Archive for December, 2011

On the final trading day of the year, the Dow finished 69 points in the red on Friday, down 76 points for the week, or .6%.  After a volatile year, the Dow managed to finish with a 5.5% gain.

It was a quiet week trading-wise as for the most part investors took a holiday breather, quietly wrapping up 2011 while looking ahead to 2012.  Heading into the new year, the focus remains on Europe and the Eurozone’s debt struggles, with particular attention still focused on Italy and Spain.  As European leaders combat the crisis, stock markets will continue to swing on news out of Europe.

In the U.S., economic data has shown signs of strength lately, with stabilization in the housing sector, an uptick in manufacturing and a decrease in jobless claims lending optimism to the recovery.  The main focus, however, will remain on job creation, which will greatly affect market direction.

Oil prices remain high as the standoff over access to the Strait of Hormuz continues.  In 2011, oil prices increased almost 8 %, and look to remain high heading into the new year as the US and world economies improve.

Next week, the economic reporting highlight will be on Friday when the December employment numbers are released.  Expect the number of new jobs created in December to increase slightly and the unemployment rate to remain at 8.7%.

In observance of the New Year holiday, markets and our office will be closed on Monday, January 2^nd.

Have a Happy New Year,

James Skjong

 

 

After a 100 point drop on Monday, the Dow ended the week with four straight days of gains, finishing the week up 428 points, or 3.6%.  Perhaps the Santa Claus rally really does exist?

The US economy continued to show signs of a gradual recovery this week despite lingering global economic headwinds. US housing starts in November came in better than expected with the construction of 685,000 homes, beating consensus estimates by 50,000 homes.  Initial jobless claims were also better than expected with jobless claims coming in at 364,000: 14,000 lower than estimates and 2,000 lower than last week’s figure.

The European economy also gained this week with help from the European Central Bank.  The ECB pledged 490 billion euros to lend to the region’s banks to ease liquidity concerns and spur lending within the economy.  This lending provision rippled through the financial system, lifting bank stocks and their trust preferred securities.

Oil prices continued to inch higher this week, briefly surpassing $100 a barrel before ending the week at $99.85.  Potential sanctions on Iran, a major world oil supplier, and encouraging signs of a US economic recovery continue to benefit our oil and gas exploration and production equities by driving oil prices higher.

Next week, economic reporting highlights include the release of the December consumer confidence report on Tuesday, and manufacturing and jobless claims data on Thursday.  Expect an uptick in consumer confidence and manufacturing, and the jobless claims number to decline (albeit slightly) for the fourth week in a row.

In observance of the Christmas holiday, markets and our office will be closed on Monday, December 26^th.

Have a safe and Happy Holiday,

James Skjong

 

Enthusiasm was lacking this week as Europe again weighed heavily on markets both at home and abroad.  The Dow, which was up 1.4% last week, dropped 2.6% for the week and is now down 1.5% for the month, leaving many to wonder if there really is a Santa Claus rally?

The events in Europe this week didn’t provide immediate solutions to the ongoing debt problem, but instead focused on long-term budgetary imbalances.  Markets didn’t react favorably, but the budget imbalances are where the fundamental problems lie.  For example, a confidence vote on a package of austerity cuts and reforms passed in Italy today, helping to advance the country’s goal of a balanced budget by 2013.  Though results will not be immediate, these long-term plans are crucial to the economic health of the region going forward.

As markets fell on European news, so did the euro itself, reaching a two-month low mid-week.  This occurrence may actually help struggling European economies by making exports more competitive, thereby boosting Eurozone economies.  And falling with the euro was the price of oil, which fell for the third straight day on Friday to $92.53 per barrel.  Europe’s economic slowdown, OPEC’s acknowledgment of overproduction and relatively warm weather contributed to the decline in oil and energy stocks in general this week.

Again seemingly lost in the European noise was the positive US economic data released this week.  Unemployment filings were down, and inflation remained in check, though retail sales were a bit lower than expected for November.

Looking into next week, economic reporting highlights include the release of November housing data on Tuesday, Wednesday and Friday, and the third and final estimate of third quarter GDP on Thursday.  Expect home sales to increase slightly from October, building starts and permits to decrease slightly, and the GDP number to remain unchanged at 2.0%.

Portfolio-wise, December is a big month for trust preferred dividends.  A large amount of dividends came in this week, and another large amount will be coming at the end of the month.  Trust preferreds in our portfolios continue to yield over 7.5%

Have a good weekend,

James Skjong

 

On the strength of a fiscal deal struck by European countries, the Dow rose 187 points on Friday, finishing the week up 165 points or 1.4%.  The Dow is now up 5.2% for the year after a second straight week of gains.

The European fiscal treaty, agreed upon by the 17 Eurozone countries, will deepen the integration of the countries’ respective budgets, mandating debt targets and outlining debt reduction policies.  However, not all European countries have agreed to participate (most notably England), and questions still exist as to how to what amount the IMF will contribute to the bailout fund.  As the summit in Brussels continues, headline risk remains heading into next week as details continue to emerge.  A stabilization in Europe will help the financial sector and trust preferred securities of both European and U.S. banks.  The health of U.S. banks continues to improve.

Looking outside of Europe, in China, trade figures set to be released on Saturday are forecasted to show a slump in export growth in November.  As manufacturing and industrial production figures also have shown declines in recent weeks, it appears domestic demand is slowing in China as well as abroad.  A loosening of China’s monetary policy remains a possibility.

Domestically, attention will be focused on the Fed and Congress next week as the Fed meets for its December meeting on Tuesday and Congress debates on whether to extend the payroll tax cuts. A third round of quantitative easing (the purchasing of assets by central banks to inject money into the economy) is not expected at this time, though it is thought the Fed may take further action early next year.  U.S. economic news was generally favorable during the week with lower unemployment filings.

Economic reporting highlights next week include the release of November retail sales on Tuesday and inflation data on Thursday and Friday.  Expect retail sales to come in higher-than-expected due to robust holiday shopping and for inflation to remain level.

Have a good weekend,

James Skjong