Bulls and Bears continue to batlle in 2010 with no clear winner by Ken Mahoney
U.S. stocks finished a lackluster trading session marginally higher on Friday as relief over Congressional legislation boosted the financial sector but economic worries remained. For the week, the Dow Jones Industrial Average slumped 2.9% while the broad S&P and the Nasdaq both fell 3.7% to mark the first down week in three.
The Dow's drop was led by its consumer component as investors showed their concern over the government’s cut in its estimate for first-quarter economic growth, citing weaker consumer spending. Helping temper the losses, gains in the financial sector can be largely credited to closure surrounding the landmark package of financial regulations U.S. House and Senate lawmakers reached agreement on early Friday. After months of uncertainty about what the new rules would contain, the agreement offers the clearest picture to date about how financial institutions and government will interact. While large financial entities are likely to face tighter restrictions, critics applaud most of the measures as reasonable. The bill is expected to have sufficient support to be passed into law.
In other news last week, China's decision to remove its currency peg rippled through global markets, giving a boost to assets perceived as riskier, including stocks, commodities and growth-linked currencies. China has come under increasing international pressure to allow the Yuan to appreciate, with the U.S. in particular arguing that its comparative weakness gives Chinese exporters an unfair advantage. At the G20 meeting, Obama expressed his wishes that China would allow the Yuan to rise during the next few months.
This week marks the last one of the month, the quarter, and the first half of the year. Amidst the ongoing uncertainty, investors are sure to be focused on the glut of economic data scheduled for release in the days ahead for clues as to what the second half of the year will bring.
Key things to watch this week:
Monday – Personal Income and Outlays
Tuesday – S&P Case-Shiller HPI, Consumer Confidence
Wednesday – Chicago PMI, ADP Employment Report
Thursday – Motor Vehicle Sales, Jobless Claims, ISM Manufacturing Index, Construction Spending, Pending Home Sales,
Friday – Employment Situation, Factory Orders
Data as of 06/25/2010 1-Week Y-T-D 1-Year 5-Year 10-Year
Standard & Poor's 500 -3.65 -3.44 17.2 -1.92 -2.53
Dow -2.94 -2.73 20.2 -0.30 -0.25
NASDAQ -3.74 -2.01 21.0 1.65 -4.21
MSCI EAFE -2.61 -12.6 7.28 -1.32 -1.85
10-year Treasury Note (Yield Only) 3.30 N/A 3.54 4.10 6.02
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, Google Finance, Barron’s, djindexes.com, MSCI Barra. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not available.
HEADLINES:
Statistics from the Labor Department show the employment outlook is improving for workers in the 25 to 54 year-old age group, but the nationwide unemployment rate for older workers (55 and up) has barely moved. There's also evidence that more older Americans are withdrawing funds from already depleted retirement accounts in order to make ends meet, sometimes suffering tax penalties when they do so.
Oil prices dropped slightly to near $78 a barrel in Asia as traders kept a close eye on damage a possible hurricane could cause rigs in the Gulf of Mexico this week. Benchmark crude for August delivery was down 25 cents to $78.61 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract added $2.35 to settle at $78.86 on Friday.
World leaders, shaken by the European debt crisis but wary of ending stimulus programs, pledged to slash government deficits in the most industrialized nations in half by 2013, with flexibility to meet the goal. At the meeting that ended Sunday, they generally sided with cutting spending and raising taxes, despite warnings from U.S. President Barack Obama and others that too much austerity too quickly could choke off the global recovery.
BP may be able to plug its leaking Gulf of Mexico oil well sooner than expected according to a Sunday Times report citing engineering experts. The newspaper says engineer sources in Houston, Texas, say the company could be finished in mid-July ahead of the public target of early August. Citing sources with knowledge of the operation, the newspaper says the first well has progressed faster than expected, with less than 1,000 feet of rock left to drill before reaching its target.
QUOTE OF THE WEEK:
“You are never too old to set another goal or to dream a new dream.” - C.S. Lewis
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Will May Plunges bring June Lunges for U.S Markets? By Ken Mahoney
After a choppy session on Friday, stocks turned upward during the last hour of trading, encouraged by an increase in consumer sentiment and a decrease in bad news coming out of the euro zone. For the week, the Dow gained 2.81%, snapping a three-week losing streak and marking the Dow’s biggest weekly gain since February. The S&P 500 rose 2.51% for the week, posting its best weekly gain since early March.
Friday's gains came in spite of a Commerce Department report showing that U.S. consumer spending fell for the first time since September. The 1.2% drop was a surprise, as economists predicted a 0.2% increase. Because consumer spending accounts for two-thirds of U.S. economic activity, retail sales reports are commonly referred to as a gauge of how well the recovery is progressing. At the same time though, the University of Michigan's consumer sentiment index rose to 75.5 in June, up from 73.6 in May. In this case, it seems that the boost in consumer confidence won out over retail sales.
The markets also got a midweek boost when U.S. Federal Reserve Board Chairman Ben Bernanke said the Fed would act as needed to support the economic recovery. As of late, Mr. Bernanke has been more optimistic since the crisis peaked in 2008. “As long as we have the confidence of the markets that we will be able to exit from this situation with a sustainable fiscal program, then I think we’ll be O.K.,” he told Mr. Simpson of Idaho.
Despite two straight days of gains, analysts expect the markets to remain choppy as high unemployment and uncertainty related to Europe, Wall Street reform initiatives, and the future of BP tug at the markets. In the week ahead, economic reports are due on manufacturing, real estate and inflation, among others. This economic news will be important as investors look for direction on the remainder of the quarter, and the second half of the year.
Key things to watch this week:
Tuesday – Treasury International Capital, Housing Market Index
Wednesday – Housing Starts, Producer Price Index, Industrial Production
Thursday – Consumer Price Index, Jobless Claims, Leading Indicators, Philadelphia
Fed Survey
Data as of 06/11/2010 1-Week Y-T-D 1-Year 5-Year 10-Year
Standard & Poor's 500 2.51 -2.11 15.4 -1.77 -2.50
Dow 2.81 -2.08 16.0 -0.57 -0.38
NASDAQ 1.10 -1.13 20.7 1.75 -4.21
MSCI EAFE 0.12 -13.8 0.74 -1.43 -2.12
10-year Treasury Note (Yield Only) 3.20 N/A 3.71 4.17 6.09
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, Google Finance, Barron’s, djindexes.com, MSCI Barra. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not available.
HEADLINES:
In an interview with website Politico, U.S. President Barack Obama has said the oil disaster in the Gulf of Mexico will have the same impact on Americans’ psyche as 9/11. He stated, “In the same way that our view of our vulnerabilities and our foreign policy was shaped profoundly by 9/11, I think this disaster is going to shape how we think about the environment and energy for many years to come."
Retail sales fell for the first time in eight months in May, the government said Friday, widely missing analyst expectations. Total retail sales fell 1.2% to $362.5 billion last month, compared with April's upwardly revised 0.6% increase, the Commerce Department said.
The board of BP PLC will on Monday discuss U.S. demands to suspend dividend payments to shareholders until the British company pays for the cleanup of the Gulf of Mexico oil spill. The London meeting comes as U.S. President Barack Obama begins a two-day visit to the Gulf Coast to view the damage from the massive slick and talk to affected residents. BP has a number of options regarding dividend payments and analysts believe the company is unlikely to scrap it altogether. It can also defer it, pay it into shares or pay it into a ring-fenced account. Any decision is not expected to be announced immediately, with BP executives due to meet Obama in Washington on Wednesday.
On Thursday, some 40 lawmakers gathered in a House committee room to give speeches and kick off a marathon, two-to-three week session of deal-making on key differences buried in Wall Street reform bills passed by the Senate in May and the House last December. These bills aim to curb risk taking, protect consumers, and prevent financial firms from getting too big to fail.
Federal regulators will investigate whether Apple's business practices harm competition in the market for software used on mobile devices, according to a published report. The Federal Trade Commission is preparing to review allegations that Apple has shut other companies out of the important new computing platform, sources told the Wall Street Journal.
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Sources:
Marketwatch
The Wall Street Journal Online
Barrons
CNN Money
http://news.bbc.co.uk/2/hi/world/us_and_canada/10307782.stm
http://money.cnn.com/2010/06/11/news/economy/retail_sales/index.htm
http://finance.yahoo.com/news/BP-board-discusses-dividend-apf-465947320.html?x=0&sec=topStories&pos=5&asset=&ccode=
http://money.cnn.com/2010/06/10/news/economy/Wall_Street_Reform/index.htm
http://money.cnn.com/2010/06/11/technology/Apple_FTC/index.htm
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
Clouds still hanging over US Markets by Ken Mahoney
Ongoing worries about the European debt crisis combined with a disappointing jobs report on Friday drove the markets lower last week.
Part of Friday’s drop can be attributed to missed expectations. Economists surveyed by Briefing.com had forecast an overall gain of 500,000 jobs in May, so when the number came in at 431,000 – 411,000 of which are estimated to be census jobs – investors reacted negatively. This lower-than-expected number raises questions about whether government stimulus money intended to increase hiring is accomplishing enough. On the bright side, much of the underlying data on the jobs report was positive, with both wages and hours worked showing an increase. After nearly two years of constant job losses, the U.S. economy has added 982,000 jobs so far in 2010, adding workers in every month. This is a good sign that the labor market is improving beyond the short-term Census jobs, underscoring the fact that it is important not to read too much into one month’s results.
Investors were also shaken by news that Hungary is facing debt problems. While headlines about the PIIGS (Portugal, Ireland, Italy, Greece and Spain) have become commonplace, the news about Hungary added to the argument that problems are spreading throughout Europe. Upon further inspection though, comments made by Hungarian officials look more like political maneuvering than credible concerns.
Since peaking on April 26th, the Dow has lost 11.4% and is now sitting firmly in correction territory. Since rally highs on April 23rd, the S&P has lost 12.5%, and the Nasdaq 12.3%. History shows that a fall of more than 15% from market highs will generally trigger a bear market (losses of greater than 20%), but analysts are conflicted about whether the current correction will push us into bear territory. Ed Crotty, chief investment officer at Davidson Investment Advisors commented, “From a macro perspective, the environmental disasters, political issues, you name it, there's plenty to worry about, but in looking at the economic potential of companies, the risk-reward looks pretty good.”
HEADLINES:
A containment cap placed over BP's gushing undersea oil well captured 6,077 barrels of oil during its first 24 hours in operation, between a quarter and a half of the amount that is spilling into the Gulf of Mexico each day, authorities said Saturday.
A new study shows that aging may improve your state of mind. The results, published online May 17th in the Proceedings of the National Academy of Sciences, found that stress declines from age 22 onward, reaching its lowest point at 85. Worry stays fairly steady until 50, then sharply drops off. Anger decreases steadily from 18 on, and sadness rises to a peak at 50, declines to 73, then rises slightly again to 85. Enjoyment and happiness have similar curves: they both decrease gradually until we hit 50, rise steadily for the next 25 years, and then decline very slightly at the end.
The Group of 20 major economic powers (G-20) agreed Saturday to finish work on tightened banking standards ahead of their stated goal, while European governments are expected to report specific rules as early as Monday, according to a news report.
The drumbeat from some Federal Reserve officials for the central bank to raise interest rates grew louder on Thursday. The Fed's most visible rate hawk, Thomas Hoenig, the president of the Kansas City Federal Reserve Bank, used a speech to lay out his preferred upward path for short-term interest rates that would have the federal funds rate rise from near-zero to 1% by the end of summer.
The time has come for the United States to "fully embrace" clean energy technologies, President Barack Obama said Wednesday, as BP kept up its struggle to contain its runaway oil well in the Gulf of Mexico.
Will a Summer Rally materialize after May’s drop? By Ken Mahoney
The month of the “flash crash” is finally over. In the end, the Dow managed to put together its worst May drop since 1940, and its biggest monthly drop since February 2009. The selloff snaps three straight months of gains, and marks the first major 10% correction since the bull market began over one year ago.
Extraordinary volatility saw the market rise or fall more than 1.5% on nearly half of the trading sessions in May, and investors didn’t like the feeling. Fear prompted a flight to safety as the overall sustainability of the economy was called into question. For the month, the Dow fell 7.9%, the S&P fell 8.2%, and the Nasdaq fell 8.3%.
On the bright side, some analysts are predicting that May’s slump will pave the way for a healthy summer rally. Conversely, while there are many positive signs of recovery in the U.S. economy, Europe’s debt crisis, combined with increased tension between North and South Korea, are key factors dragging stocks downward. And although Greece isn’t stealing quite so many headlines as a few weeks ago, many eyes are now focused on Portugal, Ireland, Italy, and Spain as the world wonders if the $1 Trillion aid package will be enough.
As traders return from a long holiday weekend, the big question is whether ongoing pressure will push the correction into a bear market – a selloff of at least 20% from a high – or if investors will treat recent declines as a buying opportunity.
Key things to watch this week:
Monday – U.S. Holiday: Memorial Day – Markets Closed
Tuesday – ISM Manufacturing Index, Construction Spending
Wednesday – Pending Home Sales
Thursday – Jobless Claims, Productivity and Costs, Factory Orders
Friday – Employment Situation
Data as of 05/28/2010 1-Week Y-T-D 1-Year 5-Year 10-Year
Standard & Poor's 500 0.16 -2.30 18.5 -1.82 -2.09
Dow -0.56 -2.79 19.3 -0.77 -0.16
NASDAQ 1.26 -0.53 27.2 1.74 -2.95
MSCI EAFE 1.09 -13.5 5.68 -1.40 -1.47
10-year Treasury Note (Yield Only) 3.21 N/A 3.46 3.97 5.72
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, Google Finance, Barron’s, djindexes.com, MSCI Barra. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not available.
HEADLINES:
The numbers being batted around when it comes to how much the oil spill will ultimately cost BP and the local Gulf of Mexico economies are huge. $3 billion. $14 billion. One politician put it at over $100 billion. The range is so big because two important questions remain unanswered: When will the leak be sealed, and will most of the oil wash ashore? Until those are answered no one will know the price tag of the damages for sure.
Personal spending was flat in April, after six months of increases, while income rose, according to a government report released Friday. The Commerce Department said individual spending rose less than 0.1%, or $4 billion, last month after an upwardly revised 0.6% increase in March. Personal income climbed 0.4%, or $54.4 billion, in April following an upwardly revised 0.4% rise the month before.
The greenback on Friday notched its longest string of monthly gains, six in a row, against the euro since 2000 amid worries about massive debt and fiscal cutbacks needed in Europe -- and the euro made its biggest monthly drop since January 2009.
Several downtrodden U.S. cities are on the verge of defaulting on their debt, putting financially encumbered states and taxpayers on the hook to pick up the tab. The National League of Cities says municipal governments will probably come up $56 billion to $83 billion short between now and 2012.
Sales of newly built homes soared 14.8% in April from March as buyers rushed to take advantage of the expiring government tax credit. Sales in April were 47.8% higher than a year earlier.