Wednesday, April 25, 2018

The Ten-Year at 3 Percent

The big news on Wall Street yesterday was that the ten-year Treasury bill reached 3 percent, for the first tim ein more than four years. How might this affect you?

The ten-year note is the benchmark for longer-term lending. The rate on a 30-year mortgage, for example, tends to move in relation to the 10-year yield. Freddie Mac said last week that the average rate on a 30-year, fixed-rate mortgage was 4.47 percent, up from 3.99 percent at the end of last year.

The long-term effect on stocks results from the fact that higher yields mean that companies have to pay more to borrow. If rates go high enough, rising borrowing costs can weigh on stock prices because companies need to pay more to service their debt, something that can erode financial performance.

Tuesday, April 24, 2018

Young People in Need of Financial Advice

What's the hottest benefit being offered by employers to young people? It's financial wellness plans. More than a few Generation Zers just entering the workforce are stressed about making ends meet, and many would like their employers to help them better manage their finances, according to a new report from LifeWorks.

A whopping 84 percent of Gen Zers, defined as those under the age of 23, agree it’s important that employers offer financial wellness programs.  But less than half (40 percent) of respondents can’t say their employer cares about their financial wellness and helps them manage it.

Their most pressing obstacles include cost of living, 58 percent; student loan debt, 41 percent; taxes, 34 percent; poor spending habits, 33 percent; and credit card debt, 29 percent. When they face unexpected expenses, 31 percent resort to using credit cards, which suggests that Gen Zers don’t have enough to cover the cost of emergencies.

Sunday, April 22, 2018

This Week in Earnings

This will be a big week for earnings reports, with three of the market's most widely watched stocks set to report. Alphabet, Google's parent company, reports today, Facebook reports on Wednesday, and Amazon reports on Thursday.

  • On average, analysts polled by FactSet expect first-quarter earnings for Facebook of $1.35 a share. Of the 45 sell-side analysts who cover Facebook, the average price target is $216, up from Friday’s closing price of $166.
  • Those analysts expect earnings of $9.28 a share and adjusted earnings of $11.75 for Alphabet. Most people are watching to see how Alphabet's stake in Uber affects its value.
  • Expectations are also high for Amazon, which just reported in its annual shareholder letter that it has more Prime members than Costco. Analysts are looking for Amazon to report revenue growth on average of about 40 percent in its first quarter on Thursday. 

Friday, April 20, 2018

Bullish Sentiment Grows

Despite all the ups and downs in the markets the past few months, individual investors are feeling more positive these days. According to this week's AAII Sentiment Survey, 37.8 percent of investors describe themselves as bullish, meaning they expect prices will be higher six months in the future.

The reading represents an eight-week high, and a jump of 11.7 percentage points from the previous week, although it is still below the long-term average of 38.5 percent. Pessimism fell by 13.5 percentage points to 29.2 percent in the latest week, dropping below its long-term average of 30.5 percent for the first time in four weeks.

The optimism and pessimism gauges have been extremely volatile of late, seeing steep swings on a near-weekly basis. Last week, the number of bearish investors hit its highest level since March 2017.

Thursday, April 19, 2018

Taxes in New Jersey

Now that you've made it through Tax Day, here's a sobering fact to keep in mind: Residents of New Jersey pay the fifth-most federal taxes among the 50 states. The average American adult pays $6,151 per year in federal taxes, but filers here in New Jersey pay $8,835.

The average income per capita in the Garden State is $53,534, which means that the average adult has a tax liability of 16.5 percent. It's slightly worse in New York, where the average adult pays $8,850, for an average tax liability of 17.4 percent.

But that's not the worst in the nation. That distinction belongs to the state of Connecticut, with an average payment of $10,861 and an average tax liability of 18 percent.

Wednesday, April 18, 2018

Companies and Their Cash

American companies are awash in cash: S&P 500 companies, excluding financials, had $2.39 trillion in cash and investments in 2017, according to JPMorgan Chase & Co. researchers. That’s up from $2.2 trillion in 2016 and $1.75 trillion in 2010.

What are they going to do with all that cash? A lot of it could go towards stock buybacks, as companies figure out what to do with their fatter profits and bring back overseas money as a result of the recent tax-code overhaul. That would be good news for a market that has struggled to break even this year.

Based on the amount of buybacks already announced this year by S&P 500 companies, JPMorgan analysts project roughly $800 billion in total buybacks in 2018. That would be up significantly from $530 billion last year.

Tuesday, April 17, 2018

Retail Bounces Back Strong in March

U.S. retail sales rebounded in March after three straight monthly declines as households boosted purchases of motor vehicles and other big-ticket items, suggesting consumer spending was heading into the second quarter with some momentum. The Commerce Department said yesterday that retail sales increased 0.6 percent last month after an 0.1 percent dip in February.

The biggest winners: Auto dealers posted their best month since last September, with sales rising 2 percent. Sales fell 0.3 percent at gas stations, but they were up 9.7 percent from March 2017.

Sales also rose at grocery stores, restaurants and bars, and drug stores. They fell at home and garden stores, clothing shops and sporting goods stores.