Archive for February, 2012

After briefly flirting above 13,000 for the second time this week, the Dow failed to keep momentum amidst a lackluster trading session on Friday, eventually closing down 2 points to 12,983.  For the week, the Dow was up 33 points, or .3%, producing its seventh gain out of the eight trading weeks of 2012.

The approval of the second Greek bailout package on Monday by European finance ministers helped to calm markets.  On Friday, a formal announcement of the bond swap portion of the deal, a major part of the austerity package that will slice approximately 100 billion euros off of Greece’s 350 billion euro debt load, was announced.  Under the swap agreement, investors holding Greek government bonds will exchange the current bonds for new longer-dated bonds, in the process taking losses estimated at 73 to 74%.  Though the action eases concerns about an immediate bankruptcy, doubts still remain as to the viability of the austerity package and the overall recovery of the battered country’s economy.

In the US, January housing data released during the week showed an improvement in existing home sales, while new homes sales data beat analysts’ expectations.  Initial unemployment claims, released Thursday, stayed flat at 351,000.

The high price of oil continues to strengthen our oil and gas positions.  After peaking at $109.95 per barrel on Friday, the commodity closed the week at $109.77 on speculation that tensions in the Middle East will erupt into war and supply disruptions.  Since early October, oil is up 45%, and 11% year to date.

Trust preferred portfolios also continue to perform well, returning almost 9.0% year-to-date through yesterday, Thursday, February 25^th, beating the Dow by almost 3%.

Next week, economic reporting highlights include January durable goods and February consumer confidence reports on Tuesday, a February manufacturing report on Wednesday and the initial unemployment claims release on Thursday.  Expect durable goods orders and manufacturing to decrease slightly, consumer confidence to increase and initial unemployment claims to remain near the 355,000 level.

Have a good weekend,

James Skjong

 

 

European and global growth concerns sent markets lower Friday, pushing the Dow down 89 points, or .7%.  For the week, the Dow was down 61 points, or .5%.

Greece remains the European hot spot, where government leaders are working to pass austerity measures necessary for a much-needed second bailout package.  On Thursday, an agreement was reached between the leaders of Greece’s coalition government on a package, but Eurozone finance ministers did not approve, stating additional cuts to the budget must be made.  A parliamentary vote will most likely take place on Sunday or Monday amidst new worker strikes and public displeasure, as Greece has until mid-week next week to make further budget cuts.  Markets will respond to results of the vote accordingly.

Compounding the European distress was a report issued by the International Energy Agency lowering its full-year global oil demand projection on concerns of slower global growth, and a report from China showing that Chinese imports and exports both fell for the first time in two years.  Although the price of oil fell on the release of the IEA report, it still closed just under $100 a barrel for the week.

In the US, though consumer confidence dipped on Friday, initial unemployment claims on Thursday fell for the second straight week, an encouraging sign.

Our trust preferred portfolios continue to perform well, returning almost 8.5% year-to-date through yesterday, Thursday, February 9^th, beating the Dow by almost 3%.

Next week, economic reporting highlights include January retail sales data on Tuesday, initial unemployment claims on Thursday, and January inflation data releases on Thursday and Friday.  Look for retail sales to increase over December, unemployment claims to rise a bit from last week’s 358,000 figure, and inflation to tick up slightly.

A healthy jobs report sent stocks soaring on Friday, pushing the Dow up 157 points, or 1.2%.  For the week, the Dow gained 1.6%, closing at its highest point since May of 2008.

On the heels of a better-than-expected unemployment claims report on Thursday, Friday’s employment release displayed even better numbers.  The economy added 243,000 jobs in January – the largest monthly gain since April of 2011 – and the unemployment rate fell from 8.5% to 8.3%.  To compliment, non-manufacturing data showed an increase in activity in January, with the related index producing its best result in a year.

In Europe, Greece is moving ever-closer to finalizing a deal with its lenders, with those owning Greek bonds expected to take a 70% “haircut,” or loss, on the investments.  The situation in Greece has temporarily taken the focus off other troubled Eurozone countries, but attention is shifting back to Portugal, the next “weakest link,” where bond yields have soared and a debt restructuring by the end summer is becoming a possibility.

Problems in Europe continue to inject nervousness in markets, but the promising US economic data indicates a gradual US recovery is underway.  Benefitting this week from the perceived economic growth was oil, which closed up $1.45 on Friday to $97.81 per barrel on the strength of a projected increase in demand stemming from economic expansion and tensions in the Middle East.  Financial stocks also exhibited strength, boosting trust preferred share prices.  For the month of January, our trust preferred portfolios returned almost 6.5%, besting the Dow by over 3% and the S&P 500 over 2%.  Foreign ETFs also had a big week.

Next week is a quiet one for economic reporting with the initial unemployment claims number on Thursday being the only release of great interest.  Watch for the claims number to continue its downward trend from 367,000 this week.

Have a good weekend,

James Skjong