5/30 Wall Street looks to economic data for clues on the Fed

Administrator - Monday, 30 May 2016 05:00

Wall Street looks to economic data for clues on the Fed
Memorial Day marks the unofficial beginning of summer, but baseball and barbecues may have to take a back seat to Fed watching for a while longer for investors who remain preoccupied with the timing of the Federal Reserve’s next rate increase.

The nonfarm payrolls report, a closely watched barometer of growth, is likely to provide an important clue given the increasingly hawkish tone of Fed officials with even Chairwoman Janet Yellen embracing the possibility of higher rates.

“Strong jobs data is a sign that the economy is doing better and that the chance of a rate hike is increasing,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

That said, economists surveyed by MarketWatch are projecting the economy to have created 158,000 new jobs in May, slightly below the 160,000 reported in April. The Labor Department will release May jobs data on Friday morning.

“We think May payrolls could be weak and if we’re right, this would likely spark concern about the domestic outlook and foil the Fed’s hopes for a midyear hike,” Paul Mortimer-Lee, chief economist for North America at BNP Paribas, said in a note.

Mortimer-Lee expects payrolls to come in around 110,000 in May.

“The Fed thinks first quarter’s growth setback was just temporary; payrolls as low as our forecast would seriously challenge that view,” he said.

The U.S. economy grew at an 0.8% annualized pace in the first quarter, slowing from a 1.4% expansion in the fourth quarter.

Consumer spending and core inflation data, both due on Tuesday, could also move the stock market if they point to building inflationary pressure, something the Fed won’t be able to ignore.

ScreenHunter_118 May. 30 18.28
ScreenHunter_119 May. 30 18.29


Gold hovers above $1,200-an-ounce after Yellen drops heavy hints on rate increases
Gold prices fell Monday, moving in the opposite direction of the U.S. dollar, which soared after comments by Federal Reserve Chairwoman Janet Yellen last week indicated an interest-rate hike could come this summer.

On Monday, gold prices GCN6, -0.78% dropped $5.50, or 0.5%, to $1,208.80 an ounce. Gold recovered from earlier, sharper losses when it briefly tapped $1,199 an ounce. That was after closing down $6.60 lower to $1,213.80 an ounce on Friday — Yellen’s comments came just ahead of the gold settlement. Prices lost 3% for the week to finish at a three-month low.

“It’s appropriate — and I have said this in the past—for the Fed to gradually and cautiously increase our overnight interest rate over time,” Yellen said, “and probably in the coming months such a move would be appropriate.” She made the comments at a Harvard University event where she received an award.

The dollar USDJPY, +0.77% meanwhile, rose above ¥111 yen. Higher interest rates or talk of that tends to lift demand for the dollar, which weighs on buyer interest in dollar-priced precious metals. As commodities don’t pay interest, higher interest rates can draw investors out of gold as they seek higher yields.

Yen weakness was exacerbated by a report that Prime Minister Shinzo Abe will likely delay a planned sales-tax increase.

“This metal has been punished considerably during trading this month and an appreciating Dollar simply adds to the pain,” said FXTM research analyst Lukman Otunuga on Monday in a note to clients. “A decisive breakdown and daily close below $1,200 could breach the flood gates with $1,160 as a target.”

For the month, gold prices stand to lose around 6.7%. Financial markets will be closed in the U.S. on Monday for the observance of Memorial Day.

Gold speculators and big futures traders pulled in on their bullish gold positions last week, according to media reports of the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.

1/17 Is Bitcoin Breaking Up?

Administrator - Sunday, 17 January 2016 11:20

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Is Bitcoin Breaking Up?
Rift widening over how to deal with the size limits within the virtual currency’s ledger of transactions

ScreenHunter_71 Jan. 17 11.18

A prominent bitcoin developer has labeled the currency a failed experiment, widening the rift over an arcane but critical technical issue that has divided the community for nearly a year.

“The fundamentals are broken, and whatever happens to the price in the short term, the long-term trend should probably be downwards,” developer Mike Hearn wrote on the blogging platform Medium. “I will no longer be taking part in bitcoin development and have sold all my coins.”

The fight stems from growing congestion on the bitcoin network caused by size limits within the currency’s ledger of transactions. If the limits aren’t raised, the result could be debilitating bottlenecks. But fixing it requires altering a system that has been profitable for those that use heavy computer power to record transactions.

Mr. Hearn has been a vocal proponent for expanding the size limits. The problem is bitcoin is open-source software, so any change has to be approved a majority of the community, and it hasn’t been able to agree.

This isn’t the first time somebody has written bitcoin’s obituary. What is different is this obit was being written by a prominent insider, and it hit a raw nerve in the community. The price of bitcoin, which had been stable for months, dropped sharply, down 20% last week to $358. The price regained some ground over the weekend, and many are still defending the currency in the wake of Mr. Hearn’s comments.


1/07 S&P 500, Dow industrials see worst ever start to new year

Administrator - Thursday, 7 January 2016 09:00

ScreenHunter_67 Jan. 07 20.55

S&P 500, Dow industrials see worst ever start to new year
S&P 500 wipes out $864 billion in value

Steep losses during the first four trading sessions of 2016 have marked the worst start to a new year for the S&P 500 and Dow Jones Industrial Average in history.

The S&P 500 SPX, -2.37% lost 100 points, or 4.9% over the past four sessions, closing at 1,943.09 on Thursday, its lowest level since October. The index lost $864 billion of its value over the past four days, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

The Dow Jones Industrial Average DJIA, -2.32% has lost 911 points, or 5.2% in 2016, according to FactSet. On Thursday, the Dow lost 392.41 points, or 2.3%, to 16,514.10, closing 10% below its intraday record in May.

Meanwhile, the Nasdaq Composite COMP, -3.03% fell 146.34 points, or 3%, to 4,689.43, erasing its modest 2015 gain. Over the past four sessions, the tech-heavy index lost 6.35%, its worst start to the year since 2000. All three main indexes are down about 10% from their record highs in May.



12/17 Friday is witching day for stocks

Administrator - Thursday, 17 December 2015 06:50

Friday is witching day for stocks

After suffering a serious post-Fed bashing, stocks could trade with both high volatility and high volume on the final quadruple witching Friday of the year.

The market sold off sharply into the close Thursday, with the Dow ending down 253 at 17,495 and the S&P 500 off 31 points or 1.5 percent to 2041. The twin culprits of falling oil prices and a stronger dollar reversed the previous day’s rally, along with concerns that the Fed may be too optimistic about raising rates.

Bond yields fell with the 10-year at about 2.22 percent, and the 2-year at 0.98 percent. Yields move inversely to price. West Texas Intermediate oil futures settled down 1.6 percent to $34.95 per barrel, just above the low of $34.53 per barrel reached on Monday. While that move seems tiny, oil prices rose nearly 10 percent off the Monday low before falling back down again.

“We’ve got a quadruple witch tomorrow. People are nervous today in advance of triple witching Friday,” said Leo Grohowski, chief investment officer with BNY Mellon Wealth Management. Quadruple “witching” expiration is the quarterly expiration of stock and index options and stock and index futures.

Thursday’s sell-off was “a little bit of a hangover” after Wednesday’s late-day rally in the wake of the Fed rate hike announcement, Grohowski said.


This could be what drives stocks next year

Worries that the Fed will keep hiking rates with a too weak economy is a recurring theme for the stock market.

Fed Chair Janet Yellen re-emphasized that economic data remain the most important signpost for the path of future hiking, after the central bank raised rates Wednesday.

For that reason, the ISM manufacturing survey and other reports in early January could play an outsized role for markets.

ScreenHunter_63 Dec. 17 18.47

According to UBS strategists, the ISM manufacturing survey, on the first trading day of the new year, could be a factor that helps determine the course of markets for the month of January.

For that matter, it could also influence performance for the year, if you believe the Wall Street adage — so goes January, so goes the year.

“Between the employment report in the first week of January and the ISM report, basically the first (trading days) of January are really going to set the tone for the entire month of January, and quite honestly looking to market history, it could very well set the whole tone for the year,” said Julian Emanuel, equities and derivative strategist at UBS.

The Dow was down triple digits Thursday as oil prices sank and the dollar strengthened. Jobless claims data were strong. The Philadelphia Fed’s gauge of manufacturing activity in the mid-Atlantic region fell to negative 5.9 from 1.9 in November.

“There’s a clear dividing line between bulls and bears now. If you’re bullish, you think the Fed is raising rates because the economy is good. It’s very gradual and everything’s going to be fine next year. That was yesterday’s rally,” said Peter Boockvar, chief market analyst at Lindsey Group.

“Then you get today, when you see the Philly Fed number, and you think ‘Geez, she’s embarking on this rate hike cycle in the seventh year of an economic expansion that’s showing signs of strain. She’s hiking interest rates, when global growth is soft and manufacturing is in recession. She’s raising interest rates and she wants to do it four times this year.'”

The December ISM survey will be especially important after it was surprisingly weak in November, falling to 48.6 percent, under 50 for the first time in three years. A reading under 50 signals contraction, and to many on Wall Street it reinforced what they were already seeing in other data — a manufacturing recession.

Boockvar said the bullish argument is that manufacturing is just a small part of the economy. “It’s all these numbers. There’s a lot of service businesses that do business with manufacturers, and the ISM services hasn’t been that great either. She picked a fine time to raise rates.”


12/13 ‘The Fed Awakens’ expected this week amid volatility spike

Administrator - Sunday, 13 December 2015 08:00

‘The Fed Awakens’ expected this week amid volatility spike

For about a decade there hasn’t been a new Star Wars movie or a Federal Reserve rate hike, and both are expected to drop this week. And while fanboys will be transfixed on “The Force Awakens,” investor attention will be firmly fixed on “The Fed Awakens.”

The highly anticipated December Federal Open Market Committee meeting comes on the heels of a fresh spike in volatility and falling oil prices. Last week, the Dow Jones Industrial Average DJIA, -1.76% dropped 3.3%, the S&P 500 index SPX, -1.94% fell 3.8%, and the Nasdaq Composite Index COMP, -2.21% shed 4.1%.

On Wednesday, the Fed will end its two-day policy meeting where the central bank is widely expected to raise interest rates for the first time since 2006, and Fed watchers are already trying to anticipate the rate of increases over 2016.

While the Fed meeting will be the centerpiece this week, investors will still be keeping a sharp eye on the falling price of oil and market volatility, according to Jeff Carbone, managing director and co-founder of Cornerstone Financial Partners.

Last week, Oil prices fell 11% and the CBOE Volatility Index VIX, +26.11% the so-called “fear index,” jumped 68%.

With the Fed promising, and not delivering on, a rate hike for more than a year, Carbone still thinks it’s too early. That sort of reluctance was echoed by Chicago Fed President Charles Evans earlier in the month.

One area Carbone points to is the selloff in high-yield debt ahead of the Fed meeting, which places even more strain on energy companies, which make up a large portion of the high-yield debt market. Last week, the S&P 500’s energy sector took the worst hit of the index’s 10 sectors with a 6.5% drop.

“The economy is not strong enough,” Carbone said. “I’m thinking they’re raising rates because they want to, and to get it going so we can move on.”

With headwinds like falling oil prices and a weakening dollar, expect volatility to continue this week right on up to the meeting, he said.

A handful of S&P 500 companies will also report earnings this week:

Report date Company/ticker (FactSet EPS / revenue estimate)
Mon., Dec. 14 None scheduled
Tues., Dec. 15 None scheduled
Wed., Dec. 16
Thurs., Dec. 17
  • Accenture PLC ACN, -2.14%  ($1.32 / $7.93 billion)
  • General Mills Inc. GIS, -1.16%  (83 cents / $4.62 billion)
  • Red Hat Inc. RHT, -1.32%  (46 cents / $521.5 million)
Fri., Dec. 18
  • Lennar Corp. LEN, -1.75%  ($1.11 / $2.98 billion)
  • CarMax Inc. KMX, -1.99%  (68 cents / $3.64 billion)
  • Darden Restaurants Inc. DRI, +0.03%  (42 cents / $1.62 billion)

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