Wednesday, November 30, 2016

Third Quarter GDP Bumps Up

Some strong economic news: Gross domestic product expanded at a 3.2 percent annual rate in the Commerce Department’s second reading for the third quarter, released yesterday. That's up from an initial estimate of 2.9 percent, and is the strongest pace since the second quarter of 2014.

Consumer spending rose 2.8 percent in the quarter, higher than the original estimate of 2.1 percent and the strongest rate since 2002. The consumer sector accounts for two-thirds of the economy, and has been a strong factor in economic growth for several quarters.

Also helping out: Corporate profits soared 6.6 percent in the third quarter, following on the heels of a 0.6 percent decline in the second quarter. After-tax profits rose 7.6 percent from the second quarter.

Monday, November 28, 2016

Who's Giving to Charity?

Here's a fascinating trend in charitable giving: Wealthy Americans are giving more to charity than ever before, while donations from low- and middle-income givers are falling. A new study from the Program on Inequality and the Public Good said data is pointing to a small group of wealthy donors giving more money and cutting bigger checks than ever before.  But less-wealthy donors are giving less.

The Giving USA Foundation annual report found a 4 percent increase, to $373.25 billion, in 2015 in charitable donations from the year-earlier period, a record high. At the same time, the makeup for charitable donors has shifted.

The Institute for Policy Studies, using Internal Revenue Service data to track charitable deductions, found that inflation-adjusted itemized contributions from people making over $10 million increased by a whopping 104 percent from 2003 to 2013. Over the same period, itemized charitable deductions from people making less than $100,000 went down 34 percent.

Friday, November 25, 2016

A Quieter Black Friday

Is Black Friday losing its relevance? Foot traffic in stores this year is expected to fall by about 3.5 percent on Black Friday compared to last year, according to data from the location tracking service Foursquare. Last year, about 102 million shoppers hit stores over the Thanksgiving holiday weekend, down from 147 million in 2012, according to the National Retail Federation.

That doesn't mean people aren't shopping during the holidays anymore. They just aren't saving their purchases for Black Friday, and many are choosing to shop online, rather than in stores. And they're shopping and spending more than ever.

Combining foot traffic in stores and shopping online, about 137.4 million people are expected to shop over the Thanksgiving weekend. That's up from 135.8 million who shopped over the long weekend last year. Overall spending during the holiday period is expected to increase 3.6 percent over last year, to $655.8 billion.

Thursday, November 24, 2016

Thoughts for Thanksgiving

"We can only be said to be alive in those moments when our hearts are conscious of our treasures." ~Thornton Wilder

"Give thanks for unknown blessings already on their way." ~ Native American Saying

"Stand up, on this Thanksgiving Day, stand upon your feet. Believe in man. Soberly and with clear eyes, believe in your own time and place. There is not, and there never has been a better time, or a better place to live in." ~ Phillips Brooks

Wednesday, November 23, 2016

Dow 19K

Yesterday, the Dow Jones Industrial Average closed above 19000 for the first time. But it took almost 500 trading days to get there from 18000, the seventh-longest stretch of time between such round-number marks. The 16000, 17000 and 18000 Dow records were all broken in fewer than 160 trading sessions since the previous 1,000-point level.

Simple math shows that each 1,000-point rise is less impressive than the last: The march from 17000 to 18000 was good for a 5.9 percent gain, for example, while the climb from 10000 to 11000 was a 10 percent rise. The Dow made it to 19000 by rising just 5.6 percent over nearly two years, since after it reached 18000 in December 2014.

Put the two measures together, and the latest 1,000-point climb was the result of average gains of just 0.01 percent each trading day. The last three round-number records were set after average moves of more than 0.04 percent each day.

Tuesday, November 22, 2016

A Slightly Cheaper Feast

Americans' Thanksgiving feast this year will be less costly than last year's. A Thanksgiving dinner for 10 people will cost an average of $49.87 this year, according to a survey from the American Farm Bureau Federation. That is down 24 cents from a year ago. Adjusted for inflation, the cost of a Thanksgiving dinner fell to its lowest since 2010, the Farm Bureau said.

The Farm Bureau, which surveyed 148 volunteer shoppers across 40 states, followed prices for a range of typical Thanksgiving items including sweet potatoes, bread stuffing and cranberries. A 16-pound turkey cost roughly $22.74 this year, down 1.3 percent from a year ago. Prices of milk, pumpkin pie, and a veggie tray of celery and carrots also fell.

Food-price deflation has financially crimped farmers and ranchers, but has benefited consumers this year. In last week’s report on consumer prices, the Labor Department found food costs at supermarkets fell 2.3 percent in October, the sixth straight monthly decline and the biggest drop since 2009.

Monday, November 21, 2016

Choppy Waters Ahead?

The VIX, the stock market's so-called Fear Index, looks tame for now, indicating that there shouldn't be a whole lot of short-term movement in the market. But are there more turbulent times further into the future?

The CBOE Volatility Index closed below 13 on Friday for the first time in more than a month, but futures contracts tell a different story. The VIX future that expires next month was at 14.95 Friday, while the one expiring in June was at 19.35.

That rising level reflects expectations that volatility will rise, despite low current levels. The differential between one-month and six-month VIX futures is approaching its largest in the past two years, after an initial increase following the U.S. presidential elections last week.

Friday, November 18, 2016

A Four-Decade Low

Sometimes we take note of economic statistics that have returned to where they were before the recession. But this one goes back much further than that: Last week, the fewest Americans filed for unemployment benefits since 1973.

Jobless claims dropped by 19,000 to 235,000 in the week ended last Saturday, a Labor Department report showed yesterday. Continuing claims fell below 2 million, reaching a 16-year low.

The biggest drop in initial claims since June suggests employers are hesitant to fire workers, as the number of experienced applicants available for hiring remains limited. Filings for unemployment benefits have stayed below 300,000 for 89 straight weeks, which is the longest such streak since 1970.

Wednesday, November 16, 2016

Tech Left Behind

The S&P 500 has done fine since election day, rising by 1.5 percent. But one sector that has lagged has been the tech stocks. Tech stocks are the only growth sector in the red on the S&P 500, off 1.7 percent over the past week. Industrials, meanwhile, are up 5 percent and financial stocks have climbed 10 percent. 

It's the biggest tech stocks that have suffered the most. and Facebook are each down 5.5 percent over the past week.

Why has this happened? One theory is that investors are booking profits in tech – by far the third quarter’s best-performing group  – and moving into sectors perceived to be the biggest beneficiaries of the Trump administration. In addition, tech companies stand to benefit relatively less than other industry groups from tax cuts, since tech firms already tend to pay lower effective tax rates.

Tuesday, November 15, 2016

Why the Holidays Are So Expensive

Americans put far more on their credit cards in December than they do in any other month. But it's not just because of holiday gift-giving.  And this year, a number of studies show, they’ll probably be spending even more.

A survey released this year by Deloitte found that Americans plan to spend on average $426 on gifts for others this year. That’s  a lot, but it's less than half of their total holiday spending. We spend hundreds on non-gift items like holiday decor, entertaining and gifts for ourselves. 

Survey results from The National Retail Foundation this year also found high levels of self-gifting: Nearly six in 10 Americans plan to buy gifts for themselves, spending an average $139.61, up 4 percent from last year. That marks the second-highest level of personal spending in the survey’s 13-year history.

Monday, November 14, 2016

Millennials Know What College Costs

The latest “How America Saves for College” survey has found, surprisingly enough, that millennial parents are saving more for their kids' college than boomer parents,  by an average of $20,155  to $18,323 for the boomers. They're also well ahead of Generation X parents, who reported setting aside an average of $12,428.

The survey defined millennials as 35 years old and younger, Gen Xers as 36 to 51, and baby boomers as ages 52 to 70. Millennial parents’ attitudes on several college savings questions reflected greater optimism than either of the older generations, including having a plan to pay for college, and showing a greater willingness to ask family members and others outside of the family to contribute money to the college kitty.

The survey also found that the number of parents using 529 state-sponsored college investment accounts reached its highest level since the study began. For the first time since Sallie Mae began the study in 2009, the percentage of parents creating a college savings plan exceeded 50 percent.

Friday, November 11, 2016

Gold on the Decline

Among all the other news of the week, there was bad news for gold investors. Gold futures marked their lowest finish since June, as strength in the U.S. dollar and growing expectations for a Federal Reserve interest-rate increase next month fueled the largest weekly decline in more than three years.

Gold futures for December delivery fell 3.3 percent to settle at $1,224.30 an ounce—the lowest close since early June. For the week, prices lost roughly 6.2 percent, the largest drop since the week ended June 21, 2013.

But there was good news for other metals, especially industrial ones. Copper futures saw a weekly climb of nearly 11 percent, which was the largest weekly gain in over five years.

The Quick Turnaround in the Economy

Americans' confidence in the U.S. economy increased sharply after the election, moving from a slightly negative evaluation (minus 10) to a slightly positive one (plus 3). Throughout the year leading up to the election, Gallup's U.S. Economic Confidence Index had been consistently negative.

Of course, that's too quick for anything to have really changed in the economy. The increase in economic confidence mostly stems from Republicans' more positive views after Republican Donald Trump won the election.

In the week before the election, just 16 percent of Republicans said the economy was getting better, while 81 percent said it was getting worse. Since the election, 49 percent say it is getting better and 44 percent worse.

Thursday, November 10, 2016

The Drop in Entrepreneurial Jobs

Job gains from new firms are at the lowest share of employment in over 20 years, another sign of the declining role entrepreneurship plays in the U.S. economy. Job gains from these establishments as a percentage of overall private-sector employment dropped to 1 percent in the first quarter of 2016, the lowest level recorded since the Labor Department began collecting this data in 1992.

That's just half what it was at its peak. Throughout the 1990s, that figure hovered between 1.6 percent and 2 percent, before edging lower throughout the subsequent decade. Since 2009, when the economic recovery began, it has held between 1.1 percent and 1.3 percent.

The number of “establishment births,” or new businesses, fell by 26,000 to 220,000 in the first quarter of 2016. The number of jobs those establishments created also dropped by 161,000 from the previous quarter to 734,000, the lowest level since 2011.

Wednesday, November 9, 2016

Reading the Election

No matter what you think of the election results, some caution is advised when watching the markets' reaction. Some historical post-election anomalies:
  • In 1932, when Franklin D. Roosevelt was first elected, the Dow Jones Industrial Average dropped 4.5 percent the following day. But the market roared higher in the year that followed.
  • The Dow fell 3.8 percent after Harry Truman’s surprise victory, in 1948, but the market finished the year up.
  • In 2004, George W. Bush’s re-election prompted a 1 percent rally, but the market did poorly during that term. 
  • Barack Obama has presided over one of the best bull markets in history, but his victories in 2008 and 2012 sparked drops of 5.3 percent and 2.4 percent.

Tuesday, November 8, 2016

Watching the Ballot Box

Election Day is finally here, and it's having an effect not only on the myriad TV commercials we've had to suffer through by the stock market as well. The Wall Street Journal identified three stocks whose investors are watching the ballot box:
  • Western Union rose 3.5 percent on Hillary Clinton's rise in the polls: Remittance fees from immigrant workers in the U.S. sending money home are a major source of income for the company — a business that would be at risk if Donald Trump wins.
  • Gun-maker Smith & Wesson Holding, which gained 2.4 percent. History suggests a win by Clinton will spur a pickup in gun sales to people worrying that firearm sales might later be restricted.
  • Corrections Corp. of America fell 0.7 percent on worries that the for-profit prison industry would find itself in a President Clinton’s crosshairs.

Monday, November 7, 2016

A Long but Shallow Decline

The S&P 500 index staged a late-session collapse on Friday to fall for its ninth session in a row, That's the longest streak of declines since 1980. The last time the S&P 500 fell for 10 days? All the way back in 1975. The record is 12 days, hit back in 1966.

But it's easy to make too much of that. The declines have been persistent but very shallow: The S&P 500 is down just 3.1 percent during the slide. Back in 1980, that nine-day streak amounted to losses of 9.4 percent, according to S&P Dow Jones Indices.

Or you can look at it this way: The S&P is down 3.1 percent over the past nine days. But there have been 298 single days where the index suffered bigger declines than the last nine days combined.

Friday, November 4, 2016

October's Jobs Report

The economy added 161,000 jobs in October, according to figures released this morning from the Bureau of Labor Statistics. Over the past three months, the economy added 176,000 jobs per month, on average. The jobless rate fell a tenth of a percentage point to 4.9 percent.

Wages continue to rise: Americans in private-sector nonfarm jobs earned an average $25.92 an hour in October, up 10 cents from the prior month. Wages have climbed 2.8 percent over the past year, the strongest 12-month gain since mid-2009.

Revisions added a total of 44,000 jobs to earlier payroll estimates for August and September. The overall pace of job creation has slowed in 2016, averaging 181,000 a month through October versus 229,000 for all of 2015.

Thursday, November 3, 2016

The Fed's Pronouncements

The Federal Reserve's statement released yesterday was less straightforward in calling for a December rate hike than expected, but that rate hike looks to be still very much on the table. The Fed warned that “the case for tightening continued to strengthen.”

The Fed also released its economic assessment, which was a mixed bag:
  • Consumer spending, which is finally perking up after a disappointing summer, was downgraded from “growing strongly” to “rising moderately.”
  • The Fed says “market-based measures of inflation expectations have moved up” but “survey-based measures of longer-run expectations are little changed."
  • Job gains continue to characterized as “solid,” despite a recent slowdown. The October jobs report will be out on Friday.