Weekly Update Archives

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

 

Disappointing corporate earnings reports and US economic data drove the Dow 74 points lower Friday.  For the week, the Dow posted declines in all but one day, finishing down 60 points, or .5%.  It was the Dow’s first weekly decline in 2012, though for the year, the index is still up 3.6%.

Domestically, economic data for the most part discouraged investors.  The Fed’s announcement on Wednesday that interest rates will remain low until 2014 and that further stimulus measures are not out of the question spurred markets for a day, but reports announcing a decline in December home sales, an increase in weekly jobless claims, and a lower-than-expected first estimate of fourth quarter 2011 GDP (the consensus estimate was 3.0% – actual was 2.8%) sent markets lower.  Though the GDP result was the highest growth rate since the second quarter of 2010, it’s worth noting that most of the growth came from inventory rebuilding.

In Europe, negotiations continued between Greece and its creditors, with progress reportedly being made.  Borrowing costs for Italy and Spain fell to levels not seen in months, though the two countries were downgraded by Fitch Ratings, with a mention of the chance of further downgrades in the next two years.

Trust preferreds continue their solid performance in the new year.  Through yesterday, Thursday, January 26^th, our trust preferred portfolios were up over 6.5% year-to-date.

Next week, economic reporting highlights include the release of January manufacturing data on Tuesday and the ever-important January employment numbers on Friday.  Look for manufacturing to remain relatively flat from December, the number of jobs created in January to decline slightly from December, and the unemployment rate to remain at 8.5%.

On the strength of corporate earnings and positive US economic data, the Dow posted gains on all four trading days this week, finishing up 298 points, or 2.4%.  It is the Dow’s third weekly gain in a row and its sixth in the last eight weeks.

In Europe, the focus was on Greece and its ability to negotiate with international lenders.  Greece is trying to cut its debt by 100 billion euros by offering to exchange old Greek bonds with high interest rates with new bonds with lower interest rates.  The sticking point is how low the interest rates on the new bonds will be.  The difference between the new and original interest rate will be the “haircut,” or loss the lenders will have to realize.  Greece wants lower rates on the new bonds, lenders want higher rates.  Negotiations continue, with hopes of a solution before Greece’s next round of bond payments in mid-March.

Oil fell below $100 per barrel, ending the week at $98.33.  The decline was attributed to a contraction in Chinese manufacturing and Greece’s ongoing debt crisis negotiations, as well as a softening of rhetoric from Iran concerning the closure of the Strait of Hormuz should an oil embargo be imposed.

Trust preferreds continue to show solid performance in 2012.  Through yesterday, Thursday, January 19^th, our trust preferred portfolios were up over 5.5% year-to-date.

In the US, though housing starts were down, building permits remained level and housing sales increased in December from the prior month (the third straight monthly gain).  Jobless claims fell 50,000 to 352,000, the fewest since April of 2008, and the core inflation rate, which excludes energy and food prices, came in at 2.2% for 2011, the highest rate since 2007 but still one deemed acceptable by the Federal Reserve.

Next week, attention will be focused on Wednesday’s Federal Open Market Committee meeting during which the Fed will release, for the first time, its own interest rate projections, inflation objectives, and perhaps even an unemployment rate target.  Also up for debate is another round of stimulus, though the recent emergence of better economic data will most likely delay any such action.  December new home sales data on Thursday and the first estimate of Q4 2011 GDP on Friday will round out the weekly data release.  Look for home sales to increase slightly and Q4 GDP to increase to around 3% from 1.8% in Q3.

Have a good weekend,

James Skjong