Daily Journal of Commerce Archives - Page 17 of 21 • Rutherford Investment

President Obama Wins Second Term

Published November 19, 2012
The market absorbed the news of President Obama’s re-election with a decidedly negative reaction. Both the Dow and the S&P fell more than 2 percent. Still, that was an improvement over 2008, when, on the day after Obama was elected, the Dow and the S&P both dropped more than 5 percent.

Both candidates spent lavishly in what was by far the most expensive race in U.S. history. Obama won a second term as president of the United States, joining a select group. Despite seeming to be disengaged from the campaign, and running on a mixed record with the electorate strongly divided, he won a resounding victory in the all-important Electoral College. The popular vote was closer.

Obama won the election by out-organizing the Republicans. His “ground game” brought the results he needed in turnout and delivered the toss-up states that he needed to win. He received 70 percent of the Hispanic vote, and strong support from women voters.

Mitt Romney suffered from an overlong campaign, with too many brutal primaries, a divided party, and positions that turned away Hispanics and women. Late in the campaign, he seemed dogged by missteps and changed positions.

Romney’s choice of a running mate, meant to appeal to the party’s right wing, brought little benefit. He could have added Sen. Marco Rubio from Florida, or Sen. Robert Portman, a popular Ohioan who regularly wins his elections with more than 70 percent of the vote. Both come from key states that Romney lost by narrow margins.

Democrats also fared well in both House and Senate races, picking up seats and strengthening Obama’s hand. The president, who believes in the […]

November 20th, 2012|Categories: Daily Journal of Commerce|Tags: electoral college, hispanic vote, hispanics, mitt romney, obama, popular vote, senate races, women voters|Comments Off

Market In Rally Mode In Third Quarter

Published October 15, 2012
U.S. equity markets have staged a strong rally since hitting a low point on June 1. At that time investors feared a global recession, Europe was facing disaster and the general outlook was despondency.

The market closed at 1,278.04 on June 1. It has since risen 12.7 percent through the third quarter in a stealth rally. The market closed at 1,440.67 on Sept. 30. In September, usually the worst month for markets, the S&P rose 2.6 percent, the Nasdaq rose 1.6 percent and the Dow rose 2.75 percent.

At the conclusion of the quarter, the Dow had risen in 11 of the past 12 months, falling only in May. The last time this happened was in 1959. The Dow has had a remarkable one-year run in which it has gained about 2,500 points, or 23 percent.

It was not all smooth sailing, because most of the September gains came in the first two weeks. Durable goods orders in July-August fell 13.2 percent. At the end of September, consumer sentiment fell. The nonmanufacturing index rose to 55.1, but less than the 55.3 expected. Second-quarter GDP was revised lower to 1.3 percent growth.

However, jobless claims fell slightly and the economy in September added 162,000 jobs – well short of the 250,000 needed to absorb new workers let alone those out of work for extended periods. By the end of September, government statistics showed that the unemployment rate was below 8 percent, for the first time during the Obama administration.

The market got a lift from the announcement by the Fed of another round of quantitative easing. Both the anticipation of QE3 and the implementation […]

October 15th, 2012|Categories: Daily Journal of Commerce|Tags: dow, global recession, jobless claims, market investors, nasdaq, qe3, quarter gdp, swing states, unemployment rate|Comments Off

Central Bankers In The Spotlight

Published September 10, 2012
Since the overall market, as measured by Standard & Poor’s, is up over 13 percent for the year, over 10 percent since May lows and more than 2 percent in August alone, cautious optimism has emerged.

However, political risk hangs so heavily over markets globally, it is hard to be anything but worried. Furthermore, September is a notoriously difficult month for stocks. Expect more turbulence.

Globally, economies are slowing. Even Germany, which has been the bulwark of the European economy, has slowed as Europe sinks into a recession. In Asia, much uncertainty prevails as China, the key driver there, sees its economy slowing.

In the U.S., signals are mixed. Factory orders are reported stronger than expected. Consumer confidence, as measured by the University of Michigan index, also is surprisingly up.

Durable goods manufacturing is up 9.8 percent year over year, with durable goods sales and orders both up over 14 percent. Factory order backlogs are 14.4 percent. New housing starts are up 29 percent, and new housing building permits are up 29 percent year over year.

The big three automakers mark double-digit sales gains in August year over year. Productivity increases to 2.2 percent up from expected 1.9 percent year over year.

But other measures, such as the purchasing managers’ index and the construction index (which includes government construction), show declines in July and August. And a serious drought in the Midwest threatens farmers and farm-related industries.

With the mixed tone, one can be wary of the U.S. economy – especially factoring in the political risk. As the election nears, the outcome is still very much in doubt. At this juncture, President Obama is probably […]

September 11th, 2012|Categories: Daily Journal of Commerce|Tags: european economy, mitt romney, obama|Comments Off

Pessimism Prevails As Global Economy Slows

Published August 10, 2012

Indications are strong that the global economy is slowing. In Europe, a continent sinking into recession, even Germany is showing signs of struggle. China is letting its currency devalue in an effort to lower the costs of its exports and set up a conflict with the U.S. The yuan’s lower value will lead to jobs being siphoned from other countries.

In the meantime, the U.S. economy has been affected by the global slowdown. The Federal Reserve has noted that economic activity has decelerated somewhat over the first half of this year. Consumer spending has slowed, which is worrisome because consumer spending represents about 70 percent of GDP. Normally resilient restaurant chains such as McDonalds, Starbucks and Chipotle Mexican Grill noted a drop in consumer traffic.

However, a few bright spots have appeared. Jobless claims are mildly positive, durable goods orders are slightly better than expected, and U.S. GDP rose by 1.5 percent in the second quarter – slightly more than the 1.3 percent expected.

The Federal Reserve, after meeting July 31 and Aug. 1, decided to continue its accommodative stance and provide additional support as needed. This was a mild approach to the problems at hand, and disappointing to the markets.

In light of the slowdown in Europe, Mario Draghi, president of the European Central Bank, pledged to protect the eurozone. He was joined by German Chancellor Angela Merkel, and French President Francois Hollande. Their full-throated defense of the eurozone has been followed by little definitive action. The ECB in a recent meeting promised more meetings and initiatives, but little of substance. The markets were very disappointed with Draghi’s follow-up to his strong comments, […]

August 13th, 2012|Categories: Daily Journal of Commerce|Tags: economic activity, european markets, eurozone, global economy, global slowdown, world economy|Comments Off

Market Slumps Amid Economic Slowdown

Published June 11, 2012
A dramatic slowdown in Europe caused by credit issues there has brought the global economy to stall speed. European unemployment has reached all-time highs during the euro era. Manufacturing in the euro zone has fallen further. The Chinese economy has shown effects of a government-engineered slowdown. China has devalued the yuan, after allowing it to appreciate, in order to stimulate its economy.

All of these factors impact the U.S., where the rate of economic growth (gross domestic product) is less than 2 percent. U.S. factory output is near a 2½-year low, indicating the economy may be headed back toward recession.

The Institute for Supply Management reported that its business barometer fell 3.5 points to 52.7 in May; it was the third straight monthly drop and the lowest reading since September 2009 (readings above 50 reflect economic expansion). The consensus estimate was for the barometer to continue at 56; so the current reading reflected a significant weakening.

At the same time, the ISM production index fell 7.1 points in May to a neutral reading of 50, also the lowest since September 2009. This index is compiled from surveys of purchasing managers in the Chicago region.

Also, the Labor Department showed that the number of workers filing for unemployment benefits rose by 10,000, to 383,000, for the week that ended May 26.

On June 1, the jobs report from the Labor Department showed that non farm payroll grew by a lackluster 69,000 last month. The rate of unemployment ticked up to 8.2 percent. All of the growth came from private industry: 82,000 jobs were added, but governments cut payrolls by 13,000.

Compounding the already weak report, […]

June 11th, 2012|Categories: Daily Journal of Commerce|Tags: business barometer, chinese economy, economic expansion, european unemployment, global economy, gross domestic product, recession|Comments Off

Slow Recovery In US Continues

but employment and consumer spending remain weak

Published May 14, 2012

At the start of the second quarter, the U.S. economy is struggling. Corporate profits provided a surprisingly strong uptick, at greater than 6 percent growth – in line with the 10-year average. However, employment numbers were disappointing. Wages and salaries were weak. The average hourly wage rose only a penny month over month, and the average work week was firm at 34.5 hours. These numbers suggest weak personal income growth and suggest why retail sales disappointed in April. These results are especially discouraging for a consumer-led economy.

The depth of the recession makes a recovery especially difficult. The U.S. lost nearly 8.8 million jobs from 2008 to 2010, more than the previous four recessions combined. Three years into the recovery, the U.S. employs 5 million fewer workers than before the recession.

The construction industry has been hit especially hard because the housing sector remains a big part of the issue. The construction industry employed 7.5 million people when the recession hit. By June 2010, that number was down to 5.5 million, and it has barely begun to recover. Construction workers make up a disproportionate share of the 4.4 million Americans who have been out of work a year or longer.

Even the small amount of private-sector growth is being offset by public-sector job cuts. Most of those have come at the local level, especially schools. While male-dominated industries like construction suffered big hits at the beginning of the recession, the tide has turned. Early in the recession the unemployment rate for men was 2.6 percent higher than for women, but now the rates are nearly equal.

The May […]

May 14th, 2012|Categories: Daily Journal of Commerce|Comments Off

Market And Economy Continue In Uptrend

Published April 9, 2012
For the first quarter of 2012, markets showed strong growth. The S&P was up 12.1 percent, 6.2 percent from the same time a year ago. The Dow was up 8.1 percent, 7.2 percent from a year ago, and the NASDAQ was up 18.7 percent, 11.2 percent from a year earlier.

However, volumes were light – not what an investor would want to see. NYSE volume was the lowest since the fourth quarter of 2007, and down 14.5 percent from a year ago as investors remained cautious. The DJ world, excluding the U.S. was up 10.8 percent, demonstrating that despite all the news, growth outside the U.S. was strongest, with emerging markets showing particular strength.

The strength in the U.S market was a reflection of the economic gains in the U.S. economy. While GDP growth in the fourth quarter of 2011 was slightly below expectations, nevertheless the growth was a revised 3.0 percent. January 2012 personal spending rose .4 percent, followed by February’s .8 percent.

Some of the spending increase came from higher energy prices, which rose 3.6 percent in February alone, the
largest gain in a year. Federal Reserve officials acknowledged that the increase in fuel costs would “push up
inflation temporarily,” but they anticipated that prices would return to their long-term target. The core PCE
index, which excludes food and energy prices, moved up 1.95 year over year in February after moving up .1
percent in January. These numbers are within the Feds target range.

Personal saving fell to 3.7 percent, from 4.3 percent in the prior month. A lower savings rate could be a sign of higher consumer confidence, and indeed a separate report […]

April 9th, 2012|Categories: Daily Journal of Commerce|Tags: consumer confidence, economic gains, energy prices, existing home sales, federal reserve officials, fuel costs|Comments Off

Market In A Confirmed Uptrend

Published March 12, 2012
For the week ending March 2, the Nasdaq and the S&P 500 advanced 0.4 percent and 0.3 percent, respectively, but the Dow retreated a fraction. Both the Nasdaq and the S&P 500 have climbed in eight of the year’s first nine weeks; the Dow has risen six of the first nine.

For the year through March 2, the Dow is up 6.8 percent, the S&P is up 9.3 percent and the Nasdaq is up 14.2 percent. The market continues to be “in a confirmed uptrend,” according to Investor’s Business Daily.

The Dow crossed the 13,000 milestone, the ninth time it has done so since 2007. Along the way the index has sunk below and bounced above 12,000, 11,000, 10,000, 9,000, 8,000 and 7,000 more than 300 times. So it is not hard to see why a number contains no magic.

The Dow remains more than 1,000 points below its record high of 14,164.53, set in October 2007. The S&P remains 15 percent below its record close of 1,565.15, set the same month. U.S. gross domestic product grew 3 percent in the fourth quarter of 2011. The GDP is the broadest measure of all goods and services produced in the economy. This was up slightly from estimated growth of 2.8 percent. Economists surveyed by the Dow Jones Newswire had expected 2.7 percent.

The latest report also included positive revision for household income in the last half of 2011, a potentially positive sign of stronger consumer spending to follow. Americans started spending more freely as the unemployment rate began to edge down. Personal expenditure rose 2.1 percent in the fourth quarter, more than anticipated.

Last […]

March 13th, 2012|Categories: Daily Journal of Commerce|Tags: disposable income, federal reserve, household finances, household income, unemployment rate|Comments Off

Markets’ Solid Starts Bode Well For 2012

Published February 10, 2012

There is an old saw about the equity markets: As January goes, so goes the year. But like many old saws, there is a basis in fact for this one. Note that the S&P jumped 4.4 percent for the month, with the tech-heavy NASDAQ up 8 percent.

In addition, the “first five days” theory holds that the S&P has never fallen in a year when the first five days of the year see gains of 1.8 percent or more. In the first five days of 2012, the Dow rose 1.8 percent.

The Dow index has matched the direction of January performance in 92 percent of years since 1970. In 85 of the Dow’s 114 years – 75 percent of the time – the January effect has held true.

Reasons for optimism have emerged. Most recently, the unemployment rate fell to 8.3 percent from 8.5 percent a month earlier and 9.1 percent as recently as August.

This is because net job creation in January was 243,000 – more than expected. Moreover, December job growth was revised upward, as was November from 100,000 originally to 157,000.

These jobs were created in the private sector; business added 257,000 jobs as the public sector continued layoffs. Small businesses added 95,000 jobs, while medium-size firms added 72,000. Large companies added only 3,000 jobs. Most Americans work at businesses ranging in size from small to medium; these are the ones that banks are becoming more willing to lend to.

Factory orders are up for the second consecutive month. Factory orders grew in Germany for the first time in four months. Orders also grew in Austria, Britain, Norway and Sweden. Northern Europe’s […]

February 13th, 2012|Categories: Daily Journal of Commerce|Tags: dow index, job creation, nasdaq, recession, unemployment rate|Comments Off

Positive Outlook For 2012 Economy

Published January 9, 2012
2011 started with hope that the economy would recover and unemployment would drop. After a roller coaster of a year, the broad market ended flat but with a positive outlook for 2012.

In the first quarter of 2011, the S&P finished up 5 percent; however, hopes were soon dashed. The “Arab Spring” may have brought optimism to North Africa, but it created uncertainty in world politics. A strong earthquake and tsunami in Japan interrupted the global supply chain. The ongoing debt crisis in Europe brought extreme volatility, apprehension and aversion to our markets.

Political problems in Washington led to a downgrade of our debt, but more importantly dashed American and foreign belief that our political leaders could fashion a way forward. Our own housing problems were not solved and prices continued to decline. In the third quarter, the S&P fell 14.33 percent.

The S&P 500 index finished the year almost exactly where it started: At the end of 2010, the index stood at 1,257.64; at the end of 2011, it was 1,257.60. The Dow Jones industrial average was much better, rising 5.5 percent on the year, outdistancing all other equity indices worldwide.

This seemingly flat performance of the broad market masked the extreme volatility of the year. On 35 trading days, the market closed with a gain or loss of 2 percent or more, making 2011 the most volatile on record for stocks.

Last year, $6.3 trillion in value was wiped out of markets. The euro ended the year as the worst performing currency. The United Kingdom’s FTSE index fell 5.5 percent, while European blue chips fell 11 percent. The Nikkei lost 17.3 […]

January 9th, 2012|Categories: Daily Journal of Commerce|Tags: dow jones industrial average, financial risk, global supply chain, tsunami in japan|Comments Off