Thursday, January 17, 2019

Import Prices Take a Sudden Drop

U.S. import prices fell for a second straight month in December, the Labor Department reported yesterday. The cost of petroleum products tumbled and a strong dollar helped bring down prices of other goods, leading to the largest annual drop in import prices in more than two years.

Overall, import prices declined 1.0 percent last month. In the 12 months that ended in December, import prices fell 0.6 percent, marking the biggest annual drop since September 2016.

It was also the first year-on-year decline since October 2016, following a 0.5 percent rise in November. The drop of 0.6 percent in 2018 meant that this was the first calendar year drop since 2015. This comes on the heels of an increase of 3.2 percent in 2017.

Wednesday, January 16, 2019

Fourth Quarter Growth Slows

Earnings growth is hitting the brakes for the fourth quarter. Firms in the S&P 500 were projected back in September to report fourth-quarter earnings growth of 17 percent from the year earlier. But dimmer expectations for global growth and disappointing holiday sales have forced many companies to slash their forecasts, pushing the estimated earnings-growth rate for the quarter closer to 11 percent, according to FactSet.

For the fourth quarter, the consensus growth for the S&P 500 was 10.6 percent through Friday. That compares to the average reported growth of 25.5 percent for the first three quarters of the year, and would represent the lowest expected growth since 7.3 percent in the third quarter of 2017.

And for the first time since that third quarter of 2017, the growth won’t be unanimous across all sectors. The utilities sector is the only one of 11 S&P 500 sectors expected to report an earnings decline.

Tuesday, January 15, 2019

Inside the Lives of Wealthy Children

Nine in 10 of children of very wealthy parents say the most important thing they will inherit is their parents’ values, not their wealth, and 84 percent want to build on their family’s legacy. That's according to a national survey of slightly more than 1,000 young people aged 16 to 26, focused on the children of parents whose net worth ranged from $1 million to over $10 million, conducted by Wells Fargo Private Bank.

Some of the study's other findings:

  • Just 1 in 3 report having a formal meeting to discuss finances and 90 percent said they don’t meet regularly on the topic, though 60 percent of them would find that valuable.
  • Half of those who do meet regularly with their family on finances say there are ground rules for the discussion such as confidentiality and taking turns.
  • While most support their family’s charitable giving, 40 percent say they want to have a stronger voice in their family’s philanthropy and 44 percent don’t discern a specific giving strategy.
  • 65 percent express confidence in their ability to manage the family wealth.

Monday, January 14, 2019

Big Banks Kick Off Earnings Season

The markets are off to a strong start in 2019, but this week may change things, when several financial giants will start off earnings season with their quarterly reports. On Monday, Citigroup kicks things off with earnings before the open.  While the stock has beaten earnings estimates 74 percent of the time, it has averaged a one-day decline of 0.35 percent on its earnings reaction days.

JP Morgan and Wells Fargo report Tuesday morning. On Wednesday morning it’s all financials on the calendar — Bank of America, BNY Mellon, BlackRock, Goldman Sachs, PNC, Charles Schwab, and US Bancorp. Thursday morning will be led by Morgan Stanley, while American Express will report Thursday after the close.

Financial stocks have been beaten down over the past year. They are currently hovering around bear market territory, with the XLF, a financial ETF that tracks the big banks, down about 19 percent off its 52-week high, hit last January 29.

Friday, January 11, 2019

The Market Recovers From Christmas

Remember the carnage just before Christmas? The Dow Jones industrial average and the S&P 500 Index registered their fifth straight gains yesterday, which means that both indexes have now exited their corrections, defined as a drop of 10 percent from a market high.

The Dow has climbed 10.1 percent from its December 24 low, while the S&P 500 has gained 10.4 percent from that Christmas Eve low. That was the day that stocks put in the worst performance ever on the day before Christmas.

Meanwhile, the Nasdaq Composite Index is up nearly 13 percent from its own Christmas Eve low, but that index remains squarely in bear-market territory, usually defined as a decline of at least 20 percent from a bull-market peak. The Nasdaq needs to climb another 7.7 percentage points to break out of its bear market, which it entered on December 21.

Thursday, January 10, 2019

Small Caps: The Next Big Thing?

The asset class to watch this year may turn out to be small caps. Analysts are expecting firms in the Russell 2000 index of small-capitalization companies collectively to post double-digit profit gains throughout 2019, according to financial-data provider Refinitiv, far outpacing the S&P 500.

Refinitive projects that profits across the Russell 2000 will grow by nearly 16 percent in the first quarter from a year earlier, building on the 12.6 percent earnings growth rate those companies were expected to hit in the final three months of 2018. By contrast, the S&P 500 is projected to expand earnings by around 6 percent in each of the first two quarters of the year.

That would be a turnaround from the way we closed 2018. The Russell 2000 fell 12 percent last December, its worst month ever. The index slid more than 20 percent from its August 31 record high to post its worst annual performance since the 2008 crisis.

Wednesday, January 9, 2019

Credit Keeps Steaming Forward

Consumer borrowing stayed strong for the second straight month in November, a good sign for the economy. The Federal Reserve reported yesterday that total consumer credit increased $22.1 billion in November. That figure is down only slightly from a $25 billion gain in October, which had been the fastest pace in 11 months.

This is the third month out of the past four in which total consumer credit has grown by more than $20 billion. That hadn’t happened in four years. Prior to these recent months, consumer credit had been trending around a $15 billion growth rate.

Revolving credit, which includes things like credit cards, actually cooled off a bit in November, rising by 5.5 percent after a 10.9 percent gain in October. On the other hand, nonrevolving credit, which is typically auto and student loans, picked up, rising 7.1 percent in November after a 6.5 percent gain in the prior month.

Tuesday, January 8, 2019

Changes at the Top

For years, Apple was the most valuable corporation in the world, with its market valuation exceeding $1 trillion for a time. That changed at the end of November, when Apple stumbled and Microsoft beat it out. November was the first time in eight years that Microsoft was bigger than Apple.

But Microsoft's reign at the top ended up lasting just over a month. reached $797 billion in market value yesterday, overtaking Microsoft's roughly $788 billion valuation to become the most valuable publicly traded company in the U.S.

For its part, Apple isn't even Number Three anymore. Apple finished yesterday with a market cap of $702 billion, placing it at Number Four behind Google-parent Alphabet’s $746 billion.

Monday, January 7, 2019

Some Troubling Trends in Retirement

There's a troubling new look at the confidence of those of us in retirement. According to a new study from Transamerica, only 46 percent of retirees agree that their nest egg is large enough to sustain them throughout retirement.

More than half of them, a total of 56 percent, ended up retired sooner than they planned, at an average age of 63. But just 11 percent of them retired early because they were financially able to do so; 54 percent pointed to employment-related reasons for early retirement, including job loss, organizational changes, general unhappiness, and/or an incentive or buyout, and 47 percent cited health woes or family reasons.

Many are getting by on pretty small incomes: Their estimated median household income is just $32,000, with 25 percent having a household income of less than $25,000. Just 15 percent have an income of $100,000 or more. 

Friday, January 4, 2019

December's Jobs Report

The economy added an unexpectedly strong 312,00 jobs in December, the Bureau of Labor Statistics reported this morning.  U.S. employers hired their highest number of workers in 10 months, while also boosting wages. Nevertheless, the unemployment rate rose to 3.9 percent in December, due to growth in the overall labor force, up from 3.7 percent in November.

The employment figures for October and November were also revised to show 58,000 more jobs added than previously reported. All told, the economy created 2.6 million jobs last year, compared to 2.2 million in 2017.

There was more good news on the wage front. Average hourly earnings rose 11 cents, or 0.4 percent, in December after gaining 0.2 percent in November. That lifted the annual increase in wages to 3.2 percent.

Thursday, January 3, 2019

2018's Biggest Winners

In 2019, even the winners had a roller-coaster ride. The biggest-gaining stock in the S&P 500, Advanced Micro Devices, was up 79.6 percent on the year - even though it lost 40 percent of its value in the fourth quarter.

The Top Ten biggest winners in the S&P last year:

  1. Advanced Micro Devices (AMD), up 79.6 percent
  2. Abiomed (ABMD), up 73.4 percent
  3. Fortinet (FTNT),  up 61.2 percent
  4. Advance Auto Parts (AAP), up 57.9 percent
  5. TripAdvisor (TRIP), up 56.5 percent
  6. Chipotle Mexican Grill (CMG), up 49.4 percent
  7. Keysight Technologies (KEYS), up 49.2 percent
  8. Red Hat (RHT), up 46.2 percent
  9. O'Reilly Automotive (ORLY), up 43.1 percent
  10. Boston Scientific (BSX), up 42.6 percent

Wednesday, January 2, 2019

Farewell to 2018

Let's get the bad new out of the way quickly: For the year 2018, the S&P 500 fell 6.2 percent, the Dow Jones industrial average dropped 5.6 percent, and the Nasdaq Composite lost 3.9 percent. That marked the worst annual performances for all three indexes since 2008.

Much of the blame lay on a horrible December. In the last month of the year, the S&P 500 and Dow both logged their worst monthly declines since February 2009, and their worst performances for the month of December since 1931.

How unlikely was the late-year decline? This year marked the first time since 1978 that the Dow finished out the year in the red after rising in the first three quarters. It was the first time the S&P 500 had done so since 1948.

Tuesday, January 1, 2019

Thoughts for New Year's Day

"Every time you tear a leaf off a calendar, you present a new place for new ideas and progress." ~ Charles Kettering

"A year from now, you're gonna weigh more or less than what you do right now." ~ Dr. Phil McGraw

"All of us every single year, we're a different person. I don't think we're the same person all our lives." ~ Steven Spielberg