Stocks Retreat Ahead of Earnings Weekly Update – March 30, 2015

Image courtesy of FreeDigitalPhotos.net/krishnan

Image courtesy of
FreeDigitalPhotos.net/krishnan

Markets lost ground again last week, giving up most of the previous week’s gains as investors tread water ahead of earnings season. For the week, the S&P 500 lost 2.23%, the Dow fell 2.29%, and the NASDAQ dropped 2.69%.1

Though markets were choppy all week, stocks closed slightly higher on Friday after remarks by Federal Reserve Chair Janet Yellen reassured investors that the path to higher interest rates would be gradual and data-driven.2 Investors also got a look at the final Q4 Gross Domestic Product (GDP) reading, which showed that the economy grew just 2.2% in the last three months of the year.3 While this isn’t a bad number by any stretch, economic growth cooled significantly from the 5.0% growth seen in the third quarter.4 Overall, the economy grew 2.4% in 2014, up from 2.2% in 2013.5

Investors care about GDP reports because they provide the most comprehensive scorecard about the overall health of the economy. Since healthy economic growth helps boost corporate profits, over the long run stock market performance tends to mirror economic performance. In the short term, as we have seen, markets can behave unpredictably even during periods of positive economic growth.

Digging deeper into the GDP data, we see that strong consumer spending, exports, and business investment were strong last quarter. However, the economy cooled because of higher imports and lower federal government spending.6 Bottom line: The economy was fundamentally on very stable footing at the end of the year. Though we don’t have first quarter GDP numbers yet, it’s clear that the Fed feels comfortable enough about the economy to think about raising rates.

The holiday-shortened week ahead is packed with important economic data and marks the end of the first quarter. Analysts will be looking particularly closely at Friday’s March jobs report, which will add fuel to the debate around when the Fed will raise interest rates. A report that shows healthy improvement in the labor market might signal that the economy is robust enough to withstand rate hikes. We expect markets to remain volatile going into earnings season as investors wait to see how U.S. companies did in the first three months of the year.

ECONOMIC CALENDAR:

Monday: Personal Income and Outlays, Pending Home Sales Index, Dallas Fed Mfg. Survey

Tuesday: S&P Case-Shiller HPI, Chicago PMI, Consumer Confidence

Wednesday: Motor Vehicle Sales, ADP Employment Report, PMI Manufacturing Index, ISM Mfg. Index, Construction Spending, EIA Petroleum Status Report

Thursday: International Trade, Jobless Claims, Janet Yellen Speaks 8:30 AM ET, Factory Orders

Friday: Employment Situation, U.S. Stock Market Closed

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HEADLINES:

Durable goods orders drop in February. Orders for big-ticket manufactured goods like cars, electronics, and appliances sank 1.4% last month. The drop indicates that U.S. companies were cautious about weak global demand.7

Consumer sentiment falls in March. A measure of confidence among U.S. consumers fell, indicating that Americans may be worried about their prospects this quarter.8

Existing home sales rebound less than expected in February. While sales rose last month, a persistent shortage of available properties restrained selling activity. Though warmer weather should boost sales, higher prices stemming from low housing inventory might curb buyers’ appetites.9

New home sales jump in February. Sales of new single-family homes surged last month to the highest level in seven years. The rush of sales despite the cold winter is a hopeful sign for the housing market.10

Are You Mentally Prepared for Retirement? How to thrive before and after the transition

GetImageThis week, my family and I had the opportunity to celebrate the life of a truly great person, my mom.  On March 22, 2011, after a short battle with depression, she chose to end her life at a very young age of 61.  While thoughts and feelings continue to swarm in my mind, I’m truly convinced that one of the main reasons for this tragedy was her lack of preparedness for retirement.  She had been a nurse her entire career, and as such she was truly depended upon and needed in many people’s lives.  Upon retirement, the feeling of being needed diminished, and her mind spiralled downward from there.

Retirement is about much more than money.  It’s also about finding a new path in life and a new identity as a retiree.

For most investors, retirement is their primary financial goal. As financial professionals, we help our clients chart a course to get them to retirement. We work together with our clients to answer financial questions like: When can I afford to retire? How much money will I need to live comfortably? Surveys show that many Americans are woefully unprepared for retirement and financial worries can make the retirement transition stressful.1 Fortunately, working with a professional can help ensure that you enter retirement with confidence in your financial future.

But having the means to retire after a lifetime of hard work and smart financial decisions is not all it takes to enjoy the next phase of your life. Many people overlook the fact that retirement is a major life transition that can come with significant mental and emotional ramifications. In this post, I discuss some of the critical non-financial issues that retirees must confront, and present some solutions suggested by psychologists who have studied the experiences of retirees.

Retirement can leave you feeling lost

There’s more to retirement than financial and logistical concerns. Many new retirees are unprepared for the psychological aspects of the transition. “People go into retirement essentially flying blind,” says Dr. Robert P. Delamontagne, author of The Retiring Mind® book series. In his research, Delamontagne found that people often aren’t mentally prepared for the retirement transition and don’t fully grasp what retirement will mean for their identity and place in the world.

Studies show that retirement can improve psychological wellbeing by removing the strain of a demanding career.2 However, the corresponding loss of work relationships, career identity, and daily purpose can cause retirees to feel adrift. Dr. Nancy K. Schlossberg, a former professor of counseling at the University of Maryland and author of Revitalizing Retirement: Reshaping Your Identity, Relationships, and Purpose, points out that a career “is such a part of your identity that people can feel very much at sea when they retire.”

This loss of a career-oriented identity is key, Schlossberg explains; “when you make a major change, your identity – who you are – is at stake.” Until retirees find a new identity in retirement and develop a new sense of purpose, they may struggle with feelings of loss and depression. Research supports this view; a meta-analysis of multiple studies found that retirees who closely identify with their role at work or had high-stress jobs are likely to find the transition to retirement hard.3

Delamontagne found that your personality type can have a lot to do with how difficult the transition will be. Those with relaxed dispositions can more easily roll with the punches and adapt to the changes retirement brings. On the other hand, energetic hard-chargers and people who have invested themselves in their careers often face more trouble making the transition into retirement. Reflecting on your own temperament and personality can give you insight on how to better manage your transition into retirement.

 

Who will you be in retirement?

Through interviews with over 100 retirees, Schlossberg identified six different paths that retirees often take to create their retirement lifestyle. For example, continuers usually adapt their existing skills and interests to retirement, often volunteering or working part-time in the same or a similar career field. Research suggests that many retirees aren’t ready to hang up their spurs altogether and instead choose to embark on encore careers. A 2013 CareerBuilder survey found that 52 percent of workers 60 and over planned to work part-time once they retired.4

Adventurers take retirement by the horns by learning new skills and working on their bucket list. They are the retirees who become dedicated RVers or devote themselves to new passions. Many retirees start out as searchers who are looking for their new path. If you find yourself here, you may benefit from career counseling and support to find a new direction. Others become retreaters who withdraw from active life; while some retreaters just need a temporary timeout to figure out their next steps, others can become depressed and confused.

Schlossberg found that retirees “don’t stay on the same pathway forever” and instead shift from one path to another as their needs and interests change.

Don’t be in too much of a rush to find the perfect retirement; what engages you at one point may no longer be practical five or ten years down the line. Delamontagne recommends gradually easing into your new retirement lifestyle before making any drastic changes. If you find yourself itching to move or buy a vacation house, try it out temporarily before committing yourself, and your finances, to a serious life change.

Whatever path you take in your retirement, it’s critical to find a purpose and decide what role you want to take on as a retiree. Whether it’s working part-time, volunteering for a cause, or pursuing a new passion, studies show that retirees who are actively engaged in their lives report greater levels of physical and psychological wellbeing.5

 

How will your relationships change in retirement?

Many retirees find that key relationships change after retirement. Professional relationships are often the first to suffer. Though many maintain connections with their former colleagues, they will lose the everyday contact with their work friends as retirees move on to a new stage of life.

People who socialized regularly with their professional connections may find it especially difficult to lose the camaraderie of the workplace. Schlossberg recommends that retirees find alternative social outlets through church activities, community groups, and hobbies. Building a substitute community and support network can help diminish the loss of professional relationships.

Your relationship with your spouse or partner will also likely change as you both adapt to a new schedule and retirement lifestyle. Many couples don’t retire at the same time, causing the joint transition to retirement to potentially take longer. One study found that couples often experience conflict when one retires while the other remains working. Researchers pointed to expectations about the division of housework and transition-related stress as common sources of conflict.6

Delamontagne zeroes in on “marital compression” – the sudden increase in togetherness that retired couples may experience – as a key cause of discord. Most married couples are accustomed to being apart for hours every day and enforced closeness can turn minor issues and personality quirks into real problems.

Delamontagne speaks from personal experience. After retiring from a successful career as an entrepreneur and CEO, Delamontagne found that he needed to change the way he interacted with his wife. Without the daily challenge of running a business, he unconsciously became more controlling. “One day, my wife said, ‘Stop telling me what to do! I’m not one of your employees,’” Delamontagne admits; “I didn’t even know I was doing it.”

What can you do to help your relationship adapt? “Open lines of communication,” says Delamontagne, who also recommends delving into the personalities of you and your spouse to better understand your internal motivations and how you relate to each other. Couples who have very different personalities, communication styles, and needs for independence may find more potential points of conflict. In his book, Honey, I’m Home: How to Prevent or Resolve Marriage Conflicts Caused by Retirement, Delamontagne offers suggestions and a discussion guide for opening dialogue between spouses. Couples who struggle to communicate might also benefit from the mediation of a counselor or neutral third party.

What else can you do? “Get a part-time job,” suggests Schlossberg. Whether you’re consulting in your former field, pursuing a hobby, or volunteering for a local cause, independent pursuits and time out of each other’s space can give your relationship some much-needed breathing room. Building that critical support network of friends and activity partners can also help you avoid leaning too much on your spouse for your social needs.

Relationships with children and other family members may also change when you retire. Family is often a source of joy and relaxation to retirees but the expectations of your relatives can also offer unwelcome pressure. While some retirees look forward to spending more time with children and grandchildren, others are equally interested in pursuing travel or a more independent lifestyle. Schlossberg found that many retirees feel pressured by their children to make themselves more available for babysitting duty and other family obligations rather than focusing on their own interests. The burden of these expectations can create a stressful family dynamic.

Whether you’re delighted by the opportunity to take an active role in babysitting or not, The American Grandparents Association recommends setting boundaries early on.7 Think carefully about how much time you want to devote to your family and communicate your expectations in advance; otherwise, you might find your own life taking a back seat to family requests.

 

Our take on retirement

I hope that you’ve found this article interesting and that you’ve taken away some information to apply to your own life and share with those close to you. Like many important life transitions, retirement can be both exhilarating and stressful.

As financial professionals, our job is to help you prepare for retirement and to give you the financial confidence to pursue your dreams in whatever form they take. However, we also want you to see us as a resource on other aspects of retirement. Though we aren’t psychologists, we have helped many clients negotiate important life transitions and can offer support as you work to pursue your retirement dreams. I’ve identified some resources in this article that may be helpful in your journey and would be happy to direct you to other sources of help.

Whether you’re still preparing for retirement or you are already living in the next phase of life, there’s no single solution that can guarantee a happy, successful retirement. However, our experience teaches us that advanced preparations can help reduce the stress of retiring and help ensure that you’re financially, emotionally, and mentally ready to retire. Finally, we want you to remember that retirement can offer you the freedom to reinvent yourself and pursue new passions. “Retirement never ends, it’s an ever-evolving process,” says Schlossberg. Embrace it and enjoy the life you have created for yourself.

Please feel free to share this information with your friends and family; everyone deserves the benefit of professional recommendations and the confidence of knowing that their future retirement has been planned for. If you would like to review your current retirement plan or need help developing one, please call our office at 419-425-2400.  Lastly, if you or someone you know struggles with depression, please seek medical help immediately.

 

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What Will the Fed Do Gradually? Weekly Update – March 23, 2015

Image courtesy of FreeDigitalPhotos.net/hywards

Image courtesy of
FreeDigitalPhotos.net/hywards

Markets finally snapped their three-week losing streak and rebounded as investors bought the dip and rallied after a Fed meeting. For the week, the S&P 500 gained 2.66%, the Dow rose 2.13%, and the NASDAQ added 3.17%.1

The Federal Reserve Open Market Committee met last week and issued a statement that supports future interest rate hikes. Though rates won’t come up at the next meeting in April, a June hike is possible if the economic tea leaves show continued improvement.2

What could an interest rate hike mean for markets? While we can’t predict the future, we can look backwards to see what hints history can provide. Back in June 2013, then Fed Chairman Ben Bernanke started talking about the need to gradually trim back bond-buying operations. This “taper talk” led to a brief selloff of 5% as jittery investors started worrying about how the economic recovery would survive without the Fed’s easy money.3

What’s happened since then? The Fed started tapering (wrapping up in October 2014), the unemployment rate has continued to fall, and the economy continues to expand. Since the day in 2013 that Bernanke announced his tapering intentions, the S&P 500 has gained 29.41% and has reached multiple all-time highs along the way.4

Right now, investors are experiencing similar rate hike jitters as they adjust to the new reality of higher interest rates. While we don’t know how soon the Fed will start hiking rates, we do know that they’ll do it in a gradual way. Will interest rate hikes torpedo the economic recovery? No. Will they affect short-term market performance? Probably.

We can’t control market performance. All we can do is focus on your personal goals, keep an eye on the overall environment, and stay flexible and on the lookout for opportunities that arise.

As we approach the end of the quarter, we can expect more market volatility as investors weigh the effects of another cold winter on economic growth and corporate earnings. Analysts will also be waiting for Friday’s final estimate of fourth quarter 2014 economic growth as well as follow-up comments from Fed economists who might give further insight into the timing of rate hikes.

ECONOMIC CALENDAR:

Monday: Existing Home Sales

Tuesday: Consumer Price Index, PMI Manufacturing Index Flash, New Home Sales

Wednesday: Durable Goods Orders, EIA Petroleum Status Report

Thursday: Jobless Claims

Friday: GDP, Consumer Sentiment

 

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HEADLINES:

Jobless claims hold steady. The number of Americans filing claims for unemployment benefits edged up slightly to 291,000 last week. The four-week moving average, a less volatile measure, increased to 304,750, dropping 7.5% over the last year.5

Foreclosures fall to lowest rate since 2006. The number of properties going into foreclosure fell in February to levels not seen since before the housing crisis. Since 2006 marked the peak of the housing bubble, the low in foreclosures may be an important milestone for the housing market.6

Homebuilder confidence dips in February. A measure of optimism among U.S. builders fell unexpectedly last month as construction firms worried about industry issues. However, builders are still broadly confident about housing market gains.7

Manufacturing growth slows. Though overall U.S. industrial production increased in February due to increased utility output during the cold winter, manufacturing gains have slowed over the last six months. A strong U.S. dollar may be contributing to falling overseas demand.8

We’ve Come a Long Way Weekly Update – March 16, 2015

Image courtesy of FreeDigitalPhotos.net/hyena reality

Image courtesy of
FreeDigitalPhotos.net/hyena reality

Markets ended another week down after mixed economic data, lower oil prices, and a strengthening dollar made investors nervous ahead of the next Federal Reserve meeting. For the week, the S&P 500 lost 0.86%, the Dow fell 0.60%, and the NASDAQ dropped 1.13%.1

The dollar became the focus of a lot of speculation last week when it reached multi-year highs against a weakened euro.2 The return of “King Dollar” worries many analysts because it means that foreigners can afford to buy fewer U.S. goods, depressing demand for many U.S. firms and cutting into profits. On the other hand, a stronger dollar makes imports cheaper and increases the buying power of U.S. consumers, which has been historically good for the economy.3

Speaking of history, Monday, March 9, 2015 marked the sixth anniversary of the current bull market, which began on March 9, 2009. Though markets have been turbulent in recent weeks, let’s take a moment to think about how far we’ve come since the dark days of the financial crisis. Since the bottom of the stock market, the S&P 500 has gained 203.52%, surpassing previous market highs along the way.4

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We’ve seen major improvements in economic fundamentals as well. Since peak unemployment of 10.0% in October 2009, the unemployment rate has dropped nearly in half to 5.5% as of last month. With millions of Americans back to work and contributing to the economy, economic growth has also made significant gains. From the fourth quarter of 2008, when Real Gross Domestic Product decreased at an annual rate of 6.3%, the economy has improved, reaching 5.0% annualized growth in the third quarter of 2014 and 2.2% (estimated) growth in the fourth quarter.5,6

Bottom line: Economic fundamentals have come a long way and there are plenty of factors that support continued equity growth. That’s not to say that there aren’t headwinds that may affect market performance in the future. The Federal debt debate is rearing its ugly head again in Washington as lawmakers square off about the Treasury debt ceiling, which will be breached this week.7 We’re also approaching the end of the first quarter and investors will be looking toward corporate earnings releases to see how U.S. companies performed. Markets may remain choppy as investors take stock of current fundamentals and try to predict how policy changes may affect markets.

This week, analysts will be closely watching the Federal Reserve’s two-day policy meeting, which is one of the most important we’ve had since last year. Though we don’t expect the central bank to raise rates this week, investors should know a lot more about the Fed’s plans once the meeting is over.8

ECONOMIC CALENDAR:

Monday: Empire State Mfg. Survey, Industrial Production, Housing Market Index, Treasury International Capital

Tuesday: Housing Starts

Wednesday: EIA Petroleum Status Report, FOMC Meeting Announcement, Chair Press Conference, FOMC Forecasts

Thursday: Jobless Claims, Philadelphia Fed Business Outlook Survey

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HEADLINES:

Retail sales fall in February. U.S. retail sales dropped for a third straight month, surprising many analysts who counted on job growth and cheap gasoline to boost sales. Harsh winter weather may be keeping shoppers at home, depressing retail spending numbers.9

Weekly jobless claims drop more than expected. The number of Americans claiming new unemployment benefits fell last week, erasing much of the previous weeks’ increases. Economists suspect seasonal factors are at play and that the labor market continues to improve.10

Consumer sentiment slides for fourth straight month. American consumers ratcheted back their optimism about the U.S. economy in early March, though temporary factors may be affecting data. While affluent Americans remain confident about the future, lower- and middle-income consumers are worried about their prospects.11

Weekly mortgage applications drop. A sharp increase in mortgage rates last week caused a corresponding drop in mortgage applications. Both mortgage applications and refinancing activity fell as buyers responded to higher rates.12

Markets Slide on Fed Fears Weekly Update – March 9, 2015

Image courtesy of FreeDigitalPhotos.net/hywards

Image courtesy of
FreeDigitalPhotos.net/hywards

Markets closed Friday with losses after a turbulent week as investors began to worry that strong labor market growth might signal rate hikes next quarter. For the week, the Dow fell 1.52%, the S&P 500 dropped 1.58%, and the NASDAQ lost 0.73%.1

The February jobs report showed that the economy is creating jobs hand over fist, gaining 295,000 new jobs last month. Unemployment fell to 5.5% and hourly wages also gained slightly.2 February is the twelfth month in a row that the economy has added more than 200,000 new jobs, which is a great sign for the labor market.3

Perversely, markets responded to the news with a selloff because a strong February jobs report increases the likelihood that the Fed might begin raising rates soon. With concerns about interest rate hikes, we’re back to the good-news-is-bad-news investor sentiment we saw in previous years during Fed tapering activities. Positive news for the economy makes investors nervous because of how the Fed will respond.

After more than five years of near-zero rates, investors are worried about what will happen to markets (and the economy) when easy money is harder to come by. Are investors right to worry about higher rates? Raising rates is like taking the training wheels off a bike; now that indicators show the economy is doing well, the Fed wants to get back to “normal” interest rate policies. However, changing policies create uncertainty and investors fear rate hikes might trigger a slide in markets. Though markets tend to follow the economy over the long term, in the short-term, changes in the economic environment can cause markets to swing.

Though many analysts are speculating about a June rate increase, hikes are not certain. Fed chair Janet Yellen has repeatedly emphasized that Fed decisions are data-dependent, and she has a history of telegraphing Fed moves well in advance. Traders will be closely watching the mid-March Open Market Committee meeting and noting any changes of language that might signal an imminent interest rate increase.4

Looking ahead, though the week is light on economic events, some important consumer data is due to be released. Analysts will focus on retail sales, consumer sentiment, and producer prices to gauge whether Americans are opening their wallets and supporting economic growth.5

ECONOMIC CALENDAR:

Tuesday: JOLTS

Wednesday: EIA Petroleum Status Report, Treasury Budget

Thursday: Jobless Claims, Retail Sales, Import and Export Prices, Business Inventories

Friday: PPI-FD, Consumer Sentiment

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HEADLINES:

Chinese exports surge, beating expectations. Exports from Chinese producers soared in February, increasing 48.3% over the previous February. Though seasonal effects may be distorting the data, the increased demand bodes well for the world’s second-largest economy.6

Treasury Secretary warns about a new debt ceiling deadline. The U.S.’ top finance official warned Congress that the government will hit its statutory debt limit on March 16, pushing the Treasury into “extraordinary measures” to finance spending. Unless Congress raises the limit, the Treasury will run out of cash in October or November.7

U.S. oil rig count lowest since April 2011. Oil companies continue to trim operations in response to low oil prices. The number of rigs drilling for oil in the U.S. continued to fall last week, reaching multi-year lows.8

U.S. service sector activity ticks upward. A measure of growth in the services sector – which includes industries like financial services, retail, and food service – increased more than expected in February. Stronger growth could signal an increase in demand for services.9

Hixon Zuercher March 2015 Monthly Video Update

What’s Grown At the Fastest Pace in 4 Years? Weekly Update – March 2, 2015

Image courtesy of FreeDigitalPhotos.net/hywards

Image courtesy of
FreeDigitalPhotos.net/hywards

Stocks ended the week mixed after losses related to a lower fourth-quarter Gross Domestic Product estimate. However, after a lackluster January, the major indices ended February on an upbeat note, with the S&P 500 posting a 5.5% gain.1 For the week, the S&P 500 lost 0.27%, the Dow lost edged down 0.04%, and the NASDAQ gained 0.15%.2

Though we’re two-thirds through with the first quarter of 2015, investors were thinking about fourth-quarter 2014 GDP last week. The revised estimate shows that the economy grew 2.2% in the final three months of the year, lower than the 2.6% originally reported. However, the good news is that consumer spending, one of the largest contributors to the economy, grew at the fastest pace in four years.3 A significant downward revision of business inventories, a measure of how optimistic U.S. firms are about future demand, was mostly responsible for the lower GDP report.4

Federal Reserve chair Janet Yellen gave investors some more guidance about interest rates in speeches before the House and Senate. Though she still preaches patience, she also indicated that the central bank might raise rates as early as July. Though the rate raise may give stocks the jitters, banks may respond by raising consumer rates to compete for your business. On the other hand, higher rates could drag on the housing market.5

With earnings season largely over, we can start drawing some conclusions about how U.S. companies did in the fourth quarter. Overall, Q4 earnings gave us a mixed picture. Out of 465 S&P 500 companies, earnings were up 6.5 percent over fourth quarter 2013, but revenues were up just 1.6 percent.6 These results suggest that many firms are still struggling with weak demand. Many firms also issued low guidance for the first quarter of 2015, indicating that they’re worried about their growth prospects this year – this squares with the lower business inventories data found in the Q4 GDP report.7 Hopefully, we’ll see lower energy prices push up spending and help U.S. companies beat their earnings estimates.

Looking ahead, analysts will be focusing on the February jobs report this week, which they hope will show that the labor market continues to recover. Investors will spotlight wage growth, a key figure that indicates how much more money workers have in their wallets.8 Economists anticipate that improving job prospects and low gasoline prices could support increased consumer spending this quarter.

ECONOMIC CALENDAR:

Monday: Personal Income and Outlays, PMI Manufacturing Index, ISM Mfg. Index, Construction Spending

Tuesday: Motor Vehicle Sales, Janet Yellen Speaks 8:15 PM ET

Wednesday: ADP Employment Report, SM Non-Mfg. Index, EIA Petroleum Status Report, Beige Book

Thursday: Jobless Claims, Productivity and Costs, Factory Orders

Friday: Employment Situation, International Trade

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HEADLINES:

Pending home sales rises to highest level since 2013. A measure of houses under contract rose in January as better credit conditions and more jobs boosted housing market activity. Since we are approaching prime home buying season, analysts hope the trend will continue into the spring.9

New single-family home sales drop slightly. Sales of newly built houses edged downward in January, possibly because of cold winter weather in the Northeast. However, sales are up 5.4% since January 2014 in a hopeful sign for the sluggish housing market.10

Durable goods rise in February. Orders for long-lasting manufactured products – like cars, refrigerators, and electronics – climbed 2.8% from January, indicating that businesses expect to be able to sell big-ticket items in coming months.11

Consumer sentiment drops slightly in February. Icy weather caused a gauge of consumer sentiment to slip last month. Despite the harsh weather, American confidence in the economy remains near eight-year highs.12

Dow Sets First Record Close of 2015 Weekly Update – February 23, 2015

Image courtesy of FreeDigitalPhotos.net/cooldesign

Image courtesy of
FreeDigitalPhotos.net/cooldesign

Stocks rallied on the news that Greece reached a new deal with its creditors, sending the Dow and the S&P 500 to new record closes and bringing the Nasdaq close to its own record set in March 2000.1 For the week, the S&P 500 gained 0.63%, the Dow rose 0.67%, and the NASDAQ grew 1.27%.2

Greek leaders, who have been in talks with EU creditors for several weeks, were able to reach an 11th-hour deal on Friday to extend the Greek bailout for an extra four months. Though the agreement just kicks the can down the road until the next major deadline, it avoids (or at least postpones) a debt default and fresh economic crisis and keeps Greece in the Eurozone for now. The delay also gives leaders breathing room to negotiate further economic reforms that will likely be unpopular with Greek voters.3 Investors reacted positively to the news and sent the major indexes to record highs.

In other geopolitical news, one of NATO’s highest-ranking generals warned that alliance members should prepare for a Russian assault on an Eastern European member state. Though the current ceasefire between Russian and Ukrainian forces continues, the remarks highlight a serious decline in trust between Europe and Russia.4 How real is the threat of all-out war? It’s impossible to know at this juncture, but it’s clear that European military commanders are taking Russia’s territorial ambitions seriously.

The week ahead is filled with important economic events. Federal Reserve Chair Janet Yellen will speak before the House and Senate about monetary policy, putting future rate changes in focus. If the Fed holds to a mid-year interest hike, it would signal the bank’s confidence in the economy’s resilience; holding off might indicate concern about how the global picture might affect domestic growth.5 Investors will also get their second look at fourth quarter 2014 Gross Domestic Product, giving us a clearer look at how the economy performed in the last three months of the year.

 

ECONOMIC CALENDAR:

Monday: Existing Home Sales, Dallas Fed Mfg. Survey

Tuesday: S&P Case-Shiller HPI, Consumer Confidence, Janet Yellen Speaks 10:00 AM ET

Wednesday: New Home Sales, Janet Yellen Speaks 10:00 AM ET, EIA Petroleum Status Report

Thursday: Consumer Price Index, Durable Goods Orders, Jobless Claims

Friday: GDP, Chicago PMI, Consumer Sentiment, Pending Home Sales Index

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HEADLINES:

Weekly jobless claims fall more than forecast. After some seasonal disruptions, weekly applications for unemployment benefits fell to 283,000 in the latest sign of an improving job market. The four-week average, a less volatile measure, fell to its lowest level in 15 weeks.6

U.S. home construction falls in January. Groundbreaking on new homes dropped 2.0% last month as builders slowed down construction of new single-family homes. However, building activity is still moving faster than it did a year ago.7

U.S. loosens trade restrictions against Cuba. The federal government announced plans to allow small Cuban businesses to export goods to the U.S. Though there are restrictions on what can be imported, the move represents an important change in relations with the communist country.8

U.S. factory activity rises. The manufacturing sector, a significant contributor to economic growth, expanded in February at its fastest pace since November. This is good news after the cold-weather related slowdowns of early 2014.9

What Pushed the Major Indexes up? Weekly Update – February 17, 2015

Image courtesy of FreeDigitalPhotos.net/renjith krishnan

Image courtesy of
FreeDigitalPhotos.net/renjith krishnan

Stocks ended another positive week at record highs, sending the Dow above 18,000 and the S&P 500 to a new record close. Investors reacted positively to firming oil prices and news of a possible peace deal in Ukraine. For the week, the S&P 500 gained 2.02%, the Dow rose 1.09%, and the Nasdaq grew 3.15%.1

There were a few factors behind the week’s rally, which erased previous losses and brought the major indexes back to positive for the year. Oil prices, which have been falling steadily for months, may be bottoming out as production declines and the number of oil rigs fall. Markets have been sensitive to oil prices and a slight bounce last week was enough to send stocks higher.2

The deteriorating financial situation in Greece was also in focus. As Greece nears its deadline for a new round of loans from the EU, encouraging remarks from Greek leaders suggest that an 11th-hour deal may be possible. Greece is seeking a new debt agreement with EU lenders that would allow it to back out of the painful austerity measures that have been imposed by creditors since 2010. If no agreement is reached, Greece would probably seek loans from alternative sources (like Russia or China), potentially damaging internal financial relations within the EU.3

Investors also reacted positively to better-than-expected growth numbers from Europe, which showed that the Eurozone economy grew 0.3% in the fourth quarter of 2014. Germany’s economy outperformed, growing 0.7% on strong domestic demand. Even better, only three countries in the 18-member zone experienced economic contractions: Greece, Finland, and Cyprus.4

Oil will likely be the source of more market activity during this holiday-shortened week as analysts try and determine whether crude oil prices may be stabilizing. The effects of a Russia-Ukraine ceasefire may also ripple through oil markets, causing additional volatility, though we can hope for further market growth.

 

ECONOMIC CALENDAR:

Monday: U.S. Markets Closed For Presidents’ Day Holiday

Tuesday: Empire State Mfg. Survey, Housing Market Index, Treasury International Capital

Wednesday: Housing Starts, PPI-FD, Industrial Production, FOMC Minutes

Thursday: Jobless Claims, PMI Manufacturing Index Flash, Philadelphia Fed Survey, EIA Petroleum Status Report

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HEADLINES:

Consumer spending lags in January. Retail sales, a core measure of how Americans spend, edged up barely 0.1% after dropping 0.3% in December. This report suggests that Americans are not using fuel savings to boost their spending, which could trim Q1 economic growth.5

Small business sentiment downbeat. Optimism about the economy fell last month among small business owners who worried about sales and decreasing inventory spending. However, sentiment about the labor market remains positive.6

Weekly unemployment claims rise unexpectedly. The number of Americans filing new unemployment claims rose slightly last week. Seasonal issues – including major snowstorms in Massachusetts – may have affected data collection and underlying labor trends still show strength.7

U.S. business inventories increase slightly. Inventories, a key factor of economic growth, edged up just 0.1% in December, supporting views that growth slowed in the fourth quarter.8

Prices At Pump Help Drive Savings Weekly Update – February 9, 2015

Image courtesy of FreeDigitalPhotos.net/digitalart

Image courtesy of
FreeDigitalPhotos.net/digitalart

Markets shook off losses last week and ended with strong weekly gains on the back of a positive January jobs report. For the week, the S&P 500 gained 3.03%, the Dow rose 3.84%, and the Nasdaq grew 2.36%.1

January’s monthly Employment Situation report showed that the economy gained 257,000 new jobs last month. Though the unemployment rate rose to 5.7%, it went up for the right reasons as Americans rejoined the labor force and began searching for jobs again. Best of all, average earnings grew 0.5%; since economists have been worrying about the slow pace of wage growth in the recovery, a jump in earnings is good news for the economy.2

Though wages went up, consumer spending in December dropped to its lowest level in five years as Americans cut spending and used extra gas money to boost their savings.

Higher incomes, lower prices at the pump, and falling inflation are giving American households a much-needed boost in spending power this year.3 Though the drop in consumer spending could hit Q4 economic growth numbers, the underlying factors set the stage for a strong 2015 for American consumers.

Stocks lost a little steam on Friday due to growing concern over a standoff between Greece’s new anti-austerity government and Eurozone leaders. Greek leaders are seeking to tear up the agreements signed by the previous government in favor of debt forgiveness from the EU. However, the message from EU leaders to Greece is clear: Uphold your financial commitments and stick to the plan.4

Though Greek voters are unequivocally tired of painful austerity cuts, Greece still depends on EU money, and its new leaders must tread carefully. Citing concern about how a liquidity crunch would affect Greece’s ability to repay debts, Standard and Poor’s downgraded Greek sovereign debt from B to B-.5 What will the outcome of the showdown be? Hard to know at this stage, but the conclusion will likely affect how future negotiations with Spain, France, and Italy play out.

Looking ahead, though the week ahead is light on economic reports, analysts will be closely monitoring the January retail sales report to see how Americans are spending. The Labor Department’s Job Openings and Labor Turnover Survey that comes out Tuesday will also give some more insight into the overall health of the jobs recovery.6 Positive data could renew focus on the Federal Reserve and a possible interest rate hike this year.

ECONOMIC CALENDAR:

Tuesday: JOLTS

Wednesday: EIA Petroleum Status Report, Treasury Budget

Thursday: Jobless Claims, Retail Sales, Business Inventories

Friday: Import and Export Prices, Consumer Sentiment

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HEADLINES:

Q4 earnings reports show revenue weakness. Though overall earnings are positive, U.S. firms are still struggling with weak demand. Including reports from 274 S&P 500 companies, overall earnings are up an optimistic 6.7% from Q4 2013; however, revenues are up just 0.2%.7

U.S. motor vehicle sales catch fire in January. U.S. automakers reported the strongest January car and truck sales in seven years. Ford and GM had strong months, showing that sales increased 15% and 18%, respectively, over last year.8

U.S. productivity falls in Q4 2014. Hourly output per worker, a measure of the productivity of the U.S. economy, fell 1.8% in the final three months of 2014. This could mean that employers have eked out every drop of labor from their workers (and may be forced to raise wages).9

Brent crude has best gains in 17 years. Oil rallied again and showed the best two-week performance since 1998, gaining 19%. Price volatility was stoked by falling oil production and violence in Libya.10