Weekly Market Update – August 12, 2016
The Dow finished 37 points lower on Friday after disappointing data on July retail sales. For the week the Dow was up 0.18%. Year-to-date the index is up 6.6%.
This week’s domestic economic data surprised to the downside. The U.S. retail sales released by the Commerce Department on Friday came in flat vs. an expected 0.5% rise, indicating a potential hurdle for economic growth in the second half of the year. Productivity declined for the third straight quarter and fell at a 0.5% annualized rate in Q2 following a 0.6% decline in Q1 while consensus expected a 0.5% increase. Unit Labor costs increased by 2%, slightly ahead of consensus. High rates of retirements and slow population growth were cited as reasons for the slowdown in productivity growth. Neither the dollar nor Treasury yields had much change. Next Wednesday’s Federal Open Market Committee (FOMC) Minutes will shed more light on the issue. For the week, the U.S. Preferred Stock Index was flat.
Crude oil surged on Thursday following a Saudi Energy Minister statement that OPEC members and nonmembers would discuss the market situation on the sidelines of the International Energy Forum in Algeria next month and could also cover “any possible action that may be required to stabilize the market.” The Saudi Energy Minister also noted that the market is on the right track toward rebalancing, but that the process of clearing inventories will take time. Many were skeptical about the possibility of a revived production freeze, and this month’s IEA report slightly reduced the global demand forecast for 2017. For the week, the crude was up 6.8%.
Earnings continued to be released for Q2 by several well-known and widely held companies. Following earnings, AMG share price was -3%, Disney +1%, and Alibaba +5%. Q2 reports have mostly concluded by this week.
Next week’s economic calendar highlights include Core Consumer Price Index (Aug. 16th), Crude Inventory and Federal Open Market Committee Minutes (Aug. 17th), and Initial Jobless Claims and Natural Gas Inventories (Aug. 18th). The rest of August normally has low trading volume as Well Street heads off for vacations.
Have a great weekend,
Yansong Pang (庞岩松)
Weekly Market Update – August 5, 2016
The Dow finished 192 points higher on Friday after the Labor Department reported a stronger-than-expected gain in monthly nonfarm payrolls. For the week the Dow was up 0.6%. Year-to-date the index is up 6.4%.
Domestic economic data came in mixed. Non-farm payrolls increased by 255,000 in July versus 179,000 consensus estimate, increasing the possibility of a September or December interest rate hike. Unemployment rate was unchanged at 4.9% and initial jobless claims rose to 269K this week from 266K last week and above the 265K consensus estimate. July ISM Manufacturing Index drop to 52.6 from prior 53.2 while the ISM non-manufacturing index fell to 55.5 from prior 56.5. Personal income rose 0.2% versus consensus for a 0.3% gain and May’s 0.2% growth. Real disposable personal income was up 0.1%, primarily on increased spending for electricity and gas, healthcare services and other nondurable goods. Private payrolls increased by 179K last month, beating the 170K consensus. New York Federal Reserve President William Dudley stated that an interest rate increase prior to the November Presidential Election was possible but cautioned a stronger dollar might hinder economic growth. For the week, the U.S. Preferred Stock Index was -0.35%.
Crude oil dropped to a three month low earlier this week due to oversupply concerns and softer than expected demand, but later bounced backed on a large gasoline stockpile decrease. OPEC members seek to revive production freeze talks in September while concerns linger about supply resumptions and softening demand. Natural gas prices were firm, supported by continuing hot weather.
Earnings were released for Q2 by several well-known and widely held companies. Following earnings, Priceline share price was +5%, Facebook +2%, and U-Haul -9%. Earnings releases will continue in the next two weeks.
Next week’s economic calendar highlights include Unit Labor Costs (Aug. 9th), Crude Inventory (Aug. 10th), Initial Jobless Claims (Aug. 11th), and Producer Price Index (Aug. 12th). Next week will conclude most of the Q2 earnings reports.
Have a great weekend,
Yansong Pang (庞岩松)
Weekly Market Update – July 8, 2016
The Dow finished 251 points higher on Friday as the far-better-than-expected June U.S. Jobs Report alleviated some concerns of an economic slowdown. For the week the Dow was up 1.1%. Year-to-date the index is up 4.1%.
Domestic economic data were largely positive for the week. Nonfarm payrolls rose by 287,000 vs. consensus estimate of 165,000, making June the strongest month of hiring since last October and providing reassurance of continued economic growth in the U.S. despite recent global uncertainties. Markit’s US services PMI rose slightly to 51.4 in June from 51.3 in May. June ISM Services Index recorded the biggest sequential increase since 2008, suggesting strong business activities. Initial jobless claims dropped to 254,000 and June ADP employment came in at 172,000, both numbers better than consensus estimates.
Earlier this week, a number of Federal Reserve officials commented that it was too early to estimate the impact of Brexit on the U.S. economy. The Federal Open Market Committee (FOMC) Minutes on Tuesday highlighted the financial market turbulence following the Brexit vote and judged it appropriate to leave policy options open and remain dependent on economic data. The strong jobs report increases the possibility of an interest rate hike later this year. For the week the US Preferred stock index was down 0.20% and the U.S. 10 Year Treasury yield dropped by 8 basis points to 1.36%. Our preferreds did quite well, and the interest rate environment and slow economic growth should allow more favorable conditions to continue.
U.S. crude oil inventories and production continue to drop which is expected to close the supply and demand gap later this year. The warm summer and the ongoing conversion of coal electric utility plants to natural gas are reducing high natural gas inventories as well.
Next week’s economic calendar highlights include Crude Inventories (July 13th), Initial Jobless Claims and Producer Price Index (July 14th), and Consumer Price Index (July 15th).
Have a great weekend,
Yansong Pang (庞岩松)
Weekly Market Update – June 3, 2016
The Dow finished 32 points lower on Friday after a disappointing May nonfarm payrolls report. For the week the Dow was largely unchanged and year-to-date the index is up 2.2%.
May nonfarm payrolls recorded a surprisingly low increase of 38,000 jobs on Friday, compared to the consensus expectation of 160,000. The data recorded the poorest job creation level in five years, even though a strike at Verizon helped explain some of the weakness. Due to the soft jobs report and renewed concerns about England’s vote to stay in or leave the European Union, the Fed might delay its interest rate hike until at least the July meeting. Accordingly, 10 year Treasury bonds rallied, rising by 1.3% for the week. The US Preferred index PFF rose .4% for the week in reaction to the news. However, contrasting economic data throughout the week still portrayed a healthy economy: unemployment rate fell to a new low of 4.7%, April consumer spending rose the fastest since August 2009, and May’s manufacturing index marked a third month of expansion after five months’ consecutive contractions.
Crude oil was down 1.1% for the week, reaching $48.83 after OPEC failed to implement a production ceiling on Thursday. Iran was a key opponent, rejecting any cap on production, while Saudi Arabia’s oil minister was optimistic that oil prices would continue to recover. US inventory data showed an unexpected decline on Thursday, partially offsetting the negative headlines from the OPEC meeting.
Next week’s economic calendar highlights include productivity and unit labor costs (June 7), jobless claims (June 9) and wholesale inventories (June 9). The Fed meeting is June 14 & 15.
Have a good weekend,