Archive for the ‘Market Update’ Category

FOMC Meeting This Week

And it’s almost a lock that they will raise rates again.  Some color from Brian Wesbury:   “When the Federal Reserve finishes its regularly scheduled meeting on Wednesday, based on the federal funds futures market, there is a 100% chance that the Fed will boost the federal funds rate by 25 basis points, to a new range of 1.5% to 1.75%.”

This should not come as a surprise, rates have been moving steadily higher since the election.  As this week begins US Treasury Yield (1 Month to 3 years) enter the week at 9-year highs.

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More from Brian Wesbury at advisorperspectives.com:  www.advisorperspectives.com

Hat tip Charlie Bilello

 

Earnings Drive Stocks

From Ryan Detrick:   Going back to 1991, what happened the past 12 times S&P 500 earnings were more that 10% for the yr?

The S&P 500 was higher all 12 times on a total return basis with a avg return of nearly 17%.

We are looking for mid-teen earnings growth this year, which should be a good sign for bulls.

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Hat tip Ryan Detrick of LPL Research

 

February Jobs Blowout

Nonfarm payrolls rose by 313,000 in February while the unemployment rate remained at 4.1 percent, the lowest since December 2000.

Wage growth was muted, however, with average hourly earnings up 2.6 percent on an annualized basis, 0.2 percentage points below expectations.

Stock market futures surged following the Bureau of Labor Statistics report.

The economy added 313,000 jobs in February, crushing expectations, while the unemployment rate remained at 4.1 percent, according to a Labor Department report Friday that could help quell inflation fears.

Economists surveyed by Reuters had been expecting nonfarm payroll growth of 200,000 and the unemployment rate to decline one-tenth of a percent to 4 percent.

An increase in the labor force participation rate to its highest level since September 2017 helped keep the headline unemployment number steady, as the number of those counted as not in the workforce tumbled by 653,000 to just over 95 million.

The total counted as “employed” in the household survey surged by 785,000 to a record 155.2 million.
Rollbacks Matter.
Hat tip CNBC.com

More On Fear

Bullish sentiment just saw its largest two-week decline since June 2013:

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Here’s our post, on the same subject, from earlier this week:  You Can Almost Smell The Fear

Hat tip Bespoke Research

Unemployment Numbers Tomorrow

Here’s a preview, courtesy of Brian Gilmartin of fundamentalis.com:

      The most important economic indicator of each month is the nonfarm payroll report usually released the first Friday of the month, and tomorrow’s February ’18 jobs report is expected to see 195,000 – 200,000 “net new jobs” created within the US economy, in line with the 170,000 to 210,000 that were seen in the last 4 years of the Obama Administration.

      Watch the unemployment rate – it hasn’t been since the late 1960’s that we’ve seen a year where the US unemployment rate has stayed below 4%. I have to think the unemployment rate drops under 4% in 2018.

     Jobless claims last week were at a 42-year low, at 210,000 and while they rose a little this morning, the fact is – as one commentator just noted – “the US job market is as tight as a drum”.

 

All The Bulls

Since World War II, here’s how they look: 

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We are currently in the second longest bull market, five more months to become number one.

Hat tip Ryan Detrick/LPL Research

You Can Almost Smell The Fear

The constant pounding of ‘negative news’ of late has left a mark.  The latest sentiment readings are entering extreme ‘fear’ territory:

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For patient long term investors this is certainly good news.

More here from Alan Steel Asset Management:  www.alansteel.com

Cohn Walks, Stocks Tank

Rough morning ahead for the S&P 500 Index.  The lede:  Stock futures are signaling a sharp pullback following the resignation of White House economic advisor Gary Cohn. Cohn’s departure has reignited fears of a trade war — which have weighed on equities over the past week — especially with European leaders warning of retaliatory tariffs. Turning to economic data, the ADP employment report for February revealed 235,000 new jobs in the private sector, blowing past expectations. Revised production data for the fourth quarter, meanwhile, came in flat. But while futures are off their lows, the Dow is still trading more than 200 points below fair value.

And now this morning’s good news:

  • Private payrolls rose by 235,000 in February, well above Wall Street estimates of 195,000, according to a report from ADP and Moody’s Analytics.
  • Growth actually decelerated slightly, as January posted an upwardly revised 244,000 from the initially reported 234,000.
  • The Moody’s/ADP report precedes the more closely watched Labor Department nonfarm payrolls count, with economists expecting that number to be around 200,000.

ISM Manufacturing Data and Recessions

Based on recent ISM numbers, which reached another new cycle high, we are very likely quite a long way from another recession.  The previous five recessions started on average roughly four years after ISM peaked:

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ISM Manufacturing Explained:  The ISM Manufacturing Index is based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment, production, inventories, new orders and supplier deliveries. A composite diffusion index monitors conditions in national manufacturing and is based on the data from these surveys.

Hat tip Ryan Detrick/LPL Research
Investopedia.com

Happy Birthday

The current bull market celebrates a birthday this week.  On March 9th it will turn 9 years old becoming the second longest bull run in history.  Only the rally in the 1990’s is longer:

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What lies ahead?  Great stuff here from LPL Research: 

The big question to investors now, with all the recent worry over tariffs, higher rates, and inflation, is if the bull market can make it to 10 years old. “This bull might be old, but remember bull markets don’t die of old age, they die of excesses. The reality is that we simply aren’t seeing the excesses seen at other major tipping points,” explained John Lynch, Chief Investment Strategist.

Excesses we monitor are overspending, overborrowing, and overconfidence. We aren’t seeing major warnings signs from these three currently. For example, borrowing (leverage) at current levels is nowhere near what we saw leading up to the Financial Crisis last decade.

Hat tip Ryan Detrick

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