The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week Laurie and her guest, Steve Stelzman of The Mortgage Company will discuss: “The Mortgage Approval Process.”
Laurie and Steve will take your calls on these topics and other inquiries this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. 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 and Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville and 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.
Stocks finished a seesaw week in which the sizable gains notched by Thursday evaporated Friday. Still, the major indexes finished slightly higher and snapped losing streaks.
After rising nearly 1%, boosted by bullish retail and jobless data, markets were whacked by a breakdown in talks between the International Monetary Fund and Greece over the country’s bailout. The IMF left the negotiating table Thursday. Greece has a June 18 repayment deadline, or it faces default and possible exit from the monetary union. The last nail in the rally’s coffin came from Congress’s vote Friday to defeat an important part of the Obama administration’s proposed fast-track Pacific trade bill.
The Dow Jones Industrial Average rose 49 points, or 0.3%, on the week, to 17,898.84. The Standard & Poor’s 500 index inched up one point to 2094.11. The Nasdaq Composite fell 17, or 0.3%, to 5051.10.
Although Greece is a small country and its economic plight is well known, a default “can scare people,” says Thomas Lee, head of research at Fundstrat Global Advisors. There might be some impact on risk appetite or on a particular bank, says Lee. But, he adds, “it doesn’t pose the same risk it did three years ago.”
Christopher Hyzy, chief investment officer of U.S. Trust Bank of America Private Wealth Management, says big investors are moving money from fixed-income assets to cash. A bullish Hyzy says “…that cash should go into equities once the data show there is no worry over economic growth.”
Americans have paid down and/or refinanced their mortgage debt to an incredible degree. Mortgage payments as a percentage of disposable income has dropped to the lowest level in 34 years, according to Federal Reserve statistics. Lower mortgage payments mean consumers have more spendable income – a big plus for future economic growth in the US.
Last week the Positive economic reports outweighed the Negative. Here are the Positives:
Job growth in May was well above expected at 280k (estimate of 226k); prior two months saw a combined upward revision of 32k. Unemployment ticked up one tenth to 5.5% because of a 397k increase in the labor force relative to the household survey gain of 272k. Participation rate was up one tenth to 62.9%.
Wages rose by .3% month over month and 2.3% year over year. That year over year gain matches the most since 2009. The payroll 6 month average is 236k vs the 260k average in 2014 as the May gain made up from only modest job gains in January, March and April. US Initial jobless claims totaled 276k, 2k less than expected but last week was revised up by 2k to 284k.
Autodata said 17.79mm cars & trucks were sold on a SAAR basis in May, well more than expectations of 17.3mm. It’s the best pace since 2005.
The Institute of Supply Management (ISM) manufacturing index for May rose to 52.8 from 51.5, above estimates of 52.0. It is off the lowest level since May ‘13. ISM said, “Comments from the panel carry a positive tone in terms of an improving economy, increasing demand, and improving flow of goods through the West Coast ports.”
Post-port strike, April trade deficit was $40.9b, about $3b narrower than expected. Exports rose for a 2nd straight month after 4 months of declines. Imports fell by 3.3% after a sharp 6.5% rise in March which followed port strike related declines in January and February. This will lift Q2 Gross Domestic Product estimates by a few tenths all else equal.
Personal Consumption Expenditures inflation figure for April was flat and up just .1% at the core rate, both one tenth less than expected. The year over year gain for the headline number was up .1% and up 1.2% at the core rate.
Personal income rose .4% month over month in April, one tenth more than expected. Private sector wage and salaries were up by .2% month over month and a pretty good 4.6% year over year.
Eurozone services Purchasing Managers Institute for May was 53.8, better than the initial print of 53.3 but down from 54.1 in April and vs 54.2 in March. Unemployment rate in April for the region fell to 11.1%, a level last seen in March ’12.
The final look at Eurozone May manufacturing Purchasing Manager Institute was 52.2 vs 52 in April and 52.2 in March and matches the best since May.
The European Markit Retail Purchasing Manager Institute rose back above 50 for the first time since June 2014 at 51.4 vs 49.5 in April.
Here are the Negative economic reports last week:
May Institute of Supply Manager services index fell to 55.7 from 57.8. It’s below the estimate of 57 and is at the lowest level since April 2014.
Mortgage Bankers Association said refi applications fell 11.5% week over week to the lowest level in 5 months as the recent uptick in mortgage rates has had an immediate impact on the desire to refi. Refi’s are now down 1.2% year over year. Mortgage applications to buy a home fell 3% week over week to the lowest since late March but are still up 14.5% year over year.
Global bond bubble has some more air come out in a messy week. Investors are saying no mas to taking an enormous amount of capital risk for very little reward in fixed income as central bank interest rate suppression has reached its limit. The US Treasury market in particular is calling out the Fed. Are they listening?
Personal spending in April was flat month over month, two tenths light vs expectations.
April factory orders report saw Core capital spending (non defense capital goods ex aircraft) revised down to a drop of .3% vs the initial print of up 1%. The year over year drop is now 2.6% vs down .6% first reported.
Q1 productivity was revised down to an annualized decline of 3.1% from -1.9% and with this, unit labor costs rose 6.7% from 5% initially reported for Q1. On a year over year basis, productivity in Q1 was up just .3%.
Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” that support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade is a B (favorable).
THE FED AND ITS POLICIES: We continue to 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: This factor’s grade is a B– (slightly above average). This was raised this week because the first quarter’s profits were better than expected and the current quarter is looking promising.
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 2, the same as last week. These risks deserve our ongoing attention.
Last week,U.S. Stocks, Foreign Stocks and Bonds all decreased. During the last 12 months, STOCKS outperformed BONDS.
Returns through 6-5-2015
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
-1.4
-.4
2.1
1.8
3.5
4.4
US Stocks-Standard & Poor’s 500
-.6
2.6
19.1
20.2
16.9
8.0
Foreign Stocks- MS EAFE Developed Countries
-1.7
6.7
-2.5
15.5
9.8
5.3
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.
Your Financial Choices airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week guest hosts Rodman Young CPA/PFS, CFP Senior Vice President of Valley National and Lori Young will discuss: “Transitions – Financially and Emotionally”
Rod and Lori will take your calls on these topics and other inquiries this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. 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 and Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville and 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.
The U.S. economy is back, chugging ahead with strong job gains and rising wages. People who had given up on ever finding a job decided to try their luck again. Dealers can barely keep the cars from flying off the lots. Factory machines are humming.
Good news, right?
Well, stock investors aren’t quite that predictable. The major U.S. stock indexes traded slightly lower for the week despite positive economic data—or perhaps because of it. Investors had been enjoying the so-so economic growth that persisted through much of this recovery. A week of unequivocally good news, on the other hand, increases the likelihood of higher interest rates in the future. “Investors think that the ideal scenario is for growth to be just sluggish enough for the Fed to stay on hold forever,” says Jim O’Sullivan, chief U.S. economist at High Frequency Economics.
Also weighing on investors’ minds are the uncertain prospects for keeping Greece in the euro zone. Last week the country delayed some payments to creditors, and Greek leaders scrambled to come to a deal before they run out of money.
The Dow Jones Industrial Average dropped 161 points, or 0.9%, on the week, to 17,849.46, its third consecutive weekly decline. The Standard & Poor’s 500 index fell 15 points to 2092.83. The Nasdaq Composite was essentially flat, ending at 5068.46. The yield on 10-year Treasury notes jumped 0.305 percentage point on the week, to 2.402%, the largest gain since June 2013, in anticipation of rising interest rates.
Recent economic data are simply too strong for investors, or the Fed, to ignore. The U.S. economy added some 280,000 jobs in May, and average hourly wages rose 0.3%, above expectations for 0.2% growth. Cars sold at an annualized rate of 17.8 million in May, also well ahead of expectations, and the ISM manufacturing index likewise showed surprising strength.
