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Major Indexes Continue Higher

jim Financial advisor, Investing, Investment Management, Market Brief, Market Commentary, Market Review, Retirement Income Planning, wealth management November 8, 2021November 8, 2021financial advisor, Investing, investment management, market brief, retirement income planning, wealth management

Major indexes closed at all-time highs last week. U.S. equities reached new record highs after strong jobs data and the Federal Reserve’s expected tapering decision. Last week, the Dow finished up 1.43%, S&P 2.03%, and Nasdaq 3.08%.

Last Week – Major Indexes Reach New Highs

The S&P 500 Index returned 2.03% last week after closing Friday at all-time highs. Equities rallied on positive economic data and strong corporate earnings. Last week earnings season reached full swing after 183 names in the S&P 500 announced quarterly results. Every S&P 500 sector except healthcare and financials posted gains. For the second straight week, the S&P was led by the consumer discretionary sector. Basic materials and technology also advanced more than 3%.

The U.S. central bank would like to see further improvements in the labor market before raising interest rates. Mainly, in the participation rate, which is still below pre-Covid levels. The Federal Reserve announced they will start tapering or reducing their asset purchases per month. When questioned about interest rates, Federal Reserve Chairman Jerome Powell stated rate hikes could happened in the back half of next year, but the Federal Reserve will remain “data dependent” in their decisions. Regarding inflation, Powell and the Federal Reserve’s certainty in inflation being transitory continues to decrease as higher prices continue. Last week wrapped up with Friday’s stronger than expected jobs report. Friday’s Non-Farm Payroll report revealed 531K new jobs added in October, with the unemployment rate falling to 4.6%.

Wages have also risen 4.9% Year-over-Year. Earlier in the week the ADP account showed private payrolls rising 571K for October, and weekly unemployment claims dropped to 269K. In other economic news, the U.S. ISM Services PMI jumped to a record 66.7 in October, while manufacturing activity slowed to 60.8 from 61.1 on stretched supply chains. U.S. Q3 productivity growth fell 5%, the biggest quarterly drop since 1981, as unit labor costs leapt 8.3%. Overseas, the Bank of England surprised by holding rates steady on labor market concerns. Crude oil fell 2% even though OPEC decided not to raise production in the face of mounting pressure from the Biden administration. China’s October PMI slipped into contraction, and Chinese tech stocks remained under pressure from regulators.

This Week

Even with a robust jobs market, high inflation, and expectations of rate increases as soon as the second half of 2022, 10-year Treasury yields fell 10 basis points last week. The Fed did add a note of caution in its statement, particularly on inflation, and investors have been well prepared for the central bank’s bond buying reduction. Ultimately it reflects an uncertain environment which may continue to drive rate volatility in the near term.

The U.S. economic calendar is light but contains important updates, with PPI on Tuesday and CPI on Wednesday. China releases their inflation data late Tuesday, with producer prices expected to advance even further from last month’s 26-year highs. Other notable events include Australia’s employment numbers, preliminary Q3 GDP from the UK, and Eurozone sentiment and industrial production figures. The week finishes up with U.S. Jolts job openings and a preliminary consumer sentiment reading for November.

This week earnings season is winding down as 20 names in the S&P 500 are expected to report. Notable names expected to report include Berkshire Hathaway Inc., The Walt Disney Co., PayPal Inc., Johnson Controls Holdings. Year-to-date index performance; Dow up 18.7%, S&P up 25.06%, and Nasdaq up 23.9% through the close on Friday.

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How High Did Earnings Lift Indexes

jim Financial advisor, Investing, Investment Management, Market Brief, Market Commentary, Market Review, Retirement Income Planning, Retirement Planning, Stock Market, wealth management November 2, 2021November 2, 2021financial advisor, Investing, investment management, market brief, retirement income planning, retirement planning, Stock Market, wealth management

The S&P 500 eclipsed 4600 for the first time thanks to the earnings lift. The S&P 500, Nasdaq Composite, and Dow Industrials indexes all reached record highs during the week. November kicks off with a busy and important week of data. Last week all indexes finished up. The Dow up 0.4%, S&P 1.35%, and Nasdaq 2.72%.

Last Week

U.S. equities drifted higher in the face of interest rate volatility and economic growth concerns. The S&P 500, Nasdaq Composite, and Dow Industrials indexes all reached record highs during the week. The Nasdaq managed to outperform despite disappointing earnings from Apple and Amazon. The U.S. yield curve experienced major flattening, as rate hike expectations are getting pulled forward due to high inflation. U.S. GDP grew at a 2% rate in Q3, below expectations of 2.8%. This puts additional pressure on longer-term rates as growth expectations revise lower. Consumer spending increased by only 1.6% after a 12% rise in Q2. Consumer confidence rebounded to 113.9 in October following three straight declines. The improvement was boosted by rising wages and a strong labor market. Jobless claims fell to another pandemic-era low of 281K.

The economy’s sore spot continues to be supply chain shortages, with durable goods orders dropping 0.4% in September after four straight monthly gains. New home sales surged to a 6-month high in September, but higher house prices and mortgage rates may dampen future demand. Pending home sales dropped unexpectedly. Interest rate movements were largely influenced by international developments, as the Bank of Canada struck a hawkish tone mid-week before GDP data showed likely Q3 underperformance. In Europe, ECB watchers expect a formal tapering announcement in December, as Eurozone inflation hit 4.1% in October on surging energy costs. Finally, German GDP rose 1.8% in Q3, missing expectations of 2.1% growth, and business sentiment worsened again in October on supply bottlenecks.

Earnings Review – Earnings Lift

Earnings season is in full swing with 279 of the companies in the S&P 500 having reported. 82% have beaten earnings expectations and 67% have beaten revenue expectations. The strongest results have come from Financials and Energy while Industrials have lagged. Supply chain issues have been a common
theme among companies reporting in several sectors. Mentions of “supply chain” in quarterly earnings calls were up 58% during the 2Q 2021 earnings season versus 4Q 2020. The current season is on track to be the highest in the 21st century. The largest companies in the S&P 500 reported last week. Tesla, Microsoft, and Alphabet all had stellar results providing an earnings lift. Amazon, Apple, and Facebook struggled in the prior quarter. Mark Zuckerberg doubled down on efforts to promote the metaverse. He also announced that Facebook, Inc. is changing its name to Meta Platforms, Inc., in December.

Week Ahead

November kicks off with a busy and important week of data. The FOMC meets mid-week, where the stage appears to be set for a long-anticipated tapering announcement. There is much to weigh, with a robust economy being checked by supply constraints. Inflation is exceeding its target by a wide margin. The improving but tight labor market that has yet to reach full employment. There are additional central bank policy updates from Australia and the UK on the calendar. Speaking of jobs, NFP lands Friday, preceded by the ADP report two days prior. Crude oil prices have stabilized the past few weeks, but remain near 7-year highs. Other events of note include employment numbers and PMI from Canada, and Eurozone retail sales and PMIs.

This week will include earnings results from oil stocks BP and Marathon Petroleum. Also reporting are video game makers Activision Blizzard, Electronic Arts, and Take-Two Interactive. News from the November Fed meeting is out on Wednesday. Year-to-date index performance; Dow up 17.03%, S&P up 22.61%, and Nasdaq up 20.25% through the close on Friday.

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Earnings Impact and All-Time Highs

jim Financial advisor, Investing, Market Brief, Market Commentary, Market Outlook, Market Review, Retirement Income Planning, wealth management October 25, 2021October 25, 2021financial advisor, Investing, market brief, Market Commentary, Market Review, retirement income planning, retirement planning, wealth management

New highs for the S&P 500, oil, and midcap stocks. U.S. equities posted moderate gains despite disappointing earnings from some technology companies. The S&P500 Index reached a new all-time high, advancing 1.5%+ for the week, while the Nasdaq Composite’s returns were similar. The final week of October kicks off with earnings from Facebook today. Reports from Boeing, General Motors, Caterpillar, Mastercard, and Exxon Mobil are also on the calendar. Indexes all finished higher last week; the Dow up 1.12%, S&P 1.66%, and Nasdaq 1.30%.

Last Week – Earnings Impact and All-Time Highs

U.S. equities posted moderate gains despite disappointing earnings from some technology companies. The S&P 500 Index reached a new all-time high. Stocks ended last week higher after rising four out of five days. The index has returned over 20% this year despite multiple economic and geopolitical headwinds. Inflation from global supply-chain constraints continues to spook investors. As evidenced by the market movement proceeding comments by Federal Reserve Chairman Jerome Powell on Friday. Fed Chairman Powell spoke at a conference and reaffirmed the plan to begin asset purchase tapering this year. He also signaled that supply chain issues and high inflation will likely persist into 2022. Investors are concerned that higher costs from supply-chain disruptions will lead the Fed to raise interest rates faster than expected. This view has been dampened by strong earnings reports from many companies leading major market indexes to near record highs.

U.S. economic data was mixed. The Fed revealed economic activity continued to grow at a modest to moderate rate, with the pace of growth slowing. The Philly Fed Index fell to 23.8 in October, reflecting an expected pullback from the prior month’s spike. October PMIs were driven by services, which rebounded to 58.2 from 54.9. Manufacturing fell to a 7-month low of 59.2 on raw material shortages. Homebuilder confidence rose on high buyer demand, as existing home sales surged 7% in September to an 8-month high. Housing starts fell on input and labor scarcities. Weekly jobless claims hit another pandemic-era low of 290K with continuing claims dropping to 2.48 million. This signals a reluctance to lay off employees while hiring remains challenged.

In corporate news, Intel plunged 11%+ Friday after its PC chip sales fell due to component shortages. Social media stocks fell based on Snap’s report of ad revenue disruptions due to privacy changes on Apple devices. On Friday, Pool Inc, Etsy, and Tesla rallied last week as a sign the resilient consumer is powering a strong economy. The S&P 500 is up over 4% since JPMorgan kicked off earnings season about two weeks ago.

Week Ahead

The week kicks off with earnings from Facebook, whose stock has been reeling from regulatory pressures, and Snap’s advertising results. Reports from Boeing, General Motors, Caterpillar, Mastercard, and Exxon Mobil are also on the calendar. Three central bank meetings highlight the economic agenda. The expectation from the Bank of Canada is to further reduce asset purchases on Wednesday. Markets are pricing in 3 rate hikes for next year. In Europe, the ECB has stagflation concerns. This results from slowing growth accompanied by escalating energy prices. The ECB may take a more cautious tone towards rate increases on Thursday. Not much is expected when the Bank of Japan meets, as the economy is still showing little inflationary pressures.

In the U.S. investors get the first look at Q3 GDP on Thursday. Estimates have steadily decreased the past several months, and Fed models sit much lower than the current 2.6% forecasts. This week also offers the durable goods report on Wednesday. New home sales and inventory data will shape investors views along with 165 companies in the S&P 500 set to report quarterly earnings this week. With the earnings impact and all-time highs, they year-to-date index performance; Dow up 16.6%, S&P up 21.0%, and Nasdaq up 17.1% through the close on Friday.

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Supply Chain and Earnings Kick-Off

jim Financial advisor, Investing, Market Brief, Market Commentary, Market Review, Retirement Income Planning, Retirement Planning, wealth management October 18, 2021October 18, 2021financial advisor, Investing, market brief, Market Commentary, Market Review, retirement income planning, retirement planning, Stock Market, wealth management

U.S. equities posted solid gains, the labor market improved offsetting inflation pressures. Investors will be wary of seasonal weakness even as the S&P 500 is showing signs of reversing its recent downtrend. This week’s Q3 earnings reports will feature prominent names like Netflix, Tesla, Intel, AT&T and American Express. Last week all indexes finished up. The Dow up 1.58%, S&P 1.84%, and Nasdaq 2.18%.

Last Week – Supply Chain

The S&P 500 Index returned 1.84% last week, the best week since mid-July and seventh best week for the year. Equities shook off negative supply chain headlines and rallied on the strength of earnings. Labor market improvements also supported the positive week, offsetting ongoing inflation pressures. The U.S. supply chain has been bottlenecked as a result of the COVID pandemic. Inventory is drying up as clogging remains an issue at U.S. ports. Inconsistent passenger airline activity is holding down freight via airlines. U.S. inflation rose higher in September by pandemic-driven shortages. CPI advanced 5.4% from the year earlier and the PPI advanced 8.6% from the year earlier. In meeting notes, the Fed commented that it observed PCE (personal consumption expenditures index) prices well above their targeted 2% rate but that they continue to anticipate this to be transitory.

Despite supply issues, equities rallied as earnings season kicked off with some strong announcements last week. Some of the more notable announcements were from mega cap banks. Strong bank earnings announcements further confirm that the U.S. economy is on solid footing despite some supply chain and employment headwinds.

The Minutes from the September 21-22 Federal Open Market Committee meeting released. The Fed indicated that tapering could begin as soon as mid-November and fully anticipates it will begin before 2022. They expect supply pressures to partially ease as supply chain issues resolve and import prices fall. High resource utilization rates in 2022 are also expected to assist in lowering pricing pressures and in total the Fed anticipates the PCE will fall below 2% in 2022 and “edge” higher to reach 2% in 2024. Retail sales rose 0.7% in September led by general merchandise stores, gas stations and autos.

New unemployment claims fell below 300K for the first time since the pandemic began, a milestone for the job market. Jobs openings also fell for the first time in 6 months but quits pushed to a record high of 4.3 million in August. The “Great Resignation” is real.

Week Ahead

Looking ahead this week, earnings season continues with 76 names in the S&P 500 expected to report quarterly results. Some notable names
include: Tesla Inc., Netflix Inc., Honeywell International Inc., Union Pacific Corp. and American Express Co. The U.S. economic calendar is light, with industrial production numbers today followed by housing data on Tuesday and Thursday. The Fed’s Beige Book and Philly Manufacturing Index will provide additional insights regarding regional economic conditions. Finally, an eye will be on the Evergrande Group situation after China’s central bank sought to ease concerns about spreading economic risks.

Year-to-date index performance; Dow up 15.3%, S&P up 19.0%, and Nasdaq up 15.6% through the close on Friday.

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Debt Ceiling and the Market Impact

jim Financial advisor, Investing, Market Brief, Market Commentary, Market Outlook, Market Review, Retirement Income Planning, wealth management October 11, 2021October 11, 2021financial advisor, Investing, market brief, Market Outlook, Market Review, retirement income planning, retirement planning, Stock Market, wealth management

Despite Friday’s disappointing jobs report, U.S. equities managed modest gains after the debt ceiling crisis was temporarily postponed. Global central banks continue to express concerns about higher prices but insist interest rate hikes are still far off, preferring to taper bond purchases first. On Wednesday investors will parse through the minutes from the most recent FOMC meeting for additional clues on policy changes. Last week, the Dow finished up 1.27%, S&P up 0.83%, and Nasdaq 0.1%.

Last Week Debt Ceiling Proposal

The S&P 500 Index returned 0.83% last week, regaining some of the previous week’s 2.19% decline. The index is currently up 1.99% for October, a welcomed trend following September’s -4.65%, its worst performance since March 2020. Equites had a rough start to the week as the index declined 1.29% on Monday with the information technology and communication services sectors leading the way down as inflation and growth fears weighed on investors. Markets rallied back on Tuesday and pushed higher through Thursday. Equities received positive news as a $480 billion increase to the debt ceiling was passed by the US Senate allowing the government to continue to operate as usual for a couple more months without a shutdown or default.

After a poor August payroll number, investors looking for strength in employment numbers were disappointed again. The September non-farm payroll data showed an increase of only 194K jobs. Well below the expectations of 500K. However, U.S. initial jobless claims of 326K were lower than the 348K expected and the previous week’s 362K. The unemployment rate also showed positive data as it declined 0.4% to 4.8%, its lowest level since March 2020. However, the labor force participation rate dropped to 61.6% from 61.7%. Overall, the numbers reflect a remarkably tight labor market, as wages increased by 0.6% Month-over-Month and 4.6% Year-over-Year. The weak jobs report led investors to believe it is less likely the Federal Reserve tapers bond purchases. The tapering process is still expected to begin by the end of this year.

Week Ahead

Central banks across the globe continue to express concerns about higher prices, but insist interest rate hikes are still far off. On Wednesday investors will review the minutes from the most recent FOMC meeting for additional clues on policy changes. This week brings inflation data, highlighted by U.S. CPI on Wednesday and PPI Thursday expected to be flat to slightly lower. Germany reports wholesale prices, Japan brings PPI, and China delivers CPI and PPI throughout the week.

On the labor front, U.S. job openings anticipate to tick up to yet another record high. This week will feature the first major Q3 earnings reports. With the large money center banks releasing numbers on Wednesday and Thursday. Financials have been the second strongest sector the past few weeks, boosted by rising yields. Closing out a busy week, U.S. retail sales will reveal how back-to-school shopping fared and if stores were able to stay stocked in the face of supply chain disruptions. The first look at October consumer sentiment also drops Friday.

Year-to-date index performance; Dow up 13.53%, S&P up 16.92%, and Nasdaq up 13.12% through the close on Friday.

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