The Crazy Christmas Week

Last week was an object lesson in why it's usually not wise to pay too much attention to the market's daily moves. Let's recap:

• Monday: In abbreviated Christmas Eve trading, the S&P 500 fell 2.7 percent, and the Dow dropped 600 points, its worst Christmas Eve ever.
• Tuesday: The markets are closed for Christmas.
• Wednesday: The biggest one-day percentage rise for all three indexes since March 2009; the Dow rises by 1000 points, its biggest point gain ever. 
• Thursday: The markets are down nearly 2 percent by 2 p.m., then reverse course to finish up by more than 2 percent.
• Friday: The markets waver all day before finishing up slightly. For all the drama, the S&P ends the week up 2.9 percent, and the Dow is up 2.8 percent.

Confidence Takes a Hit

The latest consumer confidence survey shows that Americans' optimism about the economy fell for the second month in a row in December. Confidence is now at its lowest point since July, putting the index almost 10 points below the 18-year peak it had set in October.

The percentage of consumers saying business conditions are “good” decreased from 42.0 percent to 37.2 percent, while those claiming business conditions are “bad” increased from 10.7 percent to 11.3 percent. Those claiming jobs are “plentiful” slipped from 46.8 percent to 46.2 percent.

The bigger worry is about 2019. The future expectations index — what Americans think the economy will look like six months from now — sank to 99.1 from 112.3. That’s the lowest reading for this figure since October 2016.

Christmas Sales Were Very Strong

It was a merry Christmas: Shoppers delivered the strongest holiday sales increase for U.S. retailers in six years, according to the data now starting to come in. Overall, U.S. consumers spent over $850 billion this holiday season.

Total U.S. retail sales, excluding automobiles, rose 5.1 percent between November 1 and December 24 from a year earlier, according to Mastercard SpendingPulse. Unlike a lot of these measures, MasterCard tracks both online and in-store spending with all forms of payment.

Sales have been generally strong throughout the holiday season, led by increases in online shopping. Retailers entered the holidays with momentum as online sales jumped 26.4 percent from a year earlier between the Wednesday before Thanksgiving through Black Friday.

Rebounding from a Disaster Quarter

It hasn’t been a great quarter for the stock market. There have been more than 370 quarterly returns since 1926, and if the quarter were to end today, this would be the 14th worst for the S&P 500 index in that time frame.

This doesn't have to be a terrible omen for the future. Among those 13 previous quarters:

• After the S&P dropped 37 percent in the second quarter of 1932, it rose 345 percent over the next five years
• After the S&P dropped 22 percent in the fourth quarter of 2008, it rose 128 percent over the next five years 
• After the S&P dropped 18 percent in the third quarter of 1946, it rose 115 percent over the next five years

The average outlook for the next five years after those 13 disaster quarters: a rise of 91.3 percent. So maybe we'll be all right.

Thoughts for Christmas Day

"Christmas Eve was a night of song that wrapped itself about you like a shawl. But it warmed more than your body. It warmed your heart...filled it, too, with melody that would last forever." ~ Bess Streeter Aldrich

"There's nothing sadder in this world than to awake Christmas morning and not be a child." ~ Erma Bombeck

"Unless we make Christmas an occasion to share our blessings, all the snow in Alaska won't make it 'white.'" ~ Bing Crosby

Here Comes Santa Claus?

As we enter the week of Christmas, many investors are hoping to see a Santa Claus Rally in the next couple of weeks. A Santa Claus rally describes sustained increases in the stock market that occur in the last week of December through the first two trading days in January.

Since 1969, the Santa Claus rally has yielded positive returns in 34 of the past 45 holiday seasons. The average cumulative return over these days is 1.4 percent, and returns are positive in each of the seven days of the rally, on average.

There isn't a solid theory to explain the Santa Claus rally. Maybe the most plausible attributes it to investors buying before January to take advantage of price increases due to the January effect. This refers to increases in stock prices after a drop in prices in December, triggered by fund managers selling for tax loss harvesting purposes.

Oil in Freefall

While the stock market continues to suffer, oil prices continued to fall even more steeply. The U.S. benchmark, West Texas Intermediate, is down almost 40 percent since a high in October. Brent crude, the international benchmark, fell yesterday to its lowest levels in 15 months.

The sharp decline in oil prices has been largely attributed to an oversupply shock of oil, caused by U.S. shale production and production cuts by OPEC nations. The Fed's rate hike this week may also have spurred further downward price pressure.

But also creeping into the picture: The demand side of the crude equation is starting to slow around the globe. Oil consumption in China, India and other economies across emerging Asia—the source of two thirds of global oil demand growth—is slowing. Some analysts say oil demand next year could grow at its slowest pace in eight years.

The Fed Rate Hike

As expected, the Federal Reserve took the target range for its benchmark Fed Funds rate to 2.25 percent to 2.5 percent yesterday. The move marked the fourth increase this year and the ninth since it began raising rates in December 2015.

The Fed also lowered its outlook for the long-term rate, from 3 percent in the September forecast to 2.8 percent this month. The 2019 estimate declined to 2.9 percent from 3.1 percent, and both 2020 and 2021 dropped to 3.1 percent from 3.4 percent.

Changes to the long-term growth rate were mixed. The Fed now sees GDP as growing 3 percent for the full year of 2018, down one-tenth of a percentage point from September, and 2.3 percent for 2019, a 0.2 percent point reduction.

Fund Managers Brace for the Worst

Professional money managers have turned bearish in their outlook for the stock market and the economy, according to Bank of America Merrill Lynch’s new December survey of more than 240 professional investors.  More than half, 53 percent, of those surveyed see the global economy deteriorating over the next twelve months, up from 44 percent in November.

That's the highest share of those surveyed since October 2008. Despite the expectations for slowing global economic growth, most do not think there will be a recession in 2019. Only 9 percent of those surveyed expect an actually recession next year.

One result of this attitude: Fund managers are fleeing stocks and buying bonds in record numbers. This month's survey found the biggest ever one-month move into the asset class of bonds.

The Great Cheese Glut

Tough times for an odd corner of the economy: About 1.4 billion pounds worth of American, cheddar and other kinds of cheese is now socked away at cold-storage warehouses across the country, the biggest stockpile since federal record-keeping began a century ago.  Cheese exports have suffered since Mexico and China, major dairy buyers, instituted retaliatory tariffs on U.S. cheese and whey.

Cheese shipments to Mexico in September were down more than 10 percent, according to the U.S. Dairy Export Council trade group. Shipments to China were down 63 percent on an annual basis.

Does that mean good news for cheese lovers in America? Spot market prices for 40-pound blocks of cheddar fell around 25 percent this year from 2014 prices, while 500-pound barrels, typically used for processed cheese, fell 28 percent.

The Split Between the Market and the Economy

The American economy keeps humming along. Data released on Friday showed retail sales excluding autos and gasoline grew by 0.9 percent in November, on top of a revised 0.7 percent increase in October. That prompted the Atlanta Fed to raise its fourth-quarter GDP prediction to 3 percent from 2.4 percent.

On the other hand, the stock market isn't doing so well. After another dismal day on Wall Street on Friday, the &P 500 Index is now down by 10 percent for the fourth quarter.

The divergence between the economy and the market is getting to be historic. If the Fed predictor proves accurate and there is no Santa Claus rally on Wall Street, it’d be the first time since 2010 that the economy grew by 3 percent and the S&P 500 fell at least 10 percent in the same quarter.

Inflation Quiets Down

There have been rumblings of higher inflation recently, but here’s an indicator moving in the opposite direction. U.S. import prices fell by the most in more than three years in November, the Labor Department said yesterday. The cost of petroleum products tumbled, and a strong dollar weighed on prices of other goods,

All this points to subdued imported inflation in the near term. Overall, import prices dropped 1.6 percent last month, the biggest decline since August 2015, after a 0.5 percent increase in October. For the 12 months through November, import prices rose just 0.7 percent. That was the smallest annual increase in two years.

In related news, the Federal Reserve’s preferred inflation measure, the core PCE price index excluding food and energy, increased 1.8 percent on a year-on-year basis in October, after rising 1.9 percent in the prior month. That was its smallest gain since February.

Small Businesses Slip a Step

A rare troubling sign for the economy: The NFIB Small Business Optimism Index fell in October. Just 29 percent of business owners surveyed said the next three months was a good time to expand, one point lower than last month’s reading.

The November decline was the third month in a row that the index had fallen. The seasonally adjusted reading of 104.8 is the lowest for this figure in seven months.

For October, reported job creation was unchanged, as 60 percent of businesses reported hiring or trying to hire, but 53 percent reported few or no qualified applicants for the positions they were trying to fill. Twenty-five percent of employers surveyed cited the difficulty of finding qualified workers as their top business problem.

Factories at Full Blast

Job openings have surged at U.S. manufacturers of durable goods from machinery to cars in recent months. New data out from the Labor Department suggests that, in particular, job openings for factories have reached an all-time high.

The job openings rate for the durable-goods manufacturing industry reached 4 percent in October, a record since they started keeping this data back in 2000. That’s up from 3.7 percent in September and 3.1 percent a year earlier. Total factory openings were 332,000, compared with about 8 million jobs in the sector.

Overall, the number of job openings in the U.S. rose slightly in October to just over 7 million, which is very close to a record high. Job openings had hit an all-time record of 7.3 million in August.

The Market's Roller Coaster

Yesterday was an object lesson in why it's never too wise to follow every single up and down of the market. Shortly after the opening bell, the Dow Jones Industrial Average plummeted more than 500 points, after British Prime Minister Theresa May announced that the Parliamentary vote on Brexit was being delayed, admitting that it would fail if the vote were held on schedule.

That started what looked like a rout. At their lowest points, the S&P had shed 50 points and the Nasdaq was down 81 points. But in the end, the Dow rose 34 points, the S&P gained 4 points, and the Nasdaq rose 51 points.

There was a similar story in tech. Shares of Apple initially fell after a Chinese court granted Qualcomm an injunction against the iPhone maker, but by the end of the day, the stock erased a more than 2 percent pullback to close 0.65 percent higher. Facebook shares rose 3.2 percent while Amazon, Netflix and Alphabet all rose more than 0.6 percent.

The Outlook From Big Business

Business CEOs are forecasting 2.7 percent U.S. GDP growth in 2019, according to the estimate released Friday by the Business Roundtable as part of its fourth-quarter economic outlook. While 80 percent of the CEOs surveyed expect sales will increase over the next six months, just a little over half (53 percent) expect capital spending and hiring (56 percent) will rise.

When asked about the greatest price pressures their companies face, 13 percent of the CEOs surveyed identified regulatory costs versus 40 percent two years ago. Far more identified labor costs (37 percent) and materials costs (20 percent) as the leading cost pressures for companies.

Not surprisingly, roughly 90 percent of the CEOs surveyed said that maintaining the 21 percent corporate tax rate, enacted in the 2017 tax cut bill, and easing regulations further will benefit business activity.

November's Jobs Report

The employment situation slowed a bit in November, according to numbers out this morning from the Bureau of Labor Statistics. The economy added 155,000 new jobs for the month, compared with an average monthly gain of 209,000 over the prior 12 months. Nevertheless, the headline unemployment rate remained at 3.7 percent for the third month in a row, the lowest it has been in 49 years.

Still, the economy is on track to produce the most new jobs since 2015. The U.S. has added an average of 206,000 jobs a month through the first 11 months of 2018, above the 182,000 pace during the same period last year.

For November, the increase in jobs was concentrated in health care, manufacturing and transportation. Health care providers hired 32,000 people, manufacturers added 27,000 workers and employment in transportation climbed by 25,000. Retail stores took on more workers for the first time in three months, adding 18,000 jobs. Employment fell slightly in government and in an energy industry reeling from lower oil prices.

What Women Lack

Here's an unfortunate gender gap: Women invest 40 percent less money than men do, according to a Wealthsimple survey. The investment app Acorns found that 57 percent of women didn’t invest anything in 2017, compared to just 44 percent of men.

It's not that they don't have any money. Women on average have about $156,000 in investable assets, compared to more than $200,000 for men. And women are less likely to feel in control of their financial futures than men (65 percent to 70 percent) and are less likely to feel like they know what steps to take next (60 percent versus 68 percent.)

The result: U.S. financial services firms that still focus their attention on wooing men lose almost $800 billion in investable assets from women. All these figures come from Kantar’s “Winning Over Women” report, released on Tuesday.

The Trouble With Transports

The Dow Jones Transportation Average, often considered a bellwether ahead of the larger Dow Jones Industrial Average, suffered through its biggest-ever point drop yesterday. The Dow transports tumbled 476.37 points, or 4.4 percent, with all 20 of its components closing lower. The previous biggest-ever point decline had happened on October 10.

Many on Wall Street view the Dow Transports as a key economic indicator. That sub-index helps gauge how consumers and businesses are actually taking what companies are making.

Within the Dow Transports, the biggest drag yesterday was UPS, which sank 7.4 percent, its biggest decline since January 2015. FedEx fell by 6.3 percent, suffering its steepest decline since March 2013.

Santa Rally on Tap?

Stocks kicked off the first trading day of December with gusto, with the S&P 500, Nasdaq and Dow Jones industrial average all up by more than 1 percent. That sparked hopes for a so-called Santa rally: the traditional runup in the stock market from the last week of December through the first two trading days in January.

Since 1950, no other month has recorded a higher average return or has finished higher as often as December. Over the last 100 years, the Dow has averaged a gain of 1.55 percent in December, with gains 74 percent of the time.

It's even better the last two weeks of the year. For the S&P, the days during the Santa rally have gained 1.35 percent on average, with only one other seven-day period of the entire year sporting a better return. The seven days of Santa have been higher 77.6 percent of the time, making it the seven days of the year that are most likely to be higher

Remembering Bush

All the major financial markets will be dark on Wednesday to honor the memory of former President George H.W. Bush, who passed away late Friday at the age of 94. The New York Stock Exchange and the Nasdaq will both be closed for the day.

The day of a president's funeral has traditionally been a national day of mourning. Financial markets were closed, for example, Friday, June 11, 2004, after President Reagan died. After President Ford died on December 26, 2006, the markets were closed on January 2 of the following year, even though that meant they'd be dark for four straight days, including the New Year's holiday.

The NYSE has traditionally observed the death of former and sitting presidents by closing for an entire day, starting at the onset of the 20th century. Former President William McKinley's funeral was the first to be so honored on September 19, 1901.

Spending Up While Inflation Slows

U.S. consumer spending increased by the most in seven months in October, the Commerce Department said yesterday. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 0.6 percent last month. The biggest drivers were prescription medication and utilities.

When adjusted for inflation, consumer spending advanced just 0.4 percent. But the inflation-adjusted number is also the biggest gain for that figure in seven months.

Indeed, there was a slowdown in price gains last month. The personal consumption expenditures (PCE) price index, which excludes the volatile food and energy components, inched up 0.1 percent after increasing 0.2 percent in September. That lowered the year-on-year increase in the core PCE price index to 1.8 percent, the lowest reading since February.

Less Than Charitable in the Garden State

There are wealthy people  in every state in the U.S., but in some states, the rich tend to be less inclined to charitable giving than in others, according to a new report by Business Insider. And New Jersey is one of the stingier ones.

The average person making upward of $500,000 in the U.S. donated about $74,000 in 2016 (the most recent date for which data are available). But New Jersey’s average annual charitable contribution is just $37,368, which ranks us 48th in the nation. On the other hand, 95 percent of those making more than $500,000 per year make some sort of charitable contribution.

The worst states: Alaska, at $36,124, and West Virginia, at $31,313. The most generous state? Wyoming, surprisingly enough, where the average annual contribution by households earning $500,000 – which, to be fair, is a very small number in Wyoming – landed at $223,438.

A Split in Charitable Giving

Overall, the average American household is giving far less to charity than it did a decade ago, but not everyone has fallen into this pattern. Over the past 10 years, charitable giving deductions from lower-income donors have declined significantly, at almost the same rate that charitable giving from higher income donors have increased.

In the early 2000s, households earning $200,000 or more made up only 30 percent of all charitable deductions, but by 2017, this group accounted for 52 percent. And the percent of charitable deductions from households making over $1 million grew from 12 percent in 1995 to 30 percent in 2015.

Meanwhile, the number of donors giving at typical donation levels has been steadily declining. Low-dollar and mid-level donors have declined by about 2 percent each year for more than 15 years.

Entrepreneurs Still Like Stocks

The world’s most successful entrepreneurs now invest 20.2 percent of their total wealth in equities, according to the fifth BNP Paribas global entrepreneur report. For the first time in the study’s history, U.S. entrepreneurs’ top asset allocation choice was equities, outweighing their investments in fixed income, cash or even their own businesses.

The exception is ultra-high-net-worth entrepreneurs, whose heaviest weighting remains their own businesses. The survey results were divided among high-net-worth (investable assets between $10 million and $25 million) and ultra-high-net-worth (investable assets of $25 million or more) investors who owned businesses.

Fifty-five percent of the entrepreneurs in the study have invested in technology companies, usually directly or through mutual funds. The appetite for tech is most voracious in Belgium, India and Singapore, where 79 percent, 74 percent and 70 percent of investors, respectively, invest in the sector, compared with just 59 percent in the U.S.

A Turkey Day Spent Online

While everyone had their eyes on Black Friday, holiday shoppers jumped the gun, setting records for online shopping on Thanksgiving Day. Last Thursday, online spending reached $3.7 billion, up 28 percent from last year, according to Adobe Analytics data.

Smartphones drove a record 54.4 percent of traffic on Thanksgiving, Adobe said, capturing a 36.7 percent share of revenue. The share of Thanksgiving traffic from desktops fell to 36.5 percent from 44.3 percent last year. And tablets generated just 9.1 percent of traffic, versus 9.6 percent in 2017.

According to Target Corp., shoppers ordered more than double on the retailer’s app than they did last year. The most popular items that consumers were buying: televisions, Apple watches, Legos and board games.

What Not to Buy Today

If you're shopping today, here are some ideas of products to stay away from, courtesy of the website MarketWatch. There are a lot of sale items available today, but these aren't them:

Bedding
The lowest prices on bedding and linens have been known to appear in January during what are called “white sales,” so hold off until then if you can. Discounts at this time can hit 70 percent.

Winter clothes
Fall and winter clothing generally isn’t the best value on Black Friday. Jeans, for instance, see big sales in October, and retailers frequently offer big clearance sales on jackets when winter gives way to spring.

Toys
Toys are one of the seasonal purchase staples, but historically, it’s best to wait until closer to Christmas to purchase them. In past years, select toys have been on sale for as much as 50 percent off in the final days before Christmas.

Christmas decorations
You’ll see plenty of deals on artificial trees and rolls of wrapping paper on Black Friday — especially at home and craft stores — but retailers are particularly eager to slash prices closer to December 25.

Thoughts for Thanksgiving Day

"Appreciation can change a day, even change a life. Your willingness to put it into words is all that is necessary." ~ Margaret Cousins

“The more we express thanks, the more gratitude we feel. The more gratitude we feel, the more we express thanks. It’s circular, and it leads to a happier life.” ~ Steve Goodier

“Reflect upon your present blessings, of which every man has plenty; not on your past misfortunes, of which all men have some.” ~ Charles Dickens

Rough Start to Q4

Roughly halfway through the fourth quarter, the S&P 500 has already fallen 9.08 percent. That makes this the sixth-worst start to the fourth quarter in the history of the S&P 500. 

The only worse fourth quarter through 37 trading days came during some of the worst years for the market overall: 1929, the 1930s, 1973, 1987, and 2008. If you look at all the fourth quarters that were down between 8 percent and 12 percent, like this year, the S&P actually declined for the remainder of those four years.

In case you don’t remember, at this point in the fourth quarter of 2008, the S&P was already down 35.5 percent.  The S&P ended up rallying 20 percent for the remainder of that year - before plummeting to new lows again in the first quarter of 2009.

Good News, Bad News on Earnings

Earnings for S&P 500 companies grew by a robust 25.8 percent in the third quarter. That was the strongest performance for this figure since the third quarter of 2010, when companies benefited from very attractive, recession-era comparable earnings.

Nevertheless, all the major indexes have been falling. From the start of earnings season to the end of last week, the S&P 500 index  has fallen 2.7 percent, the Dow Jones Industrial Average 1.1 percent, and the Nasdaq Composite Index 5.5 percent.

Illustrating this trend is Apple, which announced that it was going to cease reporting the number of iPhones and other products it sells. As a result of that, rather than the earnings statement itself, Apple shares are off 11.6 percent since the end of October.

A Little More Room for Retirement Savings

There's some good news for retirement savers: The Internal Revenue Service has announced increased limits for many retirement plans. Although most of them are simply cost-of-living adjustments, they will allow us to put away a little more money for retirement next year.

Some of the new limits:

• Those contributing to 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan will be able to boost their contribution from $18,500 to $19,000.
• IRA contributions, which haven't been raised since 2013, will now be $6,000, up from $5,500. 
• Catch-up contributions for workers age 50 and over remain the same at $1,000.

Black Friday Preview

Black Friday is a week from today. About 38 percent of American consumers plan to shop on Black Friday this year, and six in 10 of those shoppers anticipate making at least half of their holiday purchases on that day, according to a new Reuters/Ipsos poll.

Fifty-nine percent of the people who plan to shop Black Friday deals intend to finish at least half of their holiday shopping that day. The poll showed 37 percent of consumers intend to do their shopping primarily or totally online, while 16 percent expect to shop primarily in a physical store.

American consumers are less interested in buying clothing, jewelry, electronics, toys and gift cards this year compared to years past, the survey found, but they are eager to spend more on food. By 2022, online grocery shopping could be a $100 billion industry, and as many as 70 percent of consumers could be doing a portion of their food shopping online.

The Natural Gas Bounce

Oil prices finally finished higher on Wednesday, with U.S. benchmark crude putting an end to its record 12-session streak of declines. But the real story was in natural gas, which settled at its highest price since February 2014.

Natural-gas futures saw a spectacular climb of about 18 percent on the day—their biggest gain in more than 14 years. The rise was fueled by cold weather forecasts that continued to feed concerns about tight U.S. supplies.

December natural gas  jumped 73.6 cents, or about 18 percent, higher to $4.837 per million British thermal units. That was the largest one-day percentage gain since September 29, 2004, and the largest gain in dollar terms since January 30, 2007. Wednesday’s rally also took natural gas futures to their highest settlement since February 26, 2014.

How Prepared Is the Middle Class?

Middle-class Americans’ own assessment of financial security suggests they may be too optimistic, according to a new survey from CUNA Mutual Group. It found that many middle-class people  have a disconnect between their aspirations and their resources.

The survey finds that Americans with an annual income of $35,000 to $100,000 tend to feel positive about their prospects for upward mobility. Some 62 percent say they feel somewhat or very confident about their personal financial situation, and nearly half (46 percent) believe it is very unlikely that they will miss a loan payment over the next one to two years.

However, the survey finds that this cautious optimism belies a more troubling financial picture. More than half of the respondents were ill-equipped for a serious financial emergency, with 23 percent saying they have no emergency savings and 30 percent saying they only have one to three months’ worth.

Blowout in Oil & Gas

More than 90 percent of S&P 500 companies have now reported results for this earnings season, and the numbers look good. S&P Global Market Intelligence expects S&P 500 companies to report a 24.7 percent increase in earnings per share from a year earlier.

A little deeper inside those numbers, the biggest story in sales came from the energy sector. The top six S&P 500 companies in quarterly sales growth were all oil & gas companies. They include:

1. Pioneer Natural Resources, up 92 percent
2. Concho Resources, up 90 percent
3. EQT Corp., up 86 percent
4. EOG Resources, up 78 percent
5. Occidental Petroleum, up 73 percent
6. Newfield Exploration, up 62 percent

Worries Over Wages

In a strong quarter for earnings results, climbing labor costs have become a growing future concern, with more than a dozen companies in the S&P 500 mentioning them in conference calls so far this earnings season. That is up from just a handful of companies that noted these concerns over a similar period in the year-ago quarter.

In the recent U.S. jobs report for October, wages recorded their largest annual gain in nine and a half years. The Employment Cost Index, the broadest measure of labor costs, increased 0.8 percent in the third quarter after a 0.6 percent rise in the second quarter, putting the year-on-year rate of increase at 2.8 percent.

These wage pressures are widely expected to be a factor in declining earnings growth in 2019. Earnings growth for S&P 500 companies has been forecast to slow to about 9 percent next year following 2018’s tax-fueled earnings gains, estimated at 24 percent, according to IBES data.

Oil in Bear Territory

The news just gets worse for oil, or better for consumers, depending on how you want to look at it. The five-week rout for oil prices officially turned into a bear market yesterday, ending the longest bull run in oil since 2015.

West Texas Intermediate crude for December delivery fell $1, or 1.7 percent, to settle at $60.67 a barrel, marking its ninth straight losing session. That's the lowest close for U.S. oil since March. That left the U.S. oil benchmark down 21 percent from its October 3 peak, exceeding the widely applied definition of a bear market.

WTI is still clinging to a gain for the year, up 0.5 percent so far in 2018. Brent crude, the international benchmark, is still up 6.1 percent. Thursday’s close means that the bull market peaked on October 3, ending a 324-day run that began on June 21, 2017.

Retirement Savings Hit a New High

Americans are saving more for retirement than ever before, according to a new report from Fidelity Investments. At the end of the third quarter of 2018, average retirement account balances reached record highs in all categories. Those September 30 average balances were:

• $106,500 in 401(k) plans, up 2.4 percent from the second quarter
• $111,000 for individual retirement accounts, up 3.8 percent
• $85,500 for 403(b) plans, up 2.5 percent

Those averages are nearly double from where savers were a decade ago, at the start of the financial crisis. The average employee contribution reached its highest level since late 2006, at 8.7 percent, and average rates among women hit a record of 8.5 percent.

The Iran Sanctions and Oil Prices

Last month, the threat of U.S. sanctions on Iran drove oil prices to multiyear highs. Those sanctions kicked in on Monday - but oil prices have stopped climbing. In fact, they've fallen.

At the start of last month, as oil shipments from Iran declined, Brent crude prices, the international benchmark, breached the $86-a-barrel threshold for the first time in four years. West Texas Intermediate, the U.S. gauge, hit around $76 a barrel, also near a four-year high.

Those increases, though, seem to be the extent of the effects that the sanctions will have on oil prices.  Since early October, Brent has fallen almost 16 percent, and WTI 17 percent. The sanctions, now being imposed, are unlikely to have more effects than that.

Election Day Notes

No matter what your political disposition, you may be a little nervous about today's elections, but you shouldn't be nervous about how it will affect the markets. Since 1946, there have been 18 midterm elections. Stocks were higher 12 months after every single one.

Since 1946, stocks have risen an average of 17 percent in the year after a midterm. If you measure from the yearly midterm lows, the results are even better. From their lows, stocks jumped an average of 32 percent over the next 12 months. That’s more than double the average performance for stocks in all years.

One more political note: The second year of the presidential cycle, which is the year we're in right now, is typically the worst for stocks. The performance of stocks in the third year of a presidential term beats all other years by a long shot, returning an average of nearly 14 percent between 1928 and 2016.

Buybacks Lose Their Impact

In the period before earnings releases, public companies face greater restrictions to buying back their own shares, known as a “buyback blackout period.” By the end of last week, about three quarters of S&P 500 companies have reported earnings, according to FactSet. So the buyback announcements have now begun, with companies ranging from Estée Lauder Companies to Intercontinental Exchange announcing purchases of their own shares.

But these repurchases are not likely to power the stock market beyond its recent peaks. Companies in the S&P 500 index are on track to buy back 30 percent less in stock than they did in the second quarter.

And investors are no longer rewarding companies that buy back their own stock. Since the Federal Reserve began raising rates in December 16, 2015, the Invesco Buyback Achievers fund has gained 28 percent, compared with a 33 percent gain for the S&P 500 index over the same period. In other words, a fund that purchases shares of companies that have consistently bought back their shares hasn’t outperformed the S&P 500.

October's Jobs Report

October was another strong month for the job market, with the American economy adding 250,000 new jobs. That follows an average monthly gain of 211,000 over the prior 12 months. The unemployment rate stayed at 3.7 percent, the lowest since December 1969,  even though there was a slight rise in the labor force participation rate to 62.9 percent.

The biggest story may be wage growth, which has been the missing piece of the economic recovery. Average hourly earnings increased by 5 cents an hour for the month and 83 cents year over year, representing a 3.1 percent gain. The annual increase in wages was the strongest since 2009.

The big month for job gains comes off a disappointing September that may have been weighed down by the violent hurricanes in the Carolinas. That month's reading fell further, from an initially reported 134,000 to 118,000. However, that decline was  offset by an upward revision to August's numbers, from an already strong 270,000 to 286,000.

Black October

October was a rough ride for U.S. stocks, which ended as one of the market's worst months since the financial crisis.The S&P 500 lost 6.9 percent in October, its biggest one-month slide since September 2011, when it fell 7.2 percent. The Nasdaq plunged 9.2 percent, its largest monthly pullback since November 2008, when it lost 10.8 percent.

The S&P 500 lost $1.91 trillion in value for the month, with widespread losses almost across the board. Consumer staples and utilities were the only major S&P 500 sectors in the black in October.

Big technology stocks, including the FAANG group, were among the hardest hit. Amazon ended the month down 20.2 percent, and Netflix ended down 19.3 percent. Facebook and Alphabet finished October down 7.7 percent and 9.7 percent, respectively.

New Highs for the Pleasure Index

Are you feeling financial pleasure? The American Institute of CPAs has reported that its pleasure index was up two points from the second quarter to 73.9, setting an all-time record for the seventh quarter in a row. The largest factor is the stock market index, but the big driver was The Job Openings Per Capita Index, the pleasure index’s second largest contributor, which increased 1.1 points over the previous quarter. With 7.1 million job openings for 6.2 million job seekers, the tight labor market saw 3.6 million workers voluntarily leave their jobs in August, the fastest pace in 17 years, according to the Bureau of Labor Statistics.

The other two components of the pleasure index also rose. The AICPA Economic Outlook Index, which captures CPA executives’ expectations in the year ahead for their companies and the U.S. economy, was 3.5 percent higher than the prior year level.

The Real Home Equity Per Capita index, which measures the wealth we have in our homes, was 6.5 percent above the prior year value and 2.1 percent ahead of the previous quarter level. However, it is still 11.6 percent below its record high, set back in 2006.

Economic Snapshot

Inflation, incomes and spending are all still growing - but slowly. According to the monthly report published yesterday by the Bureau of Economic Analysis, the Personal Consumption Expenditures (PCE) price index in September rose 0.1 percent on a monthly basis to match August's reading. On a yearly basis, PCE  edged down to 2 percent from 2.2 percent. Meanwhile, core PCE, which strips volatile food and energy prices, increased 0.2 percent in September.

Meanwhile, the Commerce Department reported that income recorded its smallest gain in more than a year on moderate wage growth. All told, personal income increased $35.7 billion, or 0.2 percent, in September.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4 percent last month. The growth came as households bought more motor vehicles and spent more on health care. Personal consumption expenditures increased $53.0 billion for the month, or  0.4 percent.

Third Quarter GDP Report

Gross domestic product decelerated a bit to a 3.5 percent annual pace in the third quarter, down from a torrid 4.2 percent pace in the prior three months, the Commerce Department said Friday.  But expansion in the last two quarters is still the fastest six months of growth in four years.

What caused this? Consumer spending rose 4 percent in the third quarter, even stronger than the prior three months. This was offset somewhat by a slowdown in business and residential investment. Household investment has fallen for three straight quarters.

The value of unsold goods - or business inventories - added 2.1 percentage points to growth, as companies stocked up. A significantly larger trade deficit took 1.8 points off top-line growth. Government spending picked up, expanding 3.3 percent after a 2.5 percent gain in the second quarter.

Bear Market? Not So Fast

A market correction is often defined as a 10 percent pullback from a recent peak. Using that as a yardstick, after yesterday's stock market plunge, the S&P 500 is about 2 percentage points away from joining the Nasdaq Composite in correction mode.

But a correction doesn’t necessarily mean that a bear market is lurking around the corner. In fact, history and data make for a strong case that this recent selloff is nothing out of the norm. Data from the Schwab Center for Financial Research showed that there have been 22 market corrections since 1974 and only four of them, occurring in 1980, 1987, 2000 and 2007, eventually ended up as bear markets.

Even in the current bull market. which started in 2009, there have been six corrections that avoided turning into bears. Most recently, a dive in February was followed by stocks getting back to record territory by late summer.

The Big Drop

You've heard about it by now: Yesterday the Dow and the S&P 500 index wiped out all their hard-fought gains over the past 10 months to turn negative for 2018. October is shaping up to be a brutal month, with the S&P falling 8.9 percent month-to-date, the Dow down 7.1 percent, and the Nasdaq down 11.7 percent.

Indeed, the S&P 500 has had 14 down days so far in October, the highest number of losing days for the index since May of 2012 when it fell 14 days, according to Dow Jones Market Data. One more loss, and it will mark its highest number of down days since October of 2008.

Meanwhile, the Nasdaq Composite Index shed 329.14 points, or 4.4 percent, to 7108.4, which put the index more than 10 percent below its August 29 all-time high, meeting the widely used definition of a market correction. The loss also marked the worst day for the Nasdaq since August 18, 2011.

Women's Worries

Women have a more negative view of their financial health than men, even if they’re in good shape financially. That’s according to Prudential’s new Financial Wellness Census, which finds that among financially healthy women, 10.1 percent have a negative view of their money situation, compared with just 6.3 percent of financially healthy men. The same holds true, with no statistically significant difference, among women who aren’t financially healthy.

Prudential defined “financially healthy” as doing better than average, based on income levels, savings and debt. On average, women have saved 43 percent less for retirement than men. In addition, 46 percent say they have no retirement savings at all.

The data shows women and men on average expect to retire at age 67. But women have saved an average of only $115,000 compared with an average of $203,000 for men. That may be contributing to their negative views of their finances.

The New Charitable Landscape

It looks like we're in for a giving year. Eighty-two percent of Americans who itemized charitable deductions on their 2017 tax returns plan to maintain or increase their giving this year, according to a survey released this week by Fidelity Charitable.

The downside is that the poll also found that 58 percent of donors still planned to itemize in 2018, even though in the new tax landscape, that's not always appropriate. Many donors may not have fully worked out how the increased standard deduction in the revised tax code affects them.

For example, half of households with incomes of less than $100,000 currently plan to itemize their 2018 taxes, the survey showed. Fidelity Charitable said most of these donors will likely discover that their itemizations, including charitable donations, will not push their total deduction amount past the newly enacted standard deduction thresholds, of $12,000 for singles and $24,000 for married couples.

Housing Sales Are Slowing

Has the housing market run out of gas? Existing-home sales ran at a seasonally adjusted annual rate of 5.15 million in September, the National Association of Realtors said last week, which was a 3.4 percent decline from August. It was the lowest pace of sales since November 2015.

Sales of previously owned homes had stabilized in August after declining for four straight months, so September’s drop came as a bit of a surprise. Sales were 4.1 percent lower than year-ago levels.

On the other hand, the median sales price in September was $258,100, which was 4.2 percent higher than a year earlier. Inventory is ticking up gradually: At the current pace of sales, it would take 4.4 months to exhaust available supply, up from 4.3 months last month. And it’s taking properties longer to get snatched up: Homes stayed on the market for 32 days in September, up from 29 days in August.

Manufacturing Is Booming

Another sign of a still-strengthening U.S. economy: American manufacturers increased their capacity for the 16th straight month in September. In that month, manufacturing was up 1.4 percent from a year earlier, according to data out from the Federal Reserve this week. 

The Fed's report suggests investment in U.S. manufacturing has been increasing at a steady pace over the past three years. In June of this year, it finally passed its prior peak from 2008. Manufacturing capacity began recovering from a steep decline in 2011, faded in 2014 and resumed a modest march higher in mid-2015. 

The latest Fed manufacturing report showed factory output also rose in September, helping drive overall industrial production up 0.3 percent for the month. And that's in spite of being “held down slightly” by Hurricane Florence, which reduced output by less than 0.1 percentage point.

The Fed's Wary Outlook

The Federal Reserve released the minutes from its September meeting yesterday, and it looks as if we will be in an environment of rising interest rates for some time to come. A majority of top Federal Reserve officials believe that interest rates will have to continue to increase until the economy slows down.

The length of these interest rate hikes was a matter of some debate. A “few” officials thought policy would have to remain “modestly restrictive for a time,” while an additional “number” thought policy would need to be restrictive only “temporarily.”

At the September meeting, Fed officials voted to lift their benchmark federal-funds rate to a range between 2 percent and 2.25 percent. Fed officials have said that a 3 percent fed funds rate would be the “long-run” neutral level of interest rates, neither boosting nor slowing growth.

College Costs Are Actually Coming Down

After decades of hearing how college costs were spiraling out of control, here's some good news: The average net cost of a year at a four-year public college or university, including tuition, fees, room and board, fell to $14,880 in 2018–19.

That's down slightly from $14,910 in 2017–18, although the trend isn't in place for all schools. The net price for four-year private schools was $27,290, which was up slightly from $27,160 last year.

The reason for this is that the sticker price for higher education continues to inch up even though fewer students actually pay it, according an annual pricing-trends report by the College Board. Grants and tax benefits climbed to $21,220 this year, up from $13,860 in 2008 (in 2018 dollars) at private schools. At public institutions they rose to $6,490 this year, from $4,970 in 2008.

What Killed Sears?

You have probably heard that Sears, an American retailing icon for more than a century, is filing for bankruptcy. While Sears certainly has problems of its own, this is part of a larger trend for department stores. U.S. retail sales for September grew 0.1 percent from the prior month, sales specifically at department stores fell by 0.8 percent.

Those numbers have been diverging for a long time. Since 2000, overall U.S. retail sales have grown by more than 300 percent. But sales at department stores have declined by about 35 percent.

Sears is much diminished from the retailing giant it once was, but even today, it still was a significant force among department stores. In the first half of its current fiscal year, its merchandise sales were equal to about 6.5 percent of all U.S. department-store sales.

Assessing Last Week in the Market

The S&P 500 closed up by 1.4 percent on Friday, but that wasn't enough to erase the concerns over its worst two-day slide in eight months on Wednesday and Thursday. Even with the uptick, nearly three quarters of the S&P 500's components in correction territory, or worse.

Following Wednesday and Thursday’s 5 percent drop, the S&P is down nearly 7 percent from its record high close on September 20. But that doesn't tell the whole story, because the downturn has been incredibly widespread.

About 380 S&P 500 stocks have fallen 10 percent or more from their 52-week highs, putting the vast majority of the index in correction territory. In addition, 164 stocks have fallen by 20 percent or more from their highs, putting roughly a third of the market in bear territory.

Yesterday's Rout

It was a very rough day on Wall Street yesterday. The Dow Jones Industrial Average lost more than 800 points, and the S&P 500 had its worst day since February. Technology stocks were the worst offender, as even the biggest names went into a freefall.

The Dow Jones Industrial Average lost 3.2 percent of its value yesterday, logging its worst one-day drop since February. All 30 Dow stocks finished in the red. The S&P 500 index lost 3.3 percent, falling for its fifth straight day, its longest losing streak since November 2016.

The S&P’s losses were topped by the technology sector, which slid 4.8 percent, the steepest percentage drop since August 2011. The tech-heavy Nasdaq dropped more than 4 percent for its worst percentage decline since June 2016. Apple and Amazon both had their worst day in two and a half years.

Small Caps Meet the Bear

Most people who watch the markets carefully have noticed that the recent weakness in stocks has been especially tough on the small-cap space. One good measurement of that trend is to look at the distance that stocks are currently trading from their 52-week highs. And by that measure, smaller stocks are getting hammered.

Within the large-cap S&P 500, the average stock is currently 13.2 percent below its 52-week high.  Moving down the market cap spectrum, though, the numbers get progressively worse.  In the S&P 400 midcap space, the average spread is 16.9 percent,

But members of the S&P 600 Small Cap index are down an average of 20.7 percent from their high over the past 52 weeks.  Using the standard bear market definition of a 20 percent decline from a high, that means that the average small-cap stock is in a bear market.

The Cost of Being Retired

What do people really spend in retirement? According to the latest Bureau of Labor Statistics data,  “older households” — defined as those run by someone 65 and older — spend an average of $45,756 a year, or roughly $3,800 a month. That’s about $1,000 less than the monthly average spent by all U.S. households combined.

In some categories, spending does indeed decrease, even in surprising ones like food. In others areas, like health care, life becomes more expensive as you age. Here’s the data shown as a monthly breakdown of how households headed by a retirement-age person spend money, on average, in seven major categories:

• Housing: $1,322 Housing is the biggest spending category for all age groups — retirees included.
• Transportation: $567 The average outlay is about one-third less than the average for households of other ages.
• Health care: $499 
• Food: $483  Retirees spend nearly 20% less than the average household does on food.
• Personal insurance/pensions: $237
• Cash contributions: $202
• Entertainment: $197 Older households spend about as much on fun stuff as do those ages 25 to 34.

Inside the Bond Market

In the midst of a strong year for stocks, bonds continue to suffer. The Bloomberg Barclays U.S. Aggregate Bond index, maybe the most prominent benchmark among bond indexes, is on track to post its second-worst showing in history.

Year to date, the index year is down around 2.5 percent on a total return basis, which takes into account both the value of bonds held in the basket and the yields derived from those assets. The Barclays Agg's weakest returns came in 1994, when the index slipped around 2.9 percent, so it wouldn’t take much for the index to log its worst yearly performance. 

What is the Barclays Agg? It is largely composed of U.S. government bonds and mortgage-backed securities backed by government-sponsored enterprises, including Fannie Mae and Freddie Mac, and underweights the riskier corners of the bond market, including high-yield corporate debt or collateralized loan obligations. Ultra-safe Treasury notes represented around 36 percent of the index in 2017.

September's Jobs Report

The employment outlook slowed slightly in September: The economy added 134,000 jobs over the month, compared with an average monthly gain of  201,000 over the prior 12 months. Nevertheless, the headline unemployment rate ticked down to 3.7 percent from 3.9 percent in August.

It's worth noting that we have now reached a remarkable eight straight years of monthly job growth. That's double the previous record. The unemployment rate is the lowest it's been in nearly 50 years, since 1969.

The key industries: Employment in professional and business services increased by 54,000 in September and has risen by 560,000  over the year. Health care employment rose by 26,000 jobs in September. Construction employment continued to trend up in September  with 23,000 new jobs. and has now added 315,000 jobs over the past 12 months.

Surprisingly Tough Times for Asset Management Stocks

You would think that financial services firms would be doing well in this lengthy bull run, but that's not necessarily so. The shares of America's biggest asset managers have been trampled during this year's market rise.

A selection of 10 large publicly traded asset-manager stocks put together by CNBC are off an average of more than 25 percent from their 52-week highs. Some of the biggest names are the worst off:

• Legg Mason, down 34 percent this year
• Franklin Templeton, down 34 percent
• Janus Henderson, down 36 percent
• AMG, down 37 percent
• Invesco, down 40 percent

The Dangers of a Cyberattack

Are you prepared for a cyberattack? Not if you're like most Americans. According to the new 2018 Chubb Cyber Risk Survey, a whopping 86 percent are clueless not only about what to do, but about how vulnerable their data is, in case of cyber threats.

The drained bank account actually isn’t the biggest risk people face, although that’s what 80 percent of respondents are most worried about. Bigger threats that insinuate themselves further into people’s lives involve Social Security numbers (60 percent), medical records (30 percent), email addresses (18 percent) and public WiFi exposures (12 percent).

People might think they’re safe as long as they have a password, but the report points out that only 40 percent reported using cybersecurity software and just 30 percent regularly change online passwords and use multifactor authentication to log into their accounts. Besides, 67 percent said they “always” or “often” use the same password for multiple sites.

What the Past Six Months Mean

The U.S. stock market has been on a roll the past six months, and it can keep on rolling if the past is any indicator. The S&P 500 rose for six months between April to September, something that has only happened six times since 1928. And each of those times, the stock market has gone on to notch strong gains for the remainder of the year, according to Bespoke Investment Group.

In the previous years that this has happened, the S&P 500 has risen four out of five times in October. The average gain in those October has been 2.38 percent, compared with 0.61 percent for all Octobers.

A solid April-to-September performance also has been a positive signpost for market performance in the fourth quarter. In the previous years when that has happened, stocks have notched an average rise of 9.2 percent in the final three months of the year.

The Big Third Quarter

The S&P 500 soared more than 7 percent in the third quarter, which ended on Friday. That's the strongest quarter for the S&P since the fourth quarter of 2013. The Dow spiked more than 2,100 points, or 9 percent, in the quarter.

Health care was the best-performing sector of the third quarter, surging 14.1 percent, its best quarterly gain since the first quarter of 2013. Industrials and tech, meanwhile, rose 9.7 percent and 8.5 percent.

The strong third quarter on Wall Street could also be a good omen for the rest of the year. When the S&P 500 rises in the third quarter, it has advanced an average of 3.8 percent in the fourth quarter of all years since 1945, according to CFRA Research. In midterm election years, the S&P 500 rallies an average of 7.1 percent in the fourth quarter following a third-quarter gain.

Retiring Around the World

Thinking of retiring abroad? There are lots of other countries where people get to retire earlier than we do here in America. A new study from Aperion Care looked at retirement ages around the world, and here were the lowest:

1. United Arab Emirates, 49
2. China, 56.25
3. Russia, 57.5
4. India, 60
5. Japan, 62.7

On the other hand, the U.S. falls in the Top Five oldest retirement group:

5. Australia, 65
4. Netherlands, 65.75
3. United States, 66
2. Iceland, 67
1. Norway, 67.75

The Fed Speaks

The Federal Reserve raised interest rates on yesterday for the third time this year - and signaled they will raise rates again in December. The Fed's increase of the Fed funds rate to a range of 2 percent to 2.25 percent set the benchmark interest rate at its highest level since April 2008.

The Fed’s statement on Wednesday also included the release of updated economic projections. The most notable change is a steep upgrade in expectations for economic growth this year. Fed officials’ median forecast now calls for GDP growth to hit 3.1 percent in 2018, up from 2.8 percent in June’s projections and substantially higher than the Fed’s forecast for 2.5 percent GDP growth this year at the end of 2017.

The Fed described the economy as “strong,” writing that information since the Fed’s August meeting shows “the labor market has continued to strengthen and that economic activity has been rising at a strong rate.... Household spending and business fixed investment have grown strongly.”

Consumer Confidence Keeps Soaring

Consumers’ outlook on the U.S. economy improved further in September, to the highest level since the waning days of the dot-com boom.  The Conference Board said Tuesday that its index of consumer confidence rose to 138.4, up from 134.7 in August. The consumer confidence index was last higher 18 years ago, in September 2000.

In a sign of optimism on the labor market, the labor differential, measuring the gap between respondents saying jobs are plentiful and those saying jobs are hard to get, widened for a third month to 32.5 percentage points. That’s the biggest difference since January 2001.

Just about all the future readings were strongly positive. For example, 27.6 percent of consumers said they expect better business conditions in next six months, up from 24.4 percent in August. That's the highest that number has been since December 2003.

New Sector on the Block

Friday will see the launch of the brand-new S&P Communications Services sector, a reshuffling of major industry groups that will impact some of the most widely followed and traded names on Wall Street. The new sector includes both companies that facilitate communication operations, as well as ones that offer the content and information. The move was seen as a way to address how some companies span multiple sector categories and don’t always reflect the industry they’re currently classified in.

The new sector will include companies that are currently in three different industry groups: telecommunications, including AT&T and Verizon Communications; technology, including Facebook and Google parent Alphabet; and consumer discretionary, where Walt Disney and Netflix are making the shift.

The new sector will account for nearly 10 percent of the S&P 500’s market capitalization. The weighting of the technology sector will drop from about 26 percent of the overall market to 21 percent, though it will remain the single biggest influence. The discretionary sector will drop to 10 percent from roughly 13 percent.

Investors Unfazed by Dow Records

The U.S. stock market is back at record levels, but investors aren’t in a celebratory mood. According to the weekly survey of sentiment conducted by the American Association of Individual Investors, market participants are feeling somewhat tepid about the market.

That's in spite of a lengthy move higher that took both the S&P 500 and the Dow Jones Industrial Average to records last week. That was the first such milestone that the Dow had reached since its previous record set last January.

But according to the survey, 32 percent of investors describe themselves as bearish on the market, meaning they expect prices will be lower in six months. That represents a slight dip of 0.8 percentage points from the previous week, although it is still above the historical average of 30.5 percent.

Those Soaring Corporate Profits

These are boom times for American corporations. The Commerce Department said this week that after-tax profits across the U.S. rose 16.1 percent in the quarter ended June 30 from a year earlier. That's the largest year-over-year gain in six years.

Lower taxes were a big driver of this. Because of the lower corporate tax rate signed into law last year, taxes paid by U.S. companies in the quarter were down 33 percent from a year earlier, according to the government data, or more than $100 billion at an annual rate.

Strong economic growth also played a role. The Commerce Department recently revised upward its estimate of how fast the U.S. economy grew in the second quarter, to an annual rate of 4.2 percent from an earlier estimate of 4.1 percent.

Safety First

What's been driving the market rally in September? A flight to security. This month, the biggest gainers in the S&P 500 include firms focusing on telecommunications services, consumer staples and utilities—so-called safe sectors whose steady dividend payouts have long made them investor favorites when markets are volatile or declining.

These shares typically lag behind major indexes during rallies, in part because they are perceived to offer limited potential gains. But in September, telecom shares are up 3.1 percent, consumer staples are up 1.5 percent and utilities are up 1.5 percent, versus a 0.1 percent increase in the S&P 500.

Meanwhile, many well-known high-flyers have been tumbling. Apple, Amazon.com and Alphabet each has declined at least 3 percent apiece in September, partly reversing double-digit percentage gains for the year. Facebook has declined more than 8 percent this month, adding to its retreat in the second half of this year.

The Strength of the U.S. Market

The American economy is increasingly becoming the envy of the world. The latest evidence: According to the latest monthly survey of fund managers by Bank of America Merrill Lynch, released yesterday, global investors are favoring U.S. stocks more and more strongly.

There is currently a net allocation of 21 percent overweight to the United States equity market, the highest such level since January 2015, and the U.S. was named as the most favored equity region globally for a second straight month. The allocation to global equities fell 11 percentage points to a net overweight of 22 percent, slightly below the long-term average.

In large part, the optimism about U.S. stocks is related to the outlook for corporate profits. According to the survey, a net 69 percent of those polled said that U.S. is the most favorable region when it comes to earnings expectations, a record level in the 17-year history of the survey. Currently, the divergence between U.S. and emerging-market earnings expectations is at the widest it's been since January 2014.

The U.S.: Bad for Retirement?

The U.S. ranked just 16th as one of the best nations to retire in, according to the 2018 Global Retirement Index, just released by Natixis Investment Managers. The U.S. maintained its top 10 ranking for finances, chiefly because of improvements in tax pressure, fewer nonperforming bank loans and rising interest rates, which improve saving levels and income in retirement. But the U.S.’s quality of life sub-index score declined in the 2018 index, and its happiness indicator score, which evaluates the quality of retirees’ current lives, also fell.

So which countries provide a better retirement landscape than the U.S.? Here is Natixis' Top Ten:
1. Switzerland
2. Iceland
3. Norway
4. Sweden
5. New Zealand
6. Australia
7. Ireland
8. Denmark
9. Canada
10. The Netherlands

The Good News on Inflation

August's consumer-price index was a welcome slowdown on the inflation front. The CPI, which gauges what Americans pay for everything from rent to razor blades, was up 2.7 percent from a year earlier, a drop from the prior two months. Core inflation, which excludes food and energy, rose 2.2 percent, slightly slower than in July.

Worker pay gains, by contrast, are accelerating. Adjusted for inflation, hourly earnings rose 0.2 percent from a year earlier. While modest, that’s an improvement from the prior three months when there was no real wage growth.

That's significant because since the recession ended, inflation-adjusted pay is up just over 4 percent for American workers. Inflation-adjusted wages are up less than 1 percent for all workers and a scant 0.2 percent for production and nonsupervisory workers over the past two and a half years.

Lehman, Ten Years Later

Ten years ago this weekend, the U.S. government allowed a major global investment bank, Lehman Brothers, to file for bankruptcy. It remains the largest bankruptcy filing in U.S. history, with Lehman holding over $600 billion in debts.

By that point, Lehman had already announced an expected $3.9 billion loss in its third quarter, as well as a near $5.6 billion loss in write-downs of so-called "toxic" assets. In the first week of September, Lehman's stock dropped drastically, losing more than three quarters of its value. The Fed had already helped salvage Bear Stearns, but there was to be no bailout for Lehman.

The American economy was already technically in recession at that point, but the Lehman bankruptcy seemed to trigger an entire meltdown of the U.S. financial system.  By the time it was over with, an estimated 6 million jobs were lost, unemployment reached 10 percent, and the Dow Jones Industrial Average dropped an astounding 5,000 points. Let's hope we never see the likes of that again.

The Value of a Degree

Is a college degree losing its value? The Census Bureau’s annual report on income and poverty released yesterday highlights this depressing fact: Among bachelor’s degree recipients, roughly 3.6 million or 4.8 percent were living in poverty in 2017, according to the Census Bureau. That’s up from 3.3 million and 4.5 percent in 2016. Bachelor’s degree recipients were the only educational cohort to see the number or the share of people in poverty rise among their ranks.

Even with this increase, though, among educational attainment groups, people with at least a bachelor’s degree had the lowest poverty rates in 2017. People with at least a bachelor’s degree in 2017 represented 35.0 percent of all people aged 25 and older, but just 16.5 percent of people aged 25 and older in poverty.

The 2017 poverty rate for those with a high school diploma but with no college was 12.7 percent, down from 13.3 percent in 2016. For those with some college but no degree, 8.8 percent were in poverty in 2017, a decline from 9.4 percent in 2016.

New Highs in Small Business Optimism

U.S. small business optimism surged to a record in August, according to a new survey by the National Federation of Independent Business. The NFIB Small Business Optimism Index jumped to 108.8 last month, the highest level ever recorded in the survey's 45-year history and above the previous record of 108 in 1983, set during the second year of Ronald Reagan's presidency.

The August figure was up from an already strong 107.9 reading in July. Six of ten indicators tracked by the NFIB increased last month. The biggest gain came in plans to increase inventories.

On top of that, the NFIB noted record readings for job creation plans and the amount of owners saying it was a good time to expand. Capital spending plans reached their highest level since 2007.

Consumers Keep Borrowing

Here's another sign of a strong economy: Consumer borrowing accelerated in July, the Federal Reserve reported yesterday. Total consumer credit rose $16.6 billion in July to a whopping $3.91 trillion. That’s an annual growth rate of 5.1 percent.

The bulk of the increase came from nonrevolving credit, which is typically auto and student loans. Those debts rose  6.4 percent in July after a 4 percent gain in the prior month, for the category's largest increase in eight months.

On the other hand, revolving credit, such as credit cards, rose only slightly in July. Borrowing on credit cards rose by 1.5 percent, although that was a reverse from a 1.4 percent drop in June.

The Emerging Markets Meltdown

While emerging-market stocks were one of the strongest equity performers in 2017, they have collapsed this year. The MSCI emerging-markets index fell into-bear market territory last week, dropping 20 percent from a recent peak. The Vanguard FTSE Emerging Markets ETF lost 3.3 percent last week, its worst week since March. Year-to-date, it is down 11.5 percent.

Meanwhile the S&P 500 has gained 7.7 percent this year. According to Bespoke Investment Group, the divergence between emerging markets and the U.S. stands at a 14-year high.

There are a number of issues facing emerging economies, including a recession in South Africa, Turkey’s high levels of debt and inflation, political uncertainty in Brazil, and Argentina’s central bank raising interest rates to 60 percent in the face of a currency crisis. Additionally, the category has been pressured by a rising U.S. dollar—a headwind for many emerging markets.

August's Jobs Report

The economy had another strong month, adding 201,000 jobs in August, the Labor Department reported this morning. Over the last three months, employers have added an average of 185,000 workers to payrolls per month, slightly outpacing 2017’s average monthly growth of 182,000. The headline unemployment rate remained at 3.9 percent.

The biggest news in the August employment report was a sharp increase in pay. The average wage paid to American workers rose by 10 cents to $27.16 an hour. The yearly rate of pay increases climbed to 2.9 percent from 2.7 percent, reaching its highest level since June 2009.

White-collar professional firms filled 53,000 positions, bringing the total created over the past 12 months to more than half a million. These are the fastest growing jobs in the country.

The Markets and the Election

What does the upcoming election season mean for the stock market? A quick look at historical performance shows that stocks often see rough sledding in the September of years that feature midterm elections. But stocks tend to do just fine as Election Day nears as well as in the aftermath of the vote, regardless of the outcome.

Analysts at UBS note that the S&P 500 has rallied an average of 14.5 percent from the end of August to the end of March around midterm elections. That includes a rocky start, marked by a median decline of 1.4 percent from the end of August through early October, followed by a rally into the next year.

This rally in equities around midterm elections has actually been much stronger than the average returns seen in all other years. Taking a more short-term approach, Deutsche Bank has noted that the three-month period running from a month ahead to two months after the election has produced a median 8 percent gain.

Inflation Curiosity

The good news is that most investors take inflation into account for their retirement savings, according to a recent Nuveen survey of adults with at least $100,000 in investable assets. The bad news: Most investors don't know what the inflation rate is.

Most respondents said they carefully monitored inflation as they planned for retirement, invested or spent money. Some seven in 10 investors correctly recognized that inflation was low at present, and they largely understood that retirees experienced higher inflation rates than the norm.

Yet, 60 percent incorrectly said the U.S. inflation rate was 5 percent or higher or admitted that they were not sure. Only 32 percent came near the real number of 2 percent to 3 percent.

Thoughts for Labor Day

“All growth depends upon activity. There is no development physically or intellectually without effort, and effort means work.” ~ Calvin Coolidge

“If a man is called to be a street sweeper, he should sweep streets even as a Michelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, 'Here lived a great street sweeper who did his job well.'” ~ Martin Luther King Jr.

"The best way to learn is by doing. The only way to build a strong work ethic is getting your hands dirty." ~ Alex Spanos

America's Old Cars

How old is your car? If it follows the trends of most American drivers, it's probably pretty old. According to a study from the Energy Department, the average age of vehicles owned by households increased from 9.3 years in 2009 to 10.5 years in 2017.

Cars may just be living longer. In 2009, about 7 percent of all vehicles were five years old, and by 2017, this had fallen to just 5.8 percent of all vehicles. But in 2017, there were more vehicles on the road that were 10 years and older than in 2009.

This is up sharply from recent decades. The average car's age rose from just 6.9 years in 1980 to 7.9 years in 1985. For a while, the average age hovered just below 8 years, and as recently as 1992, it was just 8.1 years. But it's risen pretty consistently since then.

Stocks and Hurricanes

We're now heading into the thick of hurricane season, and various sectors of the market will be positively or negatively affected by the amount of severe weather we experience. But some of these effects are not as obvious as others.

Some of the market segments that react positively to preparation and recovery efforts include home-improvement retailers like Home Depot and Lowe’s, which typically see a boost in sales post-storm as damaged property is repaired. Grocery retailers often see a prestorm surge in sales as consumers stock up on necessities, and hotel companies benefit if people are forced into temporary lodging.

But the industry with the largest negative impact is branded apparel and footwear stocks, according to an analysis by Morgan Stanley. PVH Corp., the parent company of Calvin Klein and Tommy Hilfiger, scored the highest possible “hurricane exposure score” in Morgan Stanley’s analysis, alongside Tiffany & Co. Dunkin’ Brands Group is also among the companies with high hurricane exposure: In the third quarter of 2017, there was a 120 basis-point drag on the doughnut company’s same-store sales because of hurricanes.

Housing Hits the Brakes

There are a couple signs out there that the housing market is softening. First off, sales of previously-owned homes, which make up the vast majority of housing market sales, declined for the fourth month in a row in July. They've touched their lowest point in over two years, according to the National Association of Realtors.

Another sign of a slowdown: Although prices are not declining, price growth is decelerating. The national index’s 6.2 percent annual gain was down from 6.4 percent in the three-month period ending in May. The 20-city’s annual gain was also down two ticks, from 6.5 percent.

In addition, the number of new homes available for sale hit its highest level since 2009. At that month’s pace of sales, it would take 5.9 months to exhaust available inventory. Six months has historically been considered a marker of a market evenly balanced between supply and demand.

Young People's Money Woes

Young adults are living on the edge with their finances, according to a new study from the University of Illinois. About a third of young adults (those between 18 and 24 years old) were considered “financially precarious,” meaning they had few money management skills and little income stability, according to the study.

Another 36 percent of participants were considered financially “at risk” because they had an unexpected drop in income within the year and had no savings to support themselves - and didn’t have enough to pay for a $2,000 emergency. Approximately 10 percent also said they struggled with money management, such as budgeting and credit-card usage, and would put their health in jeopardy by avoiding doctor visits and prescriptions because of costs.

Only 22 percent were deemed financially stable, meaning they were saving at a mainstream bank and steered clear of financial services that charge higher interest and fees, such as payday lenders. Members of this group were more likely to be white males, employed and college-educated.

The Worst Place to Retire

We talk a lot here about how to get the best out of your retirement years, but what's the worst place to retire? According to a new survey from WalletHub, it's right here in New Jersey. Newark rates as exorbitantly expensive while also having little in the way of activities for retirees. On the bright side, the health care options are good.

Jersey City also finished high up on the list, at No. 8. Its primary advantage over Newark appears to be that there's more to do there. The top ten unfavorable cities for retirees:

1. Newark
2. Bridgeport, Conn.
3. Warwick, R.I.
4. Baltimore
5. Stockton, Calif.
6. Providence, R.I.
7. Bakersfield, Calif.
8. Jersey City
9. Modesto, Calif.
10. Fresno, Calif.

The Cost of the Crisis

What did the economic meltdown of 2007-2009 cost us? A new report from the Federal Reserve Bank of San Francisco points out that not only is the economy “significantly smaller than it should be based on its pre-crisis growth trend,” but says that Americans lost $70,000 apiece in present-value lifetime income thanks to the financial crisis.

The letter says that “the size of the U.S. economy, as measured by GDP adjusted for inflation, is well below the level implied by the growth rates that prevailed before the financial crisis and Great Recession a decade ago.” Actual U.S. GDP is running about 12 percentage points below where it would have been had the crisis not occurred.

We're not the only ones, though. The report said that the U.K. and European economies are also trailing where they would have been, had the financial crisis and Great Recession not intervened.

The Record Bull

Welcome to the longest bull market in history. Since March 9, 2009, which marked the low of the financial crisis and which many consider the birth date of the current bull market, the S&P 500 index has advanced 320 percent.

This bull now has 113 months under its belt. The previous longest was set during the 1990s. Then, the S&P 500 index bottomed out on October 11, 1990, and finally peaked nearly ten years later on March 24, 2000.

One advantage for that bull: With the dot-com fueled runup in the late 1990s, that market returned an annual average of 19.0 percent per year. The current buildup, by contrast, has returned a slightly more modest average of 16.5 percent per year.

Who Owns America's Debt

America’s debt climbed to a record $21.21 trillion at the end of June, a 6.9 percent increase from a year earlier. Who owns all this money? By and large, Americans. Some 70 percent of the national debt is owned by the U.S. government, institutional investors and the Federal Reserve. A shade under 30 percent is owned by foreign entities, according to the latest information from the U.S. Treasury.

American institutions such as private and state pension funds as well as individual investors were the biggest holders. They owned $6.89 trillion in debt or about 32.5 percent of the entire pie.

Foreigners, led by the Chinese and Japanese, owned $6.21 trillion, or 29.3 percent. Those two countries have cut their stakes since 2015, but each country still owns more than $1 trillion worth of Treasury bonds and notes.

Exiting Correction

The Dow Jones industrial average entered what is generally considered to be correction territory on February 8, when it completed a drop of 10 percent from its recent peak. This is the longest stint that the Dow has spent in correction territory since 223 trading sessions in 1961, according to Dow Jones Market Data.

But now the Dow stands less than 0.5 percent shy of emerging from correction territory. It need a gain of just 130 points to reach that mark, and notch a 10 percent gain from its recent low point.

Both the S&P 500 and the Nasdaq Composite Index also moved into correction territory back on February 8. But bot of those indexes have already emerged from their correction phases.

Young Folks Are Finding Work

The unemployment rate among young Americans fell to its lowest level in more than 50 years this summer, the labor Department said last week. On the other hand, the share of young people looking for work remained well below its peak in 1989.

Among Americans between 16 and 24 years old who were actively looking for work this summer, 9.2 percent were unemployed in July. That's a drop from the 9.6 percent youth unemployment rate in July 2017. It was also the lowest midsummer joblessness rate for youth since July 1966.

Similarly, the unemployment rate among older Americans who don’t have a high-school diploma fell to a record low this year. The jobless rate also fell sharply for those who completed high school but never attended college.

The Outlook for Raises

The tight job market means that employers are willing to part with “slightly larger” pay raises when the calendar ticks over, according to a new survey by Willis Towers Watson. The 2018 General Industry Salary Budget Survey finds that U.S. employers intend to reward their non-management exempt employees with average pay increases of 3.1 percent in 2019; this year they handed out pay raises of 3.0 percent. Executives are in for slightly smaller raises, 3.1 percent compared with 3.2 percent.

Pay increases have lagged in the neighborhood of 3 percent for the past 10 years, though only 3 percent of companies intend to freeze salaries next year. The last year in which raises were significantly larger was back in 2008, when they were around 3.8 percent.

Companies are still rewarding “star” performers at a notably higher percentage than “average” performers. Those with top marks in their evaluations got an average raise of 4.6 percent in 2018; that’s 70 percent higher than average-rated employees, who got 2.7 percent raises.

A Strong July for Retail

U.S. retail sales rose a healthy 0.5 percent in July, the Commerce Department reported yesterday. The report came with one big caveat, though: The government also said sales in June rose a smaller 0.2 percent instead 0.5 percent as originally reported.

That means the increase in July was starting from a lower baseline. On the other hand, retail sales have increased 6.4 percent over the past 12 months, close to the long-run average since 1980.

Clothing stores and restaurants posted a 1.3 percent increase in sales to lead the way in July. Sales also rose 1.2 percent for department stores and 0.8 percent for both Internet retailers and gas stations. Sales fell for home furnishings, pharmacies and stores that sell sporting goods and other hobby-style items such as books and music.

Our Shrinking Debt Burden

The debt burden of U.S. households is the smallest it’s been in nearly 16 years. Household debt — including mortgages, credit cards, auto loans, student loans and other credit — grew for the 16th consecutive quarter in the three months ending in June, rising by 0.6 percent to $13.29 trillion, the New York Fed reported yesterday. But that's only half the equation.

On the other side, personal disposable incomes reached an annual rate of $15.46 trillion in the quarter. That means the debt-to-income ratio dipped to 86 percent. That’s the lowest, by a very small amount, that this figure has been since the fourth quarter of 2002.

But it's a long way down from where this number peaked. At the height of the credit bubble in 2008, household debts topped out at 116 percent of disposable income.

A Slight Slowdown in Consumer Expectations

A monthly survey conducted on consumer expectations showed a notable pessimistic trend in July. The New York Fed’s survey — based on a panel of 1,300 household heads across the United States — found declines in one-year expectations on earnings growth , household spending, stock prices and house prices. Some highlights:

• Median one-year-ahead wage-growth expectations fell from 2.7 percent in June to 2.4 percent in July, dropping below the 2.5 percent to 2.7 percent range it had been in since November 2017
• Median home price change expectations dropped from a recent high of 3.9 percent reached in June to 3.7 percent 
• The probability that stock prices will be higher in a year fell to 40.3 percent, the lowest level since October 2016
• Median household spending growth expectations decreased by 0.1 percent to 3.2 percent in July

What's Your Goal?

Protection or production? That is the key question for most investors' portfolios. According to a new report from a global research and consulting firm Cerulli Associates, more than three-quarters of investors explicitly state that they would prefer a protection-focused portfolio versus one that outperforms.

The desire for protection is very strongly correlated with age, although not necessarily the way you think it might be. The report finds that a protection mindset is highly concentrated among investors who are 60 and older - and among affluent investors under 30 years old.

There are similar strata involved for different wealth tiers. The highest concentrations of the protection-focused mindset are among those investors with $250,000 to $500,000 (83 percent) and greater than $5 million (80 percent).

Signs of Inflation in July

U.S. consumer prices rose by 0.2 percent in July, pointing to a steady increase in inflation pressures, according to figures out from the Labor Department this morning. In the 12 months through July, the Consumer Price Index increased 2.9 percent.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, the same gain as in May and June. The annual increase in the so-called core CPI was 2.4 percent, the largest rise since September 2008.

Shelter costs were a big driver of this: Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent last month after increasing by the same margin in June. Overall, the so-called shelter index rose 3.5 percent in the 12 months through July. Prices for new motor vehicles rose 0.3 percent in July, apparel prices fell 0.3 percent, and healthcare costs fell 0.2 percent.

The Tight Labor Market

The economy has reached a point of such strength that there are now more job openings in the U.S. than there are unemployed. Overall in June, the number of available jobs exceeded the number of unemployed Americans by nearly 100,000.

There were 6.7 million job openings on average in the three months ended in June—the highest quarterly level on record dating back to 2001. The number of available jobs grew by nearly 750,000 this spring, compared with a year earlier, according to Labor Department data released this week. 

The problem is most acute in a few fields, led by transportation. The number of unfilled jobs in transportation, warehousing and utilities, combined, grew by 109,000 over the past year to 298,000, a 58 percent increase. That's the largest growth rate of about 20 broad groupings tracked by the Labor Department.

Misunderstanding Long Term Care

There is a wide disconnect between what many Americans believe about long-term care versus what the actual needs are. Today, 70 percent of Americans will need some type of long-term care, but only 46 percent believe they will need it, according to a new study by the Moll Law Group, a personal injury firm.

Most Americans — 64 percent — have nothing saved for long-term care. In addition, 67 percent aren’t able to contribute to their parent’s long-term care. Most of study participants believe the age at which they will need long-term care is 79 years old, while it’s actually 73. Women will need long-term care on average for 3.7 years, while men will need it for 2.2 years.

Another misconception is the out-of-pocket cost of long-term care. The study found that the actual out-of-pocket cost is more than $47,000, while many Americans believe it is roughly half that, $25,350.

Earnings Beats by Sector

Earnings season always features headlines that say companies “beat” or “miss” analysts’ estimates. In the latest quarter, even more companies have been beating than usual, with a total of 80 percent exceeding the analysts' expectations for their earnings per share.

Leading the way has been the health-care industry. The S&P 500's health-care sector has 63 companies, of which 61 (a whopping 97 percent) beat analysts’ estimates when they most recently reported their results. Information technology isn't far behind, at 93 percent.

The worst sector for beating estimates has been energy: Just 55 percent of those stocks exceeded the street's forecast. But notice that even there, a majority of the stocks outperform the estimates.

The Race to $1 Trillion

Apple became the first U.S.-listed company in history to achieve a $1 trillion market capitalization on Thursday. U.S. Steel is generally cited as the first U.S. publicly listed company to reach a $1 billion market capitalization, immediately upon going public in 1901.

IBM is sometimes identified as the first publicly listed U.S. company to reach the $100 billion milestone, doing so on August 20, 1987. However, IBM never closed above that threshold. Meanwhile, AT&T Corp. closed above $100 billion in November 1992, according to FactSet.

A cautionary tale: On July 16, 1999, Microsoft became the first U.S. company to reach a market cap of $500 billion. It stayed above $500 billion for just two trading sessions before dipping back below that level. This was, of course, the heyday of the dot-com boom. Microsoft went on to again hit $500 billion in market value, eventually reaching $607 billion in market cap, in December 1999. But in the spring of 2000, the bubble popped — and Microsoft finished that year with a market cap of $231 billion.

July's Jobs Report

The U.S. economy added 157,000 jobs in July, according to figures out from the Bureau of Labor Statistics this morning. Incorporating revisions for May and June, which increased employment by a net 59,000, monthly job gains have averaged a very healthy 224,000 the last three months.

The unemployment rate ticked down to 3.9 percent after edging up in June, reflecting more job seekers entering the labor market. Another 105,000 people joined the civilian-labor force in July, but that was nearly exactly matched by the increase in Americans reporting they’re not in the labor force.

White-collar professional firms added 51,000 jobs last month, continuing a strong run of employment gains. Manufacturers filled 37,000 jobs. Health-care providers hired 34,000 people.The financial industry and government were the only industries to lose jobs over the month.

Will You Owe More in Taxes?

Despite the tax cuts that take effect this year, more than 30 million taxpayers could owe money to the government next year, according to a Government Accountability Office report based on a simulation run by the Treasury Department. Taxes for more than a fifth of Americans (21 percent) could be underwithheld, meaning that their employer hasn’t taken enough money out of their paychecks to cover taxes.

Had there been no change in the tax law, 18 percent would have been underwithheld. That’s 3 million fewer people. Six percent of taxpayers are expected to break even next year, and the remainder will get some sort of refund.

So why might more Americans owe taxes next year? The IRS and Treasury Department had “limited documentation” for how it updated the withholding tables, according to the GAO report. And employees in high-tax states - like New Jersey - may be affected by the new limitations on state and local tax deductions, which would increase their tax burden.

Apple's Massive Buybacks

Apple reported its earnings yesterday, and also noted that it had bought back $20.8 billion of its stock in the year’s second quarter. That’s down from its record $22.8 billion worth of buybacks in the first quarter, but still ranks as the second-largest ever among S&P 500 companies, according to S&P Dow Jones Indices.

Apple's first quarter repurchases made up the entirety of 12 percent of S&P 500 buybacks. Companies in the broad index bought back $189 billion in the first quarter, according to S&P Dow Jones Indices, and are on pace to be about flat in the second quarter.

If Apple hadn’t bought back its stock, the S&P 500′s total buybacks wouldn’t have set a new record high in the first quarter. Subtracting out Apple buybacks from all quarters would have left first quarter buybacks trailing the third quarter of 2007.

Inklings of Inflation

Are we seeing signs of higher inflation? According to the Wall Street Journal, consumers are starting to see higher prices for recreational vehicles, soda, beer and other goods that now cost more to make as a result of recent tariffs on metals and parts.

U.S. steel and aluminum prices are up 33 percent and 11 percent, respectively, since the start of the year. Producer prices, a measure of what businesses are paid for goods and services, have also climbed to their highest level in years. The producer-price index rose 3.4 percent in June from a year earlier as energy and shipping costs climbed along with metal prices.

Those higher costs are starting to show up in what we pay for retail goods. Consumer prices rose 2.9 percent in June from a year earlier, the Labor Department said, the highest rate in more than six years.

That Huge GDP Number

Gross domestic product grew by 4.1 percent in the second quarter, according to numbers released by the Commerce Department on Friday. This is the best quarter we've seen since a 4.9 percent in the third quarter of 2014. What went right?

• Personal consumption expenditures rose 4 percent  
• Business investment grew 7.3 percent 
• Exports added 1.06 of the 4.1 percent total with their largest positive result since the fourth quarter of 2013
• Federal government outlays increased by 3.5 percent

Facebook's Big Plunge

After its disappointing earnings report on Wednesday, Facebook's stock took a bath yesterday with its biggest single-day drop since it started trading publicly in May 2012. On a market-capitalization basis, the company saw $120 billion erased, the biggest one-day loss in U.S. stock-market history.

The decline exceeded the previous record set by Intel, which had a $91 billion single-day loss in September 2000.  In just a single day, the decline in Facebook’s market value was roughly the entire market value of McDonald’s or Nike.

Remember, though, that a loss of this magnitude is only possible if the company is gigantic to begin with. Facebook dropped to a $510 billion valuation from a peak of $630 billion, after an eye-popping 472 percent run-up in its stock price since going public.

Millennials: Not Good Investors

According to a new study from Bankrate.com, many millennials think cash is the best long-term investment. Almost one in three millennials said cash instruments, such as savings accounts and certificates of deposit, are the best place to invest money they won’t need for the next 10 years. That compares with only 21 percent of older generations, most of whom prefer the stock market.

Cash is, of course, not a good investment, especially these days. Only 18 percent of all American adults are earning more than 1.5 percent on their savings, at a time when top-yielding national available savings and money-market accounts are yielding interest rates of more than 2 percent. Baby boomers are the generation most likely to earn more than 1.5 percent on their cash.

Millennials - defined as those between the ages of 18 and 37 - aren't even doing that well. More than one in five millennials said they’re earning less than 1 percent interest on their savings, while roughly 19 percentsaid they’re not earning any interest whatsoever, according to the study.

Google's investment Savvy

What helped fuel Google's earnings blowout earlier this year? The same thing that fuels a lot of our wealth: Alphabet, Google's parent company, is a savvy investor. Alphabet gained more than $1 billion just on its outside investments in the first quarter. Alphabet was the most active and largest corporate investor in the tech sector in 2017, surpassing international players like both SoftBank Group of Japan and Intel’s Intel Capital.

During the quarter Alphabet reported Monday, one investment, Glassdoor Inc., was sold for $1.2 billion to a Japanese human resources company called Recruit Holdings, while another, the electronic signature company DocuSign had a strong IPO. Two security investments have paid off recently as well, as cloud security firm Evident.io was acquired by Palo Alto Networks and Zscaler went public in the first quarter.

Alphabet’s investments gained more than $3 billion in the first quarter. With the $1 billion-plus disclosed Monday, the total gains for Alphabet’s investments in the first half of the year account for nearly one-third of Google’s GAAP net income figure for that period.

A Big Week for Earnings

If you're looking for information on the biggest stocks in the market, this is the week to pay attention. There are 174 S&P 500 index  companies scheduled to report earnings this week, and 11 of the 30 Dow Jones Industrial Average components are on the docket as well.

The most important Internet stocks are all up this week. Facebook reports Wednesday afternoon, Amazon.com is scheduled for Thursday afternoon, and Twitter reports on Friday morning.

We've already had one big Internet blowout: Alphabet, Google's parent, reported yesterday, with revenue of $26.24 billion, up from $20.91 billion in the second quarter of 2017 and higher than the average analyst estimate of $25.58 billion. Its share price jumped by nearly 5 percent in after-hours trading yesterday.