Friday, April 28, 2017

First Quarter GDP

Gross domestic product increased at just a 0.7 percent annual rate in the first quarter of 2017, the Commerce Department said this morning. That was the weakest performance since the first quarter of 2014. In the fourth quarter of 2016, real GDP increased 2.1 percent.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, slowed to a 0.3 percent rate in the first quarter. That was the slowest pace since the fourth quarter of 2009 and followed the fourth quarter's robust 3.5 percent growth rate.

One factor was higher inflation, which saw the personal consumption expenditures index averaging 2.4 percent in the first quarter, the highest since the second quarter of 2011. That also weighed heavily on consumer spending.

Thursday, April 27, 2017

New Job Creators Are Losing Ground

New companies simply aren’t the same job creators that they have been in decades past. According to Labor Department data released yesterday, during the expansion, new establishments have accounted for a little more than 11 percent of all new private-sector jobs created in the U.S.

During the 1990s, the figure was 15 percent.  That may seem like a small shift, but those few percentage points add up to nearly 300,000 jobs a quarter.

Looking back to 1992, the only sector where startups are now creating more jobs is education and health care. On the other hand, new manufacturing firms accounted for the creation of 22,000 jobs in the third quarter of 2016, down about 80 percent from 24 years earlier. Natural resources and mining, financial services and information—a sector that lumps together old-world publishing with software and internet services—are all down by about half.

Wednesday, April 26, 2017

The New Nasdaq

The Nasdaq reached a big benchmark yesterday, closing above 6000 for the first time ever. It's finally surpassed the heights it reached during the dot-com bubble in 2000.

The index is different now: Tech stocks only make up 44 percent of the index, versus about 60 percent when the dot-com bubble burst. Even in the last few years, the change has been noticeable. Consumer goods, which made up 3.2 percent of the index at the end of 2011, made up 5.3 percent at the end of March, and consumer services have gone from 18 percent to 21 percent over that same period.

The Nasdaq still includes it share of tech behemoths. Apple makes up more than 8 percent of the index by weighting. Microsoft makes up 5.7 percent; Facebook and Alphabet both make up more than 3 percent.

Tuesday, April 25, 2017

The Incredible Shrinking Bank

If you still like doing your banking by heading down to your local branch, you may have to change your ways. The number of bank branches in the United States will shrink by as much as 20 percent in five years, according to a report from commercial real estate firm JLL.

The U.S. banking industry could save as much as $8.3 billion annually if it trimmed the number of branches, and downsized the size of the average bank branch from 5,000 to 3,000 square feet, JLL estimates.

This has been a trend that has been in motion since the recession. U.S. banks have reduced their footprint by around 8 percent since the financial crisis, from 97,000 branches to roughly 90,000.

Monday, April 24, 2017

A Big Week for Earnings

This upcoming week will be a huge one for earnings reports, with more than 190 members of the S&P 500 index delivering quarterly scorecards. All told, the reports will account for around 40 percent of the S&P's total value.

Thursday will be the busiest day, with nearly 70 reports due. After the closing bell, we will hear from such heavy hitters as Alphabet (Google''s parent), Amazon, Intel, Microsoft and Starbucks.

Of the 95 S&P 500 companies that have reported earnings so far this quarter, 75.8 percent have topped analyst forecasts, slightly above the recent four-quarter average of 71percent. Some 62.1 percent have topped analyst revenue expectations, well above the 53 percent average over the last year.

Friday, April 21, 2017

Gleanings from the Beige Book

The economy continued to grow across the U.S. at a modest pace in recent weeks as a tight labor market helped broaden wage gains, though consumer spending was mixed, according to the latest beige book from the Federal Reserve. The report said that household purchases outside of automobiles were softer even as Americans were gaining more ability for future spending.

The report paints a picture of an economy maintaining its steady expansion, though without any rapid bursts of growth. Even so, wages showed progress in responding to a tightening jobs market, with most districts reporting "difficulty filling low-skilled positions" and stronger demand for higher-skilled workers.

The report made surprisingly little mention of the harsh weather that had the potential to interrupt activity, especially in the Northeast. The New York region reported "little adverse effect from the mid-March snowstorm" and "tourism and travel activity generally picked up" across regions, the book said.

Thursday, April 20, 2017

Fund Managers Look Overseas

The hottest category in stock funds right now: Europe. In April, allocations to equities in the eurozone jumped to a 15-month high, according to the latest survey of fund managers by Bank of America Merrill Lynch.

Meanwhile, allocations to U.S. equities dropped to their lowest level since early 2008. Some 83 percent of the respondents - a record for this particular survey - said U.S. equities were overvalued. Nearly a third of investors said global equities were overvalued, which is close to a 17-year high in that reading.

Fund managers also boosted their cash allocations slightly, up to 4.9 percent in April from 4.8 percent in March. The 10-year average for cash allocations is 4.5 percent.