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.
Friday, October 19, 2018
Thursday, October 18, 2018
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.
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.
Wednesday, October 17, 2018
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.
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.
Tuesday, October 16, 2018
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.
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.
Monday, October 15, 2018
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.
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.
Thursday, October 11, 2018
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.
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.
Wednesday, October 10, 2018
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.
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.
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