Friday, June 19, 2020

A Ripe Time for Homebuying

Mortgage rates have fallen to a new all-time low for the fourth time this year. The 30-year fixed-rate mortgage averaged 3.13 percent for the week ending today, down eight basis points from a week earlier, according to Freddie Mac. The 15-year fixed-rate mortgage dropped four basis points to 2.58 percent.

The previous record low was 3.15 percent, set back at the end of May. Just one year ago, the 30-year home loan averaged 3.84 percent.

Not surpsrisingly, mortgage applications to purchase a home rose 4 percent last week from the previous week, the ninth consecutive week of gains and the highest volume in more than 11 years. Applications are a remarkable 21 percent higher than they were a year ago.

Thursday, June 18, 2020

The Top Stocks in the COVID-19 Era

We have now passed 100 days since the World Health Organization declared COVID-19 to be a global pandemic. In that time, the markets have been on a roller coaster ride, with a steep plunge that was followed by a breathtaking climb.

Here are the ten S&P 500 stocks that have fared best over that period:

  1. Diamondback Energy, up 56.8 percent
  2. Abiomed, up 54.6 percent
  3. Halliburton, up 49.7 percent
  4. Fortinet, up 49.3 percent
  5. PayPal Holdings, up 49.3 percent
  6. Cadence Design Systems, up 47.9 percent
  7. West Pharmaceutical Services, up 47.2 percent
  8. Chipotle Mexican Grill, up 45.9 percent
  9. United Rentals, up 44.8 percent
  10. Marathon Oil, up 44.8 percent

Wednesday, June 17, 2020

Retail Comes Back

Another encouraging sign for the recovering economy: Retail sales rose 17.7 percent in May from the previous month, setting a new record. The gain easily topped the previous record of 6.7 percent from October 2001 — a month after the 9/11 terrorist attacks.

Clothing and accessories stores reported the biggest percentage gain at 188 percent. The category comprising sporting goods, hobby, musical instruments and book stores rose 88.2 percent. After being almost completely shuttered during the lockdown, food services and drinking places saw a 29.1 percent rebound in May.

Note, though, that the economy is still making up for lost ground. Despite the strong bounceback, total sales were still down 6.1 percent from a year ago.

Monday, June 15, 2020

The Online World Is Taking Over

Here's a sign of how much of our lives we spend online these days: Nasdaq announced on Friday that DocuSign, the electronic signature software company, would be joining its Nasdaq 100 index. What would it be replacing? The venerable but currently beleaguered United Airlines.

DocuSign just debuted on the Nasdaq back in 2018. It will join cloud companies Adobe, Workday and Zoom Video Communications on the index, reflecting the rise of cloud services as companies opt for systems they don’t need to operate on their own data center infrastructure.

The Nasdaq 100 Index is a basket of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange. The index includes companies from all industry sectors except for the financial industry.

Friday, June 12, 2020

Inside the Inflation Numbers

The Bureau of Labor Statistics says the consumer price index fell 0.1 percent in May, driven by deep discounting on energy, car insurance, clothing and public-transportation prices. The so-called core rate of inflation, which strips out volatile food and energy prices, also fell 0.1 percent

But those volatile categories have been rising. Prices for food consumed at home rose 1.0 percent after going up 2.6 percent in April. The cost of beef shot up a record 10.8 percent in May, reflecting shortages as a result of COVID-19 infections at meat processing plants.

Prices were held down by a 3.5 percent drop in the cost of gasoline, which followed a 20.6 percent drop in April. On other hand, while shelter prices are not rising as fast as they were at the beginning of the year, they are still increasing, up 2.6 percent in the past year.

Thursday, June 11, 2020

The Fed's Forecast

After its meeting yesterday, the Federal Reserve said it will be years before it raises interest rates again. The Fed now doesn’t expect to lift its benchmark interest rate until 2023. Its Fed funds rate has been in  a range of 0-0.25 percent since mid-March, when the economy went into lockdown.

Along with the rate decision, the Fed also projected Wednesday that the American economy will shrink 6.5 percent in 2020. We've already seen GDP decrease by 4.8 percent in the first quarter of this year.

However, the Fed does not expect the recession to be long-lived. The central bank thinks that 2021 is expected to show a 5 percent gain, followed by 3.5 percent in 2022.

Wednesday, June 10, 2020

The Tech Rally

The Nasdaq Composite rose 0.29 percent yesterday to finish the day at a new record close of 9,953.75, after briefly breaking above 10,000 earlier in the day. Tech stocks led the way, which is why the Dow Jones was losing ground even as the Nasdaq was setting records.

The biggest tech stocks led the rally:

  • Netflix rose 3.47 percent on the day 
  • Facebook rose 3.1 percent  
  • Apple rose 3.1 percent, setting a new high
  • Amazon rose 3 percent, also notching a new all-time high 
  • Google-parent Alphabet rose 0.28 percent

Tuesday, June 9, 2020

The Recession Is Officially Here

The longest economic expansion in American history is officially over: The National Bureau of Economic Research declared yesterday that the recession began in February. This was the fastest that NBER has declared any recession since the group began formal announcements in 1979.

Normally, economists define a recession as consecutive quarters of negative growth. But after GDP dropped by about 5 percent during the first quarter, NBER decided not to wait for a second quarter of a contracting economy, although it is widely expected to happen during the second quarter.

One notable thing about this timeline is that the extensive lockdowns due to the COVID-19 pandemic didn't really begin until March. The NBER said that employment, income and spending peaked in February and then fell sharply afterward as the viral outbreak shut down businesses across the country, ending nearly 11 full years of economic growth.

Monday, June 8, 2020

The Big Bounce

How's this for a rebound:  From the high on February 19 through the low on March 23, the average stock in the S&P fell 39.1 percent. But the average stock in the S&P 500 is now up 54.7 percent since the March 23 low. 

There is only one stock in the entire S&P 500 that's down since March 23: the beauty company Coty, and it's down less than 2 percent.  There are only eight stocks that aren't up more than 10 percent since March 23, including names like Walmart, Costco, and Kroger.

The average Energy sector stock is up more than 107 percent since March 23, but these Energy stocks are still down nearly 30 percent year-to-date because they fell 60 percent from February 19 to March 23.  Consumer Discretionary, Financials, Industrials, and Materials all have average gains of more than 50 percent since March 23rd.

Friday, June 5, 2020

May's Shocking Jobs Report

Some stunning numbers from the Bureau of Labor Statistics this morning, which is reporting that the American economy added 2.5 million jobs in the month of May. The headline unemployment rate fell to 13.3 percent last month, down  from 14.7 percent in April,

Most of this reflects workers who were temporarily laid off returning to their jobs. The number of unemployed who were on temporary layoff fell by 2.7 million in May to 15.3 million, following an increase of 16.2 million in April. Among those not on temporary layoff, the number of permanent job losers continued to rise, increasing by 295,000 in May.

The strongest category: Employment in food services and drinking places rose by 1.4 million in May, accounting for about half of the gain in total employment. This followed steep declines in this sector in April and March, when we lost 6.1 million jobs combined. Construction employment increased by 464,000 in May, gaining back almost half of April's decline. Employment increased by 424,000 in education and health services in May, after a decrease of 2.6 million in April.

Wednesday, June 3, 2020

Rise of the Small Caps

One of the big success stories of the market's comeback has been small-cap stocks. Following a yearslong bear market for small-capsthe Russell 2000 index, which tracks the performance of small-cap stocks, rose 20.9 percent during April and May.

That stretch marked the index's largest two-month percentage gain since 2009. Moreover, it is the best two-month relative performance to the S&P 500 index since February of last year, according to Dow Jones Market Data.

But keep in mind, one factor working in the favor of small-caps' rise is their dramatic underperformance over the past two years. While the S&P 500 consistently reached new heights throughout 2019 and in the first six weeks of 2020, the Russell 2000 still hasn’t regained the record high it set back in August of 2018.

The Post-Lockdown Economy

What will the economy - and our lives - look like after the pandemic? If consumers have to choose between spending a post-coronavirus-lockdown Saturday buying new clothes or at a restaurant having dinner, more will choose shopping. That’s according to a new survey from S&P Global Market Intelligence, which polled 1,250 people between April 30 and May 18.

When restrictions let up, 44 percent of consumers said they planned to head back to stores. But only 31 percent said they’d dine out. After three months, the dine-out result rose to 40 percent.

The thing consumers are most excited to spend on, according to the S&P survey, are professional services like hair salons and spas. More than half of respondents (55 percent) said they were eager to head back for those experiences.

Tuesday, June 2, 2020

A Look Back at May in the Market

The S&P 500 Index ended up rising 4.5 percent in the month of May. It is up 36.1 percent since bottoming out on March 23, although overall it's down 5.8 percent for 2020. 

These were the biggest gainers among the S&P 500 in May:

  1. L Brands, up 36.2 percent
  2. Fortinet, up 29.2 percent
  3. Dish Network, up 26.5 percent
  4. Fortune Brands Home & Security, up 26.5 percent
  5. PayPal Holdings, up 26.0 percent
  6. Albemarle Corp., up 24.6 percent
  7. Lowe's, up 24.4 percent
  8. News Corp., up 23.6 percent
  9. Dollar Tree, up 22.8 percent
  10. Oneok Inc., up 22.6 percent

Monday, June 1, 2020

Housing Springing to Life

There are some signs of very healthy life in the housing market, a good marker for the nascent economic recovery. Though the single-family home mortgage purchase index saw a more than 30 percent drop in April when compared to last year, it has reversed its course, according to new data out from the Mortgage Bankers Association.

The index is now up almost 10 percent compared to the same period last year. That indicates not just a rebound but real health in the home purchase market.

Meanwhile, mortgage applications to purchase a home rose 9 percent last week from the previous week and from a year earlier, according to the Mortgage Bankers Association’s index. It was the sixth straight week of gains for that figure, and a 54 percent recovery since early April.