Thursday, June 22, 2017

What Happened to Buybacks?

Even as the stock market keeps hitting new highs, companies have been holding back on share repurchases. S&P 500 firms repurchased $133.1 billion of their own shares in the first three months of the year, down 18 percent from the same period a year earlier, according to S&P Dow Jones Indices.

What's odd about this is that the decline came during a quarter in which the S&P 500 hit 13 new record highs; corporate executives typically boost share repurchases when the market is strong. Buybacks, for example, hit a record in 2007 before plunging in 2009 during the financial crisis.

And it’s not as if they don’t have the assets available for more buybacks. Cash levels have risen to a fresh record high of $1.5 trillion for S&P 500 companies, excluding financials, utilities, and transportation firms, which already keep high reserves, according to S&P Dow Jones Indices.

Wednesday, June 21, 2017

A Bear Market for Oil

The oil market, which looked like it was recovering at one point, may now be entering a bear market. Another sharp drop in U.S. crude prices yesterday set new lows in oil prices dating back to August.

U.S. crude prices slumped 2.2 percent on the day, to settle at $43.23 a barrel, down 21 percent from its 2014 high of $54.45. It would be 2017′s first reversal from bull to bear market, following five such swings last year.

Earlier this year there were hopes that a historic agreement by OPEC to cut output might start to right the supply-demand imbalance. But rising production from the U.S. and Libya, along with stubbornly high stockpiles, have continued to buoy prices.

Tuesday, June 20, 2017

Hedge Fund Woes Continue

There were 189 new hedge fund launches in the first quarter of 2017, according to Hedge Fund Research, up from the 153 in the fourth quarter of 2016. This marked the first quarter since the first three months of 2016 where the number of launches grew, but there are still plenty of troubling signs for hedge funds.

There were also 259 liquidations in the first quarter. The greater number of closures than launches meant that the total number of active funds dipped to 9,773 in the first quarter. In 2016, more than 1,000 funds closed down, the most of any year since the financial crisis.

And the performance has not been there. In May, the HFRI Fund Weighted Composite Index rose 0.5 percent, bringing its year-to-date gain to 3.5 percent. To compare, the S&P 500 is up 9.4 percent so far in 2017.

Monday, June 19, 2017

College Kids Getting Warier

The younger generation is taking a more cautious approach to college tuition, according to the nonprofit College Savings Foundation. When asked if they would take on debt to cover college bills, only 11 percent of the high school sophomores, juniors and seniors who participated in the survey said yes.

That’s down significantly from 20 percent just last year. Seventy-nine percent of the respondents said costs are a factor on college choice, with 39 percent saying high costs caused them to change their path and enroll in state schools, community colleges and vocational and career schools.

Fifty-four percent have already taken jobs to earn money for higher education, and 85 percent said they would work during college, with 20 percent planning on holding a full-time job. As these kids are well aware, the total amount of student debt stands at $1.4 trillion.

Friday, June 16, 2017

Happy Father's Day!

Americans will spend a record amount on Father’s Day gifts this weekend, a survey from the trade association National Retail Federation found, hitting a 15-year high of $14.3 billion. Some 77 percent of Americans celebrate Father’s Day, and the amount of money consumers spend on the holiday has increased each year consistently since at least 2007.

The average American is now spending $134.75 on gifts, up from $125.92 last year. On the other hand, dads would increasingly prefer to spend time with their kids, rather than a pair of socks or the usual tie.

The number of people opting to give a special outing such as dinner or brunch is at 48 percent, up 5 percent from 2007. Now, 27 percent of dads say they would enjoy an “experience” gift, and 25 percent of shoppers plan to buy a ticket to a concert or a sporting event for the holiday, up from 22 percent last year.

Thursday, June 15, 2017

The Fed Raises Rates

As expected, the Federal Reserve raised its benchmark Fed Funds rate yesterday, to a range of between 1 percent and 1.25 percent. According to the so-called dot plot of forecasts, released at the same time, they’re still projecting one more increase this year, making three total in 2017.

The Fed also released its updated economic projections, and they are all very slightly better than the last set. The Fed members lifted their projected growth in gross domestic product this year to 2.2 percent at the end of 2017 from March’s forecast of 2.1 percent.

The projected unemployment rate was lowered to 4.3 percent from 4.5 percent. And the Fed’s preferred inflation measure is expected to come in at 1.6 percent at the end of the year, down from 1.9 percent.

Tuesday, June 13, 2017

What Worries Investors?

Investors are more likely to say they worry about current geopolitical matters harming their investments than worry about harm from the economy, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index. When asked about possible threats to the U.S. investment climate in the coming year, three-quarters of investors were very or somewhat worried about the impact of the various military and diplomatic conflicts happening around the world.

The domestic political climate ranked a close second at 69 percent. The overall performance of the economy sparked far less concern, with about half, or 49 percent, saying they are very or somewhat worried.

The latest Investor Optimism index now registers at plus 124, down slightly from plus 126 in February. This marks the first time since the first quarter of 2016 that the index did not improve.

The FAANG Crash

The so-called FAANG stocks have been leading the market much of the year, but the past two days have been pretty rough for them. While tech stocks have been dropping, Facebook, Apple, Amazon, Netflix and Google parent Alphabet have had the most dramatic falls of all. Over the last two trading days:
  • Facebook has dropped 4.1 percent
  • Apple has dropped 6.2 percent
  • Amazon has dropped 4.5 percent
  • Netflix has dropped 8.7 percent
  • Alphabet has dropped 4.2 percent
Altogether, those five stocks have lost $125 billion in value since Thursday.

Monday, June 12, 2017

The Charitable Role of Women

One way in which women approach their finances differently from men is in their charitable giving. According to the recent Woman and Giving survey released by Fidelity Charitable, women are more spontaneous, engaged and empathetic. Half of the women interviewed say they give in the moment rather than as part of a formal giving strategy, as opposed to just 40 percent of men.

Woman-headed households are more likely to give to charity than male-headed households. At nearly every income level, women donate almost twice as much as men, but women in the top 25 percent of permanent income give 156 percent more than men in that same category.

Boomer women tend to be more confident and strategic in their philanthropy. Seventy-two percent of boomer women are satisfied with their philanthropy, compared with just over half of Millennial women.

Friday, June 9, 2017

The Nasdaq's Records Record

The Nasdaq Composite Index finished at another record high on Thursday, marking its 38th all-time closing high in 2017. That's the highest number of records in a single session for the equity gauge since 1999, according to WSJ Market Data Group.

On a year-to-date basis, the Nasdaq has registered its most all-time highs since 1986. Over the first part of that year, the index posted 48 closing records by June 8.

You might think we're on a pace to smash the all-time record of 62 record closes, set way back in 1980. But markets don't work with that much regularity. In 1986, after those 48 closing records by June 8, there were only seven more left the rest of the year..

Thursday, June 8, 2017

What the Wealthy Are Buying

Where are the wealthy putting their money? According to one new report, it's not hedge funds. Wealthy members of the Tiger 21 peer-to-peer learning network instead increased their allocations to real estate and commodities in the first quarter, according to the organization's latest report.

Real estate allocations hit a new high of 32 percent in the first quarter, two percentage points above the previous high in the fourth quarter. Members also allocated 1 percent to commodities in the first quarter, their first commodity exposure since the third quarter of 2014.

Allocations to private equity, fixed income and hedge funds each fell by one percentage point from the fourth quarter to 20 percent, 9 percent and 5 percent, respectively. At 5 percent, hedge funds have tied their historic low for members’ allocations.

Wednesday, June 7, 2017

The Jobs Mismatch

U.S. job openings surged to a record high in April, but employers appeared to have trouble finding suitable workers. The Labor Department's monthly Job Openings and Labor Turnover Survey, or JOLTS, published on Tuesday also suggests that a recent slowdown in job growth could be the result of a skills mismatch.

Job openings increased 259,000 to a seasonally adjusted 6.0 million in April, the highest since the government started tracking them in 2000. The monthly increase was the largest in just over a year and pushed the jobs openings rate to 4.0 percent, its highest level since last July.

Hiring, however, decreased by 253,000 jobs in April. The gap between job openings and hiring points to a growing skills mismatch; a report from the National Federation of Independent Business last week showed the share of small business owners reporting job openings they could not fill in May was the highest since November 2000.

Tuesday, June 6, 2017

The Scars of the Financial Crisis

Ten years after the financial crisis hit, it is still having a major psychological impact on investors, even those too young to have lost money in the crash. According to a new survey from Legg Mason Global Asset Management, millennial investors in the United States report that the financial crisis and subsequent recession strongly influence their investment decisions, leaving them more risk-averse than any other age group.

The survey finds that 82 percent of the surveyed millennials said their investment decisions are influenced by the financial crisis, with 57 percent saying they are “strongly influenced.” By comparison, 39 percent of Gen X, 13 percent of baby boomers, and 14 percent over age 65 said their investment decisions are still “strongly influenced” by the global financial meltdown.

A similar number of millennial investors said they are conservative investors (85 percent), with 52 percent calling themselves “very conservative.” Only 30 percent of Gen X, 29 percent of baby boomers, and 28 percent over age 65 consider themselves “very conservative.”

Monday, June 5, 2017

Amazon's Big Year

Amazon’s stock ended at $1,007 Friday, the first time it closed in four figures. It briefly pushed above $1,000 during Tuesday’s trading session before finishing at $997. Google parent Alphabet also came within pennies of $1,000, ending the week at $996.

Though it is a retailer, Amazon stock is acting much more in line with the other big tech firms. Amazon shares have climbed more than 34 percent this year, trouncing shares of traditional retailers. The SPDR Retail exchange-traded fund, which tracks more than 100 stocks, is down more than 6 percent on the year.

Amazon is keeping pace with the big gains that have been posted by tech stalwarts like Facebook and Apple. Each of those stocks has climbed 34 percent this year.

Friday, June 2, 2017

May's Jobs Report

In May, the economy added a mildly disappointing 138,000 jobs, but the unemployment rate fell to 4.3 percent, according to this morning's data from the Bureau of Labor Statistics. This is a new post-recession low for the unemployment rate — which is now at its lowest level since May 2001.

Employment in health care rose by 24,000 in May, while mining added 7,000 jobs. Employment in mining has risen by 47,000 since reaching a recent low point in October 2016, with most of the gain in support activities for mining.

The economy has seen an average monthly gain of 181,000 over the prior 12 months. With today's figures, the number of jobs added for March was revised down from 79,000 to 50,000, and the change for April was revised down from 211,000 to 174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported.

Thursday, June 1, 2017

The Broad-Based Tech Rally

The market-cap weighted index of tech stocks in the S&P 500 is up 20 percent in 2017, more than double the 7.8 percent advance of the S&P itself. It's tempting to think this is the result of a few big tech stocks: Apple, Microsoft, Alphabet and Facebook by themselves account for 43 percent of the S&P 500’s tech sector market capitalization.

But it’s worth noting that the majority of tech stocks in the S&P 500 are having stellar years as well. An equally weighted iteration of the S&P 500 tech sector, in which Apple carries the same sway as software company Adobe Systems, is itself up more than 17 percent this year; the median tech stock in the S&P 500 is up 18%.

Even smaller tech stocks are outperforming. More than half of the 303 tech stocks in the Russell 3000 Index, a measure of large-, medium- and small-cap companies, have recorded at least double-digit percentage gains this year.

Wednesday, May 31, 2017

Surprises in Consumer Confidence

Consumer confidence showed an unexpected decline for the month of May, falling from 119.4 down to 117.9. With that drop, consumer confidence saw its first back-to-back drop since May of last year, although it still remains well above its long-term average of 93.

There's a fascinating divergence in confidence based on income levels in the past two months. Sentiment among consumers with incomes greater than $50,000 has dropped over 10 percentage points in the last two months, which is the largest two-month decline in two years. But confidence levels among consumers with incomes between $35,000 and $50,000 actually increased this month and is barely down in the last two months.

But for lower-income folks, it's a completely different story. For consumers with annual incomes below $15,000, confidence is at its highest level in nearly 16 years.

Tuesday, May 30, 2017

The Big Boppers

It's been a strong year so far for the S&P 500 index, rising nearly 8 percent on the year. But it's been remarkably top-heavy: If we strip out the performance contribution of the five largest stocks in the S&P 500, the index is up only 4.6 percent.

Those five biggest stocks are:
  • Apple,  up 16 percent
  • Facebook, up 32 percent
  • Amazon, up 33 percent
  • Microsoft, up 13 percent
  • Alphabet,  up 25 percent
At the start of the year, these five stocks accounted for 11.6 percent of the index’s market cap. That share stands at about 13.7 percent today.

Monday, May 29, 2017

Thoughts for Memorial Day

"It is foolish and wrong to mourn the men who died. Rather we should thank God that such men lived." ~ George S. Patton

“The legacy of heroes is the memory of a great name and the inheritance of a great example.” ~ Benjamin Disraeli

"The U.S. Military is us. There is no truer representation of a country than the people that it sends into the field to fight for it." ~ Tom Clancy

Friday, May 26, 2017

High Prices in Retail

Yesterday was a rare good day for retail stocks, as strong first-quarter results from retailers such as Best Buy and PVH led indexes to record highs. Best Buy soared 21.5 percent to $61.25 after the electronics retailer issued a strong first-quarter report, including better sales of mobile devices and gaming products.

PVH, the owner of brands including Calvin Klein and Tommy Hilfiger, climbed 4.8 percent to $107 after it raised its annual forecasts in the wake of its own strong report. Other retailers — including Guess, Abercrombie & Fitch and Burlington Stores — also made substantial gains.

There was good news for the biggest online retailer as well. Amazon rose 1.3 percent on the day,  peaking at a tantalizing $999 per share before falling back to $993.

Thursday, May 25, 2017

Skipping Vacation

Are you going on vacation this summer? Are you taking all the time your employer gives you? The average U.S. employee who receives paid vacation has only taken a little over half, or 54 percent, of those days in the past 12 months, a new survey of over 2,200 workers by careers website Glassdoor has found.

This is up slightly from how much vacation time employees reported taking in 2014, when Glassdoor first conducted this survey; it was 51 percent then. If an average worker who receives two weeks vacation leaves five days on the table, they’re effectively giving hundreds of dollars back to the company.

Why don’t they take what’s due? They fear getting behind on their work (cited by 34 percent), they believe no one else at their company can do the work while they’re out (30 percent), they are completely dedicated to their company (22 percent), and they feel they can never be disconnected (21 percent).

Wednesday, May 24, 2017

A Slow Summer Gas Season

If you’re planning to kick off your summer with a Memorial Day road trip, you couldn’t have picked a better year to do so. Gas prices going into the holiday, considered the unofficial start to the summer driving season, are well below where they typically are at this time of year, according to data firm Bespoke Investment Group.

A gallon of gas costs an average of $2.36 per gallon in the U.S. right now, 22 percent below the $3.04 average going back to 2005. It has only been cheaper to fill the tank in two other years since then: 2016, when prices were at $2.29 a gallon, and 2005, when they were at $2.12.

And this is the time of year, as we enter the summer, when prices are normally the strongest. On average, prices are up 22 percent between the start of the year and May 23, but thus far in 2017, prices are up a mere 1.1 percent, the lowest year-to-date increase in Bespoke’s data set by far.

Monday, May 22, 2017

Earnings Season Roundup

First quarter earnings season is now in the books. A total of 2,450 companies reported earnings, and of these, exactly 1,500 of them reported better than expected EPS numbers. That’s a 61.2 percent earnings beat rate.

Those stocks, not surprisingly, tended to rise in value after their reporting dates. On average, the stocks that beat their earnings estimates this season gained 1.97 percent on their earnings reaction days.

Since 61.2 percent of companies beat EPS estimates, that means 29.8 percent of them missed their estimates. These stocks averaged a one-day decline of 3.21 percent on their earnings reaction days. In other words, for those that missed, the drop was worse than the gain was for those that exceeded estimates.

History Lesson

The S&P 500 is off to its best start in four years, but that doesn’t mean it will end that way. Through May 18, the S&P 500 has gained 5.7 percent. In the past decade, two other years have better returns over the same time period, as Bespoke Investment Group noted in research published Friday.

In 2013, the S&P had jumped 17 percent by this time of year, and went on to finish the year up nearly 30 percent. In 2011, the S&P 500 had returned 6.6 percent by May 18, but would to take a tumble in August and would finish the year basically flat.

Bespoke also looked at the 10 years that correlated the most with the start of 2017. During those years, the S&P 500 averaged a gain of 4.7 percent from May 18 through end of the year, with returns positive in seven of the 10 years. But one of those years was 1987, when the stock market took a 14  percent tumble between May 18 and year-end.

Friday, May 19, 2017

Spinoffs Lose Their Luster

Companies are finding it more difficult to extract value by spinning off businesses, according to a new analysis from Citi’s investment banking group. The study examined returns for the parent company from announcement to deal completion and returns for the spinoff two years after the transaction closed. Spinoffs underperformed their industry sectors by 5 percent on average between 2011 and 2015.

They used to do much better than that. The underperformance of 5 percent in recent years compares with an average overperformance of 30 percent between 2001 and 2005, and 19 percent between 2006 and 2010.

Despite the negative trend, spinoffs remain popular. Companies completed $121.5 billion such deals globally, according to Dealogic. For the year as of May 17, companies have announced $34.9 billion in spin-offs, 27 percent ahead of last year’s pace.

Thursday, May 18, 2017

A Spike in the Fear Index

The CBOE Volatility Index posted its biggest daily jump yesterday since the day following Britain’s vote to exit from the European Union, which upset markets around the world last June. The VIX measures expectations for market swings in the S&P 500 index 30 days in the future.

The so-called Fear Index was up about 46 percent on the day. That is its biggest daily move since June 24. when the index jumped 49.3 percent. The S&P Index lost nearly 2 percent on the day.

Still, the level for the so-called fear gauge remains low compared with its long-term average of 20. This one-day climb comes just a week after the fear gauge registered its lowest close since 1993.

Wednesday, May 17, 2017

Industrial Output: The Latest Good News

U.S. industrial output rose sharply in April, the latest evidence that economic growth is picking up following a lackluster start to the year. Manufacturing output, the biggest component of industrial production, posted its strongest gain since early in 2014, pushing the Fed’s manufacturing index to a new post-recession high.

Industrial production—a measure of output at factories, mines and utilities—jumped 1.0 percent from a month earlier. That might not sound like much, but it was the largest gain in more than three years.

The strong showing follows a string of upbeat April indicators, including the unemployment rate falling to its lowest level since 2007, solid consumer spending gains at online sellers, restaurants and other retailers, and existing-home sales climbing at their fastest pace in a decade.

Monday, May 15, 2017

The Slow Road to 2400

The S&P 500 finished above 2400 for the first time ever yesterday, crossing a barrier that had proven elusive for months. This wasn't the first time it reached 2400, but it was the first time it had closed there.

The benchmark index first topped 2400 in intraday trading more than two months ago, on March 1, but dropped back below that level before the session ended. In the last few trading days, the index held just below 2400 on a closing basis.

The slow rise is a measure of how calm the stock market has been lately. The S&P 500 rose just 0.48 percent on Monday, its 14th straight session without an absolute move of 0.50 percent or more. That matches a streak last seen in 1995.

Sunday, May 14, 2017

The Retail Split

We talked last week about the problems that department store stocks have been having this quarter. It's not about dropping retail sales: A Commerce Department report on Friday showed a seasonally adjusted 0.4 percent jump in retail sales in April, as well as revisions higher to prior data.

But the data also showed a growing divide: sales among nonstore retailers, which includes online shopping, jumped 1.4 percent, while department-store sales had a much smaller increase of 0.2 percent. Nonstore sales are up nearly 12 percent over the past 12 months, while department store sales were down 3.7 percent.

So the news has been good for online retailers; Amazon’s shares climbed 0.6 percent Friday morning. But Nordstrom sank 8.2 percent, Dick’s dropped 6.6 percent, and J.C. Penney fell 7.6 percent. All are down more than 10 percent on the year, and J.C. Penney has fallen more than 40 percent.

Friday, May 12, 2017

Department Store Woes

There's one little segment of the economy that continues to show sign of trouble: Department stores. Big retailers have begun to report results for the first quarter, and the news is not pretty.

Macy’s reported Thursday a worse-than-expected drop in revenue during the first quarter as same-store sales marked a particularly large slide. Kohl’s said same-store sales fell more than expected. Nordstrom reported that same-store sales slipped 0.8 percent versus a year ago.

Macy's promptly sank 15 percent. Nordstrom dropped 8 percent, and Kohl's fell 6.4 percent. The three stocks were the worst performers in the S&P 500 for the session. The SPDR S&P Retail exchange-traded funds fell 2.4 percent on the day.

Thursday, May 11, 2017

In the Black

Here's some good news: The federal government ran its second highest monthly surplus on record this April. In its monthly budget report, the Treasury Department said yesterday that the surplus for April totaled $182.4 billion, the second largest surplus after a record $189.8 billion surplus set in April 2001.

Wait a minute, you're thinking: Don't most people pay their taxes in April? Yes they do.The government generally runs surpluses in April, and this year's was inflated because of a deadline change that allowed corporations until April to make their final tax payments for last year.

Through the first seven months of the current budget year, which ends in September, the federal government is running a deficit of $344.4 billion. That's still down 2.4 percent from the same period a year ago.

Wednesday, May 10, 2017

The Changing Face of Retirement

American are working longer because they want to, not because they have to. That’s according to Gallup's Economy and Personal Finance survey, which shows that 11 percent intend to work full time once they hit retirement age—while just 25 percent of employed Americans plan to stop working altogether.

Among the would-be full-time retirement workers, the majority plan to do so because they want to, not because they have to, and the proportion of “want to” versus “will have to” explanations has risen slightly since 2013. The percentage who say they want to keep working just part time has also increased, from 34 percent to 44 percent.

Two 1995 polls revealed that an average of 14 percent said they expected to retire after 65 and 49 percent before 65. Current retirees present a different image: 68 percent said they retired before age 65, while just 30 percent worked till 65 or older.

Tuesday, May 9, 2017

The $800 Billion Gorilla

Apple today became the first company to ever have a market capitalization of $800 billion - briefly. Apple stock crossed the $800 billion mark early in the afternoon, but then gave back some of its value before closing, ending the day at a market cap of $797.8 billion.

It's still by far the most valuable company in the world. The rest of the top five, in order of market cap:
  • Alphabet $652 billion
  • Microsoft $530 billion
  • $451 billion
  • Berkshire Hathaway $406 billion

Monday, May 8, 2017

Older Debt

The Federal Reserve Bank of New York released numbers recently showing that the share of all household debt held by people aged 60 and older has almost doubled, from 12.6 percent in 2003, to 22.5 percent in 2016. The total debt is now nearly $3 trillion.

Mortgages, auto loans, credit cards and even student loan balances have all grown significantly for older Americans -- and only older Americans. Borrowers under 60 reduced their mortgages and credit card balances relative to the peak during the 2008 financial crisis.

Seniors are holding $67 billion in student loans, and the number of seniors holding such loans has quadrupled since 2005. That makes older folks the fastest-growing segment of the student loan borrower population, according to a recent report by the Consumer Financial Protection Bureau.

Friday, May 5, 2017

April's Jobs Report

The economy bounced back strong in April, adding 211,000 jobs after a disappointing March. The headline unemployment rate ticked down to 4.4 percent, the lowest it's been since prior to the recession.

The March figure, already low at 98,000, was revised down to 79,000 jobs added on Friday. But all told, the economy has added an average 185,000 jobs a month in 2017, roughly matching last year’s pace.

The broader measure of unemployment known as the “U-6” rate fell to 8.6 percent, the lowest it's been since November 2007. This rate takes into account not only unemployed workers, but also Americans who are too discouraged to look for work and part-timers who would prefer full-time work.

Thursday, May 4, 2017

The Fed Stands Pat

No surprises on interest rates this month: The Federal Reserve announced yesterday that it held its benchmark interest rate steady after its latest policy meeting, as had widely been expected. The Fed kept the benchmark federal funds rate at a range of 0.75 percent to 1 percent, following the 0.25 percent increase in March.

The Fed acknowledged that the overall economy and consumer spending both slowed down during the first quarter. But they view it as temporary, and think the economy in general is strong enough to withstand further hikes.

In other words, the Fed expects to continue raising interest rates – and the next hike may be in June. The majority of the Fed's 17 leaders predict two or more rate hikes for the rest of the year. That's a faster pace compared to the last two years, when the Fed only raised rates once a year.

Wednesday, May 3, 2017

Putting the Brakes on Car Sales

Sales at all six of the biggest automakers in the U.S. dropped again in April, with Ford and Honda Motor posting the steepest declines -- about 7 percent each. Five of the six biggest companies — General Motors, Ford, Fiat Chrysler Automobiles, Honda and Nissan — all reported sales falling faster than analysts had forecast. Only Toyota posted monthly sales that were better than expected, but they too were down.

U.S. car sales are expected to fall this year after rising to a record of 17.55 million in 2016, up from 17.5 million in 2015. The annualized pace of U.S. auto sales slowed to 16.9 million in April. A year ago, the rate was 17.4 million.

Industrywide deliveries are down 2.4 percent so far this year compared to the same period last year. The four-month slump reinforces the sense among many that this year will hold the U.S. auto market’s first annual contraction since 2009, the year GM and Chrysler reorganized in bankruptcy court.

Tuesday, May 2, 2017

Sector Scoreboard

With a third of 2017 in the books, the S&P 500 is up 7 percent on the year, and those gains are pretty broad-based. Nine of the eleven sectors in the index have advanced in 2017 - but the two that have dropped have both fallen quite a bit.

The full scoreboard:
  • Information Technology, up 15 percent
  • Consumer Discretionary, up 11 percent   
  • Health Care, up 10 percent    
  • Consumer Staples, up 7 percent    
  • Materials, up  7 percent   
  • Utilities, up 7 percent    
  • Industrials, up 6 percent   
  • Real Estate, up 4 percent  
  • Financials, up 2 percent
  • Telecommunications Services,  down 7 percent    
  • Energy, down 9 percent  

Monday, May 1, 2017

A Cool Thousand

Earnings season has driven two well-known stocks close to the thousand-dollar-per-share-price level. reached its all-time high of $950 on Friday, while Google parent Alphabet rose as much as 5 percent, to a fresh intraday peak of $936.

Currently, there are only four companies in the S&P 500 at $1000 or more a share, led by Berkshire Hathaway class A shares, which are currently at nearly $250,000 apiece. The others in the $1,000 club include Seaboard (at $4,234), NVR (at $2,111), and Priceline Group (at $1,846).

Alphabet’s total market value of $607 billion is second only to Apple among S&P 500 companies. And Amazon comes in fourth, with a market capitalization of nearly $439 billion.

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.

Wednesday, April 19, 2017

Good News, Bad News

First the good news: Median usual weekly earnings for full-time workers rose 3.9 percent in the first quarter from a year earlier, the Labor Department said yesterday. That was the best gain since late 2008.

Nearly eight years after the recession ended, weekly pay is nearing the 4 percent annual growth pace that was reached in the prior two economic expansions. That’s a sign that the economy has returned to full health.

But there's some bad news: When adjusting for inflation, paychecks are growing more slowly than they were a year ago. Inflation is still fairly low, but higher than it was in 2015. When factoring in price changes, weekly earnings rose just 1.2 percent from a year earlier. That matches the fourth quarter of 2016 as the smallest advance since late 2014.

Tuesday, April 18, 2017

Where Your Tax Money Goes

Today is tax day, when most Americans file their income taxes. The Wall Street Journal has helpfully broken down where our tax money goes. For every $100 you pay in federal taxes:

  • Social Security gets $23.61    
  • Medicare  gets  $15.26    
  • National defense  gets  $15.24    
  • Medicaid  gets  $9.55    
  • Interest  claims  $6.25    
  • Other spending  claims  $4.94    
  • Veterans  get  $4.58    
  • Civilian federal retirement gets   $2.57    
  • Transportation  gets  $2.39    
  • Refundable credits get  $2.21

Monday, April 17, 2017

The Slowing Sales Economy

Consumer retail sales in March fell unexpectedly by 0.2 percent, but that's not the end of the issue. At the same time, February’s previously recorded gain of 0.1 percent was revised down to a negative 0.3 percent. Those were the weakest consecutive monthly declines since the first two months of 2015.

The main headwind came from auto dealerships and gas stations. Auto deal sales fell to $87.8 billion from $89.1 billion in February, down from $90 billion in January. Gas station sales fell to $36.5 billion from $36.8 billion in February.

Aside from those two categories, though, sales pretty much treaded water in March. Excluding cars and gas, retail sales were up 0.1 percent last month.

Friday, April 14, 2017

More Oil Woes

As the price of oil remains fairly low, there's a new complicating factor. Global oil demand is expected to grow at a slower pace for the second year in a row in 2016, the International Energy Agency said yesterday.

OPEC launched an effort this year to cut almost 1.8 million barrels a day of oil, with help from other countries, including Russia, the world’s largest crude producer. And OPEC’s oil production fell by 365,000 barrels a day in March.

But it doesn't seem to be enough to lift prices. The IEA said the production cuts so far have had just a limited effect on massive levels of stored oil, which built up in 2015 and 2016 as traders bought cheap crude to sell later at higher prices. Combined with slack demand, that may keep prices low for some time.

Thursday, April 13, 2017

The Amazing Shrinking Stock

One of the most amazing stories in the stock market is about a company called Dryships, a Greek shipping company. When companies grow, their stocks often split, but Dryships has fallen on hard times, and its stock has reverse-split - by a whopping 48,000 to 1.

Let's say you owned 48,000 shares of Dryships back in early 2016. It had a reverse split of 1-25 that March, which means your original 48,000 shares were now just 1,920 shares. Five months later, in August, it did another 1-4 reverse split, reducing the 1,920 shares down to 480. Just three months later, there was a 1-15 split, so those 480 shares you now held were reduced to just 32 shares. In January of this year, Dryships did a reverse split of 1-8, which reduced those 32 shares to just four. Then, this week it did another reverse split of 1-4 shares, reducing your original 48,000 down to just one measly share.

On a split-adjusted basis, Dryships was trading at over $8,000 per share back in early 2016. After all those reverse splits, it now trades at under $2 per share.

Wednesday, April 12, 2017

Healthy, Wealthy and Wise

Being wealthy has a lot of perks attached to it, but according to a new study in the British medical journal the Lancet, the rich get the biggest perk of all. They get to live longer.

In the United States, the wealthy live as much as 15 years longer than their poorer compatriots.  The studies not only find the richest 1 percent live up to 15 years longer than the poorest 1 percent, but that the gap in life expectancy between rich and poor has increased in recent decades.

The poorest among us are the ones on whom the system has taken the biggest toll, the Lancet reports. In fact, life expectancies have fallen in some groups despite advances in treatment. Women in the poorest 20 percent, born between 1930 and 1960, statistically lived four years less than women in the richest 20 percent.

Tuesday, April 11, 2017

The Upside on Earnings

As of the end of March, S&P 500 companies were forecast to report earnings growth of 9.1 percent during first quarter earnings season, which kicks off this week. But companies often beat expectations, so the actual earnings growth may be higher.

Over the last five years, 68 percent of companies, on average, have beaten analyst forecasts, adding 2.9 percent on top of expectations, according to FactSet. That would mean the first quarter earnings growth rate could be more like 12 percent, which would be the the best since 2011.

Much of the gain in earnings can be chalked up to the energy sector, which is turning profitable again as oil prices have stabilized. In addition, financials are forecast to have grown earnings by 14.5 percent in the first three months of the year, with bank earnings up 10 percent, according to FactSet.

Monday, April 10, 2017

Retail Unravels Further

Here's a sobering follow-up to Friday's disappointing employment report: More jobs were lost in the beleaguered retail industry than any other sector over the past two months. Some economists are starting to wonder if the number of jobs available at brick-and-mortar stores may have peaked.

The U.S. retail industry shed 29,700 jobs in March and 31,000 in February, according to the Labor Department. The combined two-month decline was the largest since 2009, and comes after the number of workers in the retail industry peaked near 16 million in January.

Some 2,880 store closings have been announced so far in 2017, compared to 1,153 over the same stretch last year, according to Credit Suisse. The current pace of store closures puts the industry on track to top 8,600 this year, far exceeding the peak of 6,163 hit in 2008, at the onset of the financial crisis.

Friday, April 7, 2017

March Jobs Report

The March employment report, out this morning from the Bureau of Labor Statistics, was the most disappointing in a while. The economy added just 98,000 jobs for the month, well down from February’s revised job gains of 219,000.

The good news was that the unemployment rate dropped to 4.5 percent, a new post-recession low and the lowest since May 2007. Wages also rose, increasing by 0.2 percent over last month and a total of 2.7 percent over the prior year.

Today’s report also saw both the January and February jobs numbers revised down by a combined 38,000. Over the past three months, job gains have now averaged 178,000.

Thursday, April 6, 2017

The Fed's Inflation Worries

The Fed released the minutes from its last meeting yesterday, and one of the concerns is the return of inflation. Some Fed officials worried that if unemployment, currently at 4.7 percent, fell even further, it could pose a “significant upside risk” of higher inflation.  The Fed's unemployment goal is 4.8 percent, and inflation has remained below the Fed's 2 percent inflation goal for several years.

Some Fed officials argued that the inflation target might be achieved by the end of this year. Others argued that since inflation had run below 2 percent for so long, it would do no harm to allow prices to rise above 2 percent for a time.

“Nearly all members judged that the committee has not yet achieved its objective for headline inflation on a sustained basis,” the minutes said. “A few members expressed the view that the committee should avoid policy actions or communications that might be interpreted as suggesting the committee's 2 percent inflation objective was actually a ceiling.”

Wednesday, April 5, 2017

Financial Hardships for Women

While there’s been a little improvement in the financial capability of women, they still trail men in being able to make ends meet or covering a financial emergency. That’s according to a report by the TIAA Institute and the Global Financial Literacy Excellence Center, which finds that despite improvement over the study period—2012 through 2015—certain subgroups are still exhibiting financial distress.

In 2015, three-quarters of working women held at least one form of long-term debt, the study found, with many carrying too much debt. Even worse, working women are not prepared for retirement. The majority don’t even plan for it, while two-thirds fear running out of money once they do retire.

In addition, 54 percent of working women do still find it tough to meet all their monthly expenses. Those just beginning their careers, those with lower levels of education and African American women find it particularly difficult.

Tuesday, April 4, 2017

First Quarter Winners

We looked at the results for the major indexes for the first quarter of 2017 yesterday. Here are the stocks in the S&P 500 that had the strongest first quarters:
  • NRG Energy was up 52.8 percent year to date. The utilities sector is up about 5.2 percent for the year.
  • Vertex Pharmaceuticals was up 48.4 percent; it released positive results for a cystic fibrosis drug just last week.
  • Activision Blizzard was up 38.9 percent; it's the leader in the video game subgroup of the tech sector.
  • Viacom Inc., owner of MTV and Paramount Pictures, was up 33.4 percent
  • Incyte Corp. was up 33.3 percent; another pharmaceutical, it focuses on cancer drugs.

Monday, April 3, 2017

First Quarter Scorecard

The first quarter ended on Friday, and it was a banner quarter for all the major indexes. The S&P 500 index gained 5.5 percent, its strongest first-quarter performance since 2013 and the best gain it's posted in any quarter since the fourth quarter of 2015.

The Dow Jones industrial average was up 4.6 percent over the past quarter. That marks the sixth consecutive quarterly gain for the Dow, the longest such stretch since the fourth quarter of 2006.

After all that, though, the Nasdaq was the best performer of all the major indexes, returning a nearly 10 percent gain over the past quarter. That's its best quarterly performance since the end of 2013.

Friday, March 31, 2017

A Strong Year for Corporate Bond Sales

The combination of strong demand and relatively low borrowing costs has been a boon for the bond market in 2017. U.S. companies have sold $406.1 billion of high-grade debt so far this year, a record for any first quarter going back to at least 1995, according to Dealogic.

This is the third consecutive first quarter where investment grade corporate issues have set a record high. Global issuance of high-grade bonds, on the other hand, is just short of record levels, totaling $843.6 billion through March 30, versus $890.5 billion for the same period last year, and $896.7 billion for the full first quarter of 2016.

Several American companies have issued huge bond offerings this year. The biggest deals include Microsoft's $17 billion sale, Broadcom Corp.’s $13.6 billion sale, and Verizon Communications $11 billion offering.

Thursday, March 30, 2017

The Smartest People Live Here

Here's no surprise: New Jersey is one of the most financially literate states in the country. That's according to personal finance site WalletHub, which analyzed 15 metrics including high school financial literacy grades and how many adults have emergency funds.

The site also looked at public high-school graduation rates and household spending habits, who was likely to have a “rainy-day fund,” and which states had the most unbanked households. The entire top ten:

1. New Hampshire
2. Minnesota
3. North Dakota
4. Maine
5. Virginia
6. Maryland
7. New Jersey
8. Illinois
9. Colorado
10. Montana

Wednesday, March 29, 2017

Consumer Confidence in Bloom

The consumer confidence report for the month of March that came out yesterday was impressive on a lot of fronts.  Confidence levels are at their highest since 2000, comfortably above the highs we saw during the prior expansion from 2003 through 2007. That breaks what had been a trend of lower highs in confidence since the peak consumer confidence readings in the 1990s.

One very good sign was that consumers felt more optimistic about the jobs market. The percentage of consumers stating jobs are “plentiful” rose from 26.9 percent to 31.7 percent, while those claiming jobs are “hard to get” decreased from 19.9 percent to 19.5 percent.

If there was one concerning aspect of the report, though, it was among lower-income Americans. While higher income Americans saw their confidence levels surge to the highest levels since late 2000, confidence among consumers with incomes below $50,000 actually declined and has yet to exceed the peak levels we saw from the last cycle.

Tuesday, March 28, 2017

Shaky Earnings

Companies in the S&P 500 are expected to report first-quarter profits grew 9.1 percent, compared with the same quarter a year earlier, according to FactSet. If that holds up, it would be best quarter since the end of 2011 and a third straight quarter of earnings growth.

After five straight quarters of declining profits, a brightening earnings outlook comes at a welcome time. Still, there are reasons to be cautious. The biggest contributor to elevated first-quarter earnings forecasts is the energy sector, which is expected to earn $7.7 billion. A year ago, this group lost $1.5 billion. Exclude the group, and Factset forecasts S&P 500 earnings rose just 5.2 percent.

Also, while a rebound in oil prices is now lifting earnings, a resurgence in U.S. shale-oil production has investors increasingly worried. The price of crude oil has dropped 11 percent this month. Another prolonged slump in the price of oil could once again weigh on earnings.

Monday, March 27, 2017

A Troubling Sign in Business Investment

Amid generally good economic news, there was one troubling number released recently. Durable goods orders rose 1.7 percent in February, but new orders for nondefense capital goods excluding aircraft edged down by 1 percent. The move down might be evidence that businesses continue to hold back on investing heavily in their own businesses.

Overall, orders through the first two months of 2017 are up only 1.3 percent from a year ago. That is slower than January’s growth rate, which was 2.6 percent year-over-year. January was the first time the measure had grown on a year-over-year basis since October 2015, and only the second time since December 2014.

There has been definite improvement in recent months. Last summer, the year-over-year figures were running down 3 to 4 percent. But last month’s figures continue to point to a sluggish economy.

Friday, March 24, 2017

Moving In, Moving Out

Communities like ours, in the outer rings of metropolitan areas, are growing again. Last year saw the strongest evidence yet that Americans are returning to traditional patterns in where they move—from cities to suburbs and from North to South—after a recession-driven pause of nearly a decade.

Central counties of metropolitan areas grew 0.7 percent last year while outlying counties grew 1 percent, according to new Census Bureau population estimates. After two years of roughly comparable growth, this marked the first time since the recession that outer suburbs clearly outgrew central cities and inner suburbs. As recently as 2012, central counties grew 0.9 percent while outlying counties grew just 0.5 percent.

But we're losing population to Sun Belt cities that had seen migration from the North cut sharply since the housing-market collapse and recession of 2007-09. Las Vegas lost 5,000 more than it gained in 2011, but last year gained a net 28,000. Phoenix saw a gain of 4,000 in 2011 grow to 51,000 last year.

Thursday, March 23, 2017

More and More Millionaires

The number of millionaire households in America increased by 400,000 in 2016, reaching a new record of 10.8 million, according to a new study from the Spectrem Group. There are now 1.4 million households worth $5 million or more and 156,000 households worth $25 million or more.

Since the 2008 financial crisis, the number of millionaire households has grown every year, adding a total of 4 million millionaire household since then. The stats mean that more than one out of every 10 households in America is worth $1 million or more.

Mass affluent households, those with a net worth between $100,000 and $1 million not including their primary residence, grew to 28.97 million last year. That's an increase of 500,000 over 2012, and of 3.77 million over the post-recession low of 25.2 million.

Wednesday, March 22, 2017

A Down Day Ends the Streak

The S&P 500 ended its streak of 109 trading days without a 1 percent  decline yesterday, when it fell by 1.24 percent.  This was the first 1 percent drop for the index since October 11, 2016.

The Dow Jones Industrial Average also halted a streak of 109 days without a 1 percent decline, when it dropped by 1.1 percent. In the history of the indexes, there had only been 11 other prior streaks of 100-plus days without a 1 percent decline.

The S&P 500’s streak without a 1 percent down day was the longest since the one that ended May 18, 1995. The Dow’s was the longest since the one that ended September 20, 1993.

Tuesday, March 21, 2017

The Happiest Place on Earth

Are Americans happy? According to the 2017 World Happiness Report, an annual ranking of 155 countries published by the Sustainable Development Solutions Network, the United States ranks at No. 14 in the world, down a spot from last year.

The U.S. has never cracked the top 10 since the rankings were first published in 2012, when it came in at No. 11. The report involved polling of 1,000 residents per country by research organization Gallup.

At No. 1? Norway, up from No. 4 last year, followed by Denmark (last year’s No. 1), Iceland and Switzerland. These four countries rank highly on all the main factors found to support happiness: caring, freedom, generosity, honesty, health, income and good governance. “Their averages are so close that small changes can re-order the rankings from year to year,” the report said.

Monday, March 20, 2017

Dueling GDP Estimates

What does the Fed think of the economy in the first quarter, which comes to a close in a couple of weeks? It depends on which Federal Reserve Bank you ask.

The Federal Reserve Banks of Atlanta and New York both publish trackers that gather and crunch data as it comes in, as part of their mandate to evaluate how the economy is faring. The Atlanta Fed’s GDPNow tracker is projecting that first-quarter GDP growth will be particularly weak, at only 0.9 percent. The New York Fed’s Nowcast, by contrast, is forecasting a far stronger economy, with first-quarter growth at 2.8 percent as of Friday.

Early in January, the New York Fed’s estimate was just 1.5 percent, but it started rising sharply late in that month, first on strong manufacturing data, and then on particularly robust readings of business and consumer sentiment. We'll find out if they're right when the first estimate of GDP comes in on April 28.

Friday, March 17, 2017

More Hiring, More Quitting

Both hiring and quitting edged up in January, which can be taken as signs of optimism among both employers and workers. The rate of hiring rose to 3.7 percent in January from 3.6 percent in December, , according to new figures from the Labor Department.

The rate of quitting, which tends to rise when people are more confident about their prospects elsewhere, rose to 2.2 percent in January from 2.1 percent the prior month. January’s quits rate matches the recent peak set in December 2015.

The openings rate, defined as job openings as a share of total employment and available jobs, held at 3.7 percent last month. It has maintained roughly that rate since August 2016. The trend in openings since the summer could suggest there is less potential for hiring to accelerate, as employers added to jobs at the best the rate in 15 years during 2014 and 2015.

Thursday, March 16, 2017

The Fed Hike

As expected, the Federal Reserve has raised its benchmark interest rate for the second time in three months and forecast two additional hikes this year. The move reflects a consistently solid U.S. economy and will likely mean higher rates on some consumer and business loans.

The Fed hiked its Fed funds rate by 0.25 percent, to between 0.75 and 1 percent. The policy statement cited the strengthening labor market and improving economy as reasons for the hike, but it noted the pace of expansion is just “moderate.”

The Fed’s “dot plot” still indicates three rate hikes this year and next, but it inched up in 2019, when it projected the median Fed funds rate could be 3 percent, instead of its 2.9 percent forecast last December. The Fed still projects the long run “neutral” rate of Fed funds is 3 percent.

Wednesday, March 15, 2017

The Cost of the Snowstorm

The winter storm that’s blasting our area may end up being only a one-day affair, but it may be  severe enough to make a noticeable dent in  the economy. The storm is so severe, the disruptions from it will likely show up in the first-quarter report on the growth of the U.S. economy, research firm Oxford Economics predicted.

Oxford estimates that disruptions to business activity could shave up to 0.2 percentage points off of first quarter GDP. They note that their forecast for the quarter has been an already low 1.1 percent.

The Northeast region contributes roughly $3 trillion in annual output to the U.S. GDP, which equals about $12 billion daily. Assuming a loss of 10  to 20 percent of overall output on Tuesday, that would add up to a loss of about $2.4 billion worth of activity.

Tuesday, March 14, 2017

Shaky Confidence for Retirement

Americans' confidence in their ability to retire comfortably isn't just shaky - it's dropping. Last year just 64 percent of workers were confident they’d be able to manage a comfortable retirement, while in 2015, 72 percent did. But that number is now getting worse.

According to the latest version of Capital One Investing’s Financial Freedom Survey, 2017 saw that confidence slip to just 62 percent. In addition, fewer than half of respondents even have a long-term financial plan. The top reasons for that lack of confidence are lack of knowledge and experience, cited by 51 percent, and distrust of the markets and the financial industry, cited by 49 percent.

People also aren’t exactly rushing to take actions even they believe they should be taking, with 39 percent of non-retired Americans believing they should contribute 15 percent or more of their income to retirement. But only 13 percent are doing so, and that’s down from 15 percent last year.

Monday, March 13, 2017

Small Business Hiring Accelerates

The hiring freeze at small businesses looks like it's finally thawing. The pickup in hiring was clear in the report last week from payroll provider ADP, which said its small business customers added 104,000 jobs in February, following a January gain of 62,000.

That compared to an average monthly increase of 33,000 from September through December. Hiring gains for this group for all of 2016 averaged 60,000.

That's not the only good news. A recent survey by the advocacy group the National Small Business Association done showed 43 percent of owners expected to hire in the next 12 months. That's up from 33 percent last summer.

Friday, March 10, 2017

February's Jobs Report

February was another strong month for the employment situation, with the economy adding 235,000 jobs. The headline unemployment rate is now 4.7 percent.

Last month's increase in jobs followed a 238,000 rise in January. The first two months of this year represent the strongest back-to-back months for the job market since July.

Unseasonably warm weather appeared to be a factor. Construction jobs, which can fluctuate depending on the weather, rose by 58,000, the most since March 2007, and followed a 40,000 increase in January. Manufacturing payrolls gained 28,000, a three-year high.

Thursday, March 9, 2017

Happy Birthday, Bull Market

On March 9, 2009, eight years ago today, the S&P 500 Index bottomed out at 667. Since then:

  • The S&P has risen more than 350 percent, closing at 2363 yesterday.
  • Over the past eight years, the index's average annual return was 14.9 percent.
  • The Dow Jones industrial average is up 200 percent.
  • Apple has risen nearly 1,000 percent.
  • Home Depot is up more than 600 percent, while American Express and Walt Disney Co. are both up by more than 500 percent.

Wednesday, March 8, 2017

Before the Bull Market

Tomorrow marks the eighth anniversary of the start of the bull market, one of the strongest and longest such markets in stock market history. Investors would do well to remember what preceded that market, though.

The decade between 1999 and 2009, in terms of stock returns, was one of the weakest on record. The average annual return for the S&P 500 index was less than 1 percent. After you adjust for inflation, you would have actually lost money being invested in the S&P for that entire period.

The decade between 1999 and 2009 included years of double-digit gains but years of double-digit losses as well. By contrast, in the past eight years, there hasn't been a single year where the S&P lost money.

Tuesday, March 7, 2017

Estimating a Woman's Retirement Needs

American women continue to face a difficult path to a secure retirement. According to a research report from the Transamerica Center on Retirement Studies, only 1 in 10 are “very confident” they will be able to retire comfortably.

More than half of women surveyed said they are just guessing at how much money they’ll need to feel secure once they retire. Women are likely to need more money than men thanks to a longer projected lifespan, and the greater likelihood to need more money to cover medical bills.

The report finds women estimate they’ll need to have saved a median amount of $500,000 to feel financially secure when they retire, which is the same estimate men come up with. However, 56 percent of women who have an estimate say they “guessed” at the amount, with just 8 percent having used a calculator or completed a worksheet to come up with their estimate.

Monday, March 6, 2017

Refinancing Continues to Grow

With interest rates still low, mortgage refinancing remained very strong in the fourth quarter of 2016. In fact, more people refinanced their mortgages in the final three months of the year than committed to purchase loans.

Lenders issued more than 883,000 mortgage refinance loans in the fourth quarter of last year. That's an increase of more than 20 percent from the previous year. Altogether, there were 3.36 million refinancings last year, up 4 percent from 2015.

Meanwhile, just 595,000 mortgage loans for home purchases were originated in the fourth quarter. That's down 12 percent from the year-earlier period.

Friday, March 3, 2017

A Record Recovery

The arrival of March this week means that the current economic expansion has now entered its 93rd month. According to the official national figures, the recession ended and the recovery started in June 2009.

The current expansion is the third-longest in U.S. history, since we've now surpassed the 92-month expansion of the 1980s. In records dating back to before the Civil War, the U.S. has only twice had longer spells of growth: the 1960s and 1990s.

Throughout U.S. history, the gap between one recession’s end and the next one’s beginning has averaged just under five years. If this economy makes it to next summer, it will be the second-longest in U.S. history. It will have to last until mid-2019 to become the longest on record.

Thursday, March 2, 2017

Why Don't People Own Homes Like They Used To?

The homeownership rate—the percentage of households that own rather than rent the homes that they live in—has fallen sharply since mid-2005. In fact, in the second quarter of 2016 the homeownership rate fell to 62.9 percent, its lowest level since 1965.

A significant portion of the increase in the homeownership rate from the mid-1990s through 2005 occurred because of strictly demographic reasons. Over that period the population aged 45 and over grew at a 2.4 percent annually, while those aged 16 to 44 grew at only a 0.3 percent rate. Older people are more likely to establish their own household and to own the home they live in, so the end of that trend meant fewer people owning homes.

And of course, the subprime crisis started up in 2007, forcing many people out of their homes. The large volume of home foreclosures in the wake of the financial crisis and Great Recession has certainly played a role.

Wednesday, March 1, 2017

The "Revised" GDP Number

The second estimate of GDP growth for the fourth quarter came out yesterday, and it couldn't have been less "revised." Total growth reported by the Bureau of Economic Analysis in its second estimate was decreased by all of 2 basis points. to 1.86 percent versus 1.88 percent in the first estimate.

There were some interesting trends beneath that headline number, though. Consumption was more than the entirety of the growth in this estimate, adding 2.05 percent, up from 1.70 percent in the advance estimate. That's primarily thanks to upward revisions in motor vehicles and gasoline as well as food.

Upward revisions to health care services spending also added 0.48 percent to growth versus the first estimate of GDP. On the down side, investment’s contribution to total growth was revised down by 0.22 percent.

Tuesday, February 28, 2017

Boomer Fears Persist

Ten years after the financial crisis began in 2007, almost two-thirds of middle income baby boomers feel they have not benefited from the economic recovery. Half of those boomers report having less savings now than before the crisis.

That's according to the new Bankers Life’s Center for a Secure Retirement report, which surveyed 1,000 baby boomers, aged 52 to 70, with annual incomes between $30,000 and $100,000 and less than $1 million in investable assets. Only 31 percent of the respondents feel well prepared for retirement, down from 41 percent before the financial crisis. Just over one-third expect a personally satisfying retirement, down from 44 percent.

Close to half expect to keep working in retirement, full time or part time, compared to 35 percent before the financial crisis. More than two-thirds, or 68 percent, of middle-income boomers are worried about another financial crisis occurring in their lifetime.

Monday, February 27, 2017

The Effects of Missing Tax Refunds

Tax refunds may be a little slow in coming this year. Legislation passed in 2015 was aimed at preventing tax fraud - but it may also postpone funds being sent by the IRS to 25 million to 30 million U.S. households this year.

All told, the income tax delay may crimp consumer spending by as much as $21 billion in February, Goldman Sachs estimated earlier this month. One corner of the economy that is especially susceptible: restaurants.

At Jack in the Box, same-store sales may fall as much as 2 percent in the current quarter, while sales at its Qdoba chain may drop as much as 3 percent.  Meanwhile, same-stores sales at Red Robin have fallen by 4.3 percent in the most recent quarter. All those dining companies are blaming the slow refunds for the slowdown.

Friday, February 24, 2017

World Stocks Are Hot, Too

The rally in U.S. stocks now has spilled into the global markets. The MSCI ACWI Index, which serves as a proxy for the entire global equity market, set a new record yesterday, closing at the highest level in its 23-year history.

The MSCI index, which covers approximately 85 percent of the investable equity market worldwide, has risen 5.7 percent since the beginning of this year. The ACWI — which stands for All Country World Index — comprises 2,484 large and mid-cap stocks across both developed and emerging markets.

It's those emerging markets have led the way this year. Year to date, the MSCI Emerging Markets index has risen 10.3 percent, while MSCI World index, which captures stocks in developed countries, has gone up 5.2 percent.

Thursday, February 23, 2017

The Fed's Next Move

After its January meeting, the Federal Reserve said it may raise interest rates again "fairly soon" if jobs and inflation data come in line with expectations, according to the minutes released yesterday. While the Fed chose to leave its interest rates unchanged at the meeting three weeks ago, investors widely expect two to three more rate hikes this year, perhaps as early as March.

The documents also showed that the Fed has begun discussing when to start unwinding its $4.5 trillion balance sheet of mortgage-backed and Treasury securities. Those remain on its books after the quantitative easing program, which was an effort to ease lending and stimulate the economy after the financial crisis.

Fed officials  agreed they would start discussing what kind of economic conditions could lead to unloading those securities. Those changes are also expected to boost long-term interest rates.

Wednesday, February 22, 2017

The Quiet Price of Oil

Much has been said about the drop in volatility that we’ve seen in the stock market lately, but we’ve also seen a big drop in volatility for oil prices. Over the last 50 trading days, oil has averaged an absolute daily change of  pus or minus 1.2 percent. 

That’s significantly lower than where things stood last year at this time.  During oil’s big price collapse from late 2014 through early 2016, volatility spiked significantly.  In early 2016 when prices were about to bottom, oil had averaged a daily move of nearly  plus or minus 4 percent over the prior couple of months.

While the current reading is down sharply compared to a year ago, it’s still not close to the lows seen just prior to the peak for oil prices in late 2014.  Back then oil was seeing daily moves of just over half a percent.

Tuesday, February 21, 2017

The High Cost of Traffic

Cheap gas and a surging economy are taxing the nation’s roads and contributing to congestion that cost U.S. motorists almost $300 billion last year in wasted time and fuel, according to a new report out this week. It's not surprising that New York City is among the worst - motorists spent 89 hours on average in traffic during peak periods last year.

Getting stalled on New York’s crowded streets cost drivers $2,533 each last year, according to the transportation analytics firm INRIX. Traffic problems cost the city as a whole nearly $17 billion.

But New York is far from the worst. Los Angeles had the worst traffic in the world among the 1,064 cities studied. The average driver in L.A. wasted 104 hours sitting in gridlock during the busiest commuting times last year, and lost $2,408 each in squandered fuel and productivity.

Monday, February 20, 2017

A Too-Hot Market Sign

Is this market getting overheated? One of the most commonly used price-to-earnings ratios based on future earnings has reached its highest level since 2004, according to FactSet data.

The S&P 500 index's 12-month forward price-to-earnings ratio has climbed to 17.6, based on Friday’s closing price of 2,351 and a 2017 earnings-per-share estimate of $133.49. The current forward 12-month P/E ratio is now above the 20-year average of 17.2, according to FactSet.

The last time the forward P/E was this high was on June 23, 2004, when the S&P 500 closed at 1,144.06 and analysts expected $65.14 earnings per shares over the following 12 months. Forward P/Es peaked above 27 in 2000, just around the time the bubble burst.