Monthly Archives: September 2016

U.S. Market Weekly Summary – Week Ending 09/30/2016

S&P 500 Edges Up 0.2% on Week, Led by Jump in Energy Sector; Utilities Lead Decliners

The Standard & Poor’s 500 index eked out a gain of 0.2% this week, as a big jump in the energy sector as well as gains in industrials, materials and technology stocks managed to slightly outweigh declines across utilities, health care and financials.

The S&P 500 ended the week at 2168.27, up from 2,164.69 a week ago.

On the upside, the energy sector was boosted by a climb in oil prices after the Organization of the Petroleum Exporting Countries surprised the market with an agreement to cut output. Among the energy sector’s gainers, shares of Exxon Mobil (XOM) rose 4.6% and InterOil (IOC) climbed 3.4% this week. Wednesday, InterOil indicated its sale to Exxon Mobil is moving along, noting the Supreme Court of Yukon is considering the deal as well as an objection from InterOil’s former CEO, Phil Mulacek.

Ferrellgas Partners (FGP) was among the biggest decliners in the utilities sector, tumbling 31% this week as the propane company reported a fiscal fourth-quarter loss that was much wider than expected amid write-downs in its crude-oil logistics and water solutions reporting segments. The company’s revenue rose from the year-earlier period but still missed expectations. Ferrellgas also said its president and chief executive stepped down from both positions and its board. The developments follow the termination earlier this month of a major midstream contract.

In the health-care sector, Pain Therapeutics (PTIE) shares plunged 63% this week as the biopharmaceutical company said it received a complete-response letter from the US Food & Drug Administration in which the agency said it can’t approve the new-drug application for Remoxy ER oxycodone capsules in its present form while additional actions and data are needed for drug approval. The letter focuses on the abuse-deterrent properties of Remoxy ER and proposed drug labeling, Pain Therapeutics said.

Shares of Durect (DRRX), whose extended-release, abuse-deterrent technology is used in Remoxy ER, were also among the health-care sector’s biggest decliners this week with a drop of 18%.

Deutsche Bank (DB) was in the spotlight among financial companies this week, after a report by Bloomberg said some hedge funds that do business with the German lender have withdrawn some excess cash and positions held at the bank.
Deutsche Bank CEO John Cryan, meanwhile, said in a letter to employees that the report was causing “unjustified concerns” and had to be seen in the context of the bank’s more than 20 million clients. He said the company fulfills all capital requirements. The shares rose 2.7% this week thanks to a 14% rebound on Friday.

Market Insights 9/30/2016

Stocks Rally to Finish Week Positive

Domestic equities finished solidly higher, amid some upbeat economic data and also receiving a boost from an unconfirmed report that Deutsche Bank is close to a settlement with the U.S. Department of Justice.

Treasuries and gold were lower, the U.S. dollar was flat and crude oil prices were higher.

The Markets…

The Dow Jones Industrial Average gained 165 points (0.9%) to 18,370

The S&P 500 Index increased 17 points (0.8%) to 2,151

The Nasdaq Composite jumped 43 points (0.8%) to 5,312

In moderately-heavy volume, 966 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.41 to $48.24 per barrel, wholesale gasoline increased $0.02 to $1.46 per gallon and the Bloomberg gold spot price declined $3.17 to $1,317.20 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 95.49

Markets were higher for the week, as the DJIA gained 0.3%, the S&P 500 Index increased 0.2% and the Nasdaq Composite ticked 0.1% higher

Upbeat reads for sentiment and manufacturing, income and spending report mixed

Personal income was 0.2% higher month-over-month in August, matching the Bloomberg forecast and compared to July’s unrevised 0.4% increase. Personal spending came in flat last month, below expectations of a 0.2% increase and versus July’s favorably revised 0.4% rise. The August savings rate as a percentage of disposable income was 5.7%. The PCE Deflator inched 0.1% higher, versus expectations of a 0.2% increase. Compared to last year, the deflator was 1.0% higher, above estimates of 0.8%. Excluding food and energy, the PCE Core Index moved 0.2% higher m/m, in line with expectations, and the index was up 1.7% y/y, slightly above estimates of a 1.6% rise.

Despite the unchanged spending reading in today’s report, consumers may be loosening their pocketbooks a bit, with unemployment low and wages starting to tick higher. We continue to believe consumer demand for tech will stay solid. In fact, it may even be expanding. According to the Bureau of Economic Analysis, the real Personal Consumption Expenditure (PCE) annualized quarterly change as of June 30, 2016 was 32.3% for televisions, 24.6% for personal computers and 18.6% for tech games, toys and hobbies.

The Chicago Purchasing Managers Index moved further into expansion territory (above 50), after rising to 54.2 in September from 51.5 in August and versus expectations of an increase to 52.0. New orders rose slightly, whereas employment fell below 50 to its lowest level since June.

The final September University of Michigan Consumer Sentiment Index was revised to 91.2 from the preliminary level of 89.8, and compared to expectations of a slight rise to 90.0. The index was up compared to August’s level of 89.8, and the highest since June. The expectations component of the report moved above August’s level, while current conditions was adjusted higher, but below the prior month’s level. The 1-year and 5-10 year inflation outlooks both inched higher to 2.4% and 2.6%, respectively, from the corresponding 2.3% and 2.5% readings in August.

Treasuries were modestly lower, with the yields on the 2-year and 10-year notes increasing 3 basis points (bps) to 0.76% and 1.59%, respectively, and the 30-year bond rate advancing 4 bps to 2.32%. The end of the bull market doesn’t mean a bear market is starting, as slow global growth, deflationary pressures abroad, a firm dollar and demographic trends are likely to keep yields low. Investors should focus less on short-term changes in the market and more on structuring a fixed income portfolio that can work for them over the long run.

European markets bounce back, Asia mostly higher

European equities finished mixed, paring early solid losses that stemmed from continued anxiety surrounding the banking sector amid capital concerns toward Deutsche Bank AG (DB $13), which rebounded after hitting a fresh all-time low, after a report surfaced that the German lender was near a settlement with the U.S. Department of Justice (DoJ). The DoJ was demanding a $14 billion fine in relation to DB’s alleged practices leading up to the 2008 mortgage crisis. DB nor the DoJ have commented on the news.

In economic news, U.K. consumer confidence improved at a better rate than forecasts, growth in housing prices in the country matched estimates, and Q2 GDP was revised a tick lower than the preliminary reading. Meanwhile retail sales in Germany nearly tripled expectations, and France reported upbeat reads on inflation and consumer spending. The euro and the British pound were higher versus the U.S. dollar, while bond yields in the region were mixed.

Stocks in Asia took their cue from the U.S. markets yesterday to finish mostly lower, with European banking concerns driving sentiment, while the energy sector’s out-performance was able to mute some of the losses. Japanese equities fell amid some strength in the yen and a slew of disappointing economic data. Consumer price inflation in the island nation came in cooler than expected, the unemployment rate was slightly higher than forecasts, housing construction fell short of forecasts, and household spending tumbled. Australian securities declined despite an upbeat housing construction report, South Korean listings traded to the downside, and Indian stocks finished lower.

Mainland Chinese issues bucked the regional trend, increasing modestly, after the Caixin/Markit Manufacturing PMI Index for September ticked higher to 50.1 from 50.0 in August, matching economists’ forecasts. The news didn’t filter over to trading in Hong Kong, however, where equities declined. Mainland Chinese markets will be closed next week for the golden week holiday break, while trading in Hong Kong will continue.

Market Insights 9/29/2016

Stocks Give Back Previous Session’s Gains

Domestic stocks traded lower, with financials among the largest decliners as Deutsche Bank continued to make headlines after recently being fined by U.S. authorities.

The energy sector managed to limit losses as crude oil prices extended yesterday’s jump that developed on the announced preliminary production cut agreement from OPEC, despite some elevated scrutiny toward the details of the deal.

Treasuries and the U.S. dollar were slightly higher, while gold was flat. In economic news, reports on Q2 GDP, weekly jobless claims and the trade deficit were mostly favorable.

The Markets….

The Dow Jones Industrial Average (DJIA) fell 196 points (1.1%) to 18,143

The S&P 500 Index lost 20 points (0.9%) to 2,151

The Nasdaq Composite dropped 49 points (0.9%) to 5,269

In moderately-heavy volume, 977 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.78 to $47.83 per barrel, wholesale gasoline was flat at $1.44 per gallon

The Bloomberg gold spot price declined $0.03 to $1,321.51 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 95.53

Final revision to Q2 GDP tops forecasts, jobless claims tick higher

The final look (of three) at Q2 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 1.4%, adjusted up from the 1.1% and the 1.2% expansion reported in the second and first revisions, respectively. This compared to the Bloomberg forecast of a revised 1.3% pace of growth. Q1 GDP expanded by an unrevised 0.8% rate. Personal consumption came in at a 4.3% gain for Q2, down from the preliminary estimate of 4.4%, where it was expected to remain. Personal consumption grew by an unrevised 1.6% in Q1.

Weekly initial jobless claims rose by 3,000 to 254,000 last week, versus estimates of an increase to 260,000, with the prior week’s figure being downwardly revised to 251,000. The four-week moving average declined by 2,250 to 256,000, while continuing claims fell 46,000 to 2,062,000, south of the estimated level of 2,129,000.

The advance goods trade deficit narrowed to $58.4 billion in August, from the downwardly revised $58.8 billion in July, versus projections calling for the deficit to widen to $62.2 billion.

Pending home sales fell 2.4% month-over-month in August, versus projections of a flat reading and following the downwardly revised 1.2% gain registered in July. Compared to last year, sales were 4.0% higher, versus forecasts of a 2.6% increase. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which unexpectedly declined last month.

Treasuries finished higher, with the yields on the 2-year and 10-year notes, as well as the 30-year bond rate all dipping 2 basis points to 0.74%, 1.56% and 2.28%, respectively.

The end of the bull market doesn’t mean a bear market is starting, as slow global growth, deflationary pressures abroad, a firm dollar and demographic trends are likely to keep yields low. Investors should focus less on short-term changes in the market and more on structuring a fixed income portfolio that can work for them over the long run.

Tomorrow’s economic calendar will begin with a report on personal income and spending, forecasted to show income rose 0.2% m/m during August and that spending increased 0.1%, followed by the Chicago Purchasing Managers Index, with economists expecting a reading of 52.0 for September, up from the 51.5 registered in August. Rounding out the day, we’ll receive the final University of Michigan Consumer Sentiment Index for September, estimated to have inched higher to 90.0 after the preliminary read matched August’s 89.8 level.

Europe mixed, Asia mostly higher

European equities finished mixed, with oil & gas issues rallying on the heels of the surprise agreement to cut oil production for the first time in eight years at an informal meeting by the Organization of the Petroleum Exporting Countries (OPEC).

Financials modestly added to yesterday’s rebound after selling off recently on capital concerns toward Deutsche Bank AG. However, the German financial sector finished lower as DB gave back some of a two-day rebound and saw heavy pressure in U.S. trading after the European markets closed as Bloomberg reported that about 10 hedge funds that clear derivatives trades with the company have withdrawn some excess cash and positions held at the lender. A spokesperson for the German lender said the company is confident that the vast majority of its trading clients have a full understanding of its stable financial position, per the report.

In economic news, preliminary German consumer price inflation came in slightly hotter than expected, Eurozone economic confidence unexpectedly improved, and U.K. consumer credit topped forecasts, though a separate read on the nation’s mortgage approvals came in slightly below estimates. The euro was higher and British pound declined versus the U.S. dollar, while bond yields in the region were mostly higher.

Stocks in Asia finished mostly higher, with the energy sector gaining ground following yesterday’s surge in crude oil prices as OPEC announced the first oil output cut deal in eight years. An advance for Japanese equities was aided by some late-session weakening of the yen, even as the nation reported a larger-than-expected drop in August retail sales. Australian stocks gained ground, with oil & gas and basic materials stocks leading the way.

Securities trading in mainland China and Hong Kong increased ahead of next week’s golden week holiday break. South Korean listings traded to the upside and Indian stocks fell after the country announced that it has carried out surgical strikes on terrorist camps in Pakistan.

U.S. Second-Quarter GDP Revised Up to 1.4% Gain

Latest data confirms expansion decelerated in the first half of the year

The U.S. economy grew at a modestly faster pace in the second quarter than previously estimated, but the latest data confirms the expansion decelerated in the first half of the year.

Gross domestic product, a broad measure of goods and services produced across the economy, expanded at an inflation-adjusted 1.4% seasonally adjusted annual rate in the second quarter, the Commerce Department said Thursday. That is up from last month’s estimate of a 1.1% growth rate during the spring.

Thursday’s report showed a measure of business investment improved rather than declined, accounting for most of the upward revision. The decline in spending on buildings and other structures was much less severe than previously estimated and spending on intellectual property like software and research and development rose at the fastest pace in nearly a decade.

Second-quarter growth accelerated from the first quarter’s 0.8% pace, but was still slower than the 2.1% annual rate averaged since the recession ended in mid-2009. The current expansion’s pace is the weakest of any since 1949.

“GDP growth still looks weak” in the second quarter, said Jim O’Sullivan, economist at High Frequency Economics. But estimates for the third quarter are “likely to rise.”

Other Commerce data released Thursday showed the trade deficit on goods for August narrowed due to an increase in exports. That suggests trade could support third-quarter growth.

Economic growth has held below a 1.5% pace for three straight quarters. The marked slowdown during an already sluggish expansion raised concerns that the economy was stumbling seven years after the recession ended.

But many economists project output began to accelerate a bit this summer and should return to at least the expansion’s average growth rate during the second half of the year. Similarly, payroll growth improved in recent months after a spring slump.

“Growth was weak in the first half of the year, we’re seeing definite evidence that the economy is now expanding more strongly,” Federal Reserve Chairwoman Janet Yellen said last week. Improved economic growth and progress in the labor market “have strengthened the case for an increase in the federal-funds rate,” she said. The central bank has held its benchmark interest rate steady since December.

Fed policy makers project the economy to grow at a 1.8% pace for all of 2016, implying a modest second-half pick up. The Federal Reserve Bank of Atlanta, on Wednesday, forecast a 2.8% growth pace in the third quarter.

The second-quarter GDP report showed a measure of business spending, nonresidential fixed investment, rose at a 1% rate versus the prior estimate of a 0.9% decline. The upward revision was due to a much smaller decline in structures investment than previously estimated, and an increase in intellectual-property investments.

The change in private inventories was a smaller drag on growth than previously estimated, due to a larger contribution from farm inventories last quarter. Overall, the inventory change subtracted 1.16 percentage points from the GDP advance last quarter, smaller than the previously estimated drag of 1.26 points. Inventory building has weighed on growth for five straight quarters. An expected turn in that cycle is one reason economists project better second-half gains.

A measure of economic growth that excludes inventory effects, real final sales of domestic product, rose at a 2.6% pace in the second quarter.

Consumer spending, which accounts for about two-thirds of total output, rose at a 4.3% pace in the spring, compared with an earlier estimate of growth at a 4.4% annual rate. Last quarter’s gain was still the largest increase in household outlays since late 2014.

Residential fixed investment, including home building and improvements, fell at an unrevised 7.7% pace in the second quarter. Before last quarter, residential investment had been a driver of economic growth since 2014.

Growth in exports, which add to GDP, outpaced gains for imports, which subtract from domestic output, during the last quarter. As a result, trade contributed a slightly better 0.18 percentage point to overall growth in the second quarter. Trade was a significant drag on growth during 2015, a year in which the dollar strengthened against many foreign currencies.

Government spending declined at a 1.7% rate in the second quarter, compared with a prior estimate of down 1.5%.

Corporate profits after tax, without inventory valuation and capital consumption adjustments, rose 5.6% from the prior quarter, up from a previous estimate of a 4.9% increase in the second quarter. That measure most closely matches profits as reported on company balance sheets.

The profit measure was down 1.7% from the second quarter of 2015.

A before-tax measure of profits, which includes inventory and capital adjustments, fell 0.6% in the second quarter, versus the earlier-estimated decline of 1.2%. The measure, intended to be more in line with output gauges, was down 4.3% from a year earlier.

Profits at U.S. corporations have been stressed in recent years by the strong dollar, which makes U.S.-made products more expensive for foreign customers, and low oil prices that have hammered the domestic energy industry.

The dollar and oil prices have stabilized in recent months, but margins could be squeezed going forward by weak global growth, rising labor costs and other forces.

Market Insights 9/27/2016

Stocks Push Higher

U.S. equities, which got a slight lift following last night’s Presidential debate boost, finished higher, as some upbeat reports on Consumer Confidence and services sector growth energized investors.

In sector news, the energy sector was stalled by a tumble in crude oil prices, which gave back most of yesterday’s gains.

Treasuries finished higher, as did the U.S. dollar, while gold was lower.

The Markets…

The Dow Jones Industrial Average rose 133 points (0.7%) to 18,228

The S&P 500 Index gained 14 points (0.6%) to 2,160

The Nasdaq Composite jumped 48 points (0.9%) to 5,206

In moderate volume, 832 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil fell $1.26 to $44.67 per barrel, wholesale gasoline was $0.03 lower at $1.36 per gallon

The Bloomberg gold spot price declined $11.01 to $1,326.94 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 95.45

Consumer Confidence Index jumps, services activity accelerates more than expected

The Consumer Confidence Index jumped to 104.1 in September—the highest since August 2007—from the upwardly revised 101.8 level in August, and compared to the Bloomberg estimate of 99.0. Sentiment toward the present situation and expectations of business conditions both improved. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—rose to 6.3 from the 4.0 posted in August.

The preliminary Markit U.S. Services PMI Index for September improved to 51.9 from August’s reading of 51.0, compared to forecasts of a modest rise to 51.2, with a reading above 50 indicating expansion. The release is independent and differs from the Institute for Supply Management’s (ISM) report, as it has less historic value and its index components are weighted differently.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 5.0% gain in home prices y/y in July, versus expectations of a 5.1% increase. Month/month (m/m), home prices were flat on a seasonally adjusted basis for July, matching forecasts.

The Richmond Fed Manufacturing Activity Index rose but remained in contraction territory (a reading below zero), increasing to -8 in September from the -11 posted in August, while economists had anticipated an improvement to -2. Tomorrow, the U.S. economic calendar will bring a read on manufacturing demand with the August durable goods orders report, projected to show a broad m/m decline across the different components. The nondefense capital goods orders excluding aircraft component of the report—a gauge of business spending—is projected to dip 0.1% after July’s solid 1.5% gain and is likely to garner attention amid recently increased economic growth concerns.

MBA Mortgage Applications will be reported, while most eyes will likely be on Federal Reserve Chairwoman Janet Yellen’s testimony before the House Financial Services Committee on monetary policy, and a slew of other Federal Open Market Committee members are scheduled to speak tonight and tomorrow at various events, likely garnering some attention as well.

Treasuries finished higher, as the yield on the 2-year note ticked 2 basis points lower to 0.73%, the yield on the 10-year note decreased 3 bps to 1.56% and the 30-year bond rate dropped 4 bps to 2.28%.

Europe hamstrung by exacerbated banking pressure, Asia recovers early losses

European equities pared losses on the upbeat U.S. services and consumer confidence data, which helped financials pare early losses. The sector continued to see pressure , including Deutsche Bank AG (DB $12), which has been at the center of the recent pressure on financials, and extended its sell-off. Capital concerns toward DB continued to fester as the German lender faces speculation that it may need to raise money in the wake of a record $14.0 billion fine being sought by the U.S. Department of Justice (DoJ) in relation to its practices leading up to the 2008 mortgage crisis. Automakers also came under some pressure some pressure.

Oil & gas issues weighed on stocks in the region with crude oil prices giving back some of yesterday’s solid advance amid production agreement uncertainty as OPEC holds an informal meeting this week. The euro declined and the British pound ticked higher versus the U.S. dollar, with the global markets reacting to last night’s first U.S. Presidential debate, while bond yields in the region finished mostly lower.

The U.K. FTSE 100 Index and France’s CAC-40 Index decreased 0.2%, Germany’s DAX Index and Spain’s IBEX 35 Index declined 0.3%, and Italy’s FTSE MIB Index dropped 0.4%, while Switzerland’s Swiss Market Index ticked 0.1% higher.

Asian equities finished mostly higher after overcoming early pressure as the markets reacted to the first Presidential debate in the U.S., though crude oil prices pulled back from yesterday’s solid gain amid production agreement uncertainty amid this week’s informal OPEC meeting. Stocks in Japan advanced, with a downside reversal in the yen late in the day helping the markets to break into positive territory. South Korean equities rose amid a late-session comeback, while those traded in China and Hong Kong gained solid ground with a read on the country’s August industrial profits accelerating solidly y/y. Indian securities and markets in Australia were lower, with the latter seeing some weakness in the technology and oil & gas issues.

The economic calendar internationally will be fairly light tomorrow, with Germany slated to release consumer confidence, and sentiment data also coming from Italy.

Consumer confidence hits 9-year high

Americans haven’t felt this good about the economy in a long time

Consumer confidence rose in September to its highest level since August 2007 — before the Great Recession.

The data, released Tuesday by the Conference Board, a business association, helps dismiss arguments that the uncertainty of the election is weighing down Americans’ perception of the economy. The September confidence reading was 104. It fell as low as 25 during the recession.

The improved outlook reflects a healthier job market, the Conference Board said. The unemployment rate is 4.9%, less than half its peak of 10% during the recession. And the last two years, 2014 and 2015, were the strongest for job growth since 1999.

But wage growth has been slow, and Americans don’t expect it to pick up soon. The share of Americans who believe their incomes will improve in the next six months declined in September.

Another measure of Americans’ confidence in the economy is presidential approval ratings. President Obama’s approval rating on jobs is 53%, up from 40% two years ago, according to Gallup.

Some economists are concerned that American businesses are waiting until after the election to start big projects. Spending on new buildings, equipment and projects is down this year, but it’s been weak for years, and it’s hard to link the dip to the election, economists say.

So far, Obama’s successor — whether it’s Donald Trump or Hillary Clinton — doesn’t seem to be having an impact on how Americans feel about the economy.

“The data remain consistent with an improving labor market … with no sign of any significant negative impact from election-related uncertainties,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics, a research firm.

Market Insights 9/26/2016

Markets Down Ahead of Tonight’s Showdown

U.S. equities finished the first session of the week lower following a broad-based decline overseas, as investors await the Presidential debate and after capital concerns swirled around Deutsche Bank.

Treasuries were higher, with yields working their way lower, as new home sales decline and some regional manufacturing data improved, and the U.S. dollar was lower.

Gold was little changed and crude oil prices gained solid ground despite uncertainty ahead of this week’s OPEC meeting. M&A news dominated the equity front.

The Markets…

The Dow Jones Industrial Average declined 167 points (0.9%) to 18,095

The S&P 500 Index lost 19 points (0.9%) to 2,146

The Nasdaq Composite fell 48 points (0.9%) to 5,258

In moderate volume, 781 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil rose $1.45 to $45.93 per barrel, wholesale gasoline was $0.03 higher at $1.39 per gallon

The Bloomberg gold spot price inched $0.98 lower to $1,337.64 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—decreased 0.2% to 95.31

New home sales decline to kick off economic week

New home sales decreased 7.6% month-over-month in August to an annual rate of 609,000, but above the Bloomberg forecast of 600,000 units. The median home price declined 5.4% year-over-year to $284,000. The supply of new home inventory rose to 4.6 months at the current sales pace as sales tumbled in the Northeast m/m, fell in the South and declined in the Midwest, while sales in the West grew. Compared to last year, sales in all regions were sharply higher, except in the Northeast. New home sales are based on contract signings instead of closings.

The Dallas Fed Manufacturing Index rose to -3.7 for September, from August’s unrevised -6.2 level, with economists forecasting an increase to -3.0. A reading below zero denotes contraction in manufacturing activity.

Treasuries finished higher, as the yield on the 2-year note declined 2 basis points (bps) to 0.73%, while the yields on the 10-year note and the 30-year bond are dropped 4 bps to 1.58% and 2.31%, respectively.

Tomorrow’s economic calendar will include more manufacturing and housing data, in the form of the S&P CoreLogic Case-Shiller Home Price Index, expected to show housing prices in the 20-city composite were 5.1% higher year-over-year, but flat on a seasonally-adjusted basis month-over-month, and the Richmond Fed Manufacturing Index, forecasted to improve to -2 during September from the -11 the month prior, with a reading below zero denoting contraction in manufacturing activity. Also, Markit’s preliminary Services PMI Index will be released, with economists forecasting a September reading of 51.2, up slightly from August’s 51.0, while Consumer Confidence will round out the busy day, expected to decline to 99.0 in September from the prior month’s 101.1.

Europe and Asia mostly lower as oil and U.S. politics stymie conviction

European equities traded lower, with financials falling to lead a broad-based decline amid a drop in shares of Deutsche Bank AG as media reports saying the government will not offer any state aid for the German lender fueled capital concerns. The German lender is facing speculation that it may need to raise capital in the wake of a record $14.0 billion fine being sought by the U.S. Department of Justice in relation to DB’s alleged practices leading up to the 2008 mortgage crisis. DB said that at no point did it ask the government for assistance and a German government spokesperson said there are no grounds for speculation over state funding for the bank.

Oil & gas issues saw pressure amid uncertainty regarding if this week’s informal OEPC meeting will yield a new production agreement. The negative movement for stocks came even as German business confidence rose solidly in September to the highest level since May 2014. The euro gained ground and the British pound was little changed versus the U.S. dollar, while bond yields in the region dipped. Also, the global markets awaited tonight’s first Presidential debate in the U.S., while European Central Bank President Mario Draghi spoke today, reiterating the need for fiscal and structural policies to aid economic growth, per Bloomberg.

Stocks in Asia finished mostly lower with the global markets pulling back amid focus on tonight’s first Presidential debate in the U.S., along with festering uncertainty regarding the Bank of Japan’s monetary policy. Volatility in the energy sector also hamstrung conviction as uncertainty increased ahead of this week’s OPEC meeting. Japanese equities declined, with the yen showing some strength, while mainland Chinese stocks and those traded in Hong Kong dropped. Meanwhile, India’s markets traded lower, as did those in South Korea, while Australian stocks finished flat.

Tomorrow’s international economic calendar will offer consumer inflation data from Japan, industrial orders and sales from Italy, and import prices from Germany.

U.S. Market Weekly Summary – Week Ending 09/23/2016

S&P 500 Gains 1.2% on Week Amid Fed’s Decision to Stand Pat on Rates; Utilities Lead Climb

The Standard & Poor’s 500 index rose 1.2% this week as investors reacted bullishly to the Federal Reserve’s Wednesday decision to leave interest rates at 0.25% to 0.5%, putting off a possible increase until at least November. The index ended the week at 2164.69, compared with last week’s closing level of 2139.16.

The Federal Reserve’s Federal Open Market Committee on Wednesday held off on raising its federal funds rate for the sixth consecutive time. The committee said it determined “the case for an increase in the federal-funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” Investors like having a low-rate environment but also want to see economic progress, even as such progress can lead to higher rates; Wednesday’s policy statement gave the stock market some reassurance on both fronts.

Utilities posted the biggest gain of the week on a percentage basis in a week in which every sector rose.

The real-estate sector, which was just added on Sept. 16 with the index’s annual rebalancing, gained more than 3% in its first week. S&P Dow Jones Indices has said the addition of real estate as a separate sector “recognizes its growing position in today’s global economy as well as [highlights] the progressive nature” of the Global Industry Classification Standard structure. Previously, real-estate stocks were included in financials.

Market Insights 9/23/2016

Stocks Down on Day, but Good Weekly Advance

U.S. stocks closed the regular trading session to the downside, paring solid weekly gains that stemmed from mostly positive reactions to monetary policy decisions from the Fed and Bank of Japan. Crude oil prices were solidly lower amid some uncertainty regarding what next week’s OPEC meeting will bring in terms of production.

Treasuries were mixed, gold was slightly higher and the U.S. dollar was little changed. In equity news, Twitter rallied on a CNBC report that it may be close to receiving a takeover bid.

The Markets:

The Dow Jones Industrial Average declined 131 points (0.7%) to 18,262

The S&P 500 Index lost 12 points (0.6%) to 2,165

The Nasdaq Composite decreased 34 points (0.6%) to 5,306

In moderate volume, 811 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil fell $1.84 to $44.48 per barrel, wholesale gasoline was $0.02 lower at $1.36 per gallon

The Bloomberg gold spot price gained $0.57 to $1,337.64 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 95.47

Markets were higher for the week, as the DJIA gained 0.8% and the S&P 500 Index and Nasdaq Composite advanced 1.2%


Manufacturing activity surprisingly dips

The preliminary Markit U.S. Manufacturing PMI Index for September unexpectedly dipped to 51.4 from August’s 52.0 level, where the Bloomberg forecast expected it to remain, though a reading above 50 denotes expansion in activity. Markit said payroll numbers had a moderate upturn despite slower expansion of output volumes, new business growth eased further from June’s nine-month peak, and export orders fell for the first time since May.

Treasuries finished mixed, with the yield on the 2-year note losing 2 basis points (bps) to 0.75%, the yield on the 10-year note was unchanged at 1.62% and the 30-year bond rate gained 1 bp to 2.34%.

Bond yields dipped the past two sessions in the wake of Wednesday’s monetary policy decision from the Federal Open Market Committee (FOMC), which held off on raising rates, with three members dissenting to the decision, while noting that “the case for an increase in the federal funds rate has strengthened, but decided, for the time being, to wait for further evidence of continued progress toward its objectives.”

The Fed hinted at a possible rate hike for December, while lowering its projections to a more gradual pace of hikes down the road. All, in our opinion, very bullish for equities.

Europe pares weekly gain, Asia mixed to close out a positive week

European equities trimmed a solid weekly rebound, with most major market sectors seeing some pressure, exacerbated by a disappointing read on Eurozone business activity. Stocks in the region rebounded this week as crude oil prices recovered somewhat and the global markets reacted mostly positive to key monetary policy decisions out of the U.S. and Japan. Markit’s preliminary Eurozone Composite PMI Index—a gauge of output from both the services and manufacturing sectors—declined to 52.6 for September, from 52.9 in August, and compared to the dip to 52.8 that economists had projected. This was the lowest level since January 2015, though a reading above 50 denotes expansion.

In other economic news, France’s Q2 GDP was revised to a 0.1% quarter-over-quarter (q/q) contraction, from the preliminary flat reading, where it was expected to remain. France’s economy grew 0.7% q/q in 1Q. The British pound fell versus the U.S. dollar following comments from British Foreign Secretary Boris Johnson that suggested a sooner-than-expected execution of the Brexit, per Bloomberg. U.K. stocks were relative outperformers, flirting with positive territory led by strength in commodity-related issues. The euro rose versus the greenback, while government bond yields in the major European countries gained ground.

The U.K. FTSE 100 Index was flat, while France’s CAC-40 Index decreased 0.5%, Germany’s DAX Index and Switzerland’s Swiss Market Index declined 0.4%, Spain’s IBEX 35 Index fell 1.3%, and Italy’s FTSE MIB Index dropped 1.1%.

Stocks in Asia finished mixed to close out a solid weekly advance, with data on the light side. This week’s gains came as the U.S. FOMC held off on raising rates and the Bank of Japan (BoJ) changed its monetary policy to target the yield curve and overshoot its inflation target, instead of moving rates further into negative territory, which boosted financials.

Japanese equities declined in a return from yesterday’s holiday break, reacting to the recent gain in the yen on the heels of the BoJ’s and Fed’s decisions this week. Stocks trading in mainland China and Hong Kong decreased, while Indian securities also finished to the downside. However, South Korean equities rose and Australian listings were standout winners, amid broad-based strength led by telecom and healthcare issues.

Back-to-back U.S. gains on positive reaction to central bank decisions

U.S. stocks rose solidly on the week, a second-straight weekly gain, as the global equity markets received a boost from the much-awaited monetary policy decisions in the U.S. and Japan. The Fed held off on raising rates and hinted at a December hike, but eased concerns by lowering its outlook for the pace of future increases. The BoJ’s monetary announcement appeared to foster optimism that it is taking a different approach to try to boost the economy and stoke inflation.

Financials found support from the BoJ’s decision, while energy issues participated in a broad-based advance as crude oil prices recovered, partially due to some weakness in the U.S. dollar. The real estate sector led the way, aided by a jump in homebuilder sentiment and mostly positive earnings results from the sector, which overshadowed declines in existing home sales, along with housing starts and building permits. Bond yields were mixed, as the short end of the curve was little changed, while rates on the mid-to-long end of the curve fell.

Next week’s U.S. economic calendar will yield a plethora of reports: new home sales, Markit’s Services PMI Index, Consumer Confidence, durable goods orders, the final read on Q2 GDP, personal income and spending, and the final University of Michigan Consumer Sentiment Index. Much of the attention will likely be vectored to a ramp-up in Fed speak and Monday night’s first Presidential debate between Clinton and Trump.

International reports due out next week include: China—industrial profits and the Manufacturing and non-Manufacturing PMI Indexes. Japan—retail sales, household spending, industrial production and the Consumer Price Index (CPI). Eurozone—CPI, as well as German business sentiment and retail sales. U.K.—Q2 GDP and consumer confidence.

After a slow and boring summer, volatility has picked up along with global central bank policy uncertainty and a back-up in U.S. and global bond yields. We believe the Fed is likely to hike rates one time this year, probably in December, but that central bank consternation will continue to elevate volatility. The long-running equity bull market should stay intact with modest economic growth continuing; and investors should remain globally diversified.

Company News:

Finish Line Inc. reported Q2 earnings-per-share of $0.53, in line with the FactSet estimate, as revenues rose 5.4% year-over-year to $509 million, above the projected $495 million. Q2 same-store sales grew 5.1% y/y, compared to the expected 2.9% increase. FINL reaffirmed its full-year EPS and same-store sales outlooks. The shoe and apparel retailer said the combination of top-line growth and disciplined expense management allowed it to partially offset planned gross margin pressure from its inventory reduction actions. Shares lost ground.

Facebook Inc. is in focus after the world’s largest social network disclosed that it overestimated average viewing time for video advertisements to marketers, as its metric only included views of more than three seconds. FB said it fixed the error and it did not impact billing. Shares were lower.

Twitter Inc. is rallying following a report from CNBC’s David Faber that the social media entity has received expressions of interest regarding a takeover from several companies. Faber stressed that there is no imminent sale of the company. TWTR has not commented on the report.

Market Insights 9/22/2016

Post Fed Advance Continues

U.S. stocks joined in a broad-based global equity advance as the markets continued to react positively to yesterday’s Fed decision to hold off on raising rates, though it hinted at a year-end rate hike the central bank also lowered its projection for the pace of future increases.

Treasuries and gold were higher, while the U.S. dollar was under pressure and crude oil prices extended an advance. In economic news, weekly jobless claims surprisingly fell, existing home sales dropped and the Leading Index declined.

The Markets….

The Dow Jones Industrial Average rose 99 points (0.5%) to 18,392

The S&P 500 Index gained 14 points (0.7%) to 2,177

The Nasdaq Composite increased 44 points (0.8%) to 5,340

In moderate volume, 839 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil rose $0.98 to $46.32 per barrel, wholesale gasoline was unchanged at $1.40 per gallon

The Bloomberg gold spot gained $2.11 to $1,337.28 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 95.41

Existing home sales decline, jobless claims surprisingly drop

Existing-home sales in August decreased 0.9% month-over-month to a 5.33 million annual rate compared to the Bloomberg forecast of a rise to a 5.45 million pace. July’s figure was downwardly revised to a 5.38 million annual rate. Compared to last year, sales were 0.8% higher. The median existing-home price was up 5.1% y/y at $240,200. Housing supply came in at a 4.6-month pace at the current sales rate. Sales were solidly higher in the Northeast, while declining in all other regions, as single-family home sales declined, while condominium and co-op sales jumped. National Association of Realtors (NAR) Chief Economist Lawrence Yun said recent job growth is not yielding higher home sales as inventory is not picking up to tame price growth and replace what is being quickly sold.

Weekly initial jobless claims decreased by 8,000 to 252,000 last week, versus estimates of an increase to 261,000, with the prior week’s figure unrevised at 260,000. The four-week moving average declined by 2,250 to 258,500, while continuing claims dropped 36,000 to 2,113,000, south of the estimated level of 2,140,000.

The Conference Board’s Index of Leading Economic Indicators (LEI) declined 0.2% m/m in August, versus projections calling a flat reading. Support came from the components pertaining to stock prices and the yield curve, while the index was bogged down by average workweek and ISM new orders.

The Kansas City Fed Manufacturing Activity Index for September rose to 6 from August’s -4 level, compared to forecasts of a gain to -3, with a reading north of zero depicting expansion.

Treasuries were higher, with the yield on the 2-year note flat at 0.77%, while the yields on the 10-year note and the 30-year bond decreased 3 basis points to 1.62% and 2.34%, respectively.

Tomorrow, the U.S. economic calendar will cool down, with the lone major release expected to be Markit’s preliminary Manufacturing PMI Index for September, which is forecasted to remain at the 52.0 level posted in August, with a reading above 50 denoting expansion in activity.

Europe and Asia higher following Fed decision

European equities traded nicely higher, amid a broad-based rally across the sectors, while the global markets digested the decision by the U.S. Federal Reserve to hold off on raising rates, but hint at a possible rate hike this year. However, the Fed lowered its projections to a more gradual pace of hikes down the road, which is weighing on the U.S. dollar and the nation’s bond yields. The euro and British pound moved higher versus the greenback, while bond yields in the region lost ground. Amid the likely continued volatility surrounding the timing of the next Fed rate hike. In economic news, French business confidence unexpectedly improved for September.

Stocks in Asia finished higher on the heels of yesterday’s decision in the U.S. to not hike rates, which followed the Bank of Japan’s decision to change its monetary policy focus to targeting the yield curve and committing to overshooting its inflation target, boosting the global financial sector. However, volume was light as Japanese markets were closed for a holiday. Stocks in China and Australia increased, with basic materials stocks rallying and oil & gas issues showing some strength. South Korean and Indian equities also rallied in the wake of the U.S. monetary policy decision.

The international economic docket for tomorrow will be limited, offering the All Industry Activity Index from Japan and Markit’s preliminary Manufacturing PMIs for Germany, France and the Eurozone.