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US Index Open Interest Put / Call Ratio Analysis

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US Index Open Interest Put / Call Ratio Analysis

By: Captain Hook | Mon, Feb 6, 2017


The following is an excerpt of commentary that originally appeared at Treasure Chests for the benefit of subscribers on Wednesday, January 25, 2017.


Not long now. Not long to month end. Not long until we see what the (fake?) January Barometer signal tells us to expect this year. There’s only one problem – this signal has been rendered redundant by speculator betting practices and the machines. Case in point – last year. Last year stocks were hammered in January. But how did stocks end the year? Answer: Higher – much higher. They were higher not because of ‘fundamentals’. But because the consensus of speculators were (are) still betting on lower prices, where ‘bad news’, like a Trump victory was supposed to be, triggers another short covering rally. Thing is, the entire ‘reflation rally’ from 2009 has been one short covering rally after another because of this ruse – conceivably the best ‘con job’ to date pulled off by status quo price managers.

And as you can see in the attached, true sentiment conditions have changed little post expiry this month, yet again, with continued slow motion erosion in both broad market bears and precious metals bulls alike (but going in different directions.). Certainly if the OEX ratio is any indication of true pro-trading stock jockey sentiment, this group is now broken, which in and of itself should bring trouble for stocks all on its own. These are the guys who control the big positions across the spectrum, which could spark movement in other trend following markets, not the least of which being QQQ put buyers. Therein, if trend following ratios like QQQ join the others, which have already collapsed into downtrends (SPY, IYT, MNX), the machines would have nobody remaining to squeeze, and stocks would go down.

In the meantime however, and despite this developing condition, because of the ratios trending higher (QQQ, DIA, RUT), higher to sideways prices in the broads remains a distinct possibility. The ‘trick’ will be if a positive January Barometer signal will affect speculator betting practices the same way as last year, where the consensus wagered on lower stock prices for the remainder of the year, which again, is why they finished 2016 higher. This year things should turn out to be the opposite, especially with Trump so loud about how great things will be under his administration. Everyday it’s another opportunity to grandstand for The Donald – and eventually this noise, and the gains in stocks, will exhaust the bears (put buyers), bringing all broad market put / call ratios down in the process.

And of course it’s just the opposite for precious metals. Speculators remain stubbornly (stupidly?) bullish on these markets (understandably), which should continue to affect North American (Western) paper pricing mechanisms negatively; however, the hope is just as bearish broad market speculators become exhausted for reasons discussed above (continued and intensifying Trump hype), bullish precious metals speculators will do the same. Again, timing this transition is difficult, however as mentioned previously, where if this does not take hold in the first quarter, the second appears probable at the outside. It could be the broads rolling over need to lead in terms of sequencing, however this will not matter in the full measure of time (years).

Talking specifics about the precious metals ratios (see here), when posting them yesterday morning I actually got excited when the big spikes higher in AGQ and GDX came up, however this euphoria was quickly replaced by very mixed feelings in seeing the rest of the ratios (except ABX and GG), which are rising, however it’s a start. Again, slowly but surely, the bulls are capitulating, meaning more of the key open interest put / call ratios we follow are rising for real (over unity like GDX), which will turn the machines in the bull’s favor. So with any luck a very insistent (on success) Trump will cave paper market speculators heads in to the point they finally capitulate on a lasting basis. Again, the barrage of news should be like a machine gun until the speculators give up.

This was the reason for the S&P 500 (SPX) to go up and test key resistance at 2280 today, where you will remember, if this mark is breached on a closing basis, no discernable resistance is encountered until it gets up into the 2400-plus area (never mind Dow 20k), the bottom side of the long-term channel (see Figure 3). You may have noticed the CBOE Volatility Index (VIX) closed right on important support at 11 yesterday, where any breach now would propel the SPX / VIX Ratio above long-term sinusoidal resistance on a sustained basis (see Figure 1). What does this mean? It means the market is a ‘run away’, where although further strength will likely prove temporal, still, a move to 2400-plus SPX is definitely possible running into February in blow-off fashion.

For precious metals, this might be enough to kill the rally for a bit. Who needs gold when you have Trump and rising stocks – right? Watch gold at $1180. A breach would not be good.

No ‘rope-a-dope’ for Trump. He’s come out of the corner swinging. The only problem with fighters like this is they burn out fast. That’s what happened to him with his Atlantic City Casinos. One casino wasn’t enough. Then they all got in trouble because of his huge ego.

Looks like a repeat here style wise, with the big question how long it lasts.

So while there’s no telling how long it will take Trump to punch himself out, if the 1928 / 1929 analog is any indication, summer is quite possible.

See you next time.


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Captain Hook

Captain Hook
TreasureChests.info

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. We are not registered brokers or advisors. Certain statements included herein may constitute “forward-looking statements” with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

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Published at Mon, 06 Feb 2017 10:52:10 +0000

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Analyst: Cisco to Hike Dividend Soon

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Analyst: Cisco to Hike Dividend Soon

By Shoshanna Delventhal | February 5, 2017 — 11:09 PM EST

While income-minded investors are already attracted to Cisco Systems Inc.’s (CSCO) 3.3% dividend yield, analysts now predict the firm could be planning to hike its dividend higher as soon as this week.

Analysts at research firm IHS Markit foresee the San Jose, Calif.-based tech firm to raise its dividend about 8% this week to $0.28 a quarter, up from $0.26, reports Barron’s. The expected dividend raise would be reflected in a new dividend yield of 3.6% for Cisco, assuming its stock price remains constant.

“In the past (except in FY16) the company raised its quarterly dividend by 2 to 3 cents and we project similar growth as earnings projections show modest increase in profits for the future. The management has increased the dividend five times since first issuing in 2011 and the quarterly rise occurred at the Q3 stage. Management indicated, as part of their capital allocation strategy, they intend to distribute a minimum of 50% of their free cash flow annually to shareholders through cash dividends and share repurchases,” wrote IHS Markit analyst Vik Parmar.

Past Disappointments

Cisco is slated to report its most recent fiscal 2017 second-quarter earnings Feb. 15, yet analysts say the dividend announcement could precede the earnings report, estimating an announcement to come Feb. 10.

This quarter will be telling for Cisco after disappointing investors with lower-than-expected guidance, attributed general weakness in some larger service providers. (See also: Cisco CEO: ‘Look Beyond One Quarter’.)

The networking industry leader’s share price of $31.31 on Friday close represents an approximate 37% increase year-over-year (YOY) as the firm shifts away from declining hardware systems sales to emerging markets such as cybersecurity, collaboration, the cloud and the Internet of Things (IoT). (See also: Cisco to Buy AppDynamics for $3.7B Before its IPO.)
Published at Mon, 06 Feb 2017 04:09:00 +0000

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Under Armour under siege: Stock plunges 25%

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Under Armour under siege: Stock plunges 25%

  @lamonicabuzz

Stephen Curry and the Golden State Warriors have the best record in the NBA. Tom Brady will attempt to win his fifth Super Bowl with the New England Patriots on Sunday.

Both endorse Under Armour. But their winning ways aren’t helping the company. At all.

The sportswear company reported sales and earnings that missed forecasts. It also said revenues for 2017 would be lower than what Wall Street expected.

And the company said its chief financial officer was stepping down for “personal reasons.” Wall Street often assumes that an executive leaving for “personal reasons” is a sign that a company is in trouble and that someone needs to take the fall.

Under Armour (UAA) tanked on this trifecta of bad news. Shares plunged nearly 25% in early trading Tuesday. That put the stock on track for its worst one-day drop ever.

Under Armour CEO Kevin Plank, who is part of a group of business leaders advising President Trump about economic policy for U.S. manufacturers, said in the earnings announcement that there were “numerous challenges and disruptions” in the quarter.

Many big retailers — most notably Macy’s (M) and Kohl’s (KSS) — reported weak results for the holidays, leading investors to wonder whether the American consumer is in trouble or if traditional retailers are just losing more ground to Amazon.

Under Armour has been hit particularly hard by the problems facing brick-and-mortar retailers, especially those specializing in athletic wear. The Sports Authority went out of business. Finish Line (FINL) closed hundreds of stores last year.

The poor start to 2017 for Under Armour is even more troubling when you consider how awful a year the company had in 2016. The stock plummeted nearly 30% last year because of weak sales and the broader challenges in the athletic apparel industry.

Archrival Nike (NKE) also had a dismal 2016. In fact, it was the worst-performing Dow stock last year.

Both were hurt by a resurgent Adidas (ADDDF), which posted strong sales and earnings last year, partly because of ties to the Summer Olympics in Rio and the Euro 2016 soccer tournament.

But while Under Armour is still struggling, Nike has bounced back. It reported solid results for its latest quarter, fueled by a rebound in China and Europe.

Nike’s stock did fall Tuesday along with Under Armour. But the House of Swoosh’s shares are still up nearly 4% this year. Nike also recently announced plans to set up small Nike stores at JCPenney (JCP) — a deal that could hurt Under Armour, too.

Under Armour can’t seem to catch a break. It was once a Wall Street darling. Investors embraced its upstart, underdog story.

They also loved that the company was able to sign big names like Curry, Brady and others — such as Carolina Panthers quarterback Cam Newton, baseball star Bryce Harper and golf champion Jordan Spieth — to big deals.

But Under Armour has a lot of challenges it now has to overcome. The company’s famous marketing tagline — “We Must Protect This House!” — now sounds like a rallying cry that’s fallen on deaf ears on Wall Street … and with sneaker-buying consumers.

Published at Tue, 31 Jan 2017 15:43:27 +0000

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Analysts Say California Resources May Rise to $26

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Analysts Say California Resources May Rise to $26

By Kevin Johnston | January 27, 2017 — 10:31 AM EST

California Resources Corporation (CRC) continues to climb quietly. By “quietly,” we mean without large moves or high volume. In recent trading sessions, the stock has closed at the top of the day’s trading range. This is a short-term bullish signal. Such a signal must be supported by the longer trend.

The longer trend not only indicates further price increases, it looks like a price channel is forming. In other words, CRC may settling into a price range where the lows and highs touch predictable trend lines. (See also: Channeling: Charting A Path To Success.)

Some momentum traders trade price channels exclusively. They buy when the stock hits the bottom of the price channel, then sell when the price hits the top of the price channel. CRC could be forming a price channel that will allow for that type of trading.

Long-term investors don’t need to attempt that much buying and selling. Instead, they can buy on the dips and hold the stock. This method will build a position in the stock at a relatively low price.

Analysts have estimated that California Resources will rise to $25 or $26 per share. As of this writing, it is trading at just above $23 per share.

The problem with price targets is that they are educated guesses and are subject to change. Investors may indeed make two to three dollars per share on the stock if the analysts are right, but that doesn’t mean everyone should sell once the stock hits its price target. It means that as the stock climbs, investors must continue to do due diligence to determine if the stock could go higher or will stall.

That due diligence would have to show improved revenues and operating income to justify a continued uptrend past the target price. California Resources’ income has been positive for the last two quarters, and revenues have been flat. With oil above $50 per barrel now, it is reasonable to expect CRC to show some increases in revenues and income.

The company will report earnings on February 16. A surprise on that date could cause analysts to reset the target price.
Published at Fri, 27 Jan 2017 15:31:00 +0000

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Stocks, dollar steady after Trump-led dip

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Stocks, dollar steady after Trump-led dip

 

By Patrick Graham
| LONDON

Stock markets steadied while the dollar recovered some ground on Tuesday after unease over how the U.S. policy slate will develop under Donald Trump’s presidency drove the currency to its weakest since early December.

Traders in Asia said shares were helped by hopes that the concerns about a stronger dollar expressed by the U.S. President-elect at the weekend, would be beneficial to emerging markets where companies have borrowed heavily in dollars.

In Asia, MSCI’s ex-Japan Asia-Pacific shares index .MIAPJ0000PUS rose 0.3 percent, just shy of a three-month high hit last Thursday. Energy and cyclical stocks were the chief gainers.

Short-covering also helped, especially in China .SSEC, where stocks tumbled more than 4 percent last week as traders took some money off the table before Trump’s inauguration on Friday.

European stock markets .FTEU3 were broadly steady after a choppy start, banking shares under pressure as investors chewed over details of the impact of regulatory fines on Deutsche Bank. (DBKGn.DE)

“You’ve seen the banks ease, everything has taken a breather after the strong start in January for stocks,” said Andy Sullivan, a portfolio manager with GL Asset Management UK in London.

 

“The last few days have been choppier and for the rally to be sustained, we need to see earnings growth start to come through.”

MSCI’s broadest index of global share prices .MIWD00000PUS reached its highest since mid-2015 on Friday and, driven by a bounce in expectations for U.S. inflation and growth since Trump’s election, is within sight of all-time highs.

But worries about the new U.S. president’s attitude to trade and politics, with relations with China in focus, have begun to show up more in some asset prices since the start of the year.

The dollar fell almost 1 percent on Tuesday and is on course for its worst two weeks since the election after Trump expressed concern about the dollar’s strength in the context of trade relations with China. .DXY

 

It recovered around 0.3 percent on Wednesday with eyes on a speech by the head of the Federal Reserve and U.S. inflation data for clues on the path of interest rates.

Sterling, which soared more than 3 percent on Tuesday after Prime Minister Theresa May’s Brexit speech, fell back 0.7 percent.

“Everything is just a partial reversal of the price action yesterday,” said RBC Capital Markets currency strategist Adam Cole, arguing that the greenback’s weakness had been primarily driven by excessive positioning at the end of last year.

With doubts growing about the sustainability of the “Trump trade” – higher stocks and a stronger dollar – investors’ favorite safe havens for capital have been in demand.

Gold XAU= was perched comfortably at a two-month high above 1215 dollars per ounce. It is up nearly 8 percent in the last three weeks. The yen dipped half a percent as the dollar rose on Wednesday, but is still trading around its highest in seven weeks. JPY=

Oil prices fell by just over 1 percent, with benchmark Brent futures LCOc1 dipping to $54.70 per barrel and U.S. crude to $51.68.

 

(editing by John Stonestreet)
Published at Wed, 18 Jan 2017 10:45:33 +0000

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Facebook Stock Short Interest Declines 22%

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Facebook Stock Short Interest Declines 22%

By Richard Saintvilus | January 17, 2017 — 5:11 AM EST

If you ever want to know how the market feels about a particular company, the stock’s short interest movement can often serve as your best gauge. Short interest offers a sense of how pessimistic or “bearish” investors are about a company over a certain time period.

In the case of Facebook, Inc. (FB), the Menlo Park, Calif.-based social media giant has scared away plenty of doubters. As of the most recent settlement date, Facebook’s short interest has declined from 24.3 million shares to 18.8 million, marking a 22.6% decline. Notably, the decline in bearish sentiment, reversing last month’s 32% rise, has come even as Facebook has battled issues with fake news and received criticism for reporting inaccurate ad metrics to advertisers. (See also: Why These Tech Stocks Are Poised to Thrive.)

Investors, or in this case short sellers, who believe the price of a stock will fall can seek to profit from that decline by betting money on that belief. They can borrow the shares, hoping to sell them once the share price falls or before they have to purchase or replace the shares. That collective belief is then measured and calculated in the short interest total, which is reported bi-weekly.

The fact that Facebook short interest has recently declined is not surprising. The company is set to report fourth quarter fiscal 2016 earnings results on Feb. 1. Short sellers don’t want to be on the wrong side of the trade, given the stock’s history of rising by double digits on strong results. Plus, last week, Raymond James analysts came to Facebook’s defense, saying they don’t expect the company’s ad revenue to be affected by recent events. (See also: Will Facebook’s Ad Metric Errors Hurt Q4 Results?)

For the quarter that ended December, Wall Street expects Facebook to post earnings per share of $1.30 on revenue of $8.48 billion. For the full year, which ended in December, earnings are expected to rise 80% year over year to $4.10 per share, while full-year revenue of $27.3 billion would mark a rise of 52% year over year.

Facebook shares closed Friday at $128.34, up 1.36%. The shares have risen 11.5% year to date, compared with a 1.6% rise in the S&P 500 (SPX) index. (See also: Facebook Aims to Tackle Fake News in Germany.)
Published at Tue, 17 Jan 2017 10:11:00 +0000

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General Dynamics Trades Ex-Dividend Wednesday

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General Dynamics Trades Ex-Dividend Wednesday

By Richard Saintvilus | January 16, 2017 — 1:28 PM EST

Shares of General Dynamics Corporation (GD) will begin trading ex-dividend on Wednesday, Jan. 18. To qualify for a dividend check, investors must have owned General Dynamics shares prior to Wednesday, which is the day the company’s management will finalize its roster of shareholders to whom it will mail payments.

General Dynamics stock closed Friday at $177.89, up 0.78%. The shares have risen 3.03% year to date and posted 17.54% returns over the past three months. This compares with a 1.6% year-to-date rise in the S&P 500 (SPX) index. General Dynamics stock has risen 37.85% over the past 12 months, while the S&P 500 has risen 18%. (See also: General Dynamics Flying High After Trump Win.)

In its fiscal third quarter earnings results, reported in October, the Virginia-based company beat Wall Street estimates on earnings per share but missed on revenue. The company reported adjusted earnings of $2.48 per share, which beat analysts’ projections by 10 cents, while revenue of $7.73 billion declined 3.3% year over year, missing Wall Street estimates by $180 million.

Looking ahead, for the quarter that ended December, General Dynamics is expected to deliver earnings of $2.52 per share, up from $2.40 per share a year ago, while revenue of $8.29 billion would equate to a rise of 6.2% year over year. For the full year, ended December, earnings are projected rise 7.6% year over year to $9.77 per share, while revenue of $31.41 billion would mark a 0.2% decline year over year. (See also: Legacy Capital Partners Reduces Stake in GD.)

Based on Thursday’s closing price of $177.89, the company’s $3.04 per share quarterly dividend yields 1.72% annually, or about 28 basis points below the 2.00% average yield of the S&P 500 index. General Dynamics will send its dividend payment on Feb. 10 to shareholders of record as of Jan. 20. The stock has a consensus Buy rating and an average analyst 12-month price target of $195, implying a rise of 10% from current levels. (See also: Why the Trump Market Rally Is Fading.)
Published at Mon, 16 Jan 2017 18:28:00 +0000

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Futures give up some gains after BofA, Wells reports

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U.S. stock index futures gave up some gains on Friday after disappointing quarterly reports from Bank of America and Wells Fargo.

Shares of Bank of America (BAC.N) fell 0.7 percent to $22.76 in premarket trading after the lender’s quarterly profit beat estimates, but its revenue fell short.

Wells Fargo (WFC.N) was down 1 percent at $53.95 after it reported a fall in profit and its revenue fell short of market expectations.

JPMorgan (JPM.N) was up 0.2 percent at $86.39 after its quarterly profit and revenue both topped analysts’ expectations.

The combined profit of S&P 500 companies is estimated to have risen 5.7 percent in the fourth quarter, largely helped by financial companies, according to Thomson Reuters I/B/E/S.

“There is a lot of optimism regarding the financial sector but any kind of cautious statement from them might cause a bit of a pullback,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“All the changes that are being proposed for the sector is going to take some time, it’s not going to happen right away.”

Dow e-minis 1YMc1 were up 11 points, or 0.06 percent, with 16,237 contracts changing hands at 8:35 a.m. ET.

S&P 500 e-minis ESc1 were up 1.25 points, or 0.06 percent, with 99,199 contracts traded.

Nasdaq 100 e-minis NQc1 were up 5.5 points, or 0.11 percent, on volume of 15,473 contracts.

The S&P financial sector .SPSY has jumped about 17 percent since the Nov. 8 U.S. presidential election, outpacing the S&P 500’s 6.1 percent rise, boosted by hopes of deregulation and increased interest rates.

U.S. stocks overall have been on the rise since the election on optimism that U.S. President-elect Donald Trump’s policies to boost infrastructure spending and reform corporate taxes will benefit the economy.

But, analysts fear the market has run too far too soon, with Trump’s policies expected to hit legislature hurdles, and with stock valuations stretched.

Blackrock (BLK.N) Chief Executive Larry Fink told CNBC that if the roll out of growth initiatives by Trump are slower, then the markets are ahead of themselves.

Shares of the world’s largest asset manager were little changed after the company reported a better-than-expected quarterly profit.

U.S. retail sales rose solidly in December amid strong demand for automobiles, with data showing retail sales increased 0.6 percent last month, slightly below the 0.7 percent increase expected by economists.

A separate report at 10 a.m. ET is expected to show U.S. consumer sentiment improved to 98.5 in January from 98.2.

Pandora Media (P.N) was up 8.2 percent at $12.98 after the online radio service said it would reduce its U.S. workforce and that it expects to surpass its fourth-quarter revenue forecast.

 

(Reporting by Tanya Agrawal; Editing by Savio D’Souza)
Published at Fri, 13 Jan 2017 13:58:13 +0000

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Hot Dividend-Growth Stocks for 2017 (PFE, GT)

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Hot Dividend-Growth Stocks for 2017 (PFE, GT)

By Nathan Reiff | January 11, 2017 — 5:49 AM EST

Forbes recently reported on new dividend growth information released by Ned Davis Research. The report, which outlines new thoughts on the complicated relationship between stock prices and interest rates, discovered that Fed rate adjustments could be beneficial to stock prices in the long term. When rate hikes occurred slowly, the findings show, stock prices tended to drop quickly following each rate change announcement, but then gained an average of 10.8% over the subsequent year. The best stocks in this kind of environment? Dividend-growth stocks. Here are some of the most popular dividend-growth stocks to look to for 2017.

Other Factors

Increasing dividends are not the only signal that you should consider investing in a stock of this type. It’s important to also look to factors behind dividend growth, including earnings history, payout ratios, and low multiples to earnings and book value. Considering this long list of requirements for a strong dividend-growth investment, it may seem difficult to find any stock that checks off all of the boxes, especially at a time when the S&P 500 P/E ratio is startlingly high at 24.9. With that in mind, these stocks seem to meet all of the requirements of a strong investment.

Pfizer

One of the key signs that Pfizer (PFE) was about to announce a hike in dividends at the end of 2016 was that group senior VP Alexander Mackenzie purchased 30,000 PFE shares early in the month of December. Just a few days later, the company lifted its payout rates by 6.7%, bolstering the share price in the process. Still, Pfizer ended 2016 well behind the S&P 500, constituting a major discount as compared with its pharmaceuticals rivals. Experts expect more dividend growth in the months to come, as Pfizer paid out just 56.6% of its free cash flow over 2016, and its balance sheet is stellar.

Goodyear Tire & Rubber Co.

Goodyear (GT) was slammed at the end of October of 2016, dropping by 9.0%, following an announcement that its third quarter earnings were below expected values. Simultaneous lowering of full-year earnings and revenue guidance made some investors cautious. However, it should be noted that EPS for the company climbed by 18.2% in the last quarter of 2016, and gross margin was up as well. Beyond that, with new car sales expected to decline somewhat in the future, it seems likely that Goodyear will see a boost to its sales when customers go back for replacement tires. Those investors who jumped on the low price in late October have already seen their investment grow by about 16%, and it appears to be pointing that way for the foreseeable future.

Leggett & Platt

Leggett & Platt (LEG), the seating and wire manufacturer, has 45 years of continued payout gains, many of them small. Investors expect more to come, perhaps in a bigger way, in the new year.
Published at Wed, 11 Jan 2017 10:49:00 +0000

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Wall St. set for quiet open as investors await earnings

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By Yashaswini Swamynathan

U.S. stocks were set for a muted open on Tuesday as investors await the earnings season to test if Wall Street’s record levels are justified by corporates’ performance in the fourth quarter.

Investors are also waiting for U.S. President-elect Donald Trump’s news conference on Wednesday, his first since his election win in November, for further clarity on his promised policy changes.

U.S. equities have been on a record-breaking surge since the Nov. 8 election of Trump, who has pledged tax cuts, simpler regulation and fiscal stimulus.

However, the rally’s momentum has stalled of late as investors now wait to see if he can deliver on those promises and as valuations soar – the S&P 500 is trading at about 17 times expected earnings, compared to its 10-year average of 14.

“It’s the increasing weight of valuation in the market that maybe leading to less enthusiasm in 2017. The dollar is going to be a very important factor for the earnings season,” said Stephen Wood, chief market strategist, North America for Russell Investments.

“We expect a choppy, range-bound U.S. equity market until we get more clarity on earnings.”

Dow e-minis 1YMc1 were down 19 points, or 0.1 percent at 8:32 a.m. ET, with 18,111 contracts changing hands.

S&P 500 e-minis ESc1 were down 0.75 points, or 0.03 percent, with 101,687 contracts traded.

Nasdaq 100 e-minis NQc1 were down 1 point, or 0.02 percent, on volume of 16,671 contracts.

The dollar index .DXY has risen 4.3 percent since Trump’s victory. A strong dollar crimps U.S. companies’ revenue from overseas markets.

 

However, S&P 500 companies overall are set to post their strongest quarterly growth in three years, with earnings estimated to have risen 5.8 percent in the fourth quarter, according to Thomson Reuters I/B/E/S.

Wall Street’s march has pushed Dow Jones Industrial Average .DJI to within a hair’s breadth of hitting the 20,000-point mark, helped largely by a frenetic run up in bank stocks.

Big banks including JPMorgan (JPM.N), Bank of America (BAC.N) and Wells Fargo (WFC.N) will provide the first peek into how companies fared in the quarter when they report on Friday.

The Nasdaq .IXIC closed at a record high on Monday, helped by a string of buyout deals in the healthcare sector, while a drop in oil prices weighed on the Dow and the S&P 500 .SPX.

Oil prices were steady on Tuesday, but health stocks were again among the top movers premarket.

Valeant shares (VRX.N) surged 11 percent to $17.07 after the drugmaker agreed to sell its Dendreon cancer business and three skincare brands for about $2.12 billion as the troubled firm looks to pay down its more than $30 billion debt.

Illumina (ILMN.O) rose 14.8 percent to $158 after the diagnostics company gave a strong quarterly forecast and launched a new product.

Williams Cos (WMB.N) fell 9.7 percent to $28.84 after it announced a series of transactions aimed at, among other thing, minimizing equity needs, reducing leverage and charting a path for distribution growth.

 

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)
Published at Tue, 10 Jan 2017 13:53:48 +0000

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Tribune Media to Pay Special Dividend of $5.77

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Tribune Media to Pay Special Dividend of $5.77

Now this is a fine way to start the new year: Tribune Media (NYSE: TRCO), which holds a big portfolio of TV and digital assets including the WGN channel and Screener entertainment information service, on Tuesday declared a one-time, special dividend of $5.77 per share for both its class A and B shares.

All told, this will cost the company around $500 million. The payout closely follows its latest big-ticket deal — in late December it agreed to sell its Gracenote music and video metadata provider to media research incumbent Nielsen for roughly $560 million. Gracenote wasn’t exactly a long-held asset for Tribune Media; it struck the deal to buy the company in December 2013 from a unit of Sony for $170 million.

In its press release announcing the special dividend, Tribune Media said it will be funded from existing cash.

The nearly extraordinary payout will be happily accepted by shareholders, but concerns about the company’s fundamentals are sure to linger. In recent quarters, it has struggled with profitability, and in November, it cut its net profit guidance for fiscal 2016 (which it just completed). The share price is up only 6% over the past year, in sharp contrast to nearly 50% rise of tronc, the newspaper publishing and online media company Tribune divested from itself in 2014.

Tribune Media’s special dividend will be distributed on Feb. 3 to stockholders of record as of Jan. 13. At the current share price, it would yield 16%.

In addition to the special payout, the company also pays a regular quarterly dividend of $0.25 per share. This was most recently handed out at the beginning of last December.

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Eric Volkman has no position in any stocks mentioned.

 
Published at Tue, 03 Jan 2017 22:10:03 +0000

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Xerox Shares Rise as Conduent Spinoff Is Finalized

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Xerox Shares Rise as Conduent Spinoff Is Finalized

Breaking up might be hard to do, but it can be lucrative for certain parties. That seems to be the case with document technology mainstay Xerox (NYSE: XRX). The company’s shares rose as it completed the spinoff of its business services assets into a new company, Conduent (NYSE: CNDT). The market’s early preference is clearly for the legacy company, as its stock closed up by 20% on the day while Conduent’s shares fell by nearly 7% on their first day of trading.

That, despite the fact that the shareholdings are similar — Xerox effected the split by distributing one share of Conduent stock for every five Xerox shares its stockholders owned. The record date for the distribution was Dec. 15. Investors might be concerned about a big, $1.8 billion transfer Conduent paid Xerox upon the split. The latter company will use those proceeds, in combination with cash on hand, to retire approximately $2 billion in debt.

In its press release formally announcing the finalizing of the split, Xerox CEO Jeff Jacobson said that it “sharpens our market focus and commitment to our customers.”

“I am confident the transformational actions we are implementing position Xerox for long-term success and unlocks shareholder value,” he added.

That remains to be seen, but overall, the move has to be considered positive for the core Xerox operations. Business services clearly weren’t a good fit with that profile, as evidenced by the company’s consistently declining annual revenues and withering net profits over the past few years.

Xerox announced the split almost one year ago. At the time, Xerox’s legacy document-technology business brought in around $11 billion in annual revenue, with the take for business services totaling roughly $7 billion.

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Published at Tue, 03 Jan 2017 23:00:03 +0000

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Wall St. pares some gains as oil prices drop

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Wall St. pares some gains as oil prices drop

By Yashaswini Swamynathan

Wall Street rose on Tuesday as a post-election rally extended into the new year, but stocks pared some of their early gains after oil prices lost ground due to a strong dollar.

Oil prices fell from their 18-month high and were down more than 2 percent as the dollar surged to a 14-year high, supported by strong U.S. manufacturing data.

The retreat in stocks meant the Dow Jones Industrial Average pulled further away from the elusive 20,000 mark.

The Dow came within a hair’s breadth of the historic milestone in December as investors bet that President-elect Donald Trump would introduce market friendly policies such as tax cuts and simpler regulation.

The average rose to as much as 19,938.53 earlier in the session on Tuesday, helped by Goldman Sachs (GS.N) and Walt Disney (DIS.N).

At 12:31 p.m. ET (1731 GMT), the Dow Jones .DJI was up 34.3 points, or 0.17 percent, at 19,796.9, the S&P 500 .SPX was up 9.49 points, or 0.42 percent, at 2,248.32 and the Nasdaq Composite index .IXIC was up 22.74 points, or 0.42 percent, at 5,405.86.

“The market is picking up where it left off since the Trump presidency,” said Thomas Wilson, senior investment manager at Brinker Capital.

“What you are seeing is the market moving up in anticipation of fiscal expansion and a potential reflation trade that will replace what has been a monetary policy-driven market for the last several years.”

Tech stocks were the main drivers of the gains on Wall Street on Tuesday, with the S&P 500 technology .SPLRCT sector rising 0.5 percent and giving the broader index its biggest boost.

 

Healthcare .SPXHC stocks followed, with a 0.86 percent rise.

Ten of the 11 major S&P 500 indexes were higher, with the defensive real estate .SPLRCR and consumer staples .SPLRCS sectors bringing up the rear.

Utilities .SPLRCU, another defensive sector, was the only one in the red.

Verizon (VZ.N) gave the biggest boost to the S&P, rising 2.1 percent after Citigroup upgraded the stock to “buy”.

Marathon Petroleum (MPC.N) rose 5.2 percent to $52.99 after the company said it would explore a spinoff of its retail business, caving to pressure from activist investor Elliott Management.

Advancing issues outnumbered decliners on the NYSE by 1,974 to 931. On the Nasdaq, 1,595 issues rose and 1,240 fell.

The S&P 500 index showed 17 new 52-week highs and one new lows, while the Nasdaq recorded 106 new highs and 16 new lows.

 

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Saumyadeb Chakrabarty)
Published at Tue, 03 Jan 2017 17:52:22 +0000

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Thursday: ISM Mfg, Auto sales, Unemployment claims, Construction Spending

 

Thursday: ISM Mfg, Auto sales, Unemployment claims, Construction Spending

by Bill McBride on 11/30/2016 07:20:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC:

“OPEC today struck what increasingly appears to be a historic deal, with both cuts and participation well in excess of earlier expectations.  Total OPEC cuts, compared to OPEC production as recorded by secondary sources for October 2016, are forecast at 1.2 mbpd.  To this is added 0.3 mbpd from Russia, and another, yet-to-be-confirmed 275 kpbd from Mexico, Oman and Kazakhstan.

In total, this would represent a cut of over 1.7 mbpd.  Compliance should be expected at 70% based on historical precedent, representing an effective cut of 1.2 mbpd compared to October 2016 levels.  This is a big deal, and may be enough to balance markets (which some think are already drawing in any event).  With these cuts, global excess crude and product inventories should be run off as soon as the end of Q2 2017, and not later than Q4 2017.

This implies that a robust recovery for the global oil sector is in store, with a strong H2 2017 in the outing.”

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 253 thousand initial claims, up from 251 thousand the previous week.

• At 10:00 AM, ISM Manufacturing Index for November. The consensus is for the ISM to be at 52.3, up from 51.9 in October. The ISM manufacturing index indicated expansion at 51.9% in October. The employment index was at 52.9%, and the new orders index was at 52.1%.

• Also at 10:00 AM, Construction Spending for October. The consensus is for a 0.6% increase in construction spending.

• All day, Light vehicle sales for November. The consensus is for light vehicle sales to decrease to 17.8 million SAAR in November, from 17.9 million in  October (Seasonally Adjusted Annual Rate).

Read more at http://www.calculatedriskblog.com/2016/11/thursday-ism-mfg-auto-sales.html#ox6MCzUqsA12lwbv.99

by Bill McBride on 11/30/2016 07:20:00 PM

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Investment focus: Is this the ‘Great Rotation’? Some banks think so

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Investment focus: Is this the ‘Great Rotation’? Some banks think so

By Dhara Ranasinghe and Vikram Subhedar | LONDON

After a number of false starts since the term was first coined five years ago, the idea of a ‘Great Rotation’ out of bonds into stocks is again gaining traction.

Almost $2 trillion has been wiped off the value of global bonds since Donald Trump was elected as the next U.S. president on Nov. 8, sparking a reassessment of growth and inflation views. In contrast, U.S. stocks have hit record highs.

According to Bank of America Merrill Lynch, the week to Nov. 16 saw the biggest equity inflows in two years at $28 billion and the biggest bond outflows in 3-1/2 years at $18 billion — the widest weekly disparity between stock and bond flows ever.

Whether this marks the start of a ‘Great Rotation,’ a phrase first used by Bank of America in 2011, remains to be seen but there are two reasons why this time it could be the real thing.

For starters, say analysts, a tighter U.S. jobs market and signs of stronger economic growth suggest inflation risks are rising.

Second, for the first time since the financial crisis there is a shift toward fiscal expansion — highlighted by the economic policies favored by Trump and by Britain’s budget statement this week that unveiled a $29 billion fund for infrastructure projects.

That change implies higher borrowing by governments and another source of inflationary pressures that support a view that an era of ultra-low yielding bonds may be in the past.

The only caveat is that this notion of investors shifting their hundreds of billions invested in bonds into stocks as a three-decade bond bull run comes to an end, propelling equity markets higher, has had several false starts before.

“I’ve been asked this question many times before – about whether we’re seeing a great rotation,” said Luca Paolini, Pictet Asset Management’s chief strategist. “We now see some significant inflation risks that were non-existent before. This is what’s different.”

In Germany, signs of a pick-up in inflation pushed yields sharply higher from record lows between late April and June last year – only to fall back as data suggested the region continued to battle with deflationary pressures.

U.S. 10-year bond yields rose more than 100 basis points during the so-called “taper tantrum” of 2013 as investors positioned for a scaling back of U.S. monetary stimulus. They subsequently fell back too, hitting record lows earlier this year, helped by a perception that any Federal Reserve monetary tightening would be glacial to support growth.

A Fed rate hike next month, widely expected, would mark the first increase in a year.

TURNING POINT?

But as inflation expectations are overhauled so are perceptions about the rate outlook – money markets are starting to price in one or more Federal Reserve rate hikes next year, a sea change from before the election when they priced in a less than 50 percent chance of a 2017 Fed hike.

It’s against this backdrop that early indicators of a rotation can be seen.

JPMorgan notes that over the past week, a record inflow into U.S. equity exchange traded funds (ETFs) was accompanied by a record outflow from bond ETFs.

Within equity markets a sharp rotation out of so-called “bond proxies” – dividend-paying sectors such as utilities, telecoms and healthcare which are favored by investors for their yield – and into more cyclical sectors such as banks, industrials and commodities-related sectors is already underway.

The fading allure of dividends could be a precursor to a broader asset-class switch out of bonds and into stocks, which are more geared to economic growth and an inflation pick-up.

This trend has taken hold across global equity markets. Basic resources and energy are now the best performing equity sectors within the MSCI all-country World indices .MIWD00000PUS, both up about a fifth this year. Healthcare, utilities and food and beverage stocks are the biggest laggards and the only three in the red for 2016.

“It’s too early to tell but this is the best chance I’ve seen in a long time,” said Michael Antonelli, an institutional sales trader at R W Baird & Co, referring to a great rotation.

“Money chases performance and it is thus and ever shall be so we need equity funds to start knocking the cover off the ball,” he added, alluding to an opportunity for equity funds to make strong gains.

One sign that a great rotation is taking hold is if investors continue to offload bonds on a large scale.

“We know in general that a lot of capital has gone into fixed income, so how investors react to this sell-off is really important,” said Michael Metcalfe, head of macro strategy at State Street Global Markets. “If they capitulate, they will drive the next leg of it clearly.”

TEPID ROTATION?

Any rotation is likely to be driven by the United States, where bonds have seen some of the steepest selling in years. In Europe and Japan, still subdued inflation and ultra-loose monetary policy is expected to provide some support to bonds.

Rising political risks in the euro area such as in Italy also suggest demand for safe-haven German bonds remains firm, with two-year yields hitting record lows on Friday at minus 0.75 percent.

Long-term investors such as pension funds, hurt by an era of negative bond yields, are also likely to welcome any sell-off to lock in yields at higher levels.

“Against that you could have someone like a retail investor not wanting to own fixed income. So really the idea of a great rotation will depend on who that marginal buyer or seller of fixed income is,” said Nick Gartside, chief investment officer for fixed income at JP Morgan Asset Management.”

(Graphic by Nigel Stephenson; Editing by Toby Chopra)

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Published at Fri, 25 Nov 2016 14:22:02 +0000

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Wall Street slips, led by healthcare decline

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 10, 2016. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 10, 2016.REUTERS/Brendan McDermid

Wall Street slips, led by healthcare decline

By Sinead Carew | NEW YORK

U.S. stocks ended lower on Friday, with healthcare stocks leading the declines, as investors cashed in on a post-election rally and waited for clarity on the next administration’s policies.

Wall Street equities took a breather after rising dramatically since Donald Trump’s surprise victory in the presidential election last week.

While the three major indexes closed higher for the second week in a row, the rally lost some steam this week as investors awaited more information to support their bets that Trump could succeed in passing proposals to lift infrastructure spending and reduce taxes.

“I see the market kind of churning here because it’s had a very decent move,” said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York. “Trump’s policies continue to be just rhetoric because none of it has been enacted.”

The Dow Jones industrial average .DJI fell 35.89 points, or 0.19 percent, to 18,867.93 while the S&P 500 .SPX dropped 5.22 points, or 0.24 percent, to 2,181.9.

The Nasdaq Composite .IXIC slipped 12.46 points, or 0.23 percent, to 5,321.51 after hitting a record of 5346.8.

The Nasdaq’s biggest drags came from technology companies such as Alphabet Inc (GOOGL.O) and drug firms including Amgen (AMGN.O).

Six of the 11 major S&P 500 sectors closed lower. Losses in shares of Allergan Plc (AGN.N) and Merck (MRK.N) were the biggest drags on the S&P health sector .SPXHC, which led the decliners. The health index pared its post-election lift but was still 1.8 percent higher than Nov. 8, even after Friday’s drop of 1.2 percent. Only five of the indexes stocks ended higher.

Consumer staples .SPLRCS fell 0.4 percent, weighed down by a 1.3 percent fall in Procter & Gamble (PG.N). The S&P Energy sector .SPNY was the second best performer with a 0.5 percent increase as producers added to rig count, suggesting that they might be expecting a demand boost, Polarci said.

Traders are pricing in an 83 percent chance for the Federal Reserve to raise interest rates in December, according to Thomson Reuters data.

The S&P financial sector .SPSY ended up 0.08 percent, and has risen 10.8 percent since the U.S. election, boosted by prospect of higher interest rates and lighter regulation.

St. Louis Fed President James Bullard said Friday he was leaning toward supporting a December increase and that the real question would be the Fed’s rate path in 2017.

Kansas City Federal Reserve Bank President Esther George said that while she supports raising rates, the U.S. central bank must do so only gradually. The comments added to Fed Chair Janet Yellen’s Thursday statement that the rate hike could come “relatively soon.”

Declining issues outnumbered advancing ones on the NYSE by a 1.10-to-1 ratio; on Nasdaq, a 1.18-to-1 ratio favored advancers.

The S&P 500 posted 32 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 253 new highs and 30 new lows.

About 6.69 billion shares changed hands U.S. exchanges, well below the 8.02 billion average for the last 20 sessions.

(Reporting by Tanya Agrawal and Anya George Tharakan; Editing by Nick Zieminski and David Gregorio)

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Published at Fri, 18 Nov 2016 22:59:58 +0000

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Elliott Wave Analysis: SP500 Could Be In For A Reversal Higher

HSYXgQ.png

Elliott Wave Analysis: SP500 Could Be In For A Reversal Higher


E-mini S&P500 finally broke out of a range, out of an Elliott Wave triangle which was placed in wave B. But despite a nice break down we still think that whole decline from August highs is a temporary movement, and that leg down from 2135 is wave C, final wave of a contra-trend move. As such, traders should be careful here, and be aware of a bullish turn.

Ideally an impulsive reaction will occur from the 2080 region which will put trend back in bullish mode.

S&P500, 4H

S&P500 4-Hour Chart

Triangles are overlapping five wave affairs that subdivide 3-3-3-3-3. They appear to reflect a balance of forces, causing a sideways movement that is usually associated with decreasing volume and volatility.

Basic Elliott Wave Triangle Pattern:

Idealized Basic Elliott Wave Triangle Pattern


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Gregor Horvat

Gregor Horvat
www.ew-forecast.com

Gregor Horvat

Gregor Horvat, based in Slovenia, has been in the forex markets since 2003. He is a technical analyst and individual trader who has worked for Capital Forex Group and TheLFB.com. He also is founder of forex services on www.ew-forecast.com. EW-Forecast.com provides technical analysis of the financial markets, highlighting behavioral patterns based on the Elliott Wave Principle (EWP). Website: http://www.ew-forecast.com/

Copyright © 2013-2016 Gregor Horvat

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Published at Thu, 03 Nov 2016 15:56:00 +0000

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Update: The Endless Parade of Recession Calls

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By WikiImages from Pixabay

Update: The Endless Parade of Recession Calls

by Bill McBride on 11/02/2016 10:42:00 AM

 It was almost a year ago that I wrote: The Endless Parade of Recession Calls. In that post, I pointed out that I wasn’t “even on recession watch”. Here is a repeat of that post with a few updates in italics.

Note: I’ve made one recession call since starting this blog.  One of my predictions for 2007 was a recession would start as a result of the housing bust (made it by one month – the recession started in December 2007).  That prediction was out of the consensus for 2007 and, at the time, ECRI was saying a “recession is no longer a serious concern”.  Ouch.

For the last 6+ years [now 7+ years], there have been an endless parade of incorrect recession calls. The most reported was probably the multiple recession calls from ECRI in 2011 and 2012.

In May of [2015], ECRI finally acknowledged their incorrect call, and here is their admission : The Greater Moderation

In line with the old adage, “never say never,” [ECRI’s] September 2011 U.S. recession forecast did turn out to be a false alarm.

I disagreed with that call in 2011; I wasn’t even on recession watch!

And here is another call [last December] via CNBC: US economy recession odds ’65 percent’: Investor

Raoul Pal, the publisher of The Global Macro Investor, reiterated his bearishness … “The economic situation is deteriorating fast.” … [The ISM report] “is showing that the U.S. economy is almost at stall speed now,” Pal said. “It gives us a 65 percent chance of a recession in the U.S.

Here is the report Pal is referring to from the Institute for Supply Management: November 2015 Manufacturing ISM® Report On Business®
ISM PMIClick on graph for larger image.

Here is a long term graph of the ISM manufacturing index [from last November].

The manufacturing sector has been weak, and contracted in the US in November due to a combination of weakness in the oil sector, the strong dollar and some global weakness.  But this doesn’t mean the US will enter a recession.

The last time the index contracted was in 2012 (no recession), and has shown contraction a number of times outside of a recession.
ISM PMI[Here is an update through October 2016. Manufacturing was weak due to the sharp decline in oil investment, but now the ISM index is showing expansion again.]

Looking at the economic data, the odds of a recession in 2016 are very low (extremely unlikely in my view).  [a recession in 2017 is very unlikely]. Someday I’ll make another recession call, but I’m not even on recession watch now.

[Still not on recession watch!]

Read more at http://www.calculatedriskblog.com/2016/11/update-endless-parade-of-recession-calls.html#bVQlsOgEhIC9Ol4T.99

by Bill McBride on 11/02/2016 10:42:00 AM

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Published at Wed, 02 Nov 2016 14:42:00 +0000

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Fed meeting in sight but election looms for stocks

 

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 15, 2016.REUTERS/Brendan McDermid

Fed meeting in sight but election looms for stocks

By Caroline Valetkevitch | NEW YORK

The Federal Reserve meets next week and the U.S. government releases an important report on jobs, but investors could be forgiven for having something else on their minds.

The heated U.S. presidential campaign, which for months has grabbed the bulk of U.S. news headlines, enters its final stretch next week before the Nov. 8 vote, and the race between Democrat Hillary Clinton and Republican Donald Trump of late has provided market-moving surprises.

In the latest reminder of how an upset in the expected outcome could rattle investors, news came on Friday that the Federal Bureau of Investigation is reviewing fresh evidence in its probe of Clinton’s email server.

That briefly pushed stocks down sharply and drove the CBOE Volatility Index .VIX – Wall Street’s fear gauge – to a two-week high.

“We’re so close to the election, and the pots are boiling. There’s always something going on,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

“And where there’s uncertainty with the Oval Office, it seems to historically cause problems for the market.”

Wall Street has been expecting Clinton to win her White House bid but Republicans to retain at least the U.S. House of Representatives, essentially keeping the current state of political gridlock.

In recent weeks, Clinton’s lead has widened in polls, causing some concern about the Democrats potentially winning control of both the presidency and Congress.

“That would be bad for certain sectors including health care and perhaps the financial sector,” said Ed Campbell, a portfolio manager at QMA, a multi-asset manager owned by Prudential Financial. “But I don’t think that’s likely to happen.”

Investor expectations also are low that the Fed will raise interest rates when it meets Tuesday and Wednesday, especially since the meeting falls just days ahead of the election.

The chances appear to be less than 10 percent that the Fed will raise rates next week, while there’s about a 75 percent chance the Fed will hike rates in December, according to the CME Group’s FedWatch tool on Friday.

“I think it’s largely going to be a non-event,” Campbell said. “They’d be loath to surprise the market, especially one week before the election.”

What could shake equities, however, is any comment from the Fed that could indicate the possible timing of the next hike.

At the Fed’s November meeting last year, it tweaked its policy statement to specifically reference the next policy meeting as a date of a possible rate lift-off, a move that grabbed investors’ attention.

The Fed then in December raised rates for the first time in nearly a decade.

If it’s strong enough, Friday’s jobs report could bolster already broad expectations that the Fed will raise rates again this December.

Economists polled by Reuters show expected nonfarm job gains of 175,000 for October, up from 156,000 the previous month.

“Post-election day, you might see a little bit of relief but then you start worrying about the Fed,” said Steve Chiavarone, portfolio manager at Federated Investors.

(Reporting by Caroline Valetkevitch; Additional reporting by Saqib Ahmed; Editing by James Dalgleish)

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Published at Sat, 29 Oct 2016 11:26:41 +0000

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Bond yields up, stocks sag on enhanced U.S. rate hike prospects

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People are reflected in a board showing market indices in Tokyo July 28, 2015.REUTERS/Thomas Peter

Bond yields up, stocks sag on enhanced U.S. rate hike prospects

By Hilary Russ and Chuck Mikolajczak | NEW YORK

Wall Street recovered some losses on Friday but still closed lower, with U.S. stocks and the dollar falling after the Federal Bureau of Investigation said it would probe additional emails related to Democratic presidential candidate Hillary Clinton’s use of a personal email server while secretary of state.

The dollar slipped against major currencies, including the Euro and the yen, but rose to three-week highs against the Mexican peso.

The markets, which have been pricing in a likely Clinton win against Republican candidate Donald Trump, were initially spooked by news that could be an advantage to Trump.

Stocks recovered some ground, however, once investors digested the FBI announcement, said Stephen Massocca, chief investment officer, Wedbush Equity Management LLC in San Francisco.

“People calmed down and considered what it really meant, that in all likelihood it really isn’t going to impact the election,” he said.

The Dow Jones industrial average .DJI fell 8.49 points, or 0.05 percent, to 18,161.19, the S&P 500 .SPX lost 6.63 points, or 0.31 percent, to 2,126.41 and the Nasdaq Composite .IXIC dropped 25.87 points, or 0.5 percent, to 5,190.10.

The political uncertainty dented the U.S. dollar, which was down 0.56 percent against a basket of major currencies .DXY after earlier hitting an eight-day low of 98.242. The dollar index was set to post a weekly decline of about 0.4 percent.

The greenback fell about 0.7 percent against the yen to a session low of 104.49 yen JPY= after hitting a three-month high of 105.53 earlier.

The dollar jumped more than 1.3 percent, however, against the Mexican peso to a three-week high of 19.1002 pesos MXN= before paring gains. A Trump victory has been viewed as a key risk for the Mexican currency given Trump’s promises to clamp down on immigration and redraw trade relations with the country.

Oil prices settled below $50 to mark their biggest weekly loss in six weeks on concerns OPEC will not fully carry out a planned crude output cut, even as data showed U.S. oil drillers removed rigs from production for the first time since June.

Brent crude futures LCOc1 fell 76 cents, or 1.5 percent, to $49.71 a barrel, after earlier hitting a session low of $49.31.

U.S. West Texas Intermediate CLc1 crude fell $1.02, or 2 percent, to $48.70 a barrel. It hit a low of $48.42.

The latest investigation into Clinton’s emails also pushed U.S. Treasury two-year note yields US2YT=RR down from five-month peaks to trade flat. Yields on other short-dated U.S. notes were also lower on the day.

However, the yield on 10-year Treasury notes US10YT=RR rose slightly to 1.848 percent. Earlier, 10-year yields reached five-month highs of 1.879 percent.

Stronger-than-expected growth in the world’s biggest economy boosted bets on an imminent U.S. interest rate increase and had earlier sent government bond yields broadly higher.

An estimate of U.S. second-quarter gross domestic product showed annualized economic growth of 2.9 percent, the fastest rate in two years. But the boost came largely from a recovery in inventories and a jump in agricultural exports after poor soy harvests in Argentina and Brazil this year benefited sales by American exporters.

Meanwhile, business investment in equipment contracted for a fourth straight quarter and personal consumption growth slowed to 2.1 percent from 4.3 percent.

Treasury yields were also supported by surging British gilt and German bund yields DE10YT=TWEB. Bond yields have risen recently amid concerns the ultra-easy policies of major central banks could have their limits and may not be continued indefinitely.

Europe’s index of leading 300 shares .FTEU3 closed down 0.35 percent; Germany’s DAX slipped by 0.19 percent .GDAXI and the STOXX 600 fell 0.27 percent.

(Additional reporting Gertrude Chavez-Dreyfuss, Sam Forgione and Ethan Lou in New York; Editing by Dan Grebler and Meredith Mazzilli)

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Published at Fri, 28 Oct 2016 06:08:28 +0000

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