One of the biggest reasons for the market's brighter outlook lately has been the performance of the tech sector. The tech-heavy Nasdaq Composite Index closed above 200 last week, for the first time since October, and is up more than 25 percent for the year. The Nasdaq is up nearly 60 percent since bottoming out at 1268 on March 9. (It is still 43 percent off its peak of 2859 on Oct. 31, 2007.)
Technology stocks are also the top-performing industry sector in the Standard & Poor's 500, too. Taking tech stocks out of the mix, the S&P would be up only 7.9 percent this year instead of its actual 12 percent.
There are a couple of reasons for this. After getting destroyed in the tech crash of 2000, technology firms now tend to keep more cash on hand for a rainy day - leaving them well-positioned to survive both a business downturn and the recent credit crunch. Even more than that, tech issues are one of the most cyclical stocks out there, following the business cycle up and down. It makes sense that they would be leading this recovery - and that they'll be the first sector to deflate the next time the economy turns down.
Tuesday, August 11, 2009
Monday, August 10, 2009
Job Losses, Job Gains
As I suggested on Friday, the jobs report that came out at the end of last week was very good. It was so good, in fact, that the unemployment rate, as measured by the Labor Department, dropped a tick, from 9.5 percent to 9.4 in July. But at the same time, the economy lost another 247,000 jobs in July. So how could the unemployment rate drop?
It's primarily because the ranks of the jobless fell - not because those people found jobs, but because they left the labor force altogether. Most of those people probably got discouraged by their inability to find work and gave up. The labor force, as defined by the Department of Labor, includes only those who are now employed or are actively looking for work.
That's not to say that the July news was bad, or that these figures are cooked in some way. The 247,000 jobs lost in July were down significantly from the 443,000 that were lost in June, and is the lowest monthly figure since last August. So it's a step in the right direction - just not as much of a positive step as that unemployment rate would reflect.
It's primarily because the ranks of the jobless fell - not because those people found jobs, but because they left the labor force altogether. Most of those people probably got discouraged by their inability to find work and gave up. The labor force, as defined by the Department of Labor, includes only those who are now employed or are actively looking for work.
That's not to say that the July news was bad, or that these figures are cooked in some way. The 247,000 jobs lost in July were down significantly from the 443,000 that were lost in June, and is the lowest monthly figure since last August. So it's a step in the right direction - just not as much of a positive step as that unemployment rate would reflect.
Friday, August 7, 2009
Up and Down With the Jobs Report
There appeared to be some good news in the unemployment front in the latest Labor Department figures: the number of people filing for unemployment benefits last week dropped more than economists had expected. This requires a little bit of unpacking so as to eliminate any confusion; the Washington Post headline reads "New Jobless Claims Drop More Than Expected," which sounds like bad news.
And it is bad news, in a sense. The ranks of the unemployed continue to grow, and are expected to continue growing for some time to come. A total of 550,000 people filed for unemployment last week, which is a lot. But economists had thought that number would be more like 584,000. In other words, the jobless ranks are still growing, but they're not growing quite as fast as some people expected.
There's an unemployment report due out today from the government on the jobless rate in July, and there's speculation that this will show the jobless ranks aren't growing as fast as they had been earlier this year. Even if this provides more "good news," it's important to keep in mind the context: The jobs news isn't really all that good. It's just not quite as bad as it has been.
And it is bad news, in a sense. The ranks of the unemployed continue to grow, and are expected to continue growing for some time to come. A total of 550,000 people filed for unemployment last week, which is a lot. But economists had thought that number would be more like 584,000. In other words, the jobless ranks are still growing, but they're not growing quite as fast as some people expected.
There's an unemployment report due out today from the government on the jobless rate in July, and there's speculation that this will show the jobless ranks aren't growing as fast as they had been earlier this year. Even if this provides more "good news," it's important to keep in mind the context: The jobs news isn't really all that good. It's just not quite as bad as it has been.
Thursday, August 6, 2009
Faking Forty-four Cents
Usually when you hear about counterfeiters, it's people making up phony twenties or hundreds - the biggest denominations that merchants would accept without batting an eye. You wouldn't expect anyone to make fake dollar bills, but someone has been busted for doing even less than that. Someone in Williamstown, down in South Jersey, has actually counterfeited postage.
Now, there's a little more to this story: The guy they caught makes his living selling CDs and videos on eBay. So he uses a lot of postage - more than $200,000 worth of the fake stuff, according to the complaint filed by the U.S. attorney. He would print out a postage meter strip from stamps.com, then photocopy it for multiple packages.
I think many of us take a good look at a hundred-dollar bill when we get one. Now, maybe we should start taking a look at the stamps on our letters - do those look real to you?
Now, there's a little more to this story: The guy they caught makes his living selling CDs and videos on eBay. So he uses a lot of postage - more than $200,000 worth of the fake stuff, according to the complaint filed by the U.S. attorney. He would print out a postage meter strip from stamps.com, then photocopy it for multiple packages.
I think many of us take a good look at a hundred-dollar bill when we get one. Now, maybe we should start taking a look at the stamps on our letters - do those look real to you?
Wednesday, August 5, 2009
Downgrading the Garden State
Some tough news for New Jersey today, as Moody's Investors Service announced it was downgrading the state's credit rating. New Jersey, which has $31 billion in outstanding debt, now has an Aa3 rating - the fourth-highest - on its general-obligation bonds, and A1, the fifth-highest rating, on its securities-backed bonds.
What does this mean? Moody's thinks that since New Jersey has seen a drop in its tax revenue and has had to use other revenue sources to meet its obligations, it will have a harder time paying off its debts in the future. if the long-term credit rating gets downgraded as well, the state will have to pay higher interest rates when it raises money by issuing bonds.
Maybe more importantly, it means that financial experts have combed through the fiscal data for our state and come away pessimistic. Moody's thinks there's a good likelihood that New Jersey's economic recovery may lag that of the nation as a whole. While the national economy has begun to look better lately, here at home, we still may have a tough hill to climb.
What does this mean? Moody's thinks that since New Jersey has seen a drop in its tax revenue and has had to use other revenue sources to meet its obligations, it will have a harder time paying off its debts in the future. if the long-term credit rating gets downgraded as well, the state will have to pay higher interest rates when it raises money by issuing bonds.
Maybe more importantly, it means that financial experts have combed through the fiscal data for our state and come away pessimistic. Moody's thinks there's a good likelihood that New Jersey's economic recovery may lag that of the nation as a whole. While the national economy has begun to look better lately, here at home, we still may have a tough hill to climb.
Tuesday, August 4, 2009
The GDP Figures
Concurrent with the good news from the stock markets in July that we've been talking about lately, there was a report released last Friday by the Bureau of Economic Analysis that provided us with more reason for optimism: GDP, which had been contracting at an annual rate of about 6 percent each of the past few quarters, shrunk by only 1 percent in the second quarter of 2009, from April through June.
At the same time, though, the BEA revised its estimate of GDP from the first quarter of 2009. While it had been previously reported that the economy shrink by 5.5 percent, now the BEA thinks it was more like 6.4 percent. The BEA also thinks that the economy contracted by 1.8 percent rather than the earlier report of 0.9 percent in 2008.
In a sense, this doesn't matter: The economy was what it was, and stock prices have already fallen, businesses have already failed, jobs have already been lost. Changing the big numbers doesn't change any of that. It does mean that the contraction was somewhat more severe than expected, meaning that this quarter's puny 1 percent presents a significant contrast to recent quarters.
But it's also worth remembering that not only are these economic numbers always presented in hindsight, they're also always subject to revision. Three months from now, there's always the possibility that we'll discover this past quarter wasn't as good - or as bad - as we think now.
At the same time, though, the BEA revised its estimate of GDP from the first quarter of 2009. While it had been previously reported that the economy shrink by 5.5 percent, now the BEA thinks it was more like 6.4 percent. The BEA also thinks that the economy contracted by 1.8 percent rather than the earlier report of 0.9 percent in 2008.
In a sense, this doesn't matter: The economy was what it was, and stock prices have already fallen, businesses have already failed, jobs have already been lost. Changing the big numbers doesn't change any of that. It does mean that the contraction was somewhat more severe than expected, meaning that this quarter's puny 1 percent presents a significant contrast to recent quarters.
But it's also worth remembering that not only are these economic numbers always presented in hindsight, they're also always subject to revision. Three months from now, there's always the possibility that we'll discover this past quarter wasn't as good - or as bad - as we think now.
Monday, August 3, 2009
A Hot Time in July
As we expected, Friday ended with the Dow Jones average posting its highest monthly gain since October 2002, with a sizable 8.6 percent increase. Significantly, the market was doing all this in July, which is historically a pretty blah month for investors. Traders and other Wall Street bigwigs tend to take vacation during July, dampening down the trading volume.
But this July was a firecracker. This was the Dow's best July performance since 1987. It was the best July performance by the Nasdaq since 1997, and the best by the S&P 500 since 1988. The Wilshire 5000, which contains all the equities in the United States with readily available price data (it now actually contains more than 5,000 stocks), posted the best July in the history of the index, which dates back to 1975.
This July, with people desperate for a turnaround in the markets, is probably different in many respects from previous Julys. Traders are working harder these days - those fortunate enough to still have jobs. And it's easy to get too excited about these figures: Both the S&P and the Nasdaq posted higher monthly gains as recently as April. But overall, the news for July was worth getting excited about.
But this July was a firecracker. This was the Dow's best July performance since 1987. It was the best July performance by the Nasdaq since 1997, and the best by the S&P 500 since 1988. The Wilshire 5000, which contains all the equities in the United States with readily available price data (it now actually contains more than 5,000 stocks), posted the best July in the history of the index, which dates back to 1975.
This July, with people desperate for a turnaround in the markets, is probably different in many respects from previous Julys. Traders are working harder these days - those fortunate enough to still have jobs. And it's easy to get too excited about these figures: Both the S&P and the Nasdaq posted higher monthly gains as recently as April. But overall, the news for July was worth getting excited about.
Subscribe to:
Posts (Atom)