Sep 18 2014

Fed takes 5 years to normalize balance sheet

Market Recap:

The much anticipated FOMC report ended up being little changed from previous reports and forward guidance by the Fed remains constant. Generally speaking the Federal Reserve Open Market Committee acknowledged that the US economy continues to make progress and that growth is strengthening. However they also acknowledged that the unemployment picture continues to be disappointing and that global pressures could impact US manufacturers and multi-nationals. Stocks spiked after the release of the FOMC minutes and Chairwoman Yellen’s press conference, running into record territory. In our view, the most critical statement in today’s release was when Dr. Yellen stated that it would likely take the Fed until the end of the decade (i.e. another 5 years) to normalize its balance sheet. In other words, while QE may be coming to an end by December (the remaining $15 billion in purchases will be tapered in $5 billion increments over the next three months), the unwinding of stimulus will take many more years.

Utilities and energy shares fell on commodity weakness, while the traditionally defensive consumer staple sector declined as a result of the continued dovish stance by the Fed. The US Dollar index remained relatively flat to slightly higher.

Looking Ahead:

With the Fed announcement behind us, market participants will focus their attention on the upcoming Alibaba IPO – the largest in history – as well Thursday’s Jobless Claims, Housing Starts, and Philly Fed Survey. Investors should expect markets to remain in a tight trading range, likely making new highs by small increments. This trading pattern is likely to last until the third quarter earnings season kicks off in three weeks.

Make sure to tune into Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio to hear our latest economic and market analysis, as well as a great interview with Carly Fiorina former CEO of HP and potential presidential candidate. Visit our website for details.

Sep 17 2014

Near the flat line teetering

Market Recap:

Stocks started the day in a similar manner as they did on Monday and Tuesday, near the flat line teetering into the negative before an announcement of a liquidity injection by the People’s Bank of China helped lift stocks by about ¾%. The S&P traded above 2,000 before closing just below the benchmark number, as all ten of the indexes sectors rose. Utilities and energy shares climbed the most as oil and other commodities rallied as the dollar index weakened.

Looking Ahead:

The Federal Reserve Open Market Committee is concluding its two day meeting this afternoon and will release its highly anticipated meeting minutes around 2 o’clock followed by Chairwoman Yellen’s press conference. Market participants are listening for clues of a shift in timing of the first interest rate hike since 2006. As we discussed yesterday afternoon on CNBC’s Closing Bell, we expect the overall tone of the FOMC to remain dovish and do not expect any material changes in policy until mid-2015.

Make sure to tune into Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio to hear our latest economic and market analysis as well as a great interview with Carly Fiorina, former Hewlett Packard CEO and potential candidate for the U.S. Presidency. Visit our website for details.

Sep 16 2014

It’s all about the Fed

Market Recap:

Stocks started and stayed in the Red for most of Monday as market participants worried about the implications of the Scottish Nationalist vote (voting to secede from the UK) and the upcoming FOMC meeting which kicks off on Tuesday morning. Market internals were a bit better than indexes indicated as 7 of the 10 sectors in the S&P ended in, albeit mild, positive territory. Technology, Healthcare and Consumer Discretionary shares were the big laggards, mostly on profit taking as these sectors have performed well this year. Commodities were mixed and the dollar strengthened slightly.

Looking Ahead:

It’s all about the Fed and what statements Chairwoman Yellen will make during Wednesday’s Press Conference. As the FOMC kicks off its two day meeting, the big question for astute investors is: How much weight will the committee members place on the strength of the global economy as a whole when considering US monetary policy? Should the Fed ignore or downplay the global impact of a change in policy by the US, investors can expect some modification in the interest rate guidance tomorrow. However, if the Fed believes that it must take into account the state of the global economy, the weakness in the Eurozone could temper action and keep their stance dovish. Today’s news from Germany and the UK along with the US Redbook report and Producer Price Index data are likely to be scrutinized for last minute economic hints. One thing is certain, tomorrow’s testimony by Janet Yellen and the arguments she will put forth will resemble those of the Indian Goddess Kali, who has 10 arms to be able to weigh arguments from all perspectives – hence the term on one hand, ….

Make sure to tune into Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio to hear our latest economic analysis and a great interview with Coach Schnellenberger (NFL and Collegial coach at Baltimore, Miami, Louisville). And don’t miss our President, Oliver Pursche, on CNBC this afternoon at 3:45 PM live from the floor of the New York Stock Exchange when he discussed our latest market outlook. Visit our website for details.

Sep 12 2014

Data Is Coming Into Focus

Market Recap:

It must be Ground Hog Day…. Stocks repeated Wednesday’s trading pattern on Thursday, starting the day lower before rebounding towards the end of the trading day to essentially close near flat. Sectors of the S&P were mostly higher, with Utility and Telecom shares outperforming, while healthcare stock underperformed. Commodities continued to weaken as oil hit a multi-month low and the stronger US Dollar pressured metals.

Looking Ahead:

Data is coming into focus on Friday and next week – Friday’s market moving data will include Eurozone Industrial Production, US Retail Sales, Business Inventories and Consumer Sentiment. Market participants will likely attempt to read the tea leaves to decipher how the Fed may interpret the recent mixed data and if Chairwoman Yellen will turn a bit more Hawkish at next week’s press conference. Specifically, investors are wondering if the Fed will remove the “for an extended period of time” phrase from their interest rate guidance. In our view, this question misses the point, as the more critical question is whether the US economy will continue to grow at its current pace and thereby help drive corporate earnings higher. If it does, then stocks should continue to rise – read our latest story in Forbes here:

Next Week’s Market Moving Events:

  • Monday: 8:30 AM Empire State Manufacturing Index, followed by the 9:15 release of Industrial Production data
  • Tuesday: The FOMC meeting kicks off, Producer Price Index is released, along with the Redbook report
  • Wednesday: The FOMF meeting concludes with the release of Fed minutes and Chairwoman’s conference at 2:00 PM. Consumer Price Index, Housing, and Mortgage Application data are reported.
  • Thursday: Housing Starts, Jobless Claims and the Philly Fed Survey are released
  • Friday: German Producer Price Index and the Atlanta Fed Business Inflation Expectations are released before the open, followed by Leading Indicators.

Make sure to tune in to Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio to hear a great interview with PIMCO CEO Doug Hodge and our latest economic analysis and market commentary. Visit our website for details. And don’t miss our President, Oliver Pursche, when he joins the CNBC team next Tuesday afternoon to provide our latest commentary and outlook.

Sep 11 2014

Commodities Continued Their Pull-back

Market Recap:

Stocks started Wednesday on a down tick and stayed in negative territory for most of the day before rebounding and closing up about ¼%. A rally in Apple shares appears to have been the leader in the change in sentiment on Wall Street, although we suspect the “Buy on (any) dip” attitude is more likely the chief reason. Economic news was sparse, with the only meaningful report showing Mortgage Applications falling to a multi-month low. Commodities continued their pull-back as oil oversupply fears and a stronger dollar pressured metals and energy, while a mild fall season forecast including a benign Hurricane season expectation pressured agricultural commodities. Sectors of the S&P were mixed, with Technology shares performing best.

Looking Ahead:

European and Asian bourses are generally lower overnight, and U.S. equity futures are pointing to a lower open this morning. The 8:30 AM Jobless report and 9:45 AM Consumer Confidence reports are likely to impact early trading, however we believe that stocks will likely remain in a tight trading range as investors mull the current geopolitical risks while waiting for more impactful economic data next week – including the FOMC meeting and press conference by Chairwoman Yellen.


Make sure to tune into Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio to hear a great discussion with PIMCO CEO Doug Hodge and our latest economic and market analysis. Visit our website for details.

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