Friday, September 30, 2016

Soybean Power

What has economists excited about the third quarter GDP figure? The humble soybean. Soybean exports are expected to add about 1 percent to third-quarter GDP growth, due to bumper harvests at home, crop shortfalls in South America and solid demand.

That has many institutions raising expectations for the quarter. J.P. Morgan Chase has revised its outlook to 3 percent annualized growth in the third quarter, up from its earlier estimate of 2 percent. Barclays inched up to 2.6 percent from 2.4 percent.

Any of those figures would be a big improvement from 1.4 percent GDP growth in the second quarter and 0.8 percent in the first. The Commerce Department will release its first estimate of third quarter GDP on October 28. 

Thursday, September 29, 2016

The Lopsided Sectors of the Third Quarter

Just two days remain in the third quarter, and with a gain of 2.9 percent for the S&P 500, it hasn’t been that bad for the overall market.  But so much of the quarter's success depends on which sectors investors have gotten into.

Of the eleven sectors, just two are outperforming the overall S&P 500: Technology and Financials.  The Technology sector, which is up 12.1 percent this quarter, is way out in front. Technology is also the largest sector in the S&P 500, which is why it has such a disproportionate effect on the entire index. 

Financials are a distant second with an increase of 3.6 percent. Five sectors are actually in the red for the quarter. The biggest declines have come in Telecom Services, down 5.2 percent, and Utilities, down 4.4 percent.

Wednesday, September 28, 2016

Confidence Finally Gets Past the Recession

Maybe the last lingering effects of the recession are finally over. The Conference Board’s consumer-confidence index rose in September to its highest level in nine years, a sign that American households have finally escaped the recession’s long shadow.

The  index increased to a seasonally adjusted 104.1 in September, up from 101.8 in August. That was its highest level since August 2007, the month that marked the start of the financial crisis.

The biggest changes concerned jobs. The report noted that consumers are  feeling better about employment prospects: The proportion of those expecting more jobs in the upcoming months rose to 15.1 percent from 14.4 percent, and the proportion of those expecting less jobs dropped to 17.0 percent from 17.5 percent. Moreover, those expecting a drop in incomes to decreased to 10.3 percent from 11.0 percent.

Tuesday, September 27, 2016

Cards Overtake Cash

In 2016, for the first time ever, consumers will spend a greater amount with cards than they do with cash, according to the market-research firm Euromonitor International. They figure that consumers worldwide will spend about $23.2 trillion in card payment transactions and $22.6 trillion in cash.

Cash is still used much more frequently. Cash is used for about 85 percent of transactions worldwide, but that can mostly be attributed to the popularity of using cash for small transactions, according to research from MasterCard and management consulting firm McKinsey.

The rise of debit cards is another reason why cash has declined in recent years. Debit card use worldwide grew about 8 percent in terms of cards in circulation from 2015 and 2016. By that same measure, credit card use grew about 5 percent worldwide.

Monday, September 26, 2016

Marital Bliss

American marriages seem to be in pretty good shape, at least as far as money is concerned. A recent Ameriprise study found that 88 percent of couples ranging from 25- to 70-year-olds are happy with the way they manage their money in their relationships. In addition, 68 percent say they communicate well about their dollars.

The study also revealed five steps to living in a successful financial relationship. Those include making money a priority, talking through and agreeing on financial goals, setting spending limits and discussing big purchases, keeping a joint account, and planning retirement and investments.

When couples do face disagreements, it often has to do with major purchases and children-related conversations, such as how much to spend on their kids. The study found 82 percent of couples say they’re able to resolve their disagreements on such issues.

Friday, September 23, 2016

The Most Hated Stocks in America

The stock of the venerable retailer Sears is already down 43 percent this year, but people are still betting on it to fall further, leading the web site MarketWatch to call Sears the most hated stock in the U.S. The level of short interest in Sears is at 65.6 percent, meaning nearly two thirds of people interested in the stock expect it to drop.

The other leaders on the list of "most hated":
  • Weight Watchers, 62.4 percent short interest
  • Insys Therapeutics, 57.1 percent
  • Adeptus Health, 54.3 percent
  • Clayton Williams Energy, 53.1 percent
  • RPC Inc., 47.0 percent

Thursday, September 22, 2016

The Interest Rate Outlook

One of the key releases after each Federal Reserve meeting is the so-called dot plot, where committee members use dots to suggest where they see rates heading in the months and years to come. Following today's meeting, the median of the dots at the end of the year is now 0.6 percent, suggesting just one rate increase this year, which would come after the December meeting.

But the spread of opinions is unusually broad. Three officials see no increases this year, while four members expect more than one increase to be appropriate. Looking ahead, policy-makers see two increases in 2017, and three each in 2018 and 2019. The longer-term rate beyond 2019 is forecast to be at 2.9 percent, down from 3 percent in June.

The summary of economic projections also suggested slightly lower expectations for inflation this year, 1.3 percent now versus 1.4 percent in June. The outlook for economic growth also dropped some, sitting at 1.8 percent now versus 2 percent in June.

Wednesday, September 21, 2016

Buybacks Losing Favor

Once the hottest trend among major American companies, stock repurchases have waned considerably in recent months. Year-over-year, S&P 500 company stock buybacks for the second quarter fell 6.8 percent to $125.1 billion. That's their lowest level since the third quarter of 2013.

Mega-buybacks, where a given company spends $1 billion or more in a quarter, have also tapered and are near a three-year low. The decline follows a record amount spent by companies on stock  repurchases for a 12-month stretch that ended in the first quarter of 2016.

The number of S&P 500 companies actively engaged in share buybacks has dropped to 350, marking the lowest number of companies since the fourth quarter of 2010. That's down from 380 in last year’s second quarter.

Tuesday, September 20, 2016

Housing Is Unexpectedly Strong

Some surprising news from the housing industry: U.S. home builder sentiment unexpectedly rose in September to its strongest level in 11 months, prompted by renewed interest in home purchases following a summer lull. The National Association of Home Builders and Wells Fargo said their index on builder confidence regarding newly built, single-family homes climbed to 65 points in September.

This matched the level set in October 2015, which was the highest this figure has been since the height of the housing boom. The index that tracks buyer traffic rose four points to 48: It hasn’t topped the neutral 50 mark since mid-2005.

All that housing growth has lifted U.S. household wealth as well. It increased 1.2 percent to $89.1 trillion in the second quarter,  while housing wealth rose 1.9 percent to $25.6 trillion.

Monday, September 19, 2016

Americans Keep On Working

When it comes to retirement, a whopping 75 percent of Americans say they plan to work “as long as possible” in retirement, according to a new report from And for many of them, it’s not because they love their jobs:
  • 38 percent say they are planning to work because they want to
  • 35 percent say they plan to work because they need the money
  • 27 percent said they plan to work because they need the money and want to work
According to the survey, 47 percent of retirees are either very worried or somewhat worried about outliving their retirement savings. That’s up from 37 percent the last time that question was asked, in 2009. Only 25 percent said they had no plans at all to work during retirement.

Friday, September 16, 2016

Sales Still Sluggish

Will the economy rebound in the third quarter? Retail sales figures released yesterday show that we haven't gotten out of gear yet. U.S. retail sales fell more than expected in August amid weak purchases of automobiles and a range of other goods, pointing to cooling domestic demand.

The Commerce Department said retail sales declined 0.3 percent after edging up 0.1 percent in July. Sales were up 1.9 percent from a year ago. So-called core retail sales correspond most closely with the consumer spending component of gross domestic product, and there the numbers were a little better: Excluding automobiles, gasoline, building materials and food services, retail sales slipped 0.1 percent last month after a similar drop in July.

The trend was widespread, with sales, rising in only four categories, including clothing stores and restaurants and bars. Receipts at auto dealerships fell 0.9 percent, while online sales, whose share has grown in recent years, dropped 0.3 percent.

Thursday, September 15, 2016

Benefits in Danger?

Are your benefits at work being cut back? According to a new Gallup poll, more U.S. workers say they worry about having their benefits reduced (30 percent) than worry about having their wages cut (20 percent), being laid off (19 percent), or having their hours cut back (17 percent).

Benefits cuts consistently have been the top worry since Gallup first asked the question in 1997, but it's easing from recent years. U.S. workers' concern about having their benefits cut spiked to 46 percent in 2009 before falling to 34 percent in 2014. The 30 percent who worry about benefits reductions today is essentially back to where it was before the September 2008 financial crisis.

Workers' concerns about having their wages cut or their hours reduced remain at least slightly higher than they were at any point before the recession. While the 19 percent worried about being laid off is also higher than just before the financial crisis (15 percent), it is similar to where that mark was in the late 1990s and early 2000s.

Wednesday, September 14, 2016

Incomes Are Finally Rising

For the first time since the recession, Americans' income rose last year. A new report from the Census Bureau Tuesday showed a 5.2 percent increase in U.S. household incomes in 2015, the first annual increase in eight years. The median income in 2015 was $56,500, an increase of $2,800 from the prior year, after adjusting for inflation.

But that's not the end of the story. We're still not back to where we were prior to the recession. The median household income is still 1.6 percent lower than it was in 2007, before the recession.

It also remains 2.4 percent lower than the all-time peak in American incomes. We reached the high-water mark during the economic boom of the late 1990s.

Tuesday, September 13, 2016

A Spike in Volatility

Friday's rout in the markets led many investors to expect further volatility. The VIX, a measure of stock-market fear which is based on S&P 500 options, had climbed 40 percent on Friday, raising the specter of more market upheaval in the weeks to come after months of eerie calm. Sure enough, the S&P 500 sank nearly 2.5 percent.

But that same volatility Index, or VIX, fell 13 percent to 15.16 on Monday. The S&P, which is typically up when the VIX is down, climbed 1.47 percent as investor concerns subsided.

We may be due for a period of elevated volatility. This summer, the S&P 500 had a streak of 43 consecutive days without a move, positive or negative, or more than 1 percent.

Monday, September 12, 2016

A Wide Rout

After a Fed board governor hinted at the possibility of a rate increase, pretty much everything on the market fell on Friday. It was the worst day for stocks since the Brexit vote. How widespread was the rout?
  • The S&P 500 dropped by 2.5 percent, and all ten sectors suffered losses.
  • The Dow Jones industrial average dropped 2.1 percent, with all 30 component stocks falling on the day.
  • On the New York Stock Exchange, only one in every 20 stocks advanced.
  • Oil prices, which had been rising, fell by nearly 4 percent.

Friday, September 9, 2016

Gas It Up!

With gas prices still low, it's not much of a surprise that Americans fueled up this summer at levels not seen since the recession began almost nine years ago, new data shows. Americans purchased about 406 million gallons of gasoline per day, on average, in June, according to data the U.S. Energy Information Administration released last week.

That just surpassed a previous record set in July 2007. But fuel consumption typically peaks for the year later in the summer, in July or August, when road-trip season is in full swing. So Americans likely purchased an all-time record volume of gasoline this summer.

Of course, part of this growth has been the drop in gasoline prices. The average price for a gallon of regular gasoline topped $4 in spring 2008, and approached that level again in 2011 and 2012. When it began dropping - now down close to $2 a gallon - we began driving more again.

Thursday, September 8, 2016

A Record Number of Job Openings

According to the new JOLTS report - the Job Openings and Labor Turnover Survey - the number of job openings available at the end of July climbed to a new record of 5.9 million. The number of unemployed workers per job opening has fallen to 1.3, the lowest ratio since 2001.

Another strong indication of a healthy labor demand was the second straight month where layoffs were just 1.1 percent of the labor force, matching the lowest level ever.  Private layoffs are down to 1.2 percent this month, which also ties an all-time low.

One confounding complication: The number of people actually being hired into a job was just 5.2 million for the second month in a row, despite the 5.9 million openings.  About 300,000 fewer people are being hired each month compared with the pace reached in February.

Wednesday, September 7, 2016

Services Slipping

A troubling sign for the economy: The Institute for Supply Management’s services gauge fell to a six-year low this week. The ISM’s non-manufacturing index slumped to 51.4, the lowest since February 2010, when we were emerging from the recession. 

The raw drop in the figure, indicating ISM's measure of orders and business activity, was the biggest since 2008, at the outset of the Great Recession. Still, readings above 50 indicate expansion, so we're not in dark territory yet.

Seven of 18 industries that are tracked in the ISM services survey showed a contraction in August, including retail; arts and entertainment; transportation and warehousing; and mining. That compares with just three industries that had fallen in the July survey.

Tuesday, September 6, 2016

End-of-Summer Gas Savings

If you went driving over this past Labor Day weekend, you may have noticed that gas prices are still at very low levels historically. The U.S. national average for a gallon of gasoline ended the summer driving season at about $2.24, which means that drivers enjoyed the cheapest summer at the pump since 2004.

And the price could be falling even further. With the summer driving season ending, gasoline demand may drop by around 400,000 barrels a day after Monday, according to the Oil Price Information Service. That will help send prices even lower. 

That same research firm said that the first 10 days of September should see average U.S. gasoline prices drop by five or ten cents a gallon. We could be back to $2 a gallon by Halloween.

Monday, September 5, 2016

Thoughts for Labor Day

"The fight is won or lost far away from witnesses--behind the lines, in the gym, and out there on the road, long before I dance under those lights." ~ Muhammad Ali

"Plans are only good intentions unless they immediately degenerate into hard work." ~ Peter Drucker

"Winners embrace hard work. They love the discipline of it, the trade-off they're making to win. Losers, on the other hand, see it as punishment. And that's the difference." ~ Lou Holtz

Friday, September 2, 2016

August's Jobs Report

The economy slowed a bit last month, with employers adding 151,000 jobs in August, according to the numbers out from the Bureau of Labor Statistics this morning. Over the past three months, job growth has averaged about 232,000 a month, and in 2015, monthly job growth averaged 229,000. The unemployment rate held steady at 4.9 percent in August, its third straight month at that level.

The food service industry led in hiring last month, adding 34,000 positions. Financial services grew by 20,000 jobs, with particular growth in securities, commodity contracts and investment. The health-care industry added 14,000 new jobs.

The biggest loser continues to be mining. Mining jobs fell by 9,000 in August, the 23rd straight monthly decline for that sector, totalling 225,000 jobs lost, or one-quarter of the industry's total employment.

Thursday, September 1, 2016

The Dreaded September

Today is the first day of September. No matter how you look at it, September has been an awful month for the U.S. stock market, and has been for more than a century.

Since the Dow Jones Industrial Average was created in the late 1890s, September has produced an average loss of 1.1 percent. The 11 other months of the calendar, in contrast, have produced an average gain of 0.8 percent.

Furthermore, September has an impressively consistent record at or near the bottom of the rankings. September was a below-average performer in all but one of the dozen decades since the late 1800s. And in more than half of those decades, it was in 11th or 12th place in a ranking of monthly average performance.