Jul 162016
 

Market Conditions

Up, up, and away! The bull is clearly back. Equities were up for the third week in a row, reaching a series of fresh record highs. The swift post-Brexit rebound has been driven by falling treasury yields (making bonds more expensive compared to stocks), better than expected economic data, and higher expectations for company earnings growth. The U.S. jobs report showed the strongest monthly hiring since last October, monthly retail sales rose sharply with three-month growth now the strongest in more than a year. Rate hike expectations did edge up a little, but concerns about a rate hike taking place before the end of 2016 are almost non-existent. The fed funds futures market estimates the likelihood of a hike in July at 2.4% while the implied probability of a hike in December sits at 47.8%.

The S&P 500 opened Monday at 2131.72 and closed on Friday at 2161.74, up 30.02 or 1.41% for the week.

Chart_071616_SPX

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Jul 022016
 

Market Analysis

Equities recorded their strongest weekly gains of the year following last week’s Brexit debacle. Markets were spurred higher by a vow to further ease monetary policy by the Bank of England during the summer. In the wake of those comments, markets have priced in an 85% chance of a rate cut in England by August. This all puts further pressure on central banks in the United States to keep interest rates low indefinitely. It appears that the zero-percent interest rate policy (ZIRP) is now the “new normal”. The S&P opened Monday at 2031.45 and closed on Friday at 2102.95, up 71.5 points, or 3.52%.

Chart_070216_SPX

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Jun 272016
 

The S&P 500 (SPX) is down over five percent in the past two trading days. However, trading today closed at 2000.54, a key psychological support level. It is difficult to predict the impact of Brexit both short- and long-term. However, the U.S. economy is in fairly good shape with seemingly low unemployment, strong consumer spending and sentiment, and housing demand remaining upbeat. Investors will be watching carefully for the effects of Brexit as new economic data is released. What is likely, however, is that volatility will continue in the financial markets over the course of the next few weeks or months. This presents an exceptional opportunity for premium sellers.

Chart_062716_SPX
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Jun 182016
 

Market Analysis

Stocks fell in volatile trading as investor sentiment continued to weaken ahead of next week’s “Brexit” vote. A clear swing in opinion polls in favor of the Leave camp put markets on edge this week. Investors also focused on commentary from central banks around the globe, which wasn’t surprising, considering the Federal Reserve, Bank of Japan, Bank of England, and Swiss National Bank all held their policy meetings. All four stood pat, keeping their key interest rates unchanged. However, all four cited growth concerns that fueled a flight to safety and a somewhat surprising aversion to stocks. Surprising, only because up until now, dovish commentary from the Federal Reserve has elicited strong rallies in recent years. The S&P surrendered nearly 1% on the week, opening Monday at 2091.75 and closing on Friday at 2071.22, down 20.53 points.

Chart_061816_SPX

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Jun 112016
 

Stocks rallied during the first half of the week marking a new high for 2016. However, the rally was short-lived. The SPX came within 12 points of its historic all-time high on Wednesday, but was unable to continue the upward momentum. On Friday, the market gave in to selling pressure and the SPX closed down on the week.  Investor fear has returned due in part to the World Bank lowering its global GDP forecasts. This report, along with nervousness around the looming “Brexit” vote and the FOMC meeting next week put traders into a risk-off mode before going into the weekend. The S&P 500 opened Monday at 2100.83 and closed on Friday at 2096.07, down 4.76 or 0.23% for the week.

Chart_061016_SPX

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Jun 042016
 

Market Conditions

Jobs… jobs… jobs… The market was quiet for most of the abbreviated trading week in advance of Friday’s much anticipated jobs report (or ‘lack of jobs’ report). Non-Farm Payrolls rose by just 38,000 in May, the weakest performance since September 2010, the Labor Department said Friday. This was significantly below the estimate by economists that payrolls would rise by 158,000. This sent the U.S. dollar into a tailspin against all of the major currencies. The U.S. Dollar Index futures (/DX) dropped 1.76% on Friday to its lowest point since May 17th.

Chart_060316_DX

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May 282016
 

Flag-largeStocks rallied this week as the market digested the possibility of a rate hike in June or July. Federal Reserve Chairwoman Janet Yellen said Friday, “It’s appropriate, and I’ve said this in the past I think, for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate,” if the economy and labor market continue to strengthen. The probability of a June rate hike now stands at 28% compared with just 4% earlier in the month. Also helping stocks jump higher was economic data from the housing sector which indicated that new home sales grew at their fastest pace since January 2008 and pending home sales grew 5.1% over the past month.

The S&P 500 opened Monday at 2052.53 and closed on Friday at 2099.06 up 46.53 or 2.27% for the week.

Chart_052816_SPX

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May 212016
 

Market Conditions

The S&P 500 barely ended the week higher, underscoring how the prospect of higher interest rates has unsettled investors. Federal Reserve officials and upbeat economic data in recent days have raised the possibility of a rate increase as soon as June. Last Friday, the probability of a rate hike at the June meeting was just eight percent, which increased to a thirty percent probability by the end of this week. The fed funds futures market is now pricing in a fifty-five percent likelihood of a rate hike in July, as well. Zero-percent interest rates have persisted for 90 months helping to propel the stock market higher. However, corporate earnings reports this quarter have been dismal. Companies in the S&P 500 are on track to report a fourth consecutive quarter of declines from the previous year. This coupled with potentially higher interest rates is leading investors to question what will continue to drive stocks higher.

The S&P 500 opened Monday at 2046.53 and closed on Friday at 2052.32, up 5.79 or 0.28% for the week.

Chart_052016_SPX

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May 142016
 

Market Conditions

Stocks were marginally lower on the week with the S&P 500 index suffering its third consecutive weekly loss. Despite strong gains on Tuesday, the market was unable to shake off the poor earnings reports from stocks in the consumer sector along with disappointing guidance from Macy’s, which dragged consumer discretionary stocks down. Even a better-than-expected April Retail Sales report on Friday (up 1.3% actual vs. 0.8% estimate) was not able to stop the slide in equities.

Investors received another batch of quarterly earnings throughout the week with nearly 92% of the S&P 500 companies having now reported their results. Earnings per share have declined by 12% year-over-year, the fifth quarter in a row that profits have fallen.

Fed officials spoke throughout the week with some cautioning that the possibility of a rate hike in June should not be dismissed entirely. The fed funds futures market, however, remains convinced that the next rate hike will not come before December. The market is pricing in just an 8.0% probability of a rate increase in June, while the likelihood of a December hike is at 62.0%.

The S&P 500 opened Monday at 2057.55 and closed on Friday at 2046.61, down 10.94 or 0.53% for the week.

Chart_051316_SPX

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May 072016
 

Market Conditions

Sell in May and go away… Equities have been under pressure this week as concerns escalated regarding the prospect for global growth. Additionally, recent domestic economic data has not been as robust as had been expected. Whatever chance there was of the Federal Reserve raising interest rates in June went by the wayside after the U.S. Department of Labor released an underwhelming employment report on Friday. The Non-Farm Payrolls report indicated that U.S. companies scaled back hiring in April adding just 160,000 new jobs, which was well below economists forecast of 205,000. It was the weakest gain in jobs since last September. Additionally, prior months’ job counts were revised lower by 19,000. However, first-quarter earnings have been better than expected, although they did decline over 5% from the prior year.

The S&P 500 opened Monday at 2067.17 and closed on Friday at 2057.14, down 10.03 or 0.49%.

Chart_050616_SPX

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