Tuesday, January 31, 2017

A Move Up in Fear

While the S&P 500 index hit an all-time high last week, the VIX - the stock market's fear gauge - fell to near its lowest level since 2007. But that looks like it's now changing.

The VIX, formally known as the CBOE Volatility Index, jumped 17 percent yesterday. That's the steepest one-day increase we've seen in this measure since September.

Despite the upward movement, it's still historically fairly low. The moves in the VIX ended the day right around 12. A reading around 20 is typically considered a sign that fear has gripped the market. But a reading near 12, even though it's higher than recent readings, signals relative complacency.

Sunday, January 29, 2017

Inside 4th Quarter GDP

The U.S. economy lost momentum in the final three months of 2016, growing at a 1.9 percent annual rate, down from the prior quarter’s 3.5 percent pace. The biggest reason for the slowdown: the trade deficit.

After exports grew 10 percent in the third quarter, they fell 4.3 percent in the fourth quarter. At the same time, imports rose 8.3 percent, as a stronger dollar encouraged consumers and business to buy products from overseas. As a result, trade subtracted 1.7 percentage points from annualized growth in the fourth quarter, the biggest drag since 2010.

But demand remained solid. Consumer spending growth slowed just slightly in the fourth quarter, to 2.5 percent, while business investment rose a steady if unspectacular 2.4 percent, and investment in housing jumped 10.2 percent.

Friday, January 27, 2017

Too Much Oil, Again

Are we heading for another oil glut? America's refiners just stored away more gasoline in the last month than in nearly any other in a quarter century, according to the U.S. Energy Information Administration.

Storage levels are now nearly back to a record high set a year ago, while at the same time, demand for gasoline is approaching a 15-year low. That means the amount of gasoline in storage can cover demand for 31 days, the most in 22 years,

Before a slight rebound today, gasoline futures lost 3.3 percent Wednesday after the U.S. Energy Information Administration revealed those figures. The market settled Wednesday at a six-week low and off 9.4 percent - less than a month after it hit a one-year high.

Thursday, January 26, 2017

How the Dow Got to 20,000

It took just 42 trading days for the Dow Jones industrial average to go from 19,000 to 20,000 points, the barrier it crossed yesterday. That marks the Dow’s second-fastest march from one thousand-point marker to the next. The record is just 24 sessions, which was how long it took for the index to climb from 10,000 to 11,000 during dot-com-mania in 1999.

On one hand, each 1,000-point rise is less impressive than the last. The climb from 10,000 to 11,000 amounted to full 10 percent gain, for example, while 19,000 to 20,000 equated to just a 5.26 percent rise.

But even when taking that into account, the latest 1000-point move has still been very impressive on a per-day basis. A 5.26 percent increase over the course of 42 days translates into an average gain of about 0.13 percent per day.

Wednesday, January 25, 2017

Warnings on Earnings

Just under 200 companies have reported earnings so far this season, which is only a tenth of the total amount that will have reported by the time the season ends in mid-February.  But so far, 67 percent of companies that have reported this season have posted better-than-expected earnings per share numbers. 

Over the past six years, this figure has usually been in the high 60s, so this quarter's number would be a relative improvement. However, we typically see the beat rate drift lower as more and more companies report.

Another caveat: The revenue beat rate this season only stands at 57 percent, or ten percentage points lower than the bottom-line earnings beat rate.  That is a relatively low reading, and will be worth monitoring as earnings season progresses.

Tuesday, January 24, 2017

A Weakening Dollar?

Has the dollar finally broken its run of strength? With the new presidential administration talking about how it's too strong, its value has been slipping the past few days.

The dollar index, which tracks the greenback against a basket of six major peers, slipped 0.1 percent yesterday to 100.060, its lowest level since December 8. Against the Japanese yen, the dollar was its weakest since November 30.    

This could be good news for the economy. A 2015 study by the New York Federal Reserve calculated that a 10 percent dollar appreciation over three months knocks roughly 0.5 percentage points off the growth rate over one year, and another 0.2 percentage points the subsequent year if the currency's strength persists.

Monday, January 23, 2017

A Small-Business Problem

Small businesses are in many ways the engine of the American economy, but they tend to be hampered by one crucial problem. At companies with fewer than 50 workers, not even half the employees have access to a 401(k) or pension, according to the Bureau of Labor Statistics. By contrast, at companies with 500 workers or more, 90 percent of employees have access to a retirement plan.

This leaves millions of Americans without an easy way to save for their futures. Companies with fewer than 100 workers employ 36 percent of the U.S. workforce, or about 42 million people.

There are options for small-business owners on the way, though. New Jersey has become one of the few states that is working on setting up a retirement plan marketplace, where employers can shop for lower-cost retirement plans.

Friday, January 20, 2017

Exciting News in Jobless Claims

Of all the economic indicators, none has been more surprising in its consistent strength than new jobless claims. The current level of 234,000 new unemployment claims from last week is just 1,000 above the recent low of 233,000 from early November, and marks the 98th straight week where claims have been below 300,000.

But even more significant is the four-week moving average, which gives us a broader picture. With this week’s low reading in claims, the four-week moving average fell by 9,750 to 246,750.  A drop of 9,750 may not sound like much, but it was the largest one-week decline in the four-week average since March 2015. 

Moreover, the last time the four-week moving average was this low was in 1973. At that point, the American population was less than two-thirds the size it is now.

Thursday, January 19, 2017

Retiring Abroad

Have you looked overseas for a retirement option? Between 2010 and 2015, the number of Americans who retired abroad increased 17 percent. A report from the Associated Press says that even more retirees are expected to follow their lead over the next 10 years, as the baby boomers continue to leave the workplace.

The Social Security Administration puts the number of American seniors living abroad at just under 400,000. The most popular destinations are Canada, Japan, Mexico, Germany and the U.K.

Japan, which has a large U.S. military presence, has seen the biggest uptick in American retirees in recent years. For the five years from 2010 to 2015, the number of Americans retiring there increased by 42 percent.

Wednesday, January 18, 2017

Older Americans and Student Debt

The number of people 60 and older with student loan debt has quadrupled in the past decade, but it's not what you might be thinking. These aren't old loans: The vast majority are loans taken out by parents or grandparents to finance education opportunities for young people, with 73 percent of borrowers over 60 reporting that their student loan debt is owed "for a child's and/or grandchild's education."

Older Americans now represent the fastest-growing segment of the U.S. student loan market, according to a new report by the Consumer Financial Protection Bureau. As of 2015, more than 2.8 million Americans over 60 had outstanding student loan debt — up from some 700,000 in 2005.

The average amount owed has also increased dramatically. In 2005, the average amount owed by borrowers 60 and older was about $12,000; by 2015, it was more than $23,000.

Tuesday, January 17, 2017

Here Come the Robots

Are you likely to be replaced by a robot? Probably not: Less than 5 percent of all occupations can be fully replaced by the technology we have today,  a McKinsey Global Institute study released last week found.

On the other hand, most industries do have some tasks that can be replaced by automation. The study found that 60 percent of all occupations have about 30 percent of tasks that could be turned over to automation. Half of today’s work tasks could be automated by 2055, give or take 20 years, according to the report.

But it's expected to be good for the world's economy. The report estimated that automation could lead to productivity growth of 0.8 to 1.4 percent annually for the major global economies.

Monday, January 16, 2017

Good News for Big Banks

JP Morgan Chase and Bank of America kicked off the banking sector's fourth-quarter reporting season with strong profits. JP Morgan, the largest U.S. bank by assets, reported a 24 percent increase in fourth-quarter profit to $6.73 billion on Friday. Bank of America’s profits soared 43 percent, rising to $4.7 billion from the previous quarter.

The third big bank to report, Wells Fargo, fell short. The bank reported earnings per share of 96 cents on revenue of $21.58 billion; those numbers were lower than the $1.00 and $22.45 billion that analysts were expecting. The fourth quarter was the first full quarter since Wells Fargo's fraudulent-accounts scandal came to light.

The SPDR S&P Bank ETF , a bellwether for the entire banking sector, has shot up more than 24 percent since the election. The broader financials sector is up 17 percent, making it the top performer in the S&P 500 over that time.

Friday, January 13, 2017

Cutting Your Losses

The S&P 500 fell by a very modest 0.2 percent yesterday. That extended a streak that has been very good for investors: The last time the S&P 500 fell more than 1 percent was back on October 11th, when the index dropped 1.24 percent.

The current 65-trading day streak without a decline of 1 percent or more is the second longest of the current bull market, which began in March 2009. The longest such streak of this bull market lasted 66 trading days, from April through July of 2014. 

It's also becoming one of the longest streaks of all time. Going all the way back to 1928 when the S&P 500 began, there have only been 29 longer streaks without at least a 1 percent decline than the current one.

Thursday, January 12, 2017

Credit Complaints

If you are upset about something on your credit report, you’re not alone. Of all the complaints posted to the Consumer Financial Protection Bureau’s website in 2016, the highest percentage were complaints about credit reporting — more than 43,000, or about 23 percent of the total 186,000 complaints.

The most common complaints about the credit reports were that it contained incorrect information. That was followed by complaints about the credit reporting company’s investigation (such as that it took too long or they received inadequate help on the phone), inability to get a credit report or score, improper use of their credit reports or complaints about credit monitoring or identity protection.

Mortgages and debt collection were the next most complained-about topics. Those each accounted for about 21 percent of the complaints for the year.

Wednesday, January 11, 2017

Small Businesses Are Feeling Optimistic

Optimism among America’s small businesses skyrocketed in December. A Optimism Index made up of 10 survey indicators rose 7.4 points to 105.8, its highest level since 2004, said the National Federation of Independent Business.

The survey found that a net 50 percent of firms said in December that they expected the economy to improve. That's up from 12 percent in November and a net 7 percent who had a negative outlook in October.

The biggest mover in the December survey was the “Expected better business conditions” category, which rose from a net negative 6 percent to a net 38 percent. “Good Time to Expand” and “Sales Expectations” jumped by 12 and 20 percentage points, respectively.

Tuesday, January 10, 2017

The High Cost of Raising a Child

How much does it cost to raise a child? A new report from the U.S. Department of Agriculture found that married, middle-income parents will spend $233,610 to raise a child born in 2015 from infancy to adulthood.

That estimate was as small as $174,690 for low-income families and as large as $372,210 for high earners. The agency found the cost of child-rearing rose 3 percent from 2014 to 2015, above the rate of inflation.

What’s changed since the Agriculture Department first started tracking this back in 1960? Child care and education now represent a larger piece of the pie than they did in 1960, while the share that goes toward housing and feeding children has been shrinking.

Monday, January 9, 2017

Big Banks Lead Earnings Season

Fourth quarter earnings season kicks off this week, and one of the most-watched groups will be the big banks. These banks showed 8 percent earnings growth in the third quarter, compared with 3.1 percent for the S&P 500, according to FactSet data.

S&P 500 earnings for the fourth quarter are expected to grow by about 3 percent from the year-ago period, according to FactSet. But the financial sector is expected to do much better than that, with projected growth of 13.8 percent.

The financial sector is expected to be something of a bellwether for the economy, and Friday will be the day to watch. On that day, J.P. Morgan Chase will be reporting its fourth quarter earnings, as well as Wells Fargo and Bank of America.

Friday, January 6, 2017

December's Jobs Report

In a mildly disappointing report, the Department of Labor reported this morning that the economy added 156,000 jobs in December. The headline unemployment rate ticked up by one percentage point to 4.7 percent.

Job growth totaled 2.16 million in 2016, less than the increase of 2.7 million in 2015. The number of new jobs added each month has gradually slowed as the economy recovers from the depths of the recession, from average monthly gains of 251,000 in 2014, to 229,000 in 2015, and 180,000 this year.

One positive sign in this month's numbers: Average hourly wages jumped 0.4 percent to $26 last month. Hourly pay increased 2.9 percent from December 2015 to December 2016, marking the fastest 12-month increase since the recovery began in mid-2009.

Thursday, January 5, 2017

A Record Year for Car Sales

After a strong December, U.S. auto sales reached an annual record in 2016. Full-year sales rose to 17.55 million in 2016, up 0.4 percent from the previous record of 17.5 million last year. It was the seventh straight year of growth for auto sales.

The automakers with the strongest sales growth in 2016:
  • Volkswagen of America, up 20.3%
  • GM, up 10%
  • Nissan, 9.7% 
  • Toyota, 2% 
  • Ford, 0.1%

Wednesday, January 4, 2017

The 2016 Sector Scorecard

The gains on the S&P 500 were broad-based in 2016, with  health care being the only sector to finish negative. Here's the scorecard for all the sectors:
  • Energy up 23.7 percent
  • Financials up 20.1 percent
  • Telecom up 17.8 percent
  • Industrials up 16.1 percent
  • Materials up 14.1 percent
  • Utilities up 12.2 percent
  • Information technology up 12.0 percent
  • Consumer discretionary up 4.3 percent
  • Consumer staples up 2.6 percent
  • Real estate flat
  • Health care down 4.4 percent

Tuesday, January 3, 2017

Best and Worst Stocks of 2016

In the end, 2016 was a very good year for the stock market, with the S&P 500 index rising by 9.5 percent. Here are the top performers on the S&P for 2016:
  1. Nvidia, up 300% 
  2. Oneok, up 211%
  3. Freeport-McMoRan, up 95%
  4. Newmont Mining, up 89%
  5. Applied Materials, up 73%

And the five worst performers:
  1. Endo International, down 73%
  2. First Solar, down 51%
  3. TripAdvisor, down 46%
  4. Perrigo, down 42%
  5. Vertex Pharmaceuticals, down 41%

Sunday, January 1, 2017

Thoughts for the New Year

“Tomorrow is the first blank page of a 365 page book. Write a good one.” ~ Brad Paisley

"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

"Character is the ability to carry out a good resolution long after the excitement of the moment has passed." ~ Cavett Robert