The Federal Open Market Committee minutes that were released this week have put investors on edge.  There is an ongoing debate of how and when the Fed will decide to transition and exit its current economic stimulus measures.  The Fed’s current stimulus plan of $85 billion worth of bond purchases per month, have been credited for the recent market rally, and there are fears that an early exit from this plan could derail the rally.

However, to credit the Fed as the sole reason for the market rally would be wrong.  There has been marked improvement in the housing market.  New home sales have been on the rise and the 454K new home sales for April handedly beat expectations of 425K.  Additionally, Initial and Continuing Jobless claims have been on the mend.  This past week’s 340K Initial Jobless Claims was lower than the prior’s week’s 360K and better than expectations of 348K.  Continuing Jobless Claims of 2912K also beat expectations of 3005K.

Important economic events next week include the Consumer Confidence report on Tuesday, Initial and Continuing Jobless Claims on Wednesday, and Personal Income and Spending data for the month of April, on Friday.   The Consumer Confidence report on Tuesday for the month of May is expected to show a modest improvement from the Consumer Confidence report from April.  However, both the forecasted Initial and Continuing Jobless Claims of 345K and 3000K, respectively, are expected to be slightly worse than the prior reading of 340K and 2912K.

The market, as well as our office, will be closed on Monday due to Memorial Day.

Have a good long weekend,

Fred Semmer

The University of Michigan Consumer Sentiment report rose to a better-than-expected 83.7, the index’s highest level since September of 2007, while a leading economic indicators report posted its best result since February of 2012.  Comments on Thursday by Fed Chairman Ben Bernanke that the Fed might begin tapering its stimulus efforts should the economy continue to improve caused a brief drop in markets, but momentum returned on Friday, spurred by the healthy economic data and comments from the Minneapolis Fed President suggesting the Fed has not sufficiently lowered interest rates.

The dollar continued to strengthen this week, rising to three-year highs against major currency rivals, in the process hitting a high versus the Japanese yen not experienced since October 2008.  The stronger dollar has put pressure on gold, which declined for the seventh-consecutive session Friday.  For the week, gold was down 5%.

Oil settled at $96.03 per barrel Friday, up $.03 for the week.  Natural gas ended the week at $4.06, up 3.3% on the day and 3.8% for the week.

Next week, economic calendar highlights include April existing home sales on Wednesday, and April new home sales and weekly jobless claims on Thursday.  Expect existing and new home sales to show improvement from March levels and jobless claims to fall to the 350,000 range from 360,000 this week.

Have a good weekend,

James Skjong

In a speech Friday morning, Fed Chairman Ben Bernanke reaffirmed a continuation of the Fed’s stimulus efforts while also emphasizing the continued monitoring of markets for excessive risk-taking or other practices that could cause destabilization of asset prices.

The dollar experienced its strongest week against other currencies in 10 months, in the process hitting a 4 ½-year high against the Japanese yen Friday.

Oil fell .6% Friday to close at $95.86 per barrel, up .4% for the week.  The price of oil has climbed almost $10 over the past three weeks, but will be watched as the dollar continues to strengthen.

Through Thursday, our trust preferred portfolios are up approximately 6%, on average, year-to-date, versus 5.56% for the S&P Preferred Stock Index and .55 % for the Barclays Aggregate Bond Index.  Over the past week, a couple of trust preferred issues were called.  As a result, you may have seen a higher-than-normal cash balance in your account.  We are in the process of reinvesting the cash in additional trust preferred and preferred securities, focusing on those with more tax-advantageous, qualified dividends.

The preferred shares of Magnum Hunter have recovered nicely over the past week, nearly to pre-accounting-issue levels.  The current and proposed monetization of assets has contributed to the improvement.

Next week, economic calendar highlights include April retail sales on Monday, April inflation data on Wednesday and Thursday, and initial jobless claims and April housing data also on Thursday.  Expect April retail sales to fall slightly from March, inflation to remain a non-issue, jobless claims to remain in the 330,000 range and the April housing numbers to show improvement from March.

Have a good weekend,

James Skjong

The employment report showed the creation of 165,000 jobs in April (above the 155,000 consensus estimate) and a drop in the unemployment rate to 7.5% from 7.6%.  In addition, the number of jobs created in February and March were upwardly revised to 332,000 and 138,000 from 268,000 and 88,000, respectively.  The April job growth and accompanying revisions underscore the belief that the economy has so far been able to weather the effects of the sequester and the recovery remains in process, though at a slow place.  The job reports in May and June will be closely watched as the fiscal cuts continue to filter through the economy.

Oil rose 1.6% Friday to close at $95.47 per barrel.  Since April 17, the price of oil has increased almost $10.

Through Thursday, our trust preferred portfolios are up almost 4.5%, on average, year-to-date, versus 4.73% for the S&P Preferred Stock Index and 1.04 % for the Barclays Aggregate Bond Index.

The economic calendar for next week is a light one, with weekly jobless claims on Thursday the highlight.  Expect jobless claims to rise into the 340,000 range from the better-than-expected 324,000 this week.

First quarter GDP came in at 2.5%, above the fourth quarter 2012 reading of .4% but below the consensus of 2.8%.  The acceleration in growth from the end of 2012 is a positive; however, most of the first quarter gains came in sectors such as consumption and inventories that are forecast to experience a pullback in the second quarter as effects of the sequester become more evident.  Government spending, which fell 4.1% in the first quarter after a 7.1% decline in the fourth quarter of 2012, is also expected to continue to decline over the next three months due to the budget cuts, further dampening growth.  A bright spot today was a consumer confidence report that showed an increase in consumer sentiment from March.

Oil closed at $92.96 per barrel Friday, gaining 5.3% for the week while natural gas closed at $4.23, declining 4.7% for the week.

Through Thursday, our trust preferred portfolios are up almost 4%, on average, year-to-date, versus 3.79% for the S&P Preferred Stock Index and .72% for the Barclays Aggregate Bond Index.

Next week, economic calendar highlights include April consumer confidence and manufacturing on Tuesday, initial jobless claims on Thursday, and the always anticipated jobs report (for April) on Friday.  Expect the consumer confidence and manufacturing reports to show slight declines from March, initial jobless claims to rise into the 340,000 range from 339,000 this week, and the jobs report to show the creation of approximately 150,000 jobs in April (up from 88,000 in March), steadying the unemployment rate at 7.6%.

Have a good weekend,

James Skjong

General Electric and McDonalds reported in-line earnings Friday (though both warned of global growth concerns going forward), while IBM missed on both earnings and revenue. Google, Microsoft, Chipotle and Capital One reported solid results, helping to buoy markets in the face of the ongoing manhunt in Boston. Quarterly earnings will continue in earnest next week, with the likes of Caterpillar, Amazon, Exxon Mobil, AT&T, Netflix, and perhaps most notably Apple (on Tuesday) all reporting.

Oil rose $.26 to $88.01 a barrel while natural gas closed at $4.40, more than twice the price of one year ago.

Through Thursday, our trust preferred portfolios are up over 3%, on average, year-to-date, versus 3.63% for the S&P Preferred Stock Index and .76% for the Barclays Aggregate Bond Index.

Next week, economic calendar highlights include March existing home sales on Monday and March new home sales on Tuesday, weekly jobless claims on Thursday and first quarter GDP and April consumer confidence on Friday. Expect the housing numbers to show an increase in sales from February, weekly jobless claims to remain in the 350,000 range, first quarter GDP to show growth of approximately 3.0%, and consumer confidence to stay level with the prior March reading.

Have a good weekend,

James Skjong