Financial Review

Don’t Worry

  For the week, the Dow rose 0.7%, the S&P 500 gained 1.2% and the Nasdaq climbed 2.2%.   The Federal Reserve said factory production jumped 1.0% last month after rising 0.3% in June. That was the largest gain since February and reflected increases across all major categories. Auto production surged 10.1%, the biggest rise since July 2009. There were also solid gains in the production of machinery and computers and electronic goods; yesterday we talked about the importance of capex and business spending; maybe we’re seeing signs of that.     Or not. In a separate report, the New York Fed said its “Empire State” general business conditions index fell to 14.69 this month from 25.60 in July.   A preliminary August reading on the University of Michigan/Thomson Reuters consumer-sentiment index fell to the lowest level in 9 months, 79.2 down from a final July level of 81.8.   Producer prices, or prices at the wholesale level increased 0.1% in July, with 0.5% growth for transportation and warehousing prices; goods prices were unchanged; food prices rose 0.4%; energy prices dropped 0.6%. Overall producer prices rose 1.7% over the 12 months that ended in July, down from June’s annual-growth rate of 1.9%.   But the economic news carried little weight today, as attention once again focused on geopolitics. That might not be totally accurate; Wall Street looks at geopolitical hotspots but it can’t hold their focus. A new survey of institutional money managers around the world by Bank of America …

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Financial Review

Financial Review Market Scorecard 08-14-2014

DOW + 61 = 16,713 SPX + 8 = 1955 NAS + 18 = 4453 10 YR YLD – .01 = 2.40% OIL – .39 = 97.20 GOLD + .70 = 1313.90 SILV + .05 = 19.95 Check out this episode!

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Financial Review

The Circular Capex Spending Problem

  Iraqi Prime Minister Nouri al-Maliki stepped down today, a surprising reversal for a prime minister who a day earlier had assured his supporters that he wouldn’t step down unless forced out by Iraq’s high court.   President Obama says the US operations have broken the ISIS siege of Mount Sinjar. Thousands of Yazidi refugees were stranded on the mountain. Many of those displaced had now left the mountain and further rescue operations are not planned, however US airstrikes against ISIS will continue for now. And Iraqi and Kurdish forces fighting ISIS will continue to receive US military assistance.   Russian President Vladimir Putin said Russia would stand up for itself but not at the cost of confrontation with the outside world, which sounded like a softer, gentler Putin. Trust him about as far as you can throw him. Intense fighting continues as the Ukrainian military kept up its offensive to retake separatist strongholds in Eastern Ukraine.   A new, five-day truce between Israel and Hamas appeared to be holding despite a shaky start, after both sides agreed to give Egyptian-brokered peace negotiations more time. The second extension of the ceasefire, this time for five days rather than three, has raised hopes that a longer-term resolution to the conflict can be found; maybe. The Missouri State Highway Patrol will take over the supervision of security in the St. Louis suburb that’s been the scene of violent protests since a police officer fatally shot an unarmed black teenager.   Earnings season …

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Financial Review

Oil, At Least in Theory

  The economic news today did not point to a positive session for Wall Street. Retail sales for July were flat compared to June. Excluding autos and gas, retail sales were up just 0.1%. Clothing sales increased 0.4% but that was primarily due to extreme discounting. That report was confirmed by an earnings report from Macy’s, which missed expectations on earnings and revenue, and then lowered guidance. In after-hours trade, Cisco reported better than expected earnings and revenue.   The US has deployed 130 Marines and Special Operations forces to northern Iraq to help assess ways to rescue thousands of members of the Yazidi religious group taking refuge on Mount Sinjar. Those military advisers will not have a combat role, but the Defense Department left open the possibility that US troops could help create a safe passage for the Yazidi off Mount Sinjar. That might put US troops in direct combat with the ISIS militants trying to kill the Yazidi, a proposition President Obama has not signed off on, but one the military advisers are exploring.   The US and Iran don’t agree on much, but it appears the two countries are backing Iraqi Prime Minister Nouri al-Maliki’s replacement, Haider al-Abadi. Iran’s endorsement on Tuesday means that Maliki, who has indicated he won’t go quietly, will have an even harder time holding onto his position. The United States and its allies hope that replacing Maliki, who alienated the Sunnis of Iraq, will undermine support for the militant group the Islamic …

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Financial Review

Hype is Hurting

  The Dow Industrial Average has now gone negative year-to-date. Seven of the 10 main groups in the S&P 500 declined, with energy companies dropping 0.7 percent to lead the slide as Brent crude settled at the lowest level since July 2013. The International Energy Agency said a supply glut was shielding the market against threats in the Middle East.   As we wrap up earnings season, 73% of companies have beaten earnings estimates, slightly above the 1-year average of 72%, but “beating estimates” this time doesn’t mean what it did in recent quarters. For the past few years, analysts have ratcheted down their estimates in the run-up to earnings season, setting the bar lower and lower—and setting up an easy beat. Companies are beating by an average of 4.2%, above the 1-year average of 3.2%. Q2 earnings growth is 8.4%, up from an expected 4.9% on June 30. This is the second-highest earnings growth rate since Q4 2011. Revenues are now up for 5 consecutive quarters and at all-time highs, and it now looks like revenues might be driving earnings. The strongest sectors for upside earnings surprises have been telecom services, health care (especially biotech), and information technology; while consumer staples is the weakest. US banks and thrifts had their second best quarter in 2 decades, with more than $40 billion in net income.   Profit margins have soared. Net profit margins more than doubled from 4.6% in March 2009 to 9.8% at the end of the first quarter. …

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Financial Review

Financial Review Market Scorecard 08-12-2014

DOW – 9 = 16,560 SPX – 3 = 1933 NAS – 12 = 4389 10 YR YLD + .02 = 2.44% OIL – .15 = 97.22 GOLD + .60 = 1309.50 SILV – .10 = 20.02 Check out this episode!

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Financial Review

Financial Review Market Scorecard 08-11-2014

DOW + 16 = 16,569 SPX + 5 = 1936 NAS + 30 = 4401 10 YR YLD + .01 = 2.42% OIL + .20 = 97.85 GOLD – 1.20 = 1308.90 SILV + .10 = 20.11

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Financial Review

Dog Days

  It was actually a quiet day on Wall Street; not much economic data today; we’re winding down earnings reporting season. It is a Monday, so there was some M&A action, but for the most part a slow day; we used to call them the dog days of summer. On a day like this, you can claim whatever you want for whatever market movement there is.   NATO sees a “high probability” of a Russian invasion of eastern Ukraine as some 20,000 Russian troops massed on the nearby border. Kiev had the number at 45,000 Russian troops. The Kremlin announced it had sent a convoy of humanitarian aid to Ukraine under the auspices of the International Red Cross. Western governments are generally opposing, in advance, any Russian aid missions, which they fear could serve as a pretext for a military incursion to support pro-Russian separatists fighting the Ukrainian Army in the country’s southeast. The European Commission issued a statement warning “against any unilateral military actions in Ukraine, under any pretext, including humanitarian.”   Ukraine, the United States and European nations have repeatedly warned Russia against mounting a stealth invasion under the disguise of humanitarian aid, and have looked on with growing alarm as Russian officials have spoken in ever-stronger terms about the humanitarian plight of eastern Ukrainians.   Meanwhile, the US continues its bombing-slash-humanitarian mission in Iraq. The United States launched a fourth round of airstrikes Sunday against militant vehicles and mortars firing on Irbil as part of efforts to …

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Financial Review

Rocky Relations

  The S&P and Dow both posted their best day since March. For the week, the Dow rose 0.4%, the S&P 500 gained 0.3%, and the Nasdaq rose 0.4%.   The Pentagon says US warplanes have dropped bombs on an ISIS artillery positon in northern Iraq, near Erbil, the Kurdish regional capital. US military planes have also carried out air drops of food and water to displaced refugees. Last night, President Obama announced the plan for assisting Iraqi religious refugees stranded on a hilltop in northern Iraq, and also authorizing limited airstrikes to protect US personnel in Erbil. The air strike is the first time the US has been directly involved in a military operation in Iraq since American troops withdrew in late 2011. No time limit has been set for air strikes.   In very short order, the Islamic State of Iraq and Syria, ISIS, captured one-third of Syria and about one-quarter of Iraq, and they continue to expand their frontiers. Just to put it in perspective, they now control a land mass larger than Great Britain, with a population bigger than Denmark. In northern Syria some 5,000 ISIS fighters are using tanks and artillery captured from the Iraqi army in Mosul to besiege half a million Kurds on the Turkish border. ISIS has also built a huge war chest by looting Iraqi banks of perhaps half a billion dollars, making ISIS the world’s richest terrorist organization, by some estimates. And they have been gathering weapons, US weapons left …

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Financial Review

Financial Review Market Scorecard 08-08-2014

DOW + 185 = 16,553 SPX + 22 = 1931 NAS+ 35 = 4370 10 YR YLD – .01 = 2.41% OIL + .01 = 97.35 GOLD – 3.90 = 1310.10 SILV – .03 = 20.02

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