Friday, May 25, 2018

The Good News on Student Loans

In this season of graduation, many of us are thinking about student loans. The news in that area is fairly good: The share of new delinquencies on student loans has fallen to its lowest level in more than decade. In the first quarter, slightly over 9 percent of student debt outstanding was newly delinquent, based on figures from the Federal Reserve Bank of New York.

In the first quarter, 10.7 percent of overall student-loan debt was considered delinquent, meaning a payment hadn’t been made on the debt in at least 90 days. This figure marked the smallest share of student-loan borrowers in serious delinquency since 2012.

During the recession, delinquencies across categories of debt--including auto loans and credit-card debt--spiked. Around 2011, debt delinquencies reversed course, except for student-loan delinquencies, which rose through 2012 and remained at an elevated level for several years. The student-loan delinquency rate is still far higher than rates for any other type of consumer debt.

Thursday, May 24, 2018

Another Rate Hike Seems Likely

Federal Reserve officials in their meeting in early May confirmed they planned to raise interest rates in June and were not concerned they were behind the curve on inflation. That was the primary takeaway from that meeting, whose minutes were released to the public yesterday afternoon.

“Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation,” the minutes said. Traders in the federal funds futures market see more than a 90 percent chance of a June rate hike.

Although inflation hit the Fed’s 2 percent target in the latest reading for March, for the first time in a year, officials were not convinced it would remain there for long. “It was noted that it was premature to conclude that inflation would remain at levels around 2 percent, especially after several years in which inflation had persistently run below the Fed’s 2 percent objective,” the minutes said. Only a “few” officials thought inflation might move “slightly” above the 2 percent target.

Wednesday, May 23, 2018

A Big Quarter for Banks

Bank profits soared by 28 percent during the first quarter of 2018 to $56 billion, according to statistics published this week by the FDIC. The blockbuster earnings report easily tops the prior record set just three quarters earlier.

The FDIC said that 70 percent of the nation's 5,606 banks grew their bottom line during the last quarter. The percentage of money-losing banks dropped to just 3.9 percent. The FDIC's list of problem banks fell to just 92, the lowest that figure has been since the first quarter of 2008.

The financial industry owes a chunk of the mega earnings to the corporate tax cut passed at the end of last year. The FDIC said the tax law boosted bank profits by about $6.7 billion. However, banks would have still made a record $49.4 billion without the tax cuts.

Tuesday, May 22, 2018

Fortune's Top Ten

We are often in the habit of looking at America's biggest companies in terms of their market capitalization, but Fortune's venerable Fortune 500 list ranks corporations in terms of their revenues. That pushes the tech giants like Apple and Facebook down the list, in favor of the likes of Walmart, which is a clear No. 1 in this ranking. The top ten, with their 2017 revenues in millions:

  1. Walmart $500,343
  2. Exxon Mobil $244,363
  3. Berkshire Hathaway $242,137
  4. Apple $229,234
  5. UnitedHealth Group $201,159
  6. McKesson $198,533
  7. CVS Health $184,765
  8. $177,866
  9. AT&T $160,546
  10. General Motors $157,311
The least familiar name on that list is McKesson. What did they do to make $200 billion last year? McKesson sells medical supplies, pharmaceuticals, and other forms of medical technology.

Monday, May 21, 2018

What We Wish We'd Done

Regrets? We've had a few. A new survey from finds that not only do Americans have financial regrets, but they continue to procrastinate in addressing the issue, whatever it may be.

While the largest percentage of respondents, at 39 percent, say their biggest financial regret is not saving enough, the next largest, at 18 percent, say they wish they’d started saving for retirement earlier. Fourteen percent regret not saving enough for emergency expenses, and seven percent would have liked to have saved more for the kids’ education.

A whopping 49 percent of those who do have a regret say that they haven’t started to tackle it. Some plan to put it off indefinitely, with 25 percent saying they have no plans to address it; 19 percent think they’ll get around to it in the next year, while six percent say it will take them more than a year.

Friday, May 18, 2018

Sometimes You Have to Wait

More than one-third of Americans (35%) were forced to delay a major life decision in the last year because of finances, according to a new survey by the American Institute of Certified Public Accountants. That may sound like a lot, but it's actually a drop from the 51% who did so in 2015.

What are people delaying?

  • 14% of Americans waited to buy a home, compared to 22% in 2015.
  • 13% of Americans put off higher education, compared to 24% in 2015.
  • 12% of Americans put off a medical procedure, compared to 19% in 2015.
  • 10% delayed retirement, compared to 18% in 2015.
  • 7% delayed having children, compared to 13% in 2015.
  • 6% of people put off marriage, compared to 12% in 2015.

Thursday, May 17, 2018

What It Means to Be Wealthy

Charles Schwab has just come out with its annual Wealth Index. One of the most important questions it asks: What is the net worth an American needs to be “wealthy”? The answer: an average of $2.4 million, the same as last year, in the online survey of 1,000 Americans between age 21 and 75.

To be "financially comfortable" in America today isn't quite as difficult. That requires an average of $1.4 million, up from $1.2 million a year ago, according to the survey.

The survey also asked what made respondents feel “wealthy” in their daily lives. Spending time with family was most commonly cited, at 62 percent overall, followed by “taking time for myself,” which came in at 55 percent.

Wednesday, May 16, 2018

Fund Managers Still Bullish

Many fund managers remain bullish about U.S. stocks, with most of them thinking the market’s recent rally still has further to run. Just 19 percent of investors think January's peak represented the top of a bull run that began nine years ago, according to Bank of America Merrill Lynch’s monthly survey of fund managers.

Three-quarters (76 percent) of the fund managers surveyed thought equities would keep climbing. Almost half of them said stocks would remain strong until 2019 or beyond.

Although U.S. equities have recovered some over the past two weeks, the S&P 500 remains more than 5 percent off its January high. The index hasn't notched a record close since January 26, before a sudden burst of volatility rattled world markets.

Tuesday, May 15, 2018

Congratulations, and Welcome Home

Is someone in your family graduating from college this spring? More graduates are walking across the stage to pick up their diplomas—and then walking right back home to mom and dad’s house. The share of recent graduates moving back into their parents’ homes jumped to 28 percent in 2016 from 19 percent in 2005. 

The trend is most pronounced in areas particularly affected by the housing bubble of the late 2000s. Those areas include Las Vegas and Riverside, California, according to real estate site Zillow’s recent analysis of U.S. Census data, as well as perennially expensive cities like New York City.

In fact, New York had the second highest share of college graduates living with mom and dad in 2016 of any city in the nation, with 42 percent. Only Miami, which had 45 percent of grads living with their parents, was higher.

Monday, May 14, 2018

The Final Numbers on the Equifax Scandal

Last week, in a filing to the SEC, the credit-rating agency Equifax offered its most detailed analysis of its massive breach to date. The company disclosed not only how many consumers it believes were hit but also  broke down which types of information were most likely to have been stolen.

In the end, 147 million people were affected. Names, dates of birth and Social Security numbers were by far the most common type of data stolen by the attackers, Equifax said. Then came mailing addresses, phone numbers and just under 2 million email addresses. Roughly 209,000 credit card numbers and card-expiration dates were taken.

Beyond the information stored in those databases, Equifax said the hackers accessed thousands of images of official documents — such as government-issued IDs — that people had uploaded to the company to prove their identity. Photos of as many as 38,000 driver's licenses and 12,000 Social Security or taxpayer ID cards were accessed.

Friday, May 11, 2018

The Latest on Inflation

The Consumer Price Index rose 0.2 percent in April, with increases in the cost of gasoline and rents being offset by a drop in motor vehicle prices, the Labor Department said yesterday. In the 12 months through April, the CPI increased 2.5 percent, the biggest gain since February 2017. That followed a 2.4 percent rise in the 12 months to March.

Excluding the volatile food and energy components, the CPI edged up just 0.1 percent in April. That follows on the heels of two successive monthly increases of 0.2 percent.

Services prices excluding energy rose 2.9 percent in the year through April, but much of that was due to a rise in housing costs. If you also remove rents from that equation, overall services prices were up just 2.3 percent.

Thursday, May 10, 2018

The World Slows Down

Investors bought just $533 million in world equity mutual funds and exchange-traded funds, which invest primarily in international stocks, in the week ended May 2. That was the slowest weekly pace for this category since January 2017, according to the Investment Company Institute.

After surging to $43 billion in January, monthly inflows into world equity funds slowed to an estimated $8 billion in April. That's the lowest level for that figure since December 2016.

One reason for this is that growth abroad appears to be slowing. Data from European factory orders to European inflation readings have been missing forecasts lately. In the Citigroup Economic Surprise Index, a broad measure of how expectations for economic data are being met, the eurozone index has dropped to its lowest level since September 2011.

Wednesday, May 9, 2018

The Federal Government Rakes It In

Record tax receipts will lead to April having the largest-ever monthly budget surplus for the federal government, according to the nonpartisan Congressional Budget Office. The April surplus will total $218 billion, breaking the prior record of nearly $190 billion set in April 2001.

Greater-than-expected tax receipts drove the surplus. The record $515 billion in receipts for the month was as much as $40 billion more than the agency estimated about a month ago. The prior record for receipts had been $472 billion in April 2015.

The expected April surplus, meanwhile, isn’t keeping the U.S. from running a wider budget deficit for the fiscal year to date. For the first seven months of the budget year, the shortfall totals $382 billion, or $37 billion more than the same period a year ago, CBO estimates. The CBO recently estimated the full-year deficit would be $804 billion, and that trillion-dollar deficits would return in 2020.

Tuesday, May 8, 2018

Why Oil Prices Are Rising

In recent months, oil prices have risen to levels not seen in three and a half years, since a global glut of crude sent energy markets into a tailspin in 2014. Yesterday, the benchmark oil price reached $70 a barrel for the first time since November 2014.

Why has this happened? The biggest reason is that OPEC and other major oil producers, including Russia, agreed to cut crude production by roughly 1.8 million barrels a day from late 2016 levels in an effort to eliminate a longstanding glut of global supplies. OPEC’s crude production in April fell for a third straight month to a one-year low.

Another reason: Growing demand for oil. The International Energy Agency forecasts global oil demand at 99.3 million barrels a day this year, up from 97.8 million barrels a day in 2017.

Monday, May 7, 2018

Retirees Are Staying Put

As the health and wealth of retirees have increased, more are choosing to stay in or near their homes and neighborhoods rather than moving to a lower-tax state or cheaper, more rural areas within their states. That's according to a new study from United Income, called "The State of Retirees: How Longer Lives Have Changed Retirement."

Nearly half of retirees are now living in the suburbs of cities, and their numbers have increased by almost 40 percent over the past 40 years. The share of retirees who say they have moved in the past five years has fallen from a high of 23 percent in 1980 to a low of 15 percent in 2015, the most recent data available, and only 1 percent report moving out of state, according to the study.

Three of the five states with the largest populations of retirees — California, New York and Pennsylvania — are among the states with the highest taxes. Indeed, the share of Californians who are seniors has climbed from 7 percent in 1965 to 11 percent currently. Low-tax Texas and Florida round out the five states with the largest senior populations.

Friday, May 4, 2018

April's Jobs Report

After spending six months at exactly 4.1 percent, the unemployment rate dropped to 3.9 percent in April, the Bureau of Labor Statistics reported this morning. That's the lowest the unemployment rate has been since December 2000. The economy added 164,000 jobs for the month.

The headline figure fell despite the fact that the number of new jobs added was slightly lower than we've been used to. April's figure compared with an average monthly gain of 191,000 over the prior 12 months. Job gains have averaged 208,000 over the last three months.

The biggest driver of job gains last month was professional and business services, which added 54,000 positions. Over the past 12 months, the industry has added 518,000 jobs. Employment in manufacturing increased by 24,000 in April; manufacturing employment has risen by 245,000 over the year, with about three-fourths of the growth in durable goods industries.

Thursday, May 3, 2018

The Biggest Retirement Worry

Retirees’ overall confidence in their ability to continue to cover basic expenses is on the decline, according to the latest Employee Benefit Research Institute’s Retirement Confidence Survey. One major problem:  More than four in 10 retirees report that their health care expenses are higher in retirement than they planned for.

More than any other category of expenses, health care costs have taken retirees by surprise. The 44 percent that say health care costs are higher than they planned for compares to 26 percent who said housing costs are higher than they planned for. And 27 percent said their overall expenses are higher than planned for.

Retiree confidence tends to track with the economy’s performance. In 2009, as the economy was climbing out of recession, only 20 percent said they were very confident in their ability to survive retirement comfortably. The number peaked in 2016 at 39 percent. But this year, despite a strong economy, the number of very confident retirees has dropped back to 32 percent.

Wednesday, May 2, 2018

Apple's Big Day

The world's biggest stock outdid itself yesterday. Apple announced its earnings per share at $2.73 versus the analysts' expectations of $2.67. The company's net income for the first quarter was $13.82 billion, up from $11.03 billion a year ago.

Apple has often faced low expectations and managed to surpass them. Apple's earnings-per-share results have now beaten the Wall Street consensus in 20 of the past 21 quarters.

But the ploy worked: Apple's stock price rose as much 5 percent after hours, as investors digested the company's better-than-expected outlook. The company also announced a plan to return $100 billion to shareholders in a massive stock buyback.

Tuesday, May 1, 2018

Sell in May?

There's an old stock market adage to the tune of "Sell in May and go away." There's a bit of truth to this, since returns are lower on average for the period of May through October, versus November through April.

But some experts think this year might not hew to tradition. The S&P 500 is flattish year-to-date after a wild ride higher at the beginning of the year, with a lot of volatility in between. After some down days in April, some pundits are seeing an upside correction coming in May.

While the S&P 500's total return in the May-through-October period has averaged just 1.2 percent in the past 20 years, it has nevertheless finished higher 70 percent of the time. During the November-to-April period, by contrast, the S&P was up 85 percent of the time, averaging a 6.2 percent total return.

Monday, April 30, 2018

First Quarter GDP

Gross domestic product expanded at an annual rate of 2.3 percent for the months January through March, the Commerce Department reported Friday. That marked a slight slowdown from the 3 percent growth rate registered during the final three quarters of 2017.

One key area of growth: Nonresidential fixed investment, reflecting business investment in buildings, equipment, software and more, grew at a 6.1 percent rate. That was faster than this category's average growth rate of 4.6 percent during the economic expansion.

Household spending increased at a 1.1 percent rate in the first quarter, pulling back from the fourth quarter, when it rose at a 4.0 percent rate on strong holiday spending. The saving rate rose from the fourth quarter to the first, meaning households pocketed added disposable income from tax cuts rather than spending it.

Thursday, April 26, 2018

The American Dream on the Rise

One economic trend that continues to grow: More Americans own their own homes, and fewer of them are renting. According to U.S. Census data released yesterday, the homeownership rate rose from the prior year for the fifth consecutive quarter in 2018.

The homeownership rate is now at 64.2 percent, its highest level since 2014. The share of Americans who own a home rose from 63.6 percent in the first quarter of 2017.

Last year, surprisingly enough, the homeownership rate rose for the first time in 13 years. The U.S. added 1.3 million owner households over the last year - and lost 286,000 renter households. That marked the fourth consecutive quarter in which the number of renter households declined from the same quarter a year earlier.

The Unlikely Growth in Checking Accounts

Where have you been putting your money lately? One unlikely savings vehicle that's been growing lately is the checking account. The average checking account customer today has more than $3,700 stashed away.

That's well above the recent averages: The median amount held in checking accounts since 1991 is $2,263. In 2007, when times were good just before the Great Recession, consumers had on average less than $1,000 in their account.

Since 2008, apparently due to fear of riskier investments, the checking account customer has been hoarding more money. Moebs Services, an economic-research firm, found that the average consumer checking balance has increased in 23 of the past 30 quarters.

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.

Monday, April 16, 2018

Tax Day Facts

Some numbers to keep in mind on this Tax Day:

  • $1.72 trillion: The amount the IRS expects to collect this year
  • $406 billion: The gap between what the IRS estimates people owe and what they collect
  • 155 million: The number of returns Americans are expected to file
  • 70 percent: The number of filers who get a refund
  • $2,925: The average amount of that refund
  • 8.1 billion hours: The amount of time Americans spend working on taxes
  • 1.1 million: Number of tax returns audited by the IRS each year
  • 0.6 percent: The chances that you personally will be audited

Friday, April 13, 2018

Hints of Inflation

At their meeting last month, Federal Reserve policy makers said they’re increasingly confident inflation will rise to their 2 percent target. That's according to the minutes from the March 20-21 meeting that came out this week, which highlight just how much Fed officials’ outlook has changed since last fall, when surprisingly slow inflation raised questions about the need for continued rate increases.

In some senses, we're already there. During the first quarter of this year, consumer prices rose at an annual rate of 2.5 percent, while core prices (which exclude volatile food and energy) climbed at a rate of 2.9 percent.

The Fed’s preferred inflation gauge, the personal consumption expenditure price index, tends to run a little cooler than CPI; it was at 1.8 percent at its least reading in February. But the trend is clear: Underlying inflation is picking up.

Thursday, April 12, 2018

Cash Is on Top - for Now

A new study out from Pension Partners LLC points out that the best place for investors to be in the first quarter of this year was cash. Both bonds and stocks declined over the first three months, which means  that three-month Treasury bills outperformed both U.S. equities and long-dated Treasury bonds, returning 0.3 percent.

The fear among investors is that this trend will continue, but historically, it is relatively rare for cash to outperform both bonds and stocks. Pension Partners analyzed annual returns of the S&P 500, 10-year Treasury notes and three-month Treasury bill going back to 1928. Over that stretch, there were only 12 calendar years in which cash was the top performer.

And in longer time frames than a year, there are basically no scenarios in which cash is the optimal investment choice. Pension Partners notes that as investors increased their holding period from 1 year to 30 years, the odds of cash being king declines from 13 percent to 0 percent.

Wednesday, April 11, 2018

Small Business Sentiment Pulls Back

After hitting multi-decade highs in February, optimism on the part of small businesses pulled back a fair amount in March.  The month-over-month decline of 2.9 points was the largest drop since 2015.

That's the bad news. The good news is that, even with this month’s decline, sentiment on the part of small businesses remains positive and is well above the historical average reading of 96.6. 

Small business owners do report having an increasingly difficult time filling jobs. “Owners complain at record rates of labor quality issues,” the National Federation of Independent Businesses said, “with 89 percent of those hiring or trying to hire reporting few or no qualified applicants for their open positions.” Meanwhile, the number of respondents saying they are increasing worker compensation rose to its highest level since 2000.

Tuesday, April 10, 2018

Preserving Your Retirement Assets

Is there too much risk in your retirement plan? A new MassMutual Retirement Savings Risk Study claims that a lack of understanding about risk has led some retirees and workers within 15 years of retirement to focus more on growing, rather than preserving, their assets.

For instance, 59 percent of preretirees and 32 percent of retirees describe their primary investment strategy as focused on either “aggressive growth” or “moderate growth.” In addition, 32 percent of preretirees and 49 percent of retirees characterized their investment mix as a balance between growing and preserving their savings.

But preretirees say they plan to become substantially more conservative when they retire, with 43 percent of them saying they expect to be primarily focused on asset preservation when they retire. The problem: In the event, just 23 percent of retirees said they were focused on asset preservation at that time.

Monday, April 9, 2018

Why Did Jobs Slow Down?

After Friday’s jobs report showed weaker-than-expected job growth in March, economists have been scrambling to find an explanation. U.S. nonfarm payrolls rose by 103,000 in March, a sharp slowdown from the prior month’s gain of 326,000, the Labor Department said Friday.

Some economists pointed to March’s inclement weather, citing pullback in industries that are easily affected by snowstorms and freezing temperatures. Employment in construction rose robustly by 65,000 in February, but fell by 15,000 in March. Similarly, the retail trade industry lost more than 4,000 jobs after gaining a solid 47,000 in February.

But other analysts said the weaker number in March was bound to happen simply because of February’s strong jobs growth figure. After the unusually and unsustainably robust February gains, the March weakness may just represent an unavoidable hangover.

Friday, April 6, 2018

March Jobs Report

The U.S. economy added just a somewhat disappointing 103,000 jobs in March, the lowest number in six months, the Bureau of Labor Statistics reported this morning. The headline unemployment rate was unchanged at 4.1 percent.

The figures for the first two months of the year were also revised downward. The new numbers show employers added 326,000 jobs in February and 176,000 in January, a net downward revision of 50,000. Still, through the first three months of the year, employers have added an average of 202,000 workers to payrolls, ahead of 2017’s average monthly growth of 182,000.

Wage growth ticked upward, but was still below expectations. Average hourly earnings for all private-sector workers increased 8 cents last month to $26.82. Wages rose 2.7 percent from a year earlier in March. Wages haven’t increased at better than a 3 percent rate from a year earlier since the recession ended in 2009.

Thursday, April 5, 2018

The Growing Rental Market

One thing that may be slowing the recovery of the housing market: A growing share of apartment renters aren’t interested in buying a home. They’re just too expensive.

In all, 20 percent of renters said they have no interest in owning a home, up from 17 percent in August and 13 percent in 2016, according to results of a semiannual survey of renters by mortgage company Freddie Mac. Two-thirds of renters who plan to continue renting said they are doing so for financial reasons.

The growing preference for renting comes even as the economy has strengthened and credit has loosened. Renters generally report being better off financially, with some 39 percent saying they have money to take them beyond the next payday, up from 34 percent in August, according to Freddie.

Tuesday, April 3, 2018

An Outlook for Brighter Days

After a rough patch for the markets, there's a reason for optimism ahead. S&P 500 firms are forecast to report profit growth of 17 percent in the first quarter of 2018 from a year earlier, according to reported results and analysts’ forecasts compiled by FactSet.

Those estimates reflect an upward revision of 5.4 percent throughout last quarter. That would be a record move higher, as analysts lifted their earnings targets due partly to the effects of a drop in the corporate tax rate.

Some sectors where share prices have lagged recently are expected to have some of the most robust profit growth. Energy companies are forecast to have 79 percent earnings growth. S&P 500 tech companies are expected to have grown profits by 22 percent, with Facebook, Apple, and Netflix  showing an even bigger rise.

Tech Troubles

It was a rough day yesterday for the broader market, but maybe the most significant declines happened on the tech-heavy Nasdaq index. The Nasdaq Composite Index was down 2.7 percent on the day, erasing all its gains for the year. It is now down 0.5 percent for 2018.

All 100 components in the Nasdaq-100 Index, which contains 100 of the largest stocks in the broader index, declined on the day. That index is also now in negative territory for the year. was the most notable loser of the day, dropping more than 5 percent.

The Nasdaq is nearing correction territory, defined as a drop of at least 10 percent from a peak. The Nasdaq hasn’t had a correction in more than two years, since February 2016.

Monday, April 2, 2018

Welcome, April

The U.S. stock market is coming off a rough March. The S&P 500 and Dow Jones industrial average both declined, and  it was the worst month for the Nasdaq in more than two years.

But things might be getting better. April has historically been a strong months for stocks, with the Dow Jones Industrial Average gaining an average of 1.9 percent going back to 1950. That stands as the single best month of the year for the Dow, based on average monthly performance.

It is the third-best month of the year for both the S&P 500 and the Russell 2000 index of small-cap stocks. The S&P has historically gained an average of 1.5 percent over the month, as has the Russell. For the Nasdaq, April stands as the fourth-best month, with an average gain of 1.4 percent.

Friday, March 30, 2018

Goodbye to the First Quarter

Today marks the final day of the first quarter of 2018, and most investors will be happy to see it go. Both the the S&P 500 and the Dow Jones Industrial Average will finish down for the quarter, ending a nine-quarter streak of gains for both.

In the U.S., the stock market’s decline was widespread. Of the 11 primary S&P 500 sectors, nine of them posted negative returns over the quarter. The only two positive groups—technology and consumer discretionary—saw their gains come almost entirely from the so-called group of FAANG stocks: Facebook,, Apple, Netflix and Google.

Things were even worse around the globe. The STOXX Europe 600 Index was down 4.7 percent for the quarter, while Japan's Nikkei 225 Index dropped by 7.1 percent.

Thursday, March 29, 2018

The Final Look at Fourth Quarter GDP

The growth in the economy in the fourth quarter of 2017 was boosted to 2.9 percent from 2.5 percent, the Commerce Department reported in its third and final estimate yesterday. The U.S. fell just short of 3 percent growth, after racking up gains of 3.2 percent in the 2017 third quarter and 3.1 percent in the second quarter. It would have been the first time since 2004-2005 that the economy expanded by 3 percent in three straight quarters.

The economy got a big lift from consumer spending at the end of the year and businesses also increased investment. Consumer spending was revised to show a 4 percent increase instead of 3.8 percent. That’s the largest gain since the end of 2014.

Businesses also spent a bit more than previously estimated. Investment in structures such as office buildings and drilling platforms was raised to 6.3 percent from 2.5 percent. The value of unsold goods, or inventories, was also revised up sharply to $15.6 billion.

Wednesday, March 28, 2018

Retirement Fears of Gen X

The Insured Retirement Institute recently conducted a survey of Generation X - defined as people aged 36 to 55 - about their retirement planing fears. Surprisingly, having enough money in retirement was not the top concern. Here are the fears that outweighed that:

  1. Covering their own long-term care costs: Only 63 percent of the Gen Xers said they were somewhat or very confident about having enough money to pay their long-term care bills.
  2. Meeting their parents’ LTC needs: About 53 percent of the Gen Xers said they were somewhat or very confident about being to help pay their parents’ LTC bills.
  3. Paying their children’s college bills: Only 51 percent of the Gen Xers said they were somewhat or very confident that they will have enough money to cover their children’s higher education expenses.

Tuesday, March 27, 2018

Red Flags for Audits

The IRS audited less than 1 percent of returns last year, and that number may be even lower this year, according to the personal-finance website Kiplinger. If you want to stay out of that small number of auditees, here are red flags tax experts say you should avoid:

  • One of the most common reasons for an audit is when the taxpayer is taking higher-than-average deductions in relation to his income. This can come from various types of deductions: Charitable contributions, real estate interest or student loans interest.
  • There are some scenarios where an individual is allowed to take withdrawals from a retirement account prior to 59 ½ years old. But the IRS charges a 10 percent penalty (on top of the tax paid on the withdrawal) when none of those exceptions are met. Almost 40 percent of taxpayers did not report the withdrawal when they did not qualify for the exceptions, according to Kiplinger.
  • A sudden avalanche of business expenses: In previous years, employers were allowed to deduct more than 2 percent of their adjusted gross income for unreimbursed employee expenses, but will no longer be allowed to do so in 2018. So if you suddenly have a thick wad of restaurant and Uber receipts for business trips all over the city at night, the IRS will notice. 

Monday, March 26, 2018

An Unusually Rough March

The final week of March starts today, and unless things turn around quickly, this could end up as one ugly month. March is historically fairly kind to the markets, but the Dow Jones Industrial Average and the S&P 500 are both looking grim.

The Dow Jones, down 6.0 percent so far, is on the verge of putting in its worst March since 1980, when it declined 9.0 percent, according to WSJ Market Data Group. The S&P 500 index is on pace for its worst March in 17 years, since a 6.4 percent March decline in 2001, having lost 4.6 percent so far. The Nasdaq, down 3.9 percent on the month, is staring looking at its worst March decline since 2001, when it fell 14.5 percent.

Amid all this,  the CBOE Volatility Index was nearly 57 percent higher last week. Wall Street’s so-called fear index has more than doubled thus far in 2018.

Friday, March 23, 2018

Hard-Hit Industrial Stocks

Who's going to be hurt by the Trump Administration's proposed tariffs against the Chinese? The market seems to think it's manufacturers, who could end up spending significantly more for the metals in their products.

The S&P 500's industrial sector fell by 1.4 percent yesterday. Some of the more notable losers:

  • Lightweight metals engineering firm Arconic, down 3.1 percent 
  • Airplane giant Boeing, down 2.8 percent 
  • Heavy-machinery maker Caterpillar, down 2.7 percent
  • Farm machinery maker Deere & Co., down 2.4 percent 
  • Maker of steel products Nucor, down 2.1 percent 
  • Producer of aluminum cans Amcor, down 1.5 percent

Thursday, March 22, 2018

The Fed Moves

The first Federal Reserve meeting under the leadership of new chair Jerome Powell held few surprises yesterday. As widely expected, the Fed raised its benchmark federal-funds rate by a quarter percentage point to between 1.5 percent and 1.75 percent. That is the sixth quarter-point move since December 2015.

The Fed stuck to last December's forecast of three interest-rate hikes this year, but central bankers did push up their expected rate path in 2019 and 2020, however. The Fed now sees a total of eight quarter-point hikes in the Fed funds rate through the end of 2020: three increases this year, including Wednesday’s move, three in 2019 and two in 2020. By the end of 2020, rates would be near 3.4 percent.

In its statement, the Fed said “the economic outlook has strengthened in recent months.” It also said that household and business investment “have moderated from their strong fourth-quarter readings.”

Wednesday, March 21, 2018

Bank Rates Inching Up

Now that the Fed has begun raising interest rates, it seems that banks are, too. The average rate on a one-year certificate of deposit rose to 0.49 percent last week, according to While that’s tiny by historical standards, it is the highest that figure has been in more than seven years.

Banks over the past year have already raised the interest paid on deposits held by businesses and affluent individuals who demand it. But higher CD rates are intended to lure in average customers.

Still, banks aren’t moving en masse to raise rates. The average rate on a money-market deposit account started at 0.10 percent before the rate-raising cycle and is now still at just 0.15 percent, says.

Monday, March 19, 2018

Bad Day at the Market

It was a rough day on Wall Street yesterday, headlined by Facebook's woes. Facing charges of misusing customer data, the social media giant dropped 7 percent and had its biggest one-day percentage decline since September 2012.

While the tech sector was the biggest decliner on the day, losing 2.8 percent, the day's losses were broad. All 11 of the primary S&P 500 sectors were lower on the day, as were all 30 Dow components. The Dow's decline of 1.4 percent erased its year-to-date gain and pushed the index into the negative for 2018.

Not surprisingly, the market's Volatility index also jumped on Monday. The VIX gained 38 percent to 21.82, a level that is above its long-term average of 20. The VIX is up nearly 100 percent so far in 2018.

Positive Sentiment Almost Everywhere

Most investor sentiment is pretty strong right now. The University of Michigan's consumer sentiment index hit the highest level since 2004 in March, helped by a record favorable assessment of current economic conditions. At 102, it is well above the long-term average of 86,

The good vibes haven’t just been isolated to consumers. A reading on small-business optimism hit its second-highest level ever in February, behind only to a reading from 1983 and extending a surge that started with the 2016 U.S. presidential election.

Is there anything to be nervous about? There's one thing: According to Saxo Bank’s head of commodity strategy Ole Hansen, the Geopolitical Risk Index is at its highest level since 2003, during the invasion of Iraq.

Friday, March 16, 2018

Misunderstanding HSAs

Do you understand health savings accounts? A new survey by the LIMRA Secure Retirement Institute and the Insured Retirement Institute finds that 51 percent of Americans believe they are knowledgeable about HSAs, which indicates there is much to be done to educate consumers, advisors and employers about these vehicles.

And that 51 percent probably overstates the case. According to the survey, many Americans are unaware that they can use their HSA assets — accumulated in their working years — to pay for health care and long-term care expenses in retirement.

Two in five Americans mistakenly believe that balances must be spent by the end of the year or forfeited. This may explain why 74 percent of the 294 non-retired workers participating in an HSA said they use it to pay for current health care expenses. The remaining 26 percent said they plan to save their HSA assets for future health care expenses.

Thursday, March 15, 2018

The Madness of March

Have you filled out our brackets yet? A whopping 70 million tournament brackets were completed last year, amounting to about $10.4 billion wagered in total, according to a report by WalletHub. That's about twice as much as during the Super Bowl.

But across the U.S., all that time spent on sports brackets instead of actual work has a serious impact on the bottom line. In fact, unproductive workers during March Madness amounted to an estimated $6.3 billion in corporate losses last year, WalletHub said. A separate survey by Seyfarth Shaw at Work found that March Madness ranked third among tech-related office distractions, directly behind texting and Facebook.

Although 81 percent of human resource professionals said their organizations don't have policies to police office pools, employees are happy to leave well enough alone. Ninety percent of workers agreed March Madness was good for employee morale, WalletHub says.

Wednesday, March 14, 2018

A Sleepy Inflation Report

Inflation appears to be under control, despite fears earlier this year that it might be accelerating. The last major consumer-price report before Fed officials meet next week, released yesterday, indicated that inflation is gradually picking up without a big breakout.

The Labor Department said its Consumer Price Index rose 0.2 percent last month after jumping 0.5 percent in January. In the 12 months through February, the CPI rose 2.2 percent, up just a tick from 2.1 percent in January.

Excluding the volatile food and energy components, the CPI gained 0.2 percent, down slightly from a 0.3 percent increase in January. The year-on-year rise in the so-called core CPI was unchanged at 1.8 percent in February.

Tuesday, March 13, 2018

The Pre-Meltdown Losers

As we noted yesterday, during the nine years of the current bull market, some stocks have done extremely well. But it's worth remembering that the bull run was preceded by a disastrous meltdown in the financial sector.

If you look not at the past nine years but back to July 13, 2007, when the market's previous high point was reached, there have been some terrible losers in the market. Some of the worst performers over that 10-plus-year period:

  • AIG, down 95 percent
  • Office Depot, down 92 percent
  • MBIA, down 86 percent
  • Citigroup, down 84 percent
  • ETrade, down 76 percent

Monday, March 12, 2018

The Bull's Biggest Winners

It was nine years ago that the S&P 500 turned around and began the bull run that has lasted to this very day. The S&P itself is up more than 300 percent over that time period.

Here are the biggest winners among the individual stocks in the S&P over that time frame:

  • Netflix, up 6,998.5 percent
  •, up 2,321.4 percent
  • Align Technology, up 2,316 percent
  • Regneron Pharmaceuticals, up 1,869.6 percent 
  • Booking Holdings, up 1,738.9 percent
Netflix and Amazon are familiar names. Align technology makes the Invisalign dental device; Regneron makes a variety of pharmaceuticals; and Booking Holdings owns, OPenTable, and other fare aggregators.

Friday, March 9, 2018

February's Jobs Report

The U.S. economy added a surprisingly strong 313,000 jobs in February, according to this morning’s employment report from the Bureau of Labor Statistics. The unemployment rate held steady for the fifth straight month at 4.1 percent, an 18-year low.

Construction, retail, manufacturing and health care drove most of the growth in February. Specialty trade contractors saw employment gains of 38,000, while building assembly jobs jumped by 16,000. Retail trade expanded by a whopping 50,000 jobs. Manufacturing maintained a course of steady growth in February, increasing by 31,000 jobs, with most of them sprouting in transportation equipment (8,000) and fabricated metal products (6,000).

Wage growth came in less than expected, rising 0.1 percent for the month and 2.6 percent on an annual basis. That's helping to dampen fears that inflation may be on the rise again.

Thursday, March 8, 2018

Latest From the Beige Book

Employers across the U.S. said wage growth picked up since the beginning of the year, according to a Federal Reserve's new Beige Book. Employment grew at a moderate pace compared with recent months, a sign the economy may have more labor market slack to pick up. Still, companies across the country reported continued worker shortages, particularly in the construction, information technology and manufacturing sectors.

But there were few reports that the price increases were being passed to consumers, at least not yet. For instance, in the New York region, which covers northern New Jersey, most businesses said they have raised their selling prices “only modestly” but said “they planned to hike prices in coming months.”

Businesses in the Philadelphia region, covering southern New Jersey, complained about keeping new employees on the job. “Workers appear to have less loyalty to the job, and more job-hopping is showing up on resumes,” the Philadelphia Fed reported.

Wednesday, March 7, 2018

A Month of Losses

February was a topsy-turvy time in the markets, and investors reacted accordingly. According to the TrimTabs Investment Research, $41.1 billion was pulled from U.S. stock funds in February, the third-highest monthly outflows on record (including both exchange-traded funds and mutual funds).

Most of the month’s outflows were concentrated in the first week of the month, when more than $37 billion was pulled from equity products. According to global fund tracker EPFR, this represented the largest one-week outflow in history.

The month’s redemptions, while historic, represented less than 0.5 percent of the $10 trillion in total assets currently held in domestic stock funds. In July 2002, the last month with similar outflows in terms of the dollar amount, the redemptions were much larger by this metric, accounting for what was at the time 1.7 percent of assets.

Tuesday, March 6, 2018

America to Lead the World in Oil

Is America's energy independence day approaching? According to the International Energy Agency, the U.S. will overtake Russia to become the world’s largest oil producer by 2023.

U.S. crude production is expected to reach a record of 12.1 million barrels a day in 2023, up about 2 million barrels a day from this year. American oil output will surge past Russia, currently the world’s largest crude producer at about 11 million barrels a day.

Of the 6.4 million new barrels of oil that will be pumped every day between now and 2023, almost 60 percent will come from the U.S., the IEA said. American influence on global oil markets is also expected to rise, with U.S. oil exports more than doubling to 4.9 million barrels a day by 2023. Until 2015, the U.S. didn’t export any crude oil by law, but in five years it is expected to be among the world’s biggest exporters.

Monday, March 5, 2018

A Record Year for Buybacks

S&P 500 companies will buy back a record $800 billion of their own shares in 2018, funded by savings on tax, strong earnings and the repatriation of cash held overseas, according to a new study by J.P. Morgan. That will far exceed the $530 billion in share buybacks that was recorded in 2017.

Companies have already announced $151 billion of buybacks in the year to date. There were $113.4 billion of buyback announcements in February alone, a three-year high, according to Trim Tabs Investment Research.

It's worth noting that stocks with higher buyback yields and new announcements tend to outperform their peers, especially during corrections and recessions. Since 2000, those stocks have outperformed peers by 150 basis points during corrections and 200 basis points during recessions, J.P. Morgan analysts said.

Friday, March 2, 2018

Retirement Is Easier Than Ever

Retirement planning is getting easier and easier. A Willis Towers Watson survey finds that plan sponsors continue to add enhancements to their retirement plans, including automatic features. In fact, 73 percent now automatically enroll new participants—a percentage that’s been rising steadily, from 52 percent in 2009 and 68 percent in 2014.

Still, 47 percent of those companies who haven’t added auto-enrollment cite cost as the chief reason not to do so. They also hesitate to add re-enrollment, with 80 percent only making the effort to auto-enroll at the time the employee is hired.

But just a quarter of employers have increased their plan contributions over the past five years. Among those doing so, 60 percent raised the employer match to do it; 51 percent did so by encouraging employee savings and employee engagement; and 44 percent offset benefit changes in their defined benefit program.

Thursday, March 1, 2018

The Monthly Streak Ends

A historic streak came to an end with the close of trading yesterday, on the final trading day for the month of February. On a total-return basis, the S&P 500 fell 2.6 percent over the course of the month, representing the index’s first such decline since October 2016.

That means that an uninterrupted 15-month rally has just come to a close. This was by far the longest such streak in the history of the S&P; the previous record was a 10-month rally that ended in September 1995.

The Dow Jones Industrial Average had a 4.3 percent decline for February, coming off 10 straight positive months. The Nasdaq Composite Index fell 1.9 percent for February, ending a seven-month rally.

Wednesday, February 28, 2018

Confidence Continues to Rise

This week’s consumer confidence report for February was very strong, as the headline index came in at 130.8, its highest level since November 2000.  While consumer confidence had a hard time getting above its long-term average for much of the current expansion, it has now been above that level of 94.2 for 21 straight months.

One area of the economy where consumers are very confident is in employment: The percentage of consumers who consider jobs as being "plentiful" continues to be on the rise. In February’s report, it came in just under 40 percent, which was the highest level since April 2001.

The generational divide, which widened during the early part of the expansion with younger people being much more confident than older ones, is now roughly equal. Younger consumers (under 35) have seen little in the way of a confidence boost over the past year, while older consumers (over 55) have had their confidence surge.

Tuesday, February 27, 2018

The Secret Factor for Recessions

You might think there are rumblings in the economy before a recession hits - but in the maternity ward? A new study into fertility and birth rates found that people in the U.S. cut down on baby-making decisions well in advance of recessions — almost as though anticipating them.

The study, from the National Bureau of Economic Research, found that over the past 30 years, conceptions fell at the same time or even before other indicators whenever a recession was about to start. For example, conceptions peaked in 1998 and 2006, well in advance of recessions, and the large decline in conceptions came before the large increase in unemployment. In fact, conceptions worked as well as other economic leading indicators, such as consumer confidence or durables-goods purchases.

And now? U.S. fertility rates have reached a record low, at 62.0 births per 1,000 women of childbearing age, according to the most recent government figures reported by the Pew Research Center last month.

Sunday, February 25, 2018

The Rise of HSAs

Do you have a health savings account? These pretax savings vehicles are growing in popularity: U.S. residents’ use of public and private health coverage stayed about the same between 2016 and the first three quarters of 2017, but use of HSAs climbed about 15 percent.

The number of U.S. residents under the age of 65 who had HSAs increased to 17.9 million in 2017, from 15.5 million in 2016. The number of people under 65 with high-deductible coverage and no HSA increased 5.9 percent, to about 24 million.

If you don't have one, it may be because you're only eligible for an HSA if you have a high-deductible health plan. The high-deductible cut-off is $1,350 for self-only coverage and $2,700 for family coverage.

Friday, February 23, 2018

Earnings Coming On Strong

This earnings season has been a banner one. S&P 500 companies are expected to post profit growth of 15 percent in the final three months of the year versus a year earlier, according to FactSet. That would mark the third quarter in the past four in which companies have reported profit growth of 10 percent or more.

Nearly three-quarters of reporting companies have topped analyst estimates, above the five-year average of 69 percent. And firms are expected to have grown their top-line sales numbers by a strong 8.1 percent last quarter.

So why is the S&P 500 is down about 2.4 percent since earnings season kicked off in mid-January? Most analysts seem to think that the strong earnings numbers came as no surprise to most investors. The strong numbers were already baked into stock prices - even before companies started reporting them.

Thursday, February 22, 2018

Inside Housing's Decline

The housing market is beginning to show signs of weakness: U.S. home sales unexpectedly fell in January, leading to the biggest decline in more than three years. Existing home sales dropped 3.2 percent last month.

Existing home sales, which account for about 90 percent of U.S. home sales, declined 4.8 percent on a year-on-year basis in January. That was the biggest year-on-year drop since August 2014.

The weakness in home sales is largely a function of supply constraints rather than a lack of demand. While the number of previously owned homes on the market rose 4.1 percent to 1.52 million units in January, housing inventory was down 9.5 percent from a year ago.

Wednesday, February 21, 2018

The Woes of Walmart

U.S. stocks snapped a six-day winning streak yesterday, with the Dow and S&P 500 both dropping by about 1 percent. The biggest culprit: The world's biggest retailer, Walmart.

The retail giant's stock notched the worst dollar decline in its history, after it reported its first earnings miss in ten quarters. Walmart's adjusted per-share earnings came in at $1.33, below the $1.37 consensus of analysts polled by FactSet.

Shares of Walmart lost $10.67 on the day. The stock price lost 10.2 percent of its value. That percentage decline represented the steepest one-day drop for Walmart since January 8, 1988, when it dropped by 10.3 percent.

Tuesday, February 20, 2018

The Millionaire State

There's a new study out from Phoenix Marketing International, breaking down the number of millionaires by state, and New Jersey places at a lofty No. 2. Fully 7.86 percent of all the households in our state qualify as millionaire households, with more than $1 million or more in liquid wealth, The total for the state is nearly 250,000.

All told, millionaire households across the nation increased by 6 percent between 2016 and 2017. They now total about 7.2 million households in the U.S.

The only state with a higher percentage of millionaires than New Jersey? Surprisingly, it's Maryland, where 7.87 percent of all households qualify as millionaires.

Monday, February 19, 2018

Assessing the Damage

Is the market downturn over with? For the moment, at least. The Dow Jones industrial average and the S&P 500 index each logged their sixth straight advances on Friday, notching a slight gain at the close.

The Dow last had a rally of this length in November, while the S&P’s last six-day advance was in January. For the week, the Dow rose 4.3 percent, marking its biggest one-week percentage rise since November 2016. The S&P 500 also gained 4.3 percent in its best week since January 2013.

But it wasn't enough to erase the damage of the correction. The Dow remains 5.3 percent below its all-time high, hit last month. The S&P is 4.9 percent below its own record. U.S. financial markets will be closed today in observance of Presidents Day.

Thursday, February 15, 2018

The Market's Moves

How much has the stock market been moving lately? The daily move in the S&P 500 has totaled nearly 17 percent during the first half of February, according to The Wall Street Journal’s Market Data Group.

That’s surpassed such moves for every full month since June 2016, when the index moved 17 percent amid market turbulence spurred by the Brexit vote. With half a month to go in February, the absolute move in the index has a good chance to surpass those levels.

Sliced another way, the average up-or-down daily move so far in February has been 1.7 percent, according to the Market Data Group. That’s the biggest such average since August of 2011, when S&P downgraded the U.S. credit rating.

A Nation of Debtors

We are increasingly becoming a nation of debtors. According to the New York Fed’s latest Quarterly Report on Household Debt and Credit, household debt rose in 2017 for the fifth consecutive year. In the fourth quarter of 2017, household debt grew 1.5 percent from the third quarter to $13.15 trillion. That’s equivalent to 68 percent of U.S. GDP.

Debt increased in all major categories: in mortgages (1.6 percent), student loans (up 1.5 percent), auto loans (up 0.7 percent) and credit cards (up 3.2 percent). On the other hand, it did fall 0.9 percent for home equity loans.

Although credit card debt led the fourth-quarter debt increase, consumers owe far less in credit card debt than in all other major categories, just $834 billion. That's compared with $8.88 trillion for mortgages, $1.38 trillion for student loans and $1.22 trillion for auto loans.

Wednesday, February 14, 2018

Creeping Signs of Inflation

U.S. consumer prices rose more than expected in January, the Labor Department said this morning. This could be like a further sign that inflation is firming up after a long run of softness.

The consumer-price index, which measures what Americans pay for everything from bananas to housing costs, rose 0.5 percent in January. It had risen a seasonally adjusted 0.2 percent in December.

In the 12 months leading up to January, overall prices rose 2.1 percent, matching the same annual increase as in December. Core prices, stripping out the more volatile food and energy prices, were up 1.8 percent on the year. The increase in inflation last month was largely driven by higher prices for gasoline, shelter costs, medical care, food and apparel.

Tuesday, February 13, 2018

Optimism at Small Businesses

Optimism among small companies in the U.S. rose sharply in January, fueled by a record number of owners who said now was a good time to expand, according to a National Federation of Independent Business survey released yesterday. Six of the 10 components that make up the small-business optimism index increased in January, producing one of the strongest readings in the 45-year history of the survey.

The figures show sustained, sturdy business sentiment since the November 2016 election. A measure of plans to boost capital spending in coming months increased by 2 points to 29 percent, consistent with other data indicating stronger future outlays for equipment.

Finding qualified workers remains problematic for small businesses, underscoring what a tight job market we have. One in five small companies said they plan to boost hiring, which was unchanged from the prior month.

Monday, February 12, 2018

Heavy Volume

It should come as no surprise that a week of volatile price action and slumping stocks saw a huge jump in trading volume. Total composite volume for the week was 54,528,267,895 shares, the highest since the week ending August 12, 2011, according to WSJ Market Data Group.

Total composite volume for Friday was more than 11.8 billion shares, making it the second-largest volume day of the year. The day with the most volume this year was last Tuesday, when stocks rebounded some after losses last Friday and Monday. More than 12.04 billion shares changed hands on Tuesday.

Stocks gained ground late Friday, with the S&P 500 index rising about 1.5 percent. But the S&P 500 and Dow Jones Industrial Average each fell by more than 5 percent over the course of the week.

Friday, February 9, 2018

The Biggest Losers

It was another rough day on Wall Street yesterday, as the S&P 500 fell by 3.8 percent and the Dow Jones industrial average fell 4.1 percent. All 30 stocks in the Dow declined on the day.

Incredibly, four of the Dow 30 have lost more than 10 percent of their value already this year. They include:

  • General Electric, down 17.2 percent
  • Procter & Gamble, down 12.7 percent
  • American Express, down 11.0 percent
  • Chevron, down 10.3 percent

But all of those look better than the biggest loser in the S&P. Chesapeake Energy has lost more than a quarter of its value - declining 28.8 percent - since the beginning of the year.

Thursday, February 8, 2018

Looking Forward From the Rout

The stock market's dramatic drop on Monday may scare some investors away from Wall Street for a while. But if history is any guide, it shouldn’t. According to the WSJ Market Data Group, there have been 131 sessions in the history of the S&P 500 with a 4 percent drop, as occurred on Monday. A month after a 4 percent drop, historically speaking, the S&P 500 is higher 54 percent of the time, and gains an average of 0.87 percent over that period.

The odds are only slightly better on a three-month basis—the return has been positive 56 percent of the time.  But the gains are significantly higher, with an average advance of 6.11 percent, which would be enough to erase the day’s drop.

Six months after a 4 percent drop, the S&P is higher 63 percent of the time, gaining 7.31 percent over that period. Over the course of a year it is up an average of 16.48 percent, and it is positive in 62 percent of such periods.

Wednesday, February 7, 2018

The Labor Theory of the Market Rout

Was the rout in the stock market caused by rising wages? That's one theory. A Labor Department report of rising U.S. wages last week fed market inflation fears and may have kicked off the market's swoon. But a deeper look at that report raises questions about whether wages really are rising in such threatening ways.

Average hourly earnings for all private-sector workers increased 2.9 percent in January from a year earlier, the best gain since June 2009. But the gains aren’t very widespread. A separate gauge showed that wages for nonsupervisory workers, who account for around 80 percent of employment, rose just 2.4 percent for the year ended January, in the range that’s prevailed for several years.

This isn’t the first time managerial workers have seen a big uptick in monthly pay. Wages for this group rose 1.2 percent last February and 1 percent last July, pushing overall wages up 0.3 percent in both months, But that pace wasn’t sustained in the following months.

Tuesday, February 6, 2018

The Rout

Here's what's been going on in the stock market:

  • The Dow ended yesterday down 1,175 points, the largest one-day point decline on record. Given the lofty levels the index is at, though, that's a little misleading. The drop was 4.6 percent, the largest such move since August of 2011.
  • The rout wasn't quite as bad for the S&P 500 index. The S&P 500 fell 113 points, or 4.1 percent, its largest percentage decline since 2011. 
  • Both the Dow and S&P 500 have erased their gains for the year. The Dow is down 1.5 percent and the S&P 500 is down 0.9 percent. The Nasdaq is still up 0.9 percent.
  • Boeing, which has been the driving force behind the Dow’s gains over the last year, turned to its biggest drag on Monday, wiping 138 points from from the index.  
  • Still, given how much the market has risen in recent months, the Dow and S&P are only at their lowest levels since December 8 and December 7, respectively.

Monday, February 5, 2018

The High Cost of the Super Bowl

Did you go to a Super Bowl party yesterday? According to surveys, 18 percent of American adults had plans to host such a party, and they probably set the hosts back a fair amount.

On average, organizing a Super Bowl party set back hosts some $207, according to a survey of 1,000 people conducted by personal finance website LendEDU. Of that, over a third (35 percent) went toward food and non-alcoholic beverages, while 28 percent was spent on alcohol. The rest of the money was used to purchase decorations, fan gear and other items. 

Even those who didn’t host a watch party were still likely to spend a lot of money yesterday. American adults watching the showdown between the Patriots and the Eagles were expected to spend $81 each on average, or $15.3 billion total, according to the National Retail Federation. That’s up 8.5 percent from last year, but down slightly from the all-time high set in 2016.

Friday, February 2, 2018

January's Jobs Report

U.S. employers added 200,000 jobs in January, starting 2018 on a slightly better pace than last year. Employers added an average of 181,000 jobs a month in 2017. Overall, the pace of hiring has gradually slowed each year since 2014, consistent with a tighter labor market in the later stages of an economic expansion.

The headline unemployment rate remained at 4.1 percent for the fourth consecutive month, matching the lowest level since late 2000. The unemployment rate hasn’t fallen below 4 percent since December 2000, when it was 3.9 percent.

Construction, manufacturing and restaurants all showed strong job growth. Government payrolls grew by 4,000 last month. Average hourly earnings rose by 2.9 percent from a year earlier, the most since June 2009.

Thursday, February 1, 2018

What Does January Mean?

It's been a great first month of 2018 for the stock market. The Dow Jones Industrial Average rose by 5.8 percent in January, while the S&P 500 index registered a 5.6 percent increase. The Dow produced its best January return since 1989, and the S&P 500 notched its best January since 1997.

That is a good omen for the rest of the year as well. According to the WSJ Market Data Group, on the previous occasions that the Dow has registered a return of 5 percent or more in January, it has closed out that year with a gain 83 percent of the time, or 20 out of the past 24.

The S&P 500 shows a similar pattern. It has finished the year in positive territory 78 percent of the time, or 14 of 18 occasions, when it registers a January return of 5 percent or better.

Wednesday, January 31, 2018

Finally, the Markets Drop

It was bound to happen sooner or later: The S&P 500 fell by 1.1 percent yesterday, its first decline of more than 1 percent since mid-August. There hadn't been 112-day stretch without a drop of that size since 1985.

The index has also logged back-to-back declines of more than 0.5 percent, ending a 310-day period without such an occurrence, the longest on record, according to Bespoke Investment Group. Prior to this week, the last time the index had consecutive declines like that was just before the presidential election in 2016.

The Dow’s 1.4 percent fall yesterday also shaved more than 350 points off of the index, the first point drop of that magnitude since last May. Yesterday’s declines mark the first time this year that both indexes have fallen for two consecutive days.

Tuesday, January 30, 2018

Sales Are Soaring

It's not just stock prices that have been rising: S&P 500 firms are beating analyst estimates for sales at a record rate. With nearly a quarter of companies reporting for the final three months of last year, 81 percent of firms are beating forecasts for revenue growth, according to FactSet.

If that rate holds through the end of earnings season, it would be the highest beat rate in records going back to 2008, the FactSet analysis shows. That rate is well above the 56 percent of companies on average that topped sales estimates over the previous 20 quarters.

In some parts of the economy, the sales numbers are universally strong. In the energy, real, estate, health care, and telecom sectors, every single company that has reported has beaten its sales forecasts so far.

Monday, January 29, 2018

Why Is the VIX Rising?

The most common measure of expected stock swings, the CBOE Volatility Index, or VIX, has moved higher even as the S&P 500 has risen in January. In an unusual occurrence, the VIX has moved in the same direction as the S&P 500 on half of trading days in January.

The VIX has risen 0.5 percent this year and closed Friday at 11.10, while the S&P has jumped 7.45 percent, according to The Wall Street Journal’s Market Data Group. The gauge, which is based on S&P 500 options prices, tends to rise when investors are jittery and stock markets are declining, which may make the recent situation unsustainable.

The VIX remains low relative to its historical average, which is close to 20. But the move higher is notable after its calmest year in history, in which there seemed to be no end in sight for placid markets.

Friday, January 26, 2018

The Fourth Quarter GDP Report

The U.S. expanded at a 2.6 percent annual pace in fourth quarter, the Commerce Department reported this morning. That's a slight slowing from earlier this year: The economy grew at a 3.2 percent pace in the third quarter, and 3.1 percent in the second quarter.

Consumer spending, the main engine of the economy, rose a strong 3.8 percent, the biggest increase in almost two years. Investment in new housing increased 11.6 percent, business spending on equipment surged 11.4 percent and outlays on structures edged up 1.4 percent, according to Commerce Department data.

The down sides: The value of inventories declined by $29.3 billion. Trade was an even bigger drag on GDP; imports jumped 13.9 percent, doubling the 6.9 percent rise in exports. 

Thursday, January 25, 2018

Those Savvy Millennials

Millennials’ money management habits compare favorably with those of older peers, yet money is millennials’ top-of-mind concern, according to a new report from Bank of America. Sixty-three percent of millennials in the study said they were saving, and 57 percent had a savings goal, compared with only 42 percent of Gen Xers and baby boomers. Not only that, two-thirds of the younger cohort said they were meeting their goal.

But that doesn't mean they're relaxed about it. Seventy-three percent of millennials in the new report said they often or sometimes worried about money.

BofA said a widespread notion that millennials are poor money managers exacerbates their stress. Three out of four survey participants of all ages said millennials overspent on indulgences and had difficulty meeting long-term goals.

Wednesday, January 24, 2018

The Joys of Switching Jobs

People who switch jobs make more than those who stay with an employer, according to a new study. But workers who get hired via employee referrals could end up with the short end of the stick paywise.

An ADP study finds that full-time job holders — those who stay in a single job for at least a year — saw a gain in income of 4.3 percent over the previous year. But the job switchers made out better, with a gain of 4.9 percent.

Another study from Payscale, Inc., finds that some employees who are referred earn less per year than nonreferred employees in the same company. If they’re referred by a family member or close friend, the average offer declined by about $1,600. Overall, about a third of new job offers go to people who received a referral.

Tuesday, January 23, 2018

No Bad Days

In case you haven't noticed, it’s been a long time since the market took a tumble. The S&P 500 has gone 395 trading days without a decline of 5 percent or more from a record high, according to The Wall Street Journal’s Market Data Group.

This is now the longest stretch ever without suffering through such a decline. The old record was a 394-day streak during the stock market boom of the mid-1990s.

The last time the market had a decline of 5 percent or more was in June of 2016, just after the Brexit vote. Last year, the S&P 500 had just eight up-or-down moves of 1 percent or more, the fewest since 1965.

Monday, January 22, 2018

Effects of the Shutdown

The federal government shut down as of midnight on Friday. If the shutdown persists for any length of time, there are a couple of key financial decisions that may be affected. They include:

  • Tax refunds may be slow in coming. During the shutdown in 2013, which lasted 16 days, more than 90 percent of IRS workers were furloughed, which resulted in delaying some $2.2 billion in refunds to individual taxpayers.
  • A key report on fourth-quarter gross domestic product, scheduled for Friday, could be delayed. A shutdown causes statistic-keeping agencies to furlough most of their workers, stop collecting economic data and leave their work unfinished.

Friday, January 19, 2018

The Latest in IRAs

Here's a surprising trend: Americans now have more retirement income in IRA accounts ($7.2 trillion) than in 401(k) accounts ($5.6 trillion). A few years ago the research group EBRI started collecting information about IRA contributions, and they now have enough data to show some trends over the past few years. For starters, more people are putting money in IRAs: 14.1 percent in 2015 compared to 12.1 percent in 2010.

While the overall average balance in an IRA increased 36.1 percent from 2010 to 2015, the increase for those IRA owners who continuously owned IRAs from 2010 to 2015 was 47.1 percent. The overall average balance for consistent account owners increased from $99,603 in 2010 to $146,513 in 2015.

Curiously, there were considerable differences by IRA type in the likelihood of consistent account owners contributing to an IRA. For traditional IRA owners, 87.2 percent did not contribute to their IRA in any year, while 1.8 percent contributed in all six years. In comparison, 60.1 percent of Roth IRA owners did not contribute in any year and 9.7 percent contributed in all six years.

Thursday, January 18, 2018

A Huge Holiday Season

U.S. holiday spending jumped 5.5 percent, spurred by stronger employment, rising consumer confidence and expectations of higher wages and bonuses after the recent tax bill, according to a new report from the National Retail Federation. That's the biggest one-year gain for this figure since 2005.

Sales in November and December rose to $691.9 billion, compared with $655.8 billion the previous year, excluding sales at restaurants, automobile dealers and gasoline stations. This is huge, because holiday sales can account for up to 40 percent of annual sales for some stores.

With $6.6 billion spent, Cyber Monday — the Monday after the Thanksgiving holiday — was the largest U.S. shopping day ever. Online transactions from the top 100 U.S. web retailers were 14.7 percent higher than last year's total.

Wednesday, January 17, 2018

How Hot Is 2018?

Yesterday was the tenth trading day of 2018, and market returns over that period have been the best in 15 years. The Dow Jones Industrial Average is up 4.3 percent over that period, while the S&P 500 is up 3.9 percent and the Nasdaq Composite Index has gained 4.6 percent.

According to the WSJ Market Data Group, that represents the best 10-day start to a year for both the Dow and the S&P since 2003, when the Dow kicked off the year by rising 4.57 percent and the S&P rose 4.36 percent. For the Nasdaq, 2018 marks the best 10-day start since 2012, when it rose 4.72 percent.

Of the 10 trading days in 2018 thus far, both the S&P 500 and the Nasdaq have risen in eight of them, while the Dow has gained in seven of the 10 days. The Dow topped 26,000 for the first time ever on Tuesday, though it subsequently retreated from that level and ended in negative territory for the day.

Tuesday, January 16, 2018

The Embattled IRS

Concerned about the new tax changes? Good luck getting your tax questions answered by the IRS this tax season or the next one. After the massive new tax law passed in December, the IRS has admitted it's not ready for it.

The IRS lacks the funding to “provide acceptable levels of taxpayer service,” according to the annual report from the agency’s National Taxpayer Advocate. The agency estimates it will answer only six out of 10 taxpayer calls this coming tax filing season and less than 40 percent of calls with a “live assistor” during the full 2018 fiscal year, which runs through September 30, 2018.

After the April tax filing deadline, the IRS won't be answering any tax law questions by phone or at its taxpayer assistance centers. Since fiscal 2009, the agency's employee training budgets have been cut nearly 75 percent.

Monday, January 15, 2018

The Full Employment Question

Are we at full employment? The vast majority of economists surveyed this month by The Wall Street Journal think we're just about there. Asked if the U.S. economy has reached full employment, 42 percent said yes and an additional 48 percent said no, but that it’s close.

“Full employment” doesn’t necessarily mean every American who wants a job has one. Economists use the term to describe the point where unemployment can’t go any lower without generating price and wage pressures.

The U.S. unemployment rate was 4.1 percent in December, remaining at its lowest level in 17 years. It has come down from a peak of 10 percent in the immediate aftermath of the 2007-09 recession.

Friday, January 12, 2018

The Dow's Midpoint Record

The Dow Jones Industrial Average knocked out yet another record yesterday in its rise to new heights. After knocking out a round-number milestone at 25,000, the index then posted its fasted run to a midpoint milestone. It reached 25,500 in just seven trading sessions.

The previous record for such a midpoint advance was the move to 24,500, hit after December 12 after a blistering eight sessions for the Dow. By contrast, the Dow took 17,476 days to reach its first midpoint, when it went from zero to 500, which it finally hit on March 12, 1956.

Perhaps a more fair comparison would be when the Dow took 1,423 trading sessions to go from 14,000 to 14,500. That took place after the Dow crashed at the outset of the recession; it hit 14,000 in July 2007, but didn't reach 14,500 until March of 2013.

Thursday, January 11, 2018

Money Woes and Marriage

Do you and your spouse fight about money? Nearly half of Americans (48 percent) who are married or living with a partner say they argue with the person over money, according to a survey of more than 1,000 people by The Cashlorette.

Most of those fights are about spending habits, with 60 percent saying that one person spends too much or the other is too cheap. The scary part: At least two studies show that this could lead to divorce. Data released Wednesday by financial firm TD Ameritrade found that 41 percent of divorced Gen Xers and 29 percent of Boomers say they ended their marriage due to disagreements about money.

The worst time to be doing this is early on in your relationship, watch out: That may be the No. 1 predictor of whether or not you’ll end up divorced, according to a study of more than 4,500 couples published in the journal Family Relationships.

Wednesday, January 10, 2018

The Worries of Gen X

Gen X investors are worried about retirement but aren't well-equipped to address their plans, according to a study released Monday by Jefferson National. The study showed that 52 percent of Gen X investors do not have an advisor, and are least likely to seek advice even though they are in their prime earning years, between the ages of 37 to 52.

Of particular note for advisors was the survey finding that 30 percent of Gen Xers said their number one reason for having an advisor was concern about saving enough for retirement. Their second main reason — feeling confident in their financial future — trailed by 10 percentage points.

In contrast, 36 percent each of baby boomers and older investors and 27 percent of millennials cited feeling confident in their financial future as the number one reason for seeking financial advice. Only 15 percent of millennials and 12 percent of boomers said retirement saving was their chief reason.

Tuesday, January 9, 2018

The Credit Boom

One sign of a hot economy: Consumer borrowing rose in November by the largest monthly amount in 16 years, the Federal Reserve said yesterday. Total consumer credit increased by a solid $28 billion in November to a record high of $3.83 trillion. The annual growth rate was 8.8 percent.

Credit-card borrowing powered the increase. Revolving credit, which is mostly made up of credit-card loans, expanded to an annual rate of 13.3 percent in November, the fastest pace since last December and well above the 9.9 percent gain in October.

Nonrevolving credit, which covers loans for education and cars, rose at an annual rate of 7.2 percent in November. That's the fastest pace for that figure since October 2016.

Monday, January 8, 2018

Tough Year for Carmakers

Last year was a banner year for the stock market, but not so much for automakers. The seven-year winning streak that began after the recession in 2010 fell short in 2017 with sales down 1.8 percent compared to 2016. All told, the year saw 17.2 million vehicles sold.

The full-year results for individual automakers:

  • Subaru, up 5.3 percent
  • Nissan, up 1.9 percent
  • Honda, up 0.2 percent
  • Toyota, down 0.6 percent
  • Ford, down 1.1 percent
  • General Motors, down 1.3 percent
  • Fiat Chrysler, down 8.2 percent
  • Hyundai-Kia, down 8.9 percent

Friday, January 5, 2018

December's Jobs Report

The pace of hiring slowed in December, with employers adding 148,000 jobs, the lowest number since September, the Labor Department said this morning. That brought employment gains for the year to 2.1 million. The headline unemployment rate remained at 4.1 percent.

Employers added better than 2 million jobs for the seventh straight year in 2017. It is only the second time on record—the other being in the 1990s—when the economy has produced jobs at that pace for that long.

An unexpected loss of 20,000 retail positions during the holiday season held back the December jobs number. The biggest gains came from health care (31,000), construction (30,000) and manufacturing (25,000). Bars and restaurants added 25,000, while professional and business services grew by 19,000.

Thursday, January 4, 2018

Sector Scorecard for 2017

Wrapping up our scorecard for 2017, here is how each of the industry sectors performed in 2017, courtesy of Bespoke Investing:

  • Technology up 34.3 percent
  • Materials up 24.01 percent
  • Industrials up 23.97 percent
  • Consumer discretionary up 22.8 percent
  • Financials up 22.0 percent
  • Health care up 21.8 percent
  • Consumer staples up 13.0 percent
  • Utilities up 12.0 percent
  • Energy down 0.9 percent
  • Telecom down 11.8 percent

Wednesday, January 3, 2018

2017's Winners and Losers

The S&P 500 index ended 2017 up 19 percent, after closing at a fresh record high more than 60 times over the course of the year. Here are the index's biggest winners for the year:

  • NRG Energy,  up 132 percent
  • Align Technology, up 131 percent
  • Vertex Pharmaceuticals, up 103 percent
  • Wynn Resorts, up 95 percent
  • Boeing, up 89 percent

And the biggest losers:

  • Envision Healthcare,  down 45 percent
  • Scana,  down 46 percent
  • Under Armour, Class A down 50 percent, Class C down 47 percent
  • Range Resources, down 50 percent
  • Baker Hughes, a GE Company, down 51 percent

Tuesday, January 2, 2018

Scorecard for 2017

Happy new year, and a fond farewell to 2017. For most investors, 2017 was the best year for stocks since 2013. Here are the final numbers for the year:

  • The Nasdaq composite was the biggest winner among the major indexes, with a gain of 28.2 percent. 
  • The Dow Jones industrial average rose by 25.1 percent. 
  • The large-company Standard & Poor's 500 increased 19.4 percent.
  • The relative laggard was the small-cap Russell 2000. It gained 13.1 percent, which was less than its 19.5 percent return from 2016.

Monday, January 1, 2018

Thoughts for the New Year

"Hope smiles from the threshold of the year to come, whispering, 'It will be happier.'" ~ Alfred Lord Tennyson

"The object of a new year is not that we should have a new year. It is that we should have a new soul.” ~ G.K. Chesterton

"We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called Opportunity and its first chapter is New Year’s Day.” ~ Edith Lovejoy Pierce