Archive for August, 2012

  • More on Earnings
    , August 1st, 2012 at 4:45 pm

    Here’s another earnings update from Wendy Soong at Bloomberg. Of the 500 companies in the S&P 500, 351 stocks have reported so far. A total of 235 (or 67%) have beaten expectations, 39 (11.1%) matched and 77 (21.9%) came in below expectations.

    Earnings are tracking for a decline of 0.6%. When you take out financials, earnings are down 1.4%. Earnings are now expected to decline by 1.1% in Q3, then rise by 10% in Q4.

  • Today’s FOMC Policy Statement
    , August 1st, 2012 at 2:14 pm

    Here it is:

    Information received since the Federal Open Market Committee met in June suggests that economic activity decelerated somewhat over the first half of this year. Growth in employment has been slow in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed. (I think that’s a bit strong. Housing has gotten much better – Eddy.) Inflation has declined since earlier this year, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.

    To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

    The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant an exceptionally low level of the federal funds rate.

    The condensed version: We aren’t doing anything. BTW, did you know an election is three months away?

  • S&P 500 Total Return Index
    , August 1st, 2012 at 11:23 am

    Through July, the S&P 500 is up 11% with dividends included. Over the last 12 years, the S&P 500 is up 21% including dividends. Annualized, that’s 1.6% a year.

  • The Treasury Is Considering Floating Rates
    , August 1st, 2012 at 11:01 am

    There’s an interesting story out today that the Treasury Department is considering floating rate securities to finance the government’s debt. This could happen within the next year.

    The idea is that it works just like a regular bond but the interest rate would be tied to a short-term rate. For example, the Treasury may auction off a 10-year bond that offers a coupon of the current 90-day yield plus, say, 75 basis points. That coupon would then reset every few months.

    Obviously, Uncle Sam has had to borrow a lot of money over the past four years, and with rates so low at the short-end, this may be a way to take advantage of lower borrowing costs. I think this is a good idea and it will give investors more options for investing in debt.

  • July ISM = 49.8
    , August 1st, 2012 at 10:27 am

    The latest ISM number came out this morning and it was 49.8. A reading of greater than 50 means the economy is growing. Less than 50 signals a contraction.

    This is the second month in a row that ISM has come in below 50. But this comes after a run of 33 months in a row when ISM had topped 50.

    Bear in mind that historically, we’re still well above the danger zone. Recessions usually kick in when the ISM is below 45 or so.

    The big news this week is still the jobs report. We got a sneak preview this morning when ADP, the private payrolls folks, said that 163,000 new jobs were added last month. That’s 43,000 more than Wall Street had been expecting. The government reports its jobs numbers on Friday.

    So far, Wall Street is in a good mood. The S&P 500 is up a little, but we’re waiting for what the Federal Reserve has to say when their policy statement is released later today. That should come out at 2:15 pm ET.

  • Morning News: August 1, 2012
    , August 1st, 2012 at 6:37 am

    Spain Reports Record Capital Flight

    Economic Thinkers Try to Solve the Euro Puzzle

    Draghi Reshapes ECB Crisis Pragmatism as Trichet’s Dogma Fades

    Joblessness in Euro Zone Reaches Record High

    China Hits Back at U.S. Sanctions Against Bank

    China’s Manufacturing PMI At 8-Month Low

    2nd Day of Power Failures Cripples Wide Swath of India

    Oil Falls on Speculation Fed to Forgo Stimulus

    S.E.C. Suggests Reforms of Municipal Bond Market

    Regulator Rebuffs Obama on Plan to Ease Housing Debt

    Apple, Samsung Launch Salvos As Smartphone Trial Heats Up

    BMW Keeps Outlook, Warns Of Tougher Market Conditions

    Pfizer’s Cost-Cuts Offset Loss of Lipitor

    Jeff Miller: Four Actionable Investment Themes

    Stone Street: That’s a Preposterously Long Series of Clown Questions Bro

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