MARKET-ALERT – Rumblings Up, Down, and Around Wall Street – Issue #428 Dated April 9, 2017 with Ray Dirks of RAYDIRKS Research and his team of Securities Analysts and Money Managers, along with the internationally-followed Web Sites www.CorporateProfile.com and www.CPreports.com – where Fashion meets Finance, and where Stocks meet Blonds.
Well, well, well…The stock market in the United States last week managed to chalk up modest losses despite negative fiscal news in the U.S. during the week and the impact late Thursday of President Trump’s international missile attack on the Syrian airfield where the Assad-led military directed lethal ammunition against certain civilians in the country from where so many refugees to other countries have emerged.
Rumblings’ readers/investors did much better with its Favorite Stocks for 2017 as Aflac (AFL) closed at $72.90, up $0.48, and Fusion (FSNN) at $1.63 announced very strong Revenues and EBITDA.
Let’s quote from tomorrow’s “The Trader” column in Barron’s, The Dow Jones Business and Financial Weekly, where the headline reads: “Stocks Slide 0.3%, Shrugging Off News Cycle”.
The column starts off : “Plenty happened in the market last week, but you wouldn’t know it from stocks final tally-The Dow Jones Industrial Average dipped 7 points, to 20,656, over the five-day span, while the Standard & Poor’s 500 index declined 0.3%, to 2,356. The Nasdaq Composite dropped 0.6%, to 5,878. A yawner, right?
Not quite. The action started early in the week with the release of disappointing auto sales that affected – auto makers General Motors (GM) and Ford Motor (F), parts retailers like O’Reilly Automotive (ORLY), used car sellers like AutoNation (AN), and auto parts makers like BorgWarner (BWA) – to tumble, although the S&P dropped only 0.2% Monday. The index bounced back on Tuesday, but gave up a nice gain on Wednesday after the minutes from the March Federal Open Market Committee meeting showed the Federal Reserve considering shrinking its balance sheet before year end, and Speaker of the House Paul Ryan playing down a quick series of tax cuts. Thursday night brought a Trump missile strike in Syria, and March payroll come in well below economists’ forecasts. “There were more than five days of news this week” says Brown Brothers Harriman strategist Scott Clemens. “I’m impressed by the resilience of this market.”
That resilience hasn’t bred confidence, at least among some investors. One example: Thursday’s jobless-claims report, which showed 233,000 Americans had filed for unemployment insurance, down from 259,000 the prior week. RBC Capital Markets economist Tom Porcelli used that as a chance to remind pessimistic clients , among whom “the recession discussion was back in vogue,” that the claims data point to just a 2% chance of an economic downturn in the next two months.
But we might need to tamp down our confidence in an economic acceleration in the near term. The Atlanta Fed’s GDPNow estimates the U.S. economy will grow by just 0.6% during the first quarter, down from an estimate of 1.2% on April 4. And while some have suggested it’s just a typical start-of-the-year lull, Gluskin Sheff economist David Rosenberg notes that last year, gross domestic product grew by 0.8% during the first three months of the year, and then by 1,8% during the second quarter. “You call that a big snap-back?” he says.
Maybe the market doesn’t need one. The U.S. economy hasn’t grown by more than 3.5% since the third quarter 2014, yet the S&P 500 has returned 26% during that period. “The market has done awfully well with an economy growing at a subpar pace,” says Yardeni Research strategist Ed Yardeni. “If there’s no boom, there’s no bust.”
Unless, that is, something causes one. And that’s where the Fed comes in. If anything changed last week, it was the fact that Yellen and company are considering curtailing their bond purchases, says Jason Pride, director of investment strategy at Glenmede. And just as the Fed’s bond purchases had the effect of making monetary policy even easier than it was, it could make money tighter as interest rates rise. “If they let the balance sheet roll off, then interest rates will be going up faster than you see just by looking at the fed-funds target,” pride says. I don’t want them to be in the mind-set of tightening until something breaks.”
Let’s hope it doesn’t come to that.
Rumblings suggests to its readers/investors that they do their due diligence, check with their investment advisers, and then purchase shares of companies on Rumblings list of Favorite Stocks for 2017.
Rumblings also suggests to their readers/investors that they place no more than 1% of the funds they devote to common stocks in the securities of any one company. It pays to diversify. …!
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