Nasdaq 5,000

Stocks rose after reports indicated rising incomes and a manufacturing sector that expanded for the 26th-straight month. The Nasdaq, meanwhile, closed above 5,000 for the first time in 15 years.

The Dow jumped 155 points, with 26 of its 30 components advancing; the S&P 500 Index rose 12; and the Nasdaq gained 44. Advancers led decliners by three to two on the NYSE and just under two to one on the Nasdaq. The prices of Treasuries weakened. Gold futures lost $4.90 to close at $1,208.20 an ounce, and the price of crude oil dropped 17 cents to settle at $49.59 a barrel.

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Is it still a bull market? Imagine the opposite.

Manley on the Street“… a pattern begins to evince itself.” —Thomas Jefferson, Declaration of Independence

There is no question in my mind that the past several months have been very frustrating for investors in U.S. equities. A series of rapid declines followed by a series of even more rapid recoveries have etched a pattern of volatility across our minds. Yet, as March begins, we find ourselves within striking distance of yet another new high for the S&P 500 Index (how many of those have we seen in the past two years?) and, perhaps more remarkably, only a few percentage points below the Y2K high for the Nasdaq Composite Index.

I have mentioned before that I believe this volatility is the product of two very bullish conditions. The declines, in my opinion, are evidence of the lack of deep abiding confidence in the outlook for equities among most investors. We may be drawn in by higher prices, but we still bolt at the first sign of a cloud on the horizon. I think that the rebounds are a function of the Federal Reserve’s continued desire to push money toward the real economy and its palpable impact on the capital markets. What worries many only serves to encourage me.

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Dollar strength and currency volatility

Venk Lal

Venk Lal

Today we have a guest post by Venk Lal, director of investment risk and strategy for the EverKey Global Equity team at Wells Capital Management, Inc. Mr. Lal discusses the implications of recent strength in the U.S. dollar relative to other major currencies.

Since the depths of the financial crisis in March 2009, the S&P 500 Index has appreciated more than 200% while the MSCI All Country World Index ex USA Index (MSCI ACWI ex USA Index) has risen approximately 135%. While the reasons for this recent U.S. outperformance vary, there’s one development that’s becoming increasingly important for investors: the strengthening U.S. dollar. In 2014, every one of the top dozen currencies in the MSCI ACWI ex USA Index depreciated relative to the U.S. dollar.

The strengthening dollar represents a sharp reversal from more than a decade of dollar weakness and has several implications for international investing, both at the portfolio level and for individual companies. A stronger dollar will tend to dampen returns from foreign markets in an international portfolio. That portfolio’s returns might be enhanced by using currency hedges to participate in dollar appreciation. Likewise, when the U.S. dollar is strong, international corporations can gain an advantage by selling into the U.S. market but maintaining most of their expenses and supply chains in countries with weaker currencies. Such an arrangement can increase a company’s earnings by effectively allowing it to buy low and sell high.

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The Magic of texting

Stocks traded slightly lower today as investors received mixed signals about the country’s economy.

The Dow lost 81 points, with 23 of its 30 components declining; the S&P 500 Index fell 6; and the Nasdaq was down 24. Advancers led decliners by 10 to 9 on the NYSE, but decliners outpaced advancers by 5 to 3 on the Nasdaq. Treasury prices strengthened. Gold futures rose $3.00 to close at $1,213.10 an ounce, and the price of crude oil climbed $1.59 to settle at $49.76 a barrel.

For the month, the Dow and the S&P 500 Index each gained 5% and the Nasdaq rose 7%.

In earnings news:

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Can Waffle House disrupt a $70B industry?

Stocks ended mixed as investors weighed data on the U.S. economy, showing falling inflation, rising unemployment, and a slight rebound for factory orders. The Dow fell 10 points, with 17 of its 30 components gaining, the S&P 500 Index dropped 3 points, and the Nasdaq added 20. Decliners narrowly outpaced advancers on the NYSE and advancers led decliners by five to four on the Nasdaq. The prices of Treasuries weakened. Gold futures rose $8.60 to close at $1,210.01 an ounce. The price of crude oil fell by $2.82, settling at $48.17 a barrel.

In earnings news:

- Anheuser Busch InBev’s fourth-quarter profits edged up to $2.53 billion from $2.52 billion a year ago, missing analysts’ estimates. Marketing spending rose 11%, and could climb another 9%, to support the brewer’s flagging Budweiser brand, which lost 0.3% in U.S. market share in 2014. Revenue was $12 billion, up from $11.7 billion. AB InBev’s U.S. shares (BUD) gained 2.45%, after announcing it will buy back $1 billion in shares in 2015.

- Kohls’ Corp.’s shares (KSS) shares rose 1.16% after posting a 10.5% boost in net income to $369 million, on revenue of $6.34 billion, up 4%, from a year ago. Both measures beat estimates, as did the department store chain’s full-year sales forecast. Kohls announced it will buy back $1 billion in shares, and spend almost half of its $800 million capital budget on integrating its storefront and online business.

- Despite a range of cost-cutting efforts, Sears Holdings Corp reported a fourth-quarter loss of $159 million, after posting a $358 million loss, a year ago. Revenue tumbled 23.5% to $8.1 billion, as the department store operator’s Sears and Kmart brands posted 7% and 2% sales declines, respectively. Sears’ shares (SHLD) dropped 4.80%, as investors reacted to the company’s 11th consecutive quarterly loss.

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Battling volatility in bonds (excerpt)

A global, strategic approach helps you find the income in fixed income.

David Germany, Ph.D., chief fixed-income officer and portfolio manager at Wells Capital Management, explains in this excerpt of On the Trading DeskSM from Tuesday, February 24, 2015.

Listen to the full interview.

David Germany

David Germany, Ph.D.

David, a little defining would be helpful. Tell us about your investment goals.
Ultimately, we seek to generate an attractive return for our investors over an investment cycle by investing in a wide arrange in fixed-income assets, both across sectors and the world. We believe this wide range of alternatives helps us diversify risks while also allowing us to focus our efforts on those areas offering the best opportunities.

And what might the strategic advantages be?
The great advantage of this approach is its flexibility. First, we have the ability to ask, what mix of fixed-income investments provide attractive returns, relative to risk, over the long run? Currently we believe that a roughly equal mix of corporate bonds, bank loans, mortgages, and global securities that has a low sensitivity to rising interest rates accomplishes this goal—but we can change this longer-run strategy if the world changes. Second, we have the ability to actively manage this portfolio to take advantage of tactical opportunities, focusing exposures to those areas that we believe offer the best value.

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Self-driving cars might work harder than their owners

Federal Reserve Chair Janet Yellen completed her two-day semiannual congressional testimony today, reiterating the message that the Fed could raise rates later this year if the economy continues to expand. The markets greeted the testimony calmly, with the major indexes closing flat.

The Dow gained 15 points, with 15 of its 30 components losing ground, and the S&P 500 Index and the Nasdaq each lost about one point. Advancers led decliners by five to four on the NYSE and six to five on the Nasdaq. The prices of Treasuries strengthened. Gold futures gained $4.20 to close at $1,201.50 an ounce, and the price of crude oil gained $1.71 to settle at $50.99 a barrel on a bigger-than-expected buildup in U.S. crude oil supplies.

In earnings news:

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Financial advisors under fire? (podcast)

Advisor meeting with clientsWhen Washington calls your financial advisory practice into question, it’s your opportunity to rise above the remarks and focus on communicating your transparency of practice and demonstrating your value and dedication to helping your clients meet their financial goals. Wayne Badorf, CFP®, CFS®, and Jon Lagerstedt provide best practices.

Listen to the podcast.

Wayne Badorf: I’ve seen a lot of newsfeeds coming in my email inbox about the likely proposal by the current administration to toughen the fiduciary standard for financial advisors. As I read that, I began to think, “What is the value a client is getting when they see their financial advisor?”

Jon Lagerstedt: Wayne, that’s a great question. One of those quotes from President Obama to the AARP was, “Middle class economics means that Americans should be able to retire with dignity after a lifetime of hard work. But today, the rules of the road do not ensure that financial advisors act in the best interest of their clients when they give retirement investment advice. And it’s hurting millions of working and middle class families.”

If I’m a retail client and I read the comments that the president has, it might make me think, “Are all advisors this way? Are they all charging too much money?” And I wonder if there’s a way for a financial advisor to rethink how they’re positioning themselves.

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Gold and looming interest-rate hikes

Today we have a guest post by Michael Bradshaw, CFA, portfolio manager with expertise in investing in gold, other precious metals, and gold-related stocks.

U.S. investors in gold and other dollar-denominated commodities are accustomed to the effects a stronger or weaker dollar can have on their investments. All things being equal, as the dollar weakens, the price of gold typically rises, as it takes more dollars to buy an equivalent amount of gold; as the dollar strengthens, the situation is reversed, and the price of gold typically falls. In 2014, in particular, the price of gold faced a steep uphill climb due to the dollar’s strength in the face of weakening growth overseas, particularly in Europe and China. In 2015, however, investors might be better served by paying more attention to what a stronger dollar could portend: rising interest rates.

Gold prices over the past year
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Pick boring home projects for higher resale value

Stocks gained as investors weighed Congressional testimony from Federal Reserve Chair Janet Yellen that shed light on the central bank’s plans for raising interest rates. The Dow climbed 92 points, with 23 of its 30 components gaining; the S&P 500 Index rose 5 points; and the Nasdaq added 7. Advancers led decliners by five to three on the NYSE and by four to three on the Nasdaq. The prices of Treasuries strengthened. Gold futures fell $3.50 to close at $1,197.30 an ounce. The price of crude oil fell by 17 cents, settling at $49.28 a barrel.

In earnings news:

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