last week as trade fears continued to dominate the headlines. For the week, the DJIA declined 1.26% while the broader-based S&P 500 was off 1.31%. Small-Cap US equities fared worse with the Russell 2000 closing lower by 2.46%. International equities also finished the week in the red with the MSCI EAFE and MSCI EM down 1.03% and 1.41%, respectively. Treasury yields were lower across the board; this despite inflation numbers that exceeded estimates and are not in-line with the Fed’s 2% target. The 10yr US Treasury closed the week at a yield of 2.85%.
Economic data was generally positive for the week; as mentioned above, Core PCE came in-line with the Fed’s 2.0% inflation target … Durable goods orders fell 0.6% month over month but came in ahead of expectations, new orders of durable goods are up 9.9% from the same time last year … Consumer confidence remained high as the reading came in 126.4 … 1q18 GDP was revised lower to 2%.
Global mergers and acquisitions have surged 64% in the first half of 2018, surpassing the corporate spending spree that transpired in 2007. Given that M&A tends to peak late-cycle, some investors may view this news suspiciously. US corporations have a record amount of debt (6.3t) on their balance sheets, but also record amounts of cash on their balance sheets to service that debt and explore acquisitions. It would appear that the economic expansion has a bit more to go and one should expect additional consolidation in media, health care and private equity acquisitions.
Let the cookouts and firework shows begin! Happy 4th of July from your friends at Newman Dignan & Sheerar!
“We will stand by the right, we will stand by the true, we will love, we will die for the red, white and blue” – unknown
Weekly Commentary (7/30/18) – Markets Move Higher on Strong Earnings & GDP
July 30, 2018
Stocks ended last week mostly higher on continued positive earnings reports and a strong second quarter GDP report. Second quarter earnings reports have been quite strong with most companies reporting in-line to better-than-expected earnings. On the economic front, Real U.S. GDP (GDP adjusted for inflation) grew at a 4.1% annual rate in the second quarter … the highest growth rate since 2014. New and existing home sales for June were a bit shy of expectations … we’ll keep an eye on housing to see if the recent weakness is just temporary. Also reported last week, the Flash U.S. Composite Purchasing Managers Output Index for July pulled back slightly. The good news out of the report was that the Flash Manufacturing PMI moved to a two-month high to help offset some weakness in the Flash U.S. Services Business Activity.
For the week, the DJIA gained 1.6% while the S&P 500 finished higher by 0.6%. The volatile Nasdaq lost 1.1% for the week as some high-flying technology stocks reported earnings a bit shy of heightened expectations (namely, Facebook and Netflix). Developed international markets finished in the black as the MSCI EAFE index moved up 1.4% for the week. Emerging markets recovered 2.2% last week as the U.S. dollar weakened. Small company stocks, represented by the Russell 2000, gave back 2.0% on profit taking. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week lower by 0.17%. As a result, the 10 YR US Treasury closed at a yield of 2.95% (up 6.1 bps from the previous week’s closing yield of 2.89%). Gold prices ticked lower by $2.70 to close at $1,222.60/oz. Oil prices dropped $0.92 last week as oil closed at $68.69/bbl.
The week ahead has a few important economic releases – PCE (headline and core), ADP/BLS employment reports, ISM Manufacturing and Non-Manufacturing along with an update on the International Trade balance. In addition to economic releases, we expect to see the continuation of 2nd quarter earnings releases. Trading should be somewhat light this week as many investors will be on vacation.
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. The weather is beautiful … make an effort to get outside and smell the roses as summer is in full swing!
“Just living is not enough … one must have sunshine, freedom, and a little flower.” – Hans Christian Anderson