Most of the time, the U.S. stock market looks to 3 factors to support its upward trend – let’s grade each of the factors: CONSUMER SPENDING: I grade this factor a C (neutral). THE FED AND ITS POLICIES: I grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices. BUSINESS PROFITABILITY: I grade this factor a B+ (favorable). Many of the biggest companies in the U.S. reported their first quarter profits last week. Last week’s earnings reports continued to indicate adequate profits to support stock prices. We will evaluate this grade for possible increase this coming week. NOTE: the above grades remain unchanged from last week.
Monthly Archives: May 2013
The Economy
Last week, on the “good news” side of the ledger, U.S. weekly jobless claims come in at their lowest reading since January 2008. German factory orders for March grow 2.2% versus expectations of a decline of 0.5%. And, Bank of Korea joins the party, cuts key interest rate to 2.5% from 2.75%. Housing remains a strong positive force as Mortgage Bankers Association mortgage applications climbed 7% week-over-week, rising for the 5th consecutive week. But on the negative side, April retail sales gained 2.8% v expectations of +3.5% and Wholesale sales came in weak, falling 1.6% month-over-month versus expectations of 0.1% growth. (Source: Big Picture).
Heads Up!
Another sign of change through the free market system: the first refinery to be built in the U.S. since 1976 is under construction – in NORTH DAKOTA. The refinery will sharply cut the cost of diesel fuel in the state and reduce North Dakotans’ dependency on oil products refined in other states or countries.
The Numbers
Last week, U.S. Stocks and Foreign stocks increased. Bond decreased. During the last 12 months, STOCKS outperformed BONDS. Returns through 4-19-2013 1-week Y-T-D 1-Year 3-Years 5-Years 10-Years Bonds- BarCap Aggregate Index -.4 .2 2.8 5.2 5.2 4.9 US Stocks-Standard & Poor’s 500 1.3 15.4 23.1 14.6 5.6 7.9 Foreign Stocks- MS EAFE Developed Countries .5 9.7 21.6 6.2 -3.8 6.1
LAST WEEK -Here is a look the cause of the volatility created this week by hedge funds, institutions, and those we call “traders”.
Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.
Motivational Quote of the Week
Investment Quote of the Week
“If anybody really knew, they wouldn’t tell you.”
– Anonymous
“Your Financial Choices”
“Your Financial Choices” The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP. This week, Laurie will discuss: “Doing your own Due Diligence on financial information” Laurie will take your calls on this topic and other inquiries this week. This show will be broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/Macungie area – or listen to it online from anywhere on the internet.
For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.
Personal Notes
“The mother’s heart is the child’s schoolroom” -H.W. Beecher Heartfelt thanks to my wife Jo Anne for being the mother of our two daughters and fondest memories of my mother Isabelle Riddle (1919 – 2002)
The Markets This Week
It has become a familiar refrain this year but one that’s by no means unwelcome: Stocks hit record highs last week. The Dow Jones Industrial Average closed above 15,000 for the first time, and equities rose about 1% on a lack of bad news, on decent earnings and economic news, and perhaps from just plain habit. Nothing seems to unnerve this market; old bogeymen, like European debt woes and North Korean saber-rattling, remain locked in the basement for now, says Jonathan Corpina, a senior managing partner at Meridian Equity Partners. The worry, if there were one, is that such concerns could return and swat the market during the soon-to-arrive languid summer months, a time when markets traditionally look for things to worry about, Corpina adds. For now, investors are busily rotating out of defensive stocks, he says, and moving money into technology and financial shares. Our guess is that only a sudden swoon will change that. On the week, the Dow closed at 15,118.49, up 145 points, or 1%, and an all-time high. The S&P 500 increased 19 points, to 1633.70, also a new high-water mark. The Nasdaq Composite index jumped 1.7%, or 58 points, to 3436.58. With the Dow up 15% already this year, it’s getting tougher to find relatively cheap stocks inside this 30-member and exclusive megacap club. The average 2013 ratio of price/earnings per share for the index is now about 14, with a high of 21.5 times for Home Depot (ticker: HD) and a low of six for Hewlett-Packard(HPQ), according to Thomson Reuters. The average earnings-per-share growth expected this year is just 3%. For investors looking at the Dow now, it’s worth noting that in the past three weeks the broad market has seen a rotation into stocks in sectors like tech, up 9%; materials, up 7%; and energy, up 6%. Concurrently, defensive sectors that have been popular all year—consumer staples, health care, and telecoms—have begun to trail the market. That could represent a shift to a search for growth from a search for yield Source: Barrons Online).
The “Heat Map”
Most of the time, the U.S. stock market looks to 3 factors to support its upward trend – let’s grade each of the factors: CONSUMER SPENDING: I grade this factor a C (neutral). THE FED AND ITS POLICIES: I grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices. BUSINESS PROFITABILITY: I grade this factor a B+ (favorable). Many of the biggest companies in the U.S. reported their first quarter profits last week. Surprisingly, many beat their forecasted profits. The scoreboard with two-thirds of the S&P 500 companies reporting their earnings: 70% have beat their earnings estimates. And, the S&P 500 will likely report record earnings for this quarter. If this trend holds for the next two weeks, we will raise this grade. NOTE: the above grades remain unchanged from last week.