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Oct 31 2016

This Week’s Market Moving Events:

Market Recap:

With a week to go before the Presidential Elections investors are fretting over the outcome and what it might mean for markets. Putting aside the possibility that the results might be contested and therefore unknown for several weeks (think back to Bush / Gore in 2000), the real focus for investors should be on economic data, the Fed and the congressional races that might impact fiscal policy over the next two years.

As far as rising interest rates go, while conventional wisdom states that rising interest rates have a drag-down effect on the economy and is generally viewed as a poor environment for stocks and bonds, evidence suggests the opposite holds true. Central Banks raise interest rates in response to an ‘over-heating’ of the economy or concerns of rapidly rising inflation. While many would argue that this environment does not exist today, there is a solid case to be made for raising rates at this juncture. The impact of declining energy prices is likely behind us, meaning that this will no longer put downward pressure on inflation, while continued employment growth should translate into higher wages – early signs of which can already be seen in the monthly JOLTS (Job Openings and Labor Turnover Statistics) report. From a historical perspective, the U.S. economy, corporate earnings and stock market returns have all fared well in the early stages of a rising rate environment.

For those worried about a deep or prolonged correction, keep in mind that since 1980, the market (as measured by the S&P 500) has been in negative territory at some point in each year – with an average intra-year drop of just over 14%, all the while ending in positive territory for the year 75% of the time.

This Week’s Market Moving Events:

  • Monday: Personal Income & Spending, Chicago PMI, Dallas Fed Manufacturing Survey, Japanese and Chinese economic data (after the close).
  • Tuesday: Motor Vehicle Sales, Redbook Report, PMI & ISM Manufacturing, Construction Spending.
  • Wednesday: FOMC Statement
  • Thursday: Chain Store Sales, Jobless Claims, PMI Services, Factory Orders, ISM Non-Manufacturing data.
  • Friday: October Employment Report, International Trade.

Oct 24 2016

This Week’s Market Moving Events

Market Recap:

Stocks climbed slightly last week on the back of better than forecast earnings data – roughly ¼ of S&P 500 constituents have reported so far and of these 81% have shown a positive earnings surprise. Low inflation data coupled with continued positive economic data also helped investors overcome their anxiety over the eventual interest rate hike. The upcoming week will provide plenty for investors to fret over, including a deluge of earnings reports as well as some key economic data that could tip some of the remaining ‘Doves’ on the FOMC to agree to a December tightening.

This Week’s Market Moving Events:

 

  • Monday: Chicago Fed National Activity Index, PMI Manufacturing Index. Kimberly Clark (S: KMB), Visa (S: V) report earnings.
  • Tuesday: Redbook Report, Consumer Confidence, Richmond Fed Manufacturing Index, Investor Conference. 3M (S: MMM), Apple (S: AAPL), Caterpillar (S: CAT), Elli Lilly (S: LLY), General Motors (S: GM), Merck (S: MRK), Proctor & Gamble (S: PG), Under Armour (S: UA) report.
  • Wednesday: Mortgage Applications, International Trade, PMI Services, New Home Sales. Boeing (S: BA), Coca Cola Co. (S: KO), Waste Management (S: WM) report.
  • Thursday: Durable Goods Orders, Pending Home Sales, Kansas City Fed Manufacturing Index. Alphabet (S: GOOG), Philip Morris (S: MO), Amazon (S: AMZN), Bristol Meyer (S: BMY), Colgate Palmolive (S: CL), Ford Motor Co. (S: F), Raytheon (S: RTN) report.
  • Friday: Q3 GDP, Employment Cost Index, Consumer Sentiment. Auto Nation (S: AN), Chevron (S: CSX), Exxon Mobil (S: XOM), MasterCard (S: MA), Xerox (S: XRX) report.

Oct 17 2016

Q3 Earnings Reporting Season off to a Decent Start

Market Recap:

The third quarter earnings reporting season is off to a decent start, with about 68% of the few companies who have reported exceeding sales growth and revenue expectations. None-the-less, the S&P 500 and other major indexes lost a couple of percentage points last week as investors fretted over the timing of the next interest rate hike, which is more and more likely going to come this December. So far, financial companies have had the greatest upside surprises, as well as being expected to have the bet revenue and profit growth of the 10 sectors in the S&P.

 

Looking Ahead / This Weeks Market Moving Events:

While earnings season is off to a decent start, overall expectations continue to be muted. Moreover, markets are still all about the Fed and its next move, hence market participants are more focused on economic data than earnings at this moment. Last week’s sell-off was partially driven by weak Chinese data, more of which will be released this Tuesday evening.

 

  • Monday: Industrial Production, Empire State Manufacturing Survey. Bank of America (BAC), IBM (IBM), and NETFLIX (NFLX) report earnings.
  • Tuesday: CPI, Housing Market, Redbook report and Chinese Data (after the close). Black Rock (BLK), Harley Davidson (HOG), Intel (INTC), Johnson & Johnson (JNJ), Phillip Morris (PM), Yahoo (YHOO) report
  • Wednesday: Housing Starts, Mortgage Applications and Beige Book. Abbot Labs (ABT), American Express (AXP), Halliburton (HAL), Morgan Stanley (MS), Tupperware (TUP) report.
  • Thursday: Jobless Claims, Philly Fed Business Outlook Survey, Existing Home Sales, Leading Indicators are reported. Schlumberger (SLB) and Verizon (VZ) report
  • Friday: Oil Rig Count. GE (GE), McDonalds (MCD), Whirlpool (WHR) report.

 

Oct 10 2016

Fixed Income Markets – the real action last week

Market Recap:

Stocks ended a volatile week on a slight down-note Friday, as major indexes lost a fraction of a percent. While most investors are focused on the S&P 500 or DJIA, the real action last week was in fixed income markets. The benchmark 10 Year Treasury yield has climbed by nearly ¼ point since late September, indicating that market participants are seeing an increasing chance of a December or January rate hike. International bourses mirrored U.S. volatility last week, declining slightly across the board. The U.S. dollar remained fairly steady against other major currencies, with the exception of the Mexican Peso which rose to a six month high. The Peso is largely seen as an election indicator, rising as a Mr. Trump’s poll numbers fall and rising when his chance of winning the election improve.

 

This Week’s Market Moving Events:

Monday: Happy Columbus Day

Tuesday: Small Business Optimism Index. Alcoa (S: AA) reports

Wednesday: Job Openings. CSX Corp (S: CSX) reports

Thursday: Import Price Index. Delta Air (S: DAL) and Wynn Resorts (S: WYNN) report

Friday: Retail Sales, PPI, Consumer Sentiment, Business Inventories. CitiGroup (S: C), JP Morgan (S: JPM) and Wells Fargo (S: WFC) report

Oct 03 2016

This Week’s Market Moving Events

Market Recap:

Stocks vacillated at the end of the third quarter, during which stocks (S&P 500) gained about 1 ½% – which isn’t bad considering that Q3 is historically the worst performing quarter of the year. High-quality dividend paying stocks – led by energy and telecom shares – performed very well during the quarter, while financial stocks continued to lag. The recent negative news headlines and problems facing Deutsche Bank and the new-account scandal facing Wells Fargo aren’t helping the image of the beleaguered sector (you’ll be happy to know that we have very little exposure to financial shares, and no exposure to Wells Fargo or Deutsche Bank).

 

Looking Ahead:

While politics and the Fed are dominating the headlines, many of the key drivers for equity market performance in the fourth quarter will be released this week. Amongst them are the critical motor vehicle sales and consumer spending reports, construction spending and factory orders, and of course the September Jobs report. Investors have spent the summer months fretting over the timing and impact of the next interest rate hike by the Fed. As data continues to be mixed, with the positive slightly outweighing the negative, this week’s reports could prove to be a turning point for some FOMC voting members who have been waiting on more data. A series of small disappointments could prove fortuitous for markets, while strong data will likely cause volatility (aka buying opportunities) as ‘fear’ of a December rate hike resurface.

 

This Week’s Market Moving Events:

Monday: Motor Vehicle Sales, PMI & ISM Manufacturing reports, Consumer & Construction Spending

Tuesday: Redbook Report, Chinese & Japanese economic data (after the close)

Wednesday: EU Retail Sales, International Trade, Factory Orders, ISM & PMI non-Manufacturing data.

Thursday: Chain Store Sales, Jobless Claims

Friday: September Employment Report

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