When not tweeting tributes to Joan Rivers or getting in line to buy the Apple iPhone 6 for their back-to-schoolers, investors’ attentions last week were fixed squarely across the pond.

Economies throughout the euro zone, including mighty Germany, reported weakening growth in August as sanctions on Russia began to reverberate. Even the U.K., previously unaffected by the fragile financial state of the European Union, saw its manufacturing Purchasing Managers Index decline. The prospect of a full-blown slowdown led the European Central Bank to cut already-low interest rates from 0.15% to 0.05% and announce plans for additional stimulus to try to keep its recovery on track. A slowdown in Europe is seen as the biggest risk to growth here, especially since the euro zone accounts for 20% of world gross domestic product, and multinational earnings are connected strongly to its economic activity.

“We have to be on alert for the slowdown in the euro zone to come home and hit the U.S.,” warns Nancy Lazar, founder and chief economist of Cornerstone Macro, an independent provider of economic research and investment strategies.

U.S. markets seemed to shrug off concerns, rising slightly in the Labor Day-shortened week. The Dow Jones Industrials Average ended Friday up 38.91 points to close at 17,137.36, the second highest close in history. The S&P 500 rose 4.34 points on the week to end at a record close of 2007.71 and the Nasdaq Composite Index advanced 2.63 points to close at 4582.90.

Conditions remain strongly supportive of continued growth domestically, Lazar notes, and the U.S., for now, remains decoupled from the troubles abroad and is driving what global growth there is. Reflecting that strength, and notwithstanding a weaker-than-expected payroll report, her firm raised its estimate for third-quarter gross domestic product growth in the U.S. to 4% from 3.5% based on strong auto and heavy-truck sales, improving housing starts, increasing exports, and stronger capital spending by businesses. Indeed, Lazar expects the economic expansion in the U.S. to last three to five more years.

She’s not alone. Morgan Stanley strategist Adam Parker and economist Ellen Zentner believe the probability of a cycle peak remains low and predict the S&P 500 could reach 3000, should the expansion continue for five years or more. Their estimate is based on earnings per share growth of 6% a year and a price-to-earnings ratio of 17 times. The duo define the bull market of the past five years as the deleveraging and “repair phase” following the financial crisis. Only now, they say, is the U.S. economy entering “the very early stages of expansion.”

Another sign of confidence: Initial public offerings are at levels not seen since 2007, and total proceeds in 2014 could reach $80 billion, the most since 2000 and up by almost 50% from last year, according to Renaissance Capital. Already 188 companies have come public and there could be as many as 100 more by year end, with the most notable China’s e-commerce giant Alibaba set to raise as much as $24 billion.

(Source: Barrons Online)

“What, me worry?” In the face of escalating geopolitical tensions, the stock market offered the rallying cry made famous by Mad magazine’s Alfred E. Neuman. Apart from a brief slip Thursday, after Ukraine accused Russia of invasion, the market was so unfazed that the Standard & Poor’s 500 index finished the week at an all-time high.

Continued strong U.S. economic data, combined with the close of a better-than-expected second quarter earnings period, trumped the worries, even the threat of war. Trading, however, was light ahead of the Labor Day holiday Monday, and by Friday many market participants had slipped off to an early start of the weekend.

The market doesn’t discount the same thing over and over again, even violence. From a purely investment perspective, trouble in the Middle East for U.S. markets is more important than in Ukraine because of its potential effect on oil markets and energy prices, says Joseph Amato, the chief investment officer of Neuberger Berman. Market action suggests investors are paying attention to the geopolitical tensions but not expecting an energy crisis, he adds.

The current level of tensions is relatively low for the market and “dwarfed” by the potential impact on stocks of actions by the Federal Reserve and the European Central Bank, he says. Last week, the Dow Jones Industrial Average rose 97 points, or 0.6%, to 17,098.45, and the S&P 500 climbed 15 to a record 2003.37. It rose nearly 4% in August. The Nasdaq Composite index advanced about 42 points, or 0.9%, to 4580.27.

Things might get bumpy by October, as the Fed winds down its U.S. Treasury bond buying, says Benjamin Halliburton, the chief investment officer at Tradition Capital Management. As that happens, investors will be on pins and needles, and volatility could increase.

(Source: Barrons Online)

The stock market last week was like Arnold Schwarzenegger in Conan the Barbarian—quiet, strong, and hard to understand.

Both the Dow Jones Industrial Average and Standard & Poor’s 500 index registered their best gains of the summer, with the Dow rising more than 2%, even as trading volume closed the week at its lowest level of the year.

The market’s rise is somewhat odd given that traders spent most of the week waiting for Friday, when Federal Reserve Chair Janet Yellen gave a speech in Jackson Hole, Wyo. Markets were sluggish after her speech, which gave few hints about when the Fed might start raising interest rates.

“Her strategy is probably to deliberately underwhelm,” says Luke Bartholomew, an investment manager with Aberdeen Asset Management. “She’s saying the Fed might raise rates soon, but then again might not. That kind of vagueness suits her because it leaves options open.”

Earlier in the week, Fed minutes indicated that the debate is heating up among policy makers over the timing of a rate hike. The rising hawkish tone appears to have made a mark, as the yield on the two-year Treasury rose 0.08 percentage points to 0.492%, its largest gain since March. Although the market seems to think the Fed will start to hike in June 2015, “everyone seems to be leaving the door open to the possibility it will start in March,” says David Lafferty, the chief market strategist at Natixis Global Asset Management.

The Dow jumped 338 points, or 2%, last week, to 17,001.22, its third consecutive week of gains. The S&P 500 rose 33 points to 1988.40. The Nasdaq Composite index rose 74 points, or 1.6%, to 4538.55. Trading volume on both the NYSE and NASDAQ hit the lowest full-day level this year on Friday.

Traders remain fixated on violence and political tensions throughout the world, which included the beheading last week of an American journalist by an Islamic extremist group and continued strife in Ukraine. But the turmoil didn’t seem to affect trading as much as it has in the past.

“Early in the week, geopolitics seemed to fade and that allowed markets to focus more on the generally better earnings and fundamentals,” Lafferty says.

Better-than-expected housing data also buoyed stocks, as existing- home sales and housing starts rebounded strongly. Home Depot (ticker: HD) surprised investors with strong results for the spring quarter, sending the stock 8.8% higher on the week to lead the Dow. Just three Dow stocks ended the week in the red.

“The move in the market has been very broad-based, which is a good underlying sign of fundamental strength,” Lafferty says.

(Source: Barrons Online)

Strong economic news and mostly positive earnings reports couldn’t offset fears last week that the Federal Reserve finally has started to pull away the punch bowl, albeit very slowly. Stocks had their worst one-week drop since January, and the Dow Jones Industry Average toppled into negative territory for the year.

The Federal Reserve delivered a modestly more upbeat assessment of inflation, jobs, and the economy after its two-day meeting last week. Its assessment, combined with last week’s stronger-than-expected report on gross domestic product and news of 209,000 job gains in July, cemented the belief that the central bank will conclude its Treasury purchases in October and start raising rates in 2015 if the economy continues to improve.

“This is the beginning of a little taper tantrum,” says Diana Joseph, chief investment officer at Barrington Strategic Wealth Management. As the Fed’s easy money-policies reverse, people are forced to focus more on what they’re paying for investments. If last week is any indication, investors didn’t like what they saw in their portfolios.

The Dow fell 467.20 points this week, or 2.75%, to 16,493.37. The Standard & Poor’s 500 index dropped 53.19 points to 1925.15. The Nasdaq Composite index fell 96.92 points, or 2.18%, to 4352.64.

The S&P is down 3.16% from this year’s high of 1987.98 and the selloff could have more room to run. “My incoming calls from financial advisors are running 10-to-1 with most asking what they should buy, and that’s not good,” says Jeffrey Saut, chief investment strategist at Raymond James.

The calls indicate advisors are still optimistic and willing to buy the dips. “It feels to me like we’ve started a 10% to 12% correction,” says Saut, who has 25% of his portfolio in cash. But he’ll be more certain when he sees the market’s action next week.

Among the bigger losers in the Dow last week were shares of Exxon Mobil (XOM) and Chevron (CVX). Both fell by just over 4% despite strong earnings reports, as they disclosed they had experienced declines in production in the latest quarter. The price of crude fell during the week to $98 a barrel.

(Source: Barrons Online)

Rising geopolitical tensions and violence in global hot spots slowed, but didn’t deter, stocks from finishing a touch higher on the week. Trading was choppy amid heightened concerns about Ukraine and the Middle East, but the broad market rose 0.3% on light summer volume.

Friday saw a recovery from lows the day before, when investors scattered in the wake of loud Russian saber-rattling over the ongoing unrest in Ukraine and the U.S. authorization of airstrikes in Iraq. Shares ended higher than the week’s lows, but below the highs they reached Monday.

Seemingly ignored were continued good second-quarter earnings reports and strong U.S. macro-economic data, such as falling jobless claims and a better-than-expected non-manufacturing expansion number.

The broad rebound was led by a revived utilities sector, suggesting that many investors are seeking safer equity bets. This is supported by the weekly rise in Treasury bond prices as well, even though investors generally expect interest rates to rise in the coming 12 months. The question, of course, remains when.

Last week, the Dow rose 61 points, or 0.4%, to 16,553.93, and the S&P 500 index climbed 6.44 points to 1931.59. The Nasdaq Composite rose 18, or 0.4%, to 4370.90.

Friday saw a relief rally on easing fears about what the U.S. might do militarily in Iraq and the escalation in Ukraine, says Malcolm Polley, president of Stewart Capital Advisors. With the stock market price/earnings ratio “not cheap” at 16 times, interest rates at a secular bottom, and risks of war seemingly all around, “…equity investors don’t know where to go,” so it’s no surprise that safer utility shares rallied.

(Source: Barrons Online)

Strong economic news and mostly positive earnings reports couldn’t offset fears last week that the Federal Reserve finally has started to pull away the punch bowl, albeit very slowly. Stocks had their worst one-week drop since January, and the Dow Jones Industry Average toppled into negative territory for the year.

The Federal Reserve delivered a modestly more upbeat assessment of inflation, jobs, and the economy after its two-day meeting last week. Its assessment, combined with last week’s stronger-than-expected report on gross domestic product and news of 209,000 job gains in July, cemented the belief that the central bank will conclude its Treasury purchases in October and start raising rates in 2015 if the economy continues to improve.

“This is the beginning of a little taper tantrum,” says Diana Joseph, chief investment officer at Barrington Strategic Wealth Management. As the Fed’s easy money-policies reverse, people are forced to focus more on what they’re paying for investments. If last week is any indication, investors didn’t like what they saw in their portfolios.

The Dow fell 467.20 points this week, or 2.75%, to 16,493.37. The Standard & Poor’s 500 index dropped 53.19 points to 1925.15. The Nasdaq Composite index fell 96.92 points, or 2.18%, to 4352.64.

The S&P is down 3.16% from this year’s high of 1987.98 and the selloff could have more room to run. “My incoming calls from financial advisors are running 10-to-1 with most asking what they should buy, and that’s not good,” says Jeffrey Saut, chief investment strategist at Raymond James.

The calls indicate advisors are still optimistic and willing to buy the dips. “It feels to me like we’ve started a 10% to 12% correction,” says Saut, who has 25% of his portfolio in cash. But he’ll be more certain when he sees the market’s action next week.

Among the bigger losers in the Dow last week were shares of Exxon Mobil (XOM) and Chevron (CVX). Both fell by just over 4% despite strong earnings reports, as they disclosed they had experienced declines in production in the latest quarter. The price of crude fell during the week to $98 a barrel.

(Source: Barrons Online)

On a day when one of the most famous traders of the past 50 years passed away, investors briefly lost confidence in the market, sending the Dow Jones industrials into the red for the week and back under 17,000.

Economic news and earnings reports mostly have painted a sunny picture for the market in the past few sessions, but earnings reports from Visa (ticker: V) and Amazon.com (AMZN) put investors in a sour mood on Friday. The Dow fell 123 points, or 0.7%, on the day.

Alan “Ace” Greenberg, who rose from the literal stock room to the top of Bear Stearns, died at 86 on Friday, six years after his firm succumbed to the credit crisis and was sold to JPMorgan Chase (JPM). Greenberg was the quintessential trader—after he stepped down as CEO in 1993, he continued trading equities for the firm.

If Greenberg typified the old hustle and bustle of the trading floor, this week’s market action had all the pulse-pounding thrills of cruise-ship shuffleboard. Volume remained low, and stocks mostly traded in a tight range.

For the week, the Dow fell 140 points, or 0.8%, to 16,960.57. The Standard &Poor’s 500 index rose 0.1 points to 1978.34. The Nasdaq Composite index rose 17 points, or 0.4%, to 4449.56.

A few pieces of good news stood out last week, says Keith Lerner, chief market strategist at SunTrust Private Wealth Management.

Weekly jobless claims fell to 284,000, the lowest level since 2006.

And China’s manufacturing activity rose to an 18-month high in July, according to a gauge put out by HSBC. The good news out of China helped boost stocks there and “eased some of the angst” that China is in for a prolonged slowdown, Lerner says. The Shanghai Composite Index rose 3.3% on the week. Emerging-market stocks have been outperforming U.S. counterparts, as investors have searched for better values, he adds.

The iShares MSCI Emerging Markets (EEM) exchange-traded fund has outperformed the S&P 500 by about 10 percentage points since mid-March, and rose 1.9% last week. “People are really searching for assets that look cheap,” Lerner says. “Emerging markets are the latest beneficiary of that trend.”

On the negative side, government data on housing starts showed a 9.3% decline in June, and builder DR Horton (DHI) posted disappointing earnings, causing more consternation about the housing market.

(Source: Barrons Online)

The market is not known for feelings beyond fear and greed. And yet, the hope occasioned by strong U.S. corporate earnings trumped investors’ concerns last week about violence in Ukraine and Middle East to send stocks higher by Friday’s close.

The positive finish came despite a big dip Thursday, which followed an all-time high Wednesday by the Dow Jones Industrial Average, the fifteenth this year. Small-company stocks lost ground, however.

The beginning of a ground war in Gaza and the downing of a commercial airliner over eastern Ukraine that caused nearly 300 deaths grabbed headlines Thursday. However, with second-quarter earnings season well underway, decent-to-strong profits from the likes of Honeywell International (ticker: HON), whose shares rose 2% Friday, dislodged the negative global news from investors’ focus. Intel (INTC), Morgan Stanley (MS), and UnitedHealth Group (UNH) also reported good second-quarter results.

The market responded to the strong results, says Kate Warne, investment strategist at Edward Jones, particularly since they seem to come from a nice cross-section of the American economy, such as industrials and big money-center banks. “That gives investors greater confidence that we will see continued good earnings,” she says.

Last week, the Dow advanced 156 points or 0.9% to 17,100.18, down slightly from the record high reached Wednesday of 17,138.20. The Standard & Poor’s 500 index rose 11 points to 1978.22. The Nasdaq Composite index rose 17, or 0.4%, to 4432.15. The small-cap Russell 2000 index bucked the trend, falling almost 0.7% to 1151.61.

Investors reacted to the headlines at first, but the real investor fear, Warne notes, was of a wider escalation of violence. When that didn’t happen Friday, stocks rose.

The week’s tragic events had a temporary psychological effect on the market, adds John Manley, chief equity strategist at Wells Fargo Funds Management, “but [they] won’t have a tremendous effect on the fundamentals.”

The Federal Reserve, he notes, is still “applying positive monetary pressure on stocks, valuations aren’t expensive, and earnings trends are good. What’s wrong with that?” He thinks second-quarter profits will end up surprisingly good.

Among investors, the crowd that passes for bears these days is one that calls for a correction of 10% or more in the market. “But a correction would come from a fundamental change,” says Warne. “It would come from a place the market doesn’t expect.”

This week the earnings season really heats up with reports from roughly 150 companies in the S&P 500.

(Source: Barrons Online)

Stocks backtracked almost 1% last week in quiet trading, mainly on profit-taking and short-lived jitters caused by reports that a relatively small European banking firm missed debt payments. For a few moments last Thursday, it looked like a Greek banking crisis redux.

Riskier small caps took the brunt of the beat-down, suggesting the return of the “risk off” trade. But the drop likely had more to do with a minor reversal—so far—of end-of-second-quarter capital flows into small-cap stocks, and profit-taking from record highs reached the previous week. Nervousness about the European banking sector reemerged briefly Thursday morning after news reports said Portuguese conglomerate Espírito Santo International—the largest shareholder in the parent of Portugal’s largest bank, Banco Espírito Santo (ticker: BKESY)—missed a debt payment. Stocks pared the losses Friday.

With the 64-month-old bull market not far from all-time highs, investors will be better served by focusing on U.S. shores in coming weeks as second-quarter earnings tumble out in bunches from the likes of JPMorgan Chase(JPM), Intel (INTC), Johnson & Johnson (JNJ), and Google(GOOGL), among others in the Standard & Poor’s 500 index.

Despite the contraction in U.S. gross domestic product in the first quarter, there’s a basic market assumption that the economy is on a growth track, if a slow one, says Richard Weeks, partner at HighTower Advisors., as many assume, he adds.

Last week, the Dow Jones Industrial Average fell 0.7% or 125 points to 16,943.81, and the S&P 500 lost 18 or 0.9%, to 1967.57. The Nasdaq Composite index dropped 1.6%, or 70, to 4415.49. The Russell 2000 index fell 4% to 1159.93.

At the Federal Reserve’s Open Market Committee meetings last week, the Fed reaffirmed that its bond-buying monetary stimulus will wind down in October.

A U.S. economic recovery is taken for granted, says Michael Shaoul, chairman of Marketfield Asset Management. U.S. companies, by dint of keeping a tight lid on labor and capital expenditures, have produced growing earnings. To the extent there are negative second-quarter profit surprises, perhaps caused by labor or capital capacity constraints, it will lead to choppy action in the market in the near term, he says. The bull “needs good corporate data.”

Eventually, this market is going to correct and it’s not likely to be the result of woes at a small bank in a small country on the edge of Europe.

(Source: Barrons Online)

The past week saw the stock-market debut of a company called GoPro, which makes video cameras you can strap to your head. If investors strapped cameras to their heads to film the highs and lows of finance last week, no one would watch.

Trading remains subdued, and stocks mostly treaded water. The Dow Jones Industrials and Standard & Poor’s 500 fell slightly on the week, in reaction to more hawkish banter by Federal Reserve officials. The talk suggests the central bank might raise interest rates as soon as the first quarter of 2015, slightly earlier than investors have been expecting.

After closing at a new record high the previous Friday, the Dow finished the week down 0.6%, or 95 points, to 16,851.84. The S&P 500 index fell 1.9 points, to 1960.97. The Nasdaq Composite added 30 points, or 0.7%, to close at 4397.93.

Not even a miserable first-quarter reading on gross domestic product shook the market out of the doldrums. “It was horrific, worse than anyone expected,” Yousef Abbasi, global market strategist at JonesTrading Institutional Services, said of the 2.9% decline in first-quarter economic output. “But we were very quickly willing to excuse it.”

Abbasi focused instead on statements by Fed officials such as James Bullard, who indicated the Fed might raise interest rates in the first quarter of 2015. Bullard, president of the St. Louis Fed, doesn’t vote on the Federal Open Market Committee, the Fed’s policy-making arm, but he and other Fed officials appear to be more worried about an uptick in inflation than Fed Chair Janet Yellen, who dismissed the data as “noisy” the previous week.

Other data buoyed the Street. New-home sales spiked 18.6% in May, the largest gain in more than 20 years. Consumer-sentiment data released Friday was rosier than expected.

Investors await second-quarter results for more guidance. Quarterly results from S&P 500 companies such as General Mills (ticker: GIS) and Oracle (ORCL) have mostly proven uninspiring, says Zacks Investment Research. “These initial reports don’t inspire much confidence and appear to be pointing toward another underwhelming reporting season ahead,” wrote research director Sheraz Milan, while noting that it may be “premature to draw any firm conclusions.”

Nike (NKE), bucked the tide, however, by posting better-than-expected earnings late Thursday, seeing particular growth in its soccer division, where revenue rose 18%. It was a fitting end to a week when the U.S. men’s soccer team shocked most of the world by advancing in the World Cup.

Trading is likely to remain slow in the coming holiday-shortened week.

“The big players are all on vacation,” said Brad McMillan, chief investment officer for the Commonwealth Financial Network. “Keep an eye on any news that companies release on July 3. It will probably be something they want to bury.”

(Source: Barrons Online)