Archive for May, 2012

European concerns sent the Dow 75 points lower on Friday, ending a week in which the Dow finished up 85 points, or .7% – the index’s first weekly gain in three weeks.  For the year, the Dow is now up 1.9%.

Economic data in the US was positive, as both existing and new home sales increased in the month of April.  Initial jobless claims fell (albeit by only a small margin) and a consumer confidence reading released Friday rose to its highest level since October of 2007, most likely the result of falling gas prices.  However, Europe once again dominated the headlines and steered markets.

Spain was in the news as on Friday the Spanish government was forced to inject $24 billion into one of its largest banks, Bankia.  Standard & Poor’s subsequently downgraded Bankia and four other Spanish banks, citing the belief that Spain is entering a double-dip recession that will lead to an increase in troubled assets… troubling as Spain is the fifth-largest European economy.  Euro-wide, it is believed that European leaders will not take drastic action until the Greek elections in June, which will be more or less a vote on whether the country will remain in the Eurozone.

Despite the European troubles, our trust preferred portfolios continue to outperform the Dow by approximately 5%, returning 8% on average versus 2.6% for the Dow, year-to-date through Thursday, May 24.

Next week, a consumer confidence reading on Tuesday and manufacturing and initial jobless claims data on Thursday will bear interest, but the reporting highlight will be on Friday when the May employment figures are released.  Look for the number of new jobs created in May to increase from April, and for the unemployment rate to fall to 8.0% from the current 8.1%.

In observance of the Memorial Day holiday, our offices will be closed on Monday, May 28.

 

The excitement of Facebook’s initial public offering on Friday proved to be no match for Europe as Eurozone debt worries weighed on the Dow, helping to push the index down 73 points, or .6%.  For the week, the Dow was down 451 points, or 3.5%.  For the year, the Dow is now up only 1.2%.

After a week filled with lackluster US housing, employment and retail sales data, investors hoped Facebook’s trading debut would help reverse the market’s downward trajectory.  Though Facebook’s IPO was the second largest ever in the US, raising $18.4 billion (more than all other IPOs so far this year combined), it wasn’t enough to overcome more negative news from Europe.

Greece continues to be the flashpoint abroad, where amidst a small-scale run on Greek banks, the country’s parliament dissolved on Friday to make way for fresh elections on June 17.  The outcome of the elections will factor heavily in Greece’s continued participation in the Eurozone.  Should frustrated Greek citizens vote in favor of anti-austerity parties, odds of default and a Eurozone exit would increase.  The anti-austerity sentiment found in Greece has been creeping slowly into Italy and Spain as well, as resentment within the two countries towards Germany and the German-led austerity packages continues to deepen.

Our trust preferred portfolios have been affected by the turmoil in Europe the past weeks, but continue to outperform the Dow by approximately 5% through Thursday, May 17.  Trust preferreds are less volatile than equities while continuing to yield 7.5%.  Crude oil prices fell with the economic uncertainty, dragging down energy stocks.

Next week on Monday, the results of the weekend European Union meeting undoubtedly will be news.  Housing data (including existing and new home sales on Tuesday and Wednesday) and a consumer confidence reading on Friday will be the US economic reporting highlights.  Expect sales of both existing and new homes to remain flat and consumer confidence to show a decline from the previous reading.

Have a good weekend,

James Skjong

 

Friday’s trading session was choppy as positive U.S. consumer sentiment news only slightly offset news of J.P. Morgan’s downward revision of China’s projected 2012 GDP growth figures from 8.2% to 8.0%.  Both the Dow and S&P 500 finished down for the day at .27% and .34%, respectively.

Market sentiment remained cautious this week as the U.S. equity market dealt with underwhelming jobs data and economic growth concerns in Europe and China.  Initial jobless claims came in 2,000 claims higher than expected at 367,000, while the continuing jobless claims came in at 3,229,000 compared to a consensus estimate of 3,300,000.  Despite this week’s lackluster jobs data, the S&P 500 was only down 1.2%, while the Nasdaq was only off by .8%.  Additionally, though the economic indicators have been mixed, the U.S. economy continues to march forward slowly.

Europe remains a growing concern and also a negative for the market as elections earlier this week threatened to disrupt the ongoing fiscal reforms in France and Greece.  France’s new president, Francois Hollande, is calling for a European “Growth Pact” to encourage growth rather than favoring austerity measures that aim to cut budget deficits at the risk of slowing growth.  While risks remain, analysts are hopeful that the meeting between Eurozone financial ministers next Tuesday and Wednesday will culminate in further cuts to the European Central Bank interest rate or additional involvement from the European Financial Stability Fund.

Next week will feature a number of important economic indicators from the month of April.  Retail sales and Consumer Price Index data for April are due out on Tuesday and Housing Starts and Building Permits are due Wednesday.  Initial and continuing jobless claims are due out Thursday.  Analysts expect that the initial jobless claims will tick down to 365,000 from 367,000, but that the continuing claims will inch higher from 3,229,000 to 3,250,000.

Have a good weekend,

Fred Semmer

 

Acronyms

DOE: Department of Energy

SPR: Strategic Petroleum Reserve

PADD: Petroleum Administrative Defence Districts

NYMEX: New York Mercantile Exchange

WTI: West Texas Intermediate. This is a common benchmark for US crude oil.

E&P: Exploration and Production. Also commonly referred as the upstream operations of oil and gas companies.