Market Matters…
|
Market/Index |
Year Close (2013) |
Qtr Close (03/31/14) |
Previous Week (05/30/14) |
Current Week (06/06/14) |
YTD Change |
Week Change |
|
Dow Jones Industrial |
16,576.66 |
16,457.66 |
16,717.17 |
16,924.28 |
2.10% |
1.24% |
|
NASDAQ |
4,176.59 |
4,198.99 |
4,242.62 |
4,321.40 |
3.47% |
1.86% |
|
S&P 500 |
1,848.36 |
1,872.34 |
1,923.57 |
1,949.44 |
5.47% |
1.34% |
|
Russell 2000 |
1,163.64 |
1,173.04 |
1,134.50 |
1,165.21 |
0.13% |
2.71% |
|
Global Dow |
2,483.62 |
2,504.05 |
2,564.48 |
2,599.21 |
4.65% |
1.35% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
0 bps |
|
10 yr Treasury (Yield) |
3.04% |
2.72% |
2.46% |
2.60% |
-44 bps |
14 bps |
When Mario Draghi speaks…people listen. (Who?) In a week where the Federal Reserve released its Beige Book report about the economic conditions across the country, the European Central Bank (ECB) prez one-upped his Fed counterpart (sorry Chair Yellen) and Central Bank watchers across the globe stood up and took notice. (Then again, that central bank watcher community is not so dramatic.) As expected, the ECB cut short-term rates and its overnight bank deposit rate moved into negative territory for the first time, meaning institutions technically will be charged for parking moneys there. Draghi also hinted that more unconventional measures may be in the works to combat deflation and aid a continued fragile economy and some predict a Fed-like bond purchase at some point in the near future. Investors seemed to welcome the ECB moves and set indexes some new highs in the process.
In other news, the domestic consumer remains alive and well (in the post-winter storm period) as auto sales jumped 11% in May and even embattled General Motors led the way, despite the never-ending recall headlines. Same store sales also improved in May and bested expectations for the third consecutive month. Costco led the charge as the early Thomson Reuters release depicted a 4.4% overall increase in May. Granted many large retailers like Walmart are not included in such data, but the general trend remains quite positive for consumer activity.
In the techie world, Apple announced plans for an “new and improved” operating system for the iPhone/iPad devises and Google confirmed that it will be spending upwards of $1 billion on satellites to bring the Internet and related communications across the globe. (Nothing cures hunger like a Facebook account.) In transaction news, UnitedHealth, a Dow Jones component, increased its quarterly dividend by over 30% and enhanced it share buyback program as well.
Oil prices hovered well above that crucial $100/barrel level (mid $102-ish) as traders dissected contrasting news about supplies and gasoline demand surprisingly dropped at the beginning of summer driving season. The Dow Jones and S&P 500 continued their record-setting ways as investors welcomed news from the world’s central bankers (including the Fed) as well as some very favorable data from manufacturing and labor. While the consumer had been a source of major concern in the midst of the winter storms, he/she seems to have thawed out nicely and mall traffic reflected a new energy and confidence over long Memorial Day holiday. The naysayers point out that the reduced volatility implies that the strong, bullish sentiment is neither as strong nor as bullish as may be implied. Then again, regardless of the reason or investor motivation, the market trend remains very positive for now and the optimism has been contagious in the economic releases. Not a bad way to start some (hopefully) favorable summer months. Safe travels…
Economic Calendar
|
Date |
Release |
Comments |
|
June 2 |
ISM – Manu (05/14) |
4th consecutive month of improvement |
|
Construction Spending (04/14) |
Highest level since March 2009 |
|
|
June 3 |
Factory Orders (04/14) |
Rose for a 3rd straight month |
|
June 4 |
Balance of Trade (04/14) |
Wider-than-expected deficit |
|
ISM – Services (05/14) |
Slightly above expectations |
|
|
Fed Beige Book |
Modest to moderate growth in all 12 Fed regions |
|
|
June 5 |
Jobless Claims (05/31/14) |
4-week average at lowest level since June 2007 |
|
June 6 |
Nonfarm Payroll (05/14) |
At least 200,000 jobs added each month since February |
|
Unemployment Rate (05/14) |
Matched lowest level since September 2008 |
|
|
Consumer Credit (04/14) |
Borrowing grew at fastest pace in almost 3 years |
|
|
The Week Ahead |
||
|
June 12 |
Jobless Claims (06/07/14) |
|
|
Retail Sales (05/14) |
||
|
June 13 |
PPI (05/14) |
Just what does the “wealth effect” mean for the economy and markets in the future? (It’s a bit of a chicken/egg thing.) In the first quarter 2014, the wealth of US household jumped by 2% or by $1.5 trillion to $81.8 trillion, the highest number on record. The wealth creation has been helped dramatically by the surge in the stock market and the rise in home prices. Despite the worries about the winter season and its ultimate impact on the economy and the investment markets, American kept reaping the rewards of greater riches. With more moneys in their pocketbook (at least on their portfolio statements and property appraisal reports), investors have the resources to add even more to the markets and maybe even step up in home size. (So whether it’s the chicken or the egg, it’s all a good thing.)
The economic calendar was hectic this week as the releases came fast and furious. Fortunately, most were very positive. After a couple of erroneous reports that gave analysts worries about the relevance of the data, manufacturing, as measured by the ISM, rose for the fourth consecutive month. Similarly factory orders climbed for its third month in a row and even the non-manufacturing (services) component of ISM beat expectations in May. The labor releases were among the most sought-after numbers as weeks of favorable jobless claims data (still near seven-year lows) had many analysts eager to see additional confirmation in the government unemployment reports. To start with, the jobless rate stayed at 6.3% in May, its lowest level since September 2008. The nonfarm payroll data depicted 217k new jobs created in the month, marking the fourth straight month of additions that exceeded 200k. In fact, total payrolls now exceeds the peak employment level set in January 2008. On the downside (if one must find a downside), the job makeup has shifted somewhat from the higher paid manufacturing and construction fields to others in lower paying services sectors like hospitality.
The Fed Beige Book reported that the domestic economic is growing at a “modest to moderate” pace in all 12 regions and inflation remains very “well contained.” While labor has “generally improved” (a comment confirmed in this week’s data), policymakers see more room for the labor force to grow before any true wage pressures are felt. The euro zone’s purchasing managers’ index fell a tad in May (from 53.4 to 52.2) but remains in manufacturing sector expansion territory. With its inflation rate falling to the lowest level in over four year, ECB watchers welcomed the moves of the central bank and may even be expecting more to follow in the months to come. Shifting to China, its purchasing managers’ index rose to its best showing of the year, a comforting bit of news for the global economy.
On the Horizon…This week’s hectic calendar leads into a relative quiet upcoming week on the economic front as the summer doldrums kick in. News from retail and inflation highlight the releases, though traders may see little reason to eschew any vacation plans. Maybe the world’s central bankers can head out on well-deserved breaks as well.
