Archive for ND&S Updates
ND&S Weekly Recap: Earnings Reports Continue to be Good
August 20, 2018
U.S. equity markets struggled early last week as concerns over contagion from Turkey’s currency crisis worried investors. However, a positive report on retail sales and news that negotiators from the U.S. and China would meet to try to end the trade standoff, helped to end the week on a strong note. Retail sales for July rose 0.5% suggesting that consumers remain healthy and should provide support for continued economic growth. For the week, the DJIA and the S&P 500 increased 1.5% and 0.6% respectively, while the NASDAQ declined 0.2% held back by weakness in technology stocks. The broader market pushed higher by strength in consumer staples, which rose 3.2% for the week. Value stocks outperformed growth stocks, as perhaps investors sought shelter from market volatility. The struggle continued for international stocks last week with the EAFE and emerging markets down 1.1% and 3.7%, respectively.
Fixed income markets were relatively stable as the rate on the 10-year U.S. Treasury note held steady at 2.87%. This week, investors will be watching the numbers for existing and new home sales for July. In June, existing home sales fell for the fifth time in six months and new home sales fell to their worst reading in eight months. Rate increases by the Fed may be starting to have an effect on an important part of the economy.
With 96% of S&P 500 companies reporting 2nd quarter earnings, 79% have beat on earnings and 61% have beat on revenue. Margins continue to be a major driver of earnings growth this quarter and are set to expand to 11.7%, their highest level on record.
“Music does a lot of things for a lot of people. It’s transporting, for sure. It can take you right back, it’s uplifting, it’s encouraging, it’s strengthening.” – Aretha Franklin
ND&S Weekly Commentary 8.13.18 – Victory in Japan Day
August 13, 2018
Last Friday was Turkey Day as the Turkish Lira declined 20% spreading fears throughout the global markets. As a result, equities for the week fell with the S&P 500 and DJIA declining .18% and .44%, respectively. The tech-heavy NASDAQ held its own returning 0.3% as large technology stocks regained momentum. International markets reacted to Turkey’s currency turmoil along with continued tariff announcements between the US and China. The MSCI EAFE fell 1.46% while emerging markets lost 0.98%. The 10yr US Treasury yield remained steady at 2.87%, moving down 0.08% for the week despite favorable economic news.
The US equity markets rose over 5% last month because of encouraging economic data and solid corporate profit results. With the majority of S&P 500 companies already reporting, their quarterly earnings rose an impressive 26% and even more encouraging revenue growth was 10%, twice as much as from a year ago.
This week’s economic reports include retail sales on Wednesday, housing starts on Thursday and the leading economic index on Friday.
We expect investors’ attention will remain on tariff tensions and other geopolitical headwinds, which should bring back more market volatility. We recommend staying diversified and looking for opportunities in US dividend paying companies as well as foreign equities offering attractive valuations.
“VJ Day, or Victory in Japan Day, marks the date of the Japanese surrender that ended fighting in the Pacific.” – Doc Hastings
ND&S Weekly Commentary (8.6.18) – $1,000,000,000,000
August 6, 2018
US equities finished modestly higher last week in what was a busy week from political, economic, and company specific perspectives. For the week, the DJIA increased 0.05% while the broader-based S&P 500 climbed 0.80% for the week. International equities closed the week in the red with the MSCI EAFE off 1.45% and emerging markets closed lower by 1.66%. Treasury yields stayed relatively flat for the week, despite the FOMC characterizing the US economy as “strong” which would likely hint they will continue to raise rates at the current pace. The 10yr US Treasury briefly crossed 3% before closing the week at 2.97%. Gold and oil closed the week slightly lower.
Trade tensions escalated with China as the Trump administration announced they are looking into raising the tariff rate to 25% on $200 billion worth of Chinese goods … an increase from the 10% rate initially announced. China in-turn announced they would retaliate with tariffs on roughly $60 billion worth of US goods ranging from 5% – 25%.
Economic news for the week included – Personal consumption expenditures (PCE) came in at 1.9%, slightly below estimates of 2.0%; Markit/ISM mfg. PMI at 58.1, surpassing expectations and reaffirming continued expansion of US manufacturing; Nonfarm payrolls rose 157,000 in July which missed estimates for the month. However, there were upward revisions to both May and June that resulted in the unemployment rate dropping to 3.9%. Hourly earnings rose 0.3% in June having risen 2.7% from a year ago.
Tuesday, after the closing bell, Apple (AAPL) reported both revenues and earnings per share (EPS) that beat analyst expectations with its fiscal third quarter earnings report. In addition to the strong numbers, their forward revenue guidance came in ahead of market expectations which was enough to ultimately push the company’s market cap over $1,000,000,000,000 (that’s a lot of zeros), making it the first company to reach this historic valuation.
With 80% of S&P 500 constituents having reported, 2nd quarter earnings growth is estimated to be 24%. Those earnings figures are running very close to the 24.8% EPS growth rate in the first quarter. There will be 85 companies scheduled to report this week along with economic releases on Inflation, consumer credit and jobless claims. Have a great week!
“Great things in business are never done by one person. They’re done by a team of people.” – Steve Jobs
Weekly Commentary (8/27/18) – A Bull Run and an American Hero
August 27, 2018
Stocks ended last week higher as the U.S. stock market, on Wednesday, became the longest-ever bull market on record (9 years, 5 months and 13 days). Despite a tumult of negative political news out of Washington, the strength of the U.S. economy has simply been too strong to ignore. Second quarter earnings reports are nearly complete, and earnings for the quarter point to continued strong execution by U.S. companies. Adding to the economic backdrop (and offsetting political headwinds) was Fed Chairman Powell’s speech in Jackson Hole on Friday where he sounded a more dovish tone and hinted at a more gradual pace of rate hikes (perhaps one more hike this year rather than two).
For the week, the DJIA gained 0.51% while the S&P 500 finished higher by 0.88%. The volatile Nasdaq jumped 1.67%. Developed international markets finished in the black as the MSCI EAFE index moved up 1.56% for the week. Emerging markets recovered a much-needed 2.71% last week as the U.S. dollar weakened nearly 1% and talks of trade deals lifted the badly bruised asset class. Small company stocks, represented by the Russell 2000, pushed higher by 1.94%. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week slightly higher by 0.26%. As a result, the 10 YR US Treasury closed at a yield of 2.82% (down 5 bps from the previous week’s closing yield of 2.87%). Gold prices surged higher by $29.80 to close at $1,206.30/oz. Oil prices advanced $3.51 last week as oil closed at $68.72/bbl.
Lastly, an American Hero passed away last week. Senator John Sidney McCain III died on Saturday at age 81. Senator McCain was a distinguished naval officer who was shot down over Vietnam and held as a prisoner of war suffering through immense torture. He later served honorably in the U.S. senate for 31 years. We salute Senator McCain. May he rest in peace.
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 bull market may be aging, but we see more gains ahead.
“In prison, I fell in love with my country. I had loved her before then, but like most young people, my affection was little more than a simple appreciation for the comforts and privileges most Americans enjoyed and took for granted. It wasn’t until I had lost America for a time that I realized how much I loved her.” – John McCain