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

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.

Another week of less-than-impressive economic data weighed on markets, especially today’s jobs report, which showed only 115,000 jobs were created in April, well below the 160,000 estimate. The unemployment rate fell from 8.2% to 8.1%, though mainly due to a large number of job seekers leaving the workforce. A warmer-than-average winter is partly to blame, having led to an acceleration in construction and manufacturing hiring early in the year. High energy prices have tempered additional hiring, though oil today fell $4.05 to $98.49 per barrel on the jobs news. The weak data brings the Fed and another round of stimulus back to the fore of conversation, though no action is expected unless economic conditions deteriorate much further.

In Europe, markets were lower on Friday after the release of a bleak European business activity report and ahead of parliamentary elections in Greece and the presidential election in France on Sunday. In the French election, worry exists that if Francois Hollande, the socialist candidate, can trump current President Nicolas Sarkozy, the stability of the fiscal economic pact signed last year by Eurozone leaders and related Eurozone-wide austerity measures could be in jeopardy. Hollande leads in the polls.

Our trust preferred portfolios performed steadily in April, outpacing the major equity indices. For the year, the portfolios continue to return about 10%, on average, year-to-date through yesterday, Thursday, May 3, beating the Dow by approximately 2%.

Next week, the results of the European elections, initial jobless claims on Thursday and April producer price index data on Friday will highlight the economic reporting calendar. Expect the number of initial unemployment claims to remain steady at around 365,000 and the price data to show a slight decline from March.

Have a good weekend,

James Skjong

In the US, strong corporate earnings (approximately 80% of the companies that have reported have announced to the upside) overshadowed a batch of weak economic data, including flat weekly unemployment filings and declines in consumer confidence, March new home sales, and March durable goods orders.  More surprising was the first quarter GDP number, which came in at 2.2%, below the estimate of 2.5% and fourth quarter 2011 3.0% reading.  In contrast to the GDP number, first quarter consumer spending increased 2.9% year-over-year.  Much of the increase was attributed to the warmer-than-average weather, creating concerns that the front-loading will lead to a downturn towards the end of the year.

In Europe, Spain remains in the crosshairs, as the country’s debt was downgraded by S&P late Thursday for the second time this year.  The downgrade was expected, however, and European stocks shrugged off the news to close Friday in the green.

Despite the rather flat start to the second quarter, our trust preferred portfolios, on the strength of strong bank earnings and the Fed’s low-interest-rate stance, continue to return almost 11%, on average, year-to-date through yesterday, Thursday, April 26, beating the Dow by almost 3%.

Next week, the economic reporting highlight will be the release of the April employment report on Friday.  Expect the number of jobs added to be below the January – March average of 250,000 and for the unemployment rate to remain at 8.2%.

Have a good weekend,

James Skjong

Corporate earnings were in the spotlight and healthy reports from the likes of McDonalds, General Electric and Microsoft set the market’s tone.  With Apple, Amazon, Caterpillar and other blue chips announcing next week, corporate earnings will continue to be a key driver of market performance.  Across the pond in Europe, the first round of the French presidential election and continued action in Spain and Italy will be closely monitored.

Despite the uneven start to the second quarter, our trust preferred portfolios continue to return approximately 10%, on average, year-to-date through yesterday, Thursday, April 19, beating the Dow by over 3%.

Next week, economic releases of note include a consumer confidence reading and March existing home sales on Tuesday, initial jobless claims on Thursday and the advanced first-quarter GDP report on Friday.  Expect consumer confidence and existing home sales to decrease slightly, initial jobless claims to remain in the 380,000 range and for GDP to be near 2.5%.  Also of interest will be the Fed’s FOMC statement on Wednesday, though no surprises (i.e. an announcement of further stimulus) are expected.

Have a good weekend,

James Skjong