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Month: August 2017

S&P 500 on track for best daily gain in about 4 months and only third 1% gain in 2017

S&P 500 on track for best daily gain in about 4 months and only third 1% gain in 2017

Stock markets Monday afternoon were enjoying a sharp rally, putting the S&P 500 index in position to post its best daily gain in about four months. The S&P 500 index SPX, -0.18% was most recently up more than 1% at 2,466, which would represent the best daily gain for the broad-market benchmark since April 24, according to FactSet data. In fact, the S&P 500 has only seen a gain of at least 1% on two other occasions so far in 2017 (including March 1), with a rally today of at least that level marking the third such gain this year. Overall, the Dow Jones Industrial Average DJIA, -0.35% was up 0.7%, and the Nasdaq Composite Index COMP, -0.09% was on pace for a 1.3% one-day rise, both their best daily advances since June 28.

 

The Dow Just “Plunged” 274 Points — the Horror! Well, Not Really

The Dow Just “Plunged” 274 Points — the Horror! Well, Not Really

If you’re an economic optimist, Thursday probably wasn’t your best day. When the clock struck 4 p.m. on Wall Street, the Dow Jones Industrial Average (DJINDICES:^DJI) had tumbled 274 points, marking its second-worst single-day drop of 2017. The drop reminded investors, according to numerous news outlets, just how fragile the U.S. economy is.

Catalysts behind the Dow‘s no-good, very bad day

Perhaps the biggest concern for investors yesterday was the news of a terror attack in the heart of Barcelona in which more than a dozen people were killed and more than 50 others were injured.

Additionally, speculation has been swirling that National Economic Council Director Gary Cohn, the White House economic policy coordinator, may have one foot out the door. Though the White House has denied such reports, if Cohn were to leave, it would make the path forward for tax reform that much more difficult for the Trump administration. As a reminder, investors have been factoring in an expected cut to corporate tax rates in the somewhat near future. If that doesn’t come to fruition, valuations for stocks may need to be adjusted lower.

Add on the fact that it’s been a while since we’ve witnessed any sort of sizable, extended correction in stocks, and we have what worked out to a 274-point “plunge” in the Dow Jones Industrial Average on Thursday. The horror, right?

Well, not exactly.

Putting the Dow’s 274-point drop into perspective

Even though the Dow had what many outlets would suggest was a terrible day, the 274-point “plunge” amounted to a percentage decline of just 1.24%. While I don’t have the data in front of me of how many times in its history the Dow has moved 1.2% or greater up or down, I’d be willing to place my bet on this figure being in the high hundreds, if not well over 1,000 separate times. In other words, if we were to look at the Dow’s history, a 1.24% decline is nothing more than a pedestrian daily move.

To put this into even greater context, let’s have a look at the Dow’s biggest percentage declines and point drops of all time.

As you can see from the above tables, it would take a roughly 470-point drop in the Dow just to break into the biggest 20 point drops of all time. Nevertheless, a 470-point drop is only a 2.1% decline based on Wednesday’s closing value in the Dow. We have to keep things in perspective, which means realizing that the Dow has more than tripled in value since March 2009. As the Dow’s value increases, its intraday swings higher and lower would be expected to increase, too.

On a percentage basis, again, a 1% or 2% decline in the Dow is not an extraordinary move. A decline in the Dow would need to be at least 7% (more than 1,400 points) in order to breach the 20 largest percentage losses in a single day. Yesterday’s 1.24% drop was miles away from joining that list.

 

 

 

Dollar falls on uncertainty but ends week with modest gain

Dollar falls on uncertainty but ends week with modest gain

The dollar fell against a basket of major currencies on Friday as continued uncertainty over the economic agenda of U.S. President Donald Trump pushed investors out of the greenback.

The dollar dropped to a four-month low against the yen in early trading but retraced some of its losses after rumors began to swirl about the impending firing of White House senior adviser Steve Bannon. The White House confirmed Bannon’s exit in a statement Friday afternoon.

As Trump’s chief strategist, Bannon has been seen as representing a right-wing political faction that critics have said encourages white supremacists like those involved in the deadly rioting last weekend in Charlottesville, Virginia.

Bannon has been also seen by some market participants as an opposing force to Trump’s chief economic adviser, Gary Cohn, and Treasury Secretary Steve Mnuchin.

The dollar dropped nearly 1 percent against the yen, falling to 108.58 yen, its lowest since late April. It was last down 0.37 percent at 109.15 yen.

“A lot of this was just carryover from the problems in the last few days out of Washington and the markets getting a bit dejected with the idea that Trumps going to get any legislative initiatives done this summer or even this autumn,” said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Limited. “Especially given the public backlash against the administration in the last few days.”

As a candidate, Trump promised wide-ranging tax reform and fiscal stimulus measures that traders bet would kick start the economy and inflation.

The dollar bounced back but failed to move higher against the yen or the euro and surrendered gains late in the day against the British pound.

“(Today) is kind of a microcosm of what weve seen all week,” said John Doyle, director of markets at Tempus Inc. “Weve seen volatility but its been short-term.”

The dollar index, which tracks the greenback against six major currencies, rose 0.35 percent for the week. The euro fell 0.5 percent, for its first weekly loss against the greenback in six. The dollar finished the week up nominally against the yen, gaining 0.1 percent.

“Weve seen some ups and downs,” Doyle said, “but at the end of the week the dollar, for the most part, isnt much changed from where we started.”

 

S&P 500 Futures: $1 Billion MOC, AAPL Earnings And Crude Oil’s Tumble

S&P 500 Futures: $1 Billion MOC, AAPL Earnings And Crude Oil’s Tumble

Yesterday, after trading in an 11 handle range overnight, the S&P 500 futures (ESU17:CME) opened the 8:30am CT regular session at 2474.50, up 4.50 handles. The ES printed a 2475.00 high on the open, and then sold off in a choppy fashion, ultimately finding a low of 2468.00 going into the European close. From there, the S&P’s attempted to rally, but ran out of steam during the less participated midday, making an afternoon high of 2474.00, but was never able to recover the open before settling the day at 2471.75, up 1.75 handles. Total volume on the September mini just barely hit over one million, and the market-on-close was $1 billion USD favoring the buy side.

The real story of the day was after the close, as AAPL reported earnings and shares rose from right around $150 at the close, up to just below $160 just after the conference call, a 7.5% gain helping to push the Nasdaq futures higher after the close. The VIX settled the day just above the $10.00 mark at $10.09, while crude oil futures tumbled, finding resistance at the $50.00 area, pushing down more than $2.00 from Monday’s high.

There is some dispute regarding the market’s historical track record during the month of August. Some will say it is one of the best months of the year, others say it is the worst. The correct answer is, August was the best, but now it is the worst. Based upon DJIA data starting in 1901, August once averaged a handsome 2.3% gain (1901-1949) and was the top DJIA month of the year, up 35 times in 48 years. From 1950 to 2016, August is the third worst month, up 37 times in 67 years and over the past 30 years (1987-2016) August has been the worst DJIA month with an average 1.1% loss.

Overnight, equity markets in Asia traded mixed, with a slight bias to the upside, and were led by the NIKKEI, which closed up +0.47%. Meanwhile, in Europe, equity markets are also trading mixed, but with a slight bias to the downside, led by the FTSE, which is currently trading down -0.32%.

In the U.S., the S&P 500 futures opened last night’s globex session at 2474.00, and traded sideways all night. The ES was held to just a 3.5 handle range as traders await the ADP employment data due out at 7:30am CT. As of 6:30am, the last print in the ES is 2472.75, down -0.50 handles, with 100k contracts traded.

Why Dow 22,000 is not good news for most Americans

Why Dow 22,000 is not good news for most Americans

The U.S. stock market hit another record Wednesday, with the Dow Jones Industrial Average surpassing 22,000 for the first time.

The media acted like Dow 22,000 DJIA, +0.24% is a good thing. The cheerleaders in the anchor desks are wearing goofy hats and high-fiving each other like their team just won the Super Bowl.

But record-high stock prices are not inherently a good thing. Whether it’s good for you individually depends on whether you own lots of shares or not. Most people do not own very many shares at all, so most of us aren’t benefiting much from high stock prices.

The media don’t crow every time the price of milk goes up, so why should it cheer higher prices in a different market? It’s great only if you own the cow.

Who owns the stock market? About half of all equity is owned by the richest 1 million or so families, and another 41% is owned by the rest of the top 10%. The bottom 90% of families own about 9% of outstanding shares.

In the 2013 Survey of Consumer Finances (the most recent data), the Federal Reserve found that only 48.8% of families owned any stock, either directly or indirectly. For the bottom 50% of families by income, only about a quarter had any equities. The typical middle-class family that had some shares owned less than $10,000 worth.

High prices are good for the people who are selling, and not good for the people who are buying. If you are trying to save for your retirement, high prices are terrible. Your dreams just got further away.

High stock prices are particularly bad for young people. I bought my first shares for my retirement account back in the 1970s, so I’ve benefited from the incredible gains since then. But my children are buying high, not low.

With stock markets at record levels in nominal terms, and with price-to-earnings ratios through the roof, there’s not much upside left. Returns over the next decade or two or four probably won’t match the 11% compounded annual returns I’ve received since 1977.

High stock prices might have a benefit if it meant that more capital would be invested in America’s corporations.

That’s the myth of the stock market, anyway. In reality, the stock market doesn’t funnel any additional capital into corporations at all. Nonfinancial corporations have been net buyers — not sellers — of equities for the past 23 years in a row.

The stock market is actually a process for extracting wealth from corporations and passing it along to the wealthy people who owns shares.

So spare me your celebrations of another milestone on Wall Street. It’s great news for the wealthy, because what they own just got more valuable. But for those of us trying to build some wealth, it’s not such great news.

 

Nasdaq Composite pivots sharply lower in afternoon trade

Nasdaq Composite pivots sharply lower in afternoon trade

The Nasdaq on Thursday afternoon turned sharply lower. The Nasdaq Composite Index COMP, +0.00% was most recently down 72 points, or 1.1%, as the index was jolted suddenly lower, with some investors and traders citing a combination of concerns about valuations and market participants taking some money off the table following a brisk run for the high-flying sector. The abrupt retreat for the tech-centric gauge came as the other main equity benchmarks pared an earlier advance. All three equity gauges notched all-time intraday trading highs at the open, but the S&P 500 index SPX, +0.05% was most recently down 0.5% at 2,464 and the Dow Jones Industrial Average DJIA, +0.24% traded flat at 21,710, buoyed by gains in Verizon Communication VZ, -1.39% while Dow component and tech-giant Apple Inc. AAPL, +4.73% sold off by 2.7%, cutting about 30 points from the blue-chip gauge. The popular tech-focused exchange-traded fund, the Technology Select Sector SPDR ETF XLK, +0.28% was trading down 1% in recent trade.