Market Matters…
|
Market/Index |
Year Close (2012) |
Qtr Close (03/31/13) |
Previous Week (05/24/13) |
Current Week (05/31/13) |
YTD Change |
|
Dow Jones Industrial |
13,104.14 |
14,578.54 |
15,303.10 |
15,115.57 |
15.35% |
|
NASDAQ |
3,019.51 |
3,267.52 |
3,459.14 |
3,455.91 |
14.45% |
|
S&P 500 |
1,426.19 |
1,569.19 |
1,649.60 |
1,630.74 |
14.34% |
|
Russell 2000 |
849.35 |
951.54 |
984.28 |
984.15 |
15.87% |
|
Global Dow |
1,995.96 |
2,110.73 |
2,207.98 |
2,185.54 |
9.50% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
|
10 yr Treasury (Yield) |
1.76% |
1.85% |
2.01% |
2.16% |
40 bps |
So much for that traditional second quarter bust. While naysayers had been predicting market doom and gloom, consistent with the past few years, investors had other ideas. Stocks continued their winning ways in May as the Dow Jones extended its streak to six months, while the S&P 500 one-upped the Blue Chips by earning a seventh consecutive positive performance. Plenty of uncertainty remains with the Fed debating monetary policy, labor fluctuating from month to month (week to week), Europe stagnating in contraction mode, and China predicting a slowdown (that would still be the envy of the world). But, heading into the doldrums of summer, investors like what they see and the trend remains quite friendly.
Board rooms returned to deal-making mode this week as Warren Buffet (Berkshire Hathaway ) is adding NV Energy to his utility portfolio for just under $6 billion. SCI is acquiring fellow funeral home operator Stewart Enterprises for $1.1 billion. India’s pharma giant, Sun Pharmaceutical looks to be acquiring Swedish Meda in a $5 billion deal. And continuing along the global lines, Shuanghui is hoping to participate in the biggest Chinese takeover of a US company by buying Smithfield Foods for $4.7 billion, though the move must first overcome much regulatory scrutiny. In other transaction news, the Empire State Building (and 18 other properties) may soon be part of a public company as Empire State Realty Trust may be on target for the second largest IPO for a US real estate investment trust.
PC dinosaur (too harsh?) Dell is moving forward with namesake Michael’s and Silver Lake Partners’ “privatization” proposal for $13.65/share by taking the deal to a shareholder vote in mid-June. Neiman Marcus shunned an offer from buyout firm KKR that could have led to a merger with luxury retail rival Saks. In the “no one is paying attention” category, Tiffany posted earnings and revenue that bested expectations, while discounter Costco also reported solid domestic and international results as many (non-Tiffany) consumers turn to warehouse clubs in the uncertain economic times.
The trusty folks at OPEC choose to keep production constant with a 30 million barrels a day ceiling despite ongoing struggles from some African members which produce a similar grade to US-produced shale. Prices remained volatile with many traders turning bearish on news of escalating inventories and concerns about demand in the summer months. Investors enjoyed a welcome break for the Memorial Day holiday and returned to work just as eager to buy as when they left. Stocks surged to new highs early in the week before pulling back on rising bond yields with “junk” rated securities particularly hard hit. Buyers reappeared as a lower revision to GDP growth was viewed positively by Fed watchers who suspect the policymakers may be able to buy more time before ending the bond buying program. However, equities sold off sharply late (literally the last trading hour of the week) though the move was blamed on technical month-end rebalancing. Though the major indexes ended the shortened trading week in the red, the monthly winning streaks continued.
Economic Calendar
|
Date |
Release |
Comments |
|
May 28 |
Consumer Confidence (05/13) |
Best showing since February 2008 |
|
May 30 |
Jobless Claims (05/25/13) |
Increased for 3rd time in 4 weeks |
|
GDP (1st quarter revised) |
Slight downward revision |
|
|
May 31 |
Personal Income/Spending (04/13) |
Both slightly below expectations |
|
The Week Ahead |
||
|
June 3 |
ISM – Manu (5/13) |
|
|
Construction Spending (4/13) |
||
|
June 4 |
Balance of Trade (04/13) |
|
|
June 5 |
Factory Orders (04/13) |
|
|
ISM – Services (05/13) |
||
|
Fed Beige Book |
||
|
June 6 |
Jobless Claims (06/01/13) |
|
|
June 7 |
Nonfarm Payroll (05/13) |
|
|
Unemployment Rate (05/13) |
||
|
Consumer Credit (04/13) |
With few significant economic releases and little word coming from the Fed, economists should have taken more than just one day off for the Memorial Day holiday. (Perhaps some did.) Housing continued to lead the domestic recovery as the S&P Case-Shiller index soared by double-digits in March to its largest gains in seven years. With home inventories growing tighter with each passing month and demand rising in the low mortgage rate environment, sellers are finally enjoying some pricing leverage after years of declining equity in their houses. The housing rebound has seemingly contributed to a rise in consumer confidence as the government’s monthly release climbed to its highest level in five years and the Thomson Reuters/Univ. of Michigan sentiment index was also revised higher. GDP growth in the 1st quarter, on the other hand, was revised lower in its second release and its pace depicts the weakest recovery since World War II. Still, the numbers have suggested domestic economic expansion for 15 straight quarters and recent housing and even manufacturing news bodes well for the future. The Chicago Purchasing Managers’ index climbed well above forecasts, a favorable sign for manufacturers. Though jobless claims rose in the latest weekly release and some analysts fear a slowdown in the labor rebound, the filings still remain well below the 400k level that generally suggests stability in the jobs market.
On the global front, euro-zone sentiment also improved in its latest release which will hopefully lead to a pickup in biz and consumer activity in the months ahead (wishful thinking?). Still, the labor market remains weak with aggregate unemployment standing at a record 12.2%, while German jobless claims rose in May far more than expected. Additionally, retail sales in the region’s largest (and strongest?) economy were weaker-than-expected. The Organization of Economic Cooperation and Development lowered its forecast for the euro-zone economy to now reflect a contraction of 0.6% for 2013 from a previous decline of 0.1% released in November. Against that backdrop, a key European Central Bank official stated that the ECB will maintain its aggressive monetary policy “as long as necessary.” The IMF revised China’s growth target and Japanese investors continued to wade deeper into profit-taking mode.
On the Horizon…The new month brings a busy week on the economic calendar and investors will focus most on news from manufacturing and labor, particular any pickup in nonfarm additions. The Fed continues to monitor the unemployment situation closely and any signs of improvement would enter into the decision to “taper” the bond buys. Additionally, the Beige Book could lend additional insight into the mind of Bernanke and friends. The summer brings vacations and short-staffed trading desks so investors can expect additional volatility (100-point+ move days) as they shift sentiment between the record-setting euphoria and fears of “too far too fast.”
© Brounes & Associates
