Monday, January 14, 2019

Markets decline on worries about earnings season

Dow fell 86 (above opening lows), decliners over advancers 3-2 & NAZ retreated 65.  The MLP index was off 2+ to the 242s & the REIT index rose 1 to go over 340.  Junk bond funds inched higher & Treasuries slid back a tad in price.  Oil dropped 1 to go under 51 & gold went up 2 to 1291.

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Cash is becoming the king as investors flee volatile stock markets.  Assets in money market mutual funds have swollen to $3.066T, their highest level since Mar 2010, driven by retail investors.  The money fund assets had spent much of the last decade in the $2T range but tracked above $3T again in mid-Dec, coinciding with a late-2018 market downturn that resulted in the S&P 500 posting a 6.2% drop for the year, it’s worst showing in a decade.  Weekly total net assets of money market mutual funds
  • 12/04/18 $2.91 trillion
  • 12/12/18 $3.00 trillion
  • 12/19/18 $3.01 trillion
  • 12/26/18 $3.04 trillion
  • 01/02/19 $3.05 trillion
  • 01/09/19 $3.07 trillion
Source: Investment Company Institute

Since reaching a low on Dec 24, the S&P 500 has snapped back 10.4% thru Fri, led by stocks in the energy sector as well as consumer discretionary & industrial names.  Energy was the worst-performing sector in Q4.  But the market recovery hasn't been enough to convince skittish investors to come back.  Withdrawals from ETFs, a popular investment with many retail investors, are up to $7B this year.  Last week, ETFs tracking small company stocks had outflows of more than $1B & tech-focused ETFs had outflows of $767M.

Investors are hiding out in cash: Assets in money market funds surge past $3 trillion

Most Americans do not think their financial situation will improve in 2019.  And those who are pessimistic largely blame one source: leadership in DC.  A majority of Americans, 55%, do not think their financial situations will be better in 2019 compared to 2018.  Of those individuals, 12% think their finances will be worse & 44% believe they will stay the same.  At the same time, 44% of those surveyed think things will get better for them this year.  The online survey from personal finance website was conducted in mid-Dec — well before the federal gov shutdown.  It included 1K individuals ages 18 & up.  The partial gov shutdown began on Dec 22 which has left 800K federal workers without pay.  It now holds the record for the longest shutdown in US history.  Of those who think their finances will be worse, most blame political leaders, as indicated by 49% of respondents, followed by cost-of-living increases, more debt, less income from savings or investments, rising interest rates & less income at work.

More Americans are pessimistic about their money, and they blame Washington

The Federal Reserve's recent interest-rate increases are not a "headwind" slowing the momentum of the economy, said Fed Vice Chairman Richard Clarida.  "The economy has good momentum going into 2019," even as the central bank has been gradually raising rates, Clarida said.  Pres Trump recently called the Fed the "biggest threat" to economic growth.  The Fed vice chairman defended the Dec rate hike, calling it "appropriate," & said the federal funds rate is now only slightly higher than the inflation rate, historically a very low level of interest rates.  Looking forward, the Fed "can afford to be very patient" on future interest rates moves, Clarida said.  In particular, the Fed will be watching the slower global economy.  So far, the impact from overseas is not severe on the domestic economy, he added.

Fed is not a 'headwind' holding back economy, Clarida says

Just another uneventful day for the stock market.  There was not much news driving buying or selling.  The "big" US-China talks have still not produced any significant results & the gov shutdown is going nowhere fast.  The only major news is that gold remains strong & its bulls are looking to take it back over the 1300 ceiling.  The major news story this week looks to be early earnings results which investors are anxious to see.. 

Dow Jones Industrials

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