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Posts Tagged ‘Dow Jones’

The Stock Market Is Ignoring the Economy

Posted by hkarner - 20. April 2020

Date: 18‑04‑2020

Source: The Wall Street Journal

The Dow enjoyed its best two‑week stretch in more than 80 years, but the economy is still struggling

Medical workers collect patient data this month at a coronavirus testing facility in Farmington Hills, Mich. Despite a sharp increase in virus cases and deaths, stocks have rallied.

The Dow Jones Industrial Average staged its best two‑week performance since the 1930s, a dramatic rebound that has left many investors with a confounding reality: soaring share prices and a floundering economy.

The explosive rally is a sign that many are positioning for the U.S. to make a speedy recovery when the coronavirus crisis eases. Investors have been encouraged in recent days by signs that several states will move to resume business, along with hopes that a viable treatment for Covid‑19 could be near.

The blue‑chip index rose 2.2% this week, extending its rally over the past two weeks to 15%—its best performance since 1938. The S&P 500 climbed 3% this week, while the Nasdaq Composite surged 6.1% as investors piled into highflying technology stocks. The Dow and S&P 500 are still down more than 10% for the year, while the Nasdaq’s losses have been cut to 3.6%

Many investors agree the most important driver of the rebound has been the Federal Reserve’s massive stimulus plan, combined with the efforts of the U.S. government, which sent a signal that both were willing to step in like never before to buoy the economy. U.S. stocks bottomed March 23, after the Fed cut rates to near‑zero.

“They took away the depression. That scenario is out of the picture now,” said Zhiwei Ren, a portfolio manager at Penn Mutual Asset Management. “The Fed is the fundamental reason” for the rebound.

The central bank also unleashed a massive program to buy Treasurys and mortgage‑backed securities, while President Trump signed a roughly $2 trillion stimulus package, the biggest relief package in U.S. history.

For some investors, it doesn’t pay to bet against stocks after the Fed stepped in. The stimulus spurred a fear of missing out among investors and gave many the confidence to resurrect some of the most popular tactics of recent years—buying dips in the stock market and piling into shares of big technology companies.

The coronavirus’ toll on the population and the economy has been dour. More than 150,000 people around the globe have died, while cases world‑wide have topped 2 million. In the U.S., more than 22 million Americans have sought unemployment benefits in recent weeks.

Retail sales, a measure of purchases at stores, gasoline stations, restaurants, bars and online, fell by a seasonally adjusted 8.7% in March from a month earlier, the most severe decline since record‑keeping began in 1992. Earnings for the first quarter among big U.S. companies are expected to decline nearly 15% from a year earlier, according to FactSet, which would mark the biggest decline since 2009.

Still, as the data has darkened, investors have been buying stocks, extending the Dow’s rally from its March low to 30%. It is a sharp about‑face from March, the most volatile month in the stock market’s history, when the 11‑year bull market in equities abruptly ended.

“While it’s great to be in the green, we do wonder, what is it that the markets are celebrating,” said Amy Kong, chief investment officer at Barrett Asset Management. “Nobody knows how long this is going to last,” she said of the pandemic.

Many analysts are now betting on a so‑called V‑shaped recovery—a sharp slowdown and then a quick economic recovery. Goldman Sachs Group Inc. economists expect the economy to significantly contract in the first and second quarters before rebounding later in the year.

Analysts are also looking past this year’s abysmal earnings expectations and forecasting profit growth in the first and second quarters of next year, FactSet data show. Corporate earnings are projected to plunge by 27% in the second quarter of 2020, before rebounding.

Marko Kolanovic, JPMorgan Chase & Co’s global head of quantitative and derivatives strategy, has been analyzing reams of data on the spread of the pandemic around the globe, looking at hospitalization rates and resources like hospital beds for clients. He expects U.S. stocks to be back at highs in the first half of next year. Why? Going against the Federal Reserve is typically a losing battle, he said.

The Fed’s latest move “reinforces our view of a full asset price recovery, and equity markets reaching all‑time highs next year,” Mr. Kolanovic said in a recent note. “Investors with [a] focus on negative upcoming earnings and economic developments are effectively ‘fighting the Fed,’ which was historically a losing proposition.”

There may be limits to that approach, other analysts said. For example, a $350 billion small‑business loan program from the U.S. government has already exhausted its funding, highlighting the mammoth challenge that lawmakers face—and sheer amount of cash necessary—to support the economy and keep Americans employed.

These types of loans can be forgiven if firms don’t lay off workers, but U.S. lawmakers have recently struggled to agree on the next round of coronavirus emergency aid.

Despite the stimulus checks going to Americans around the country, measures by the central bank and government can’t alter human behavior and force people to leave their homes, eat at restaurants, shop at malls and go to movies. That has led some analysts to say a recovery may take longer than many are currently anticipating.

“How long before you and I are going to feel comfortable going to a concert again?” said Dominic Nolan, a senior managing director at Pacific Asset Management, which oversees roughly $12 billion in debt. “A government program doesn’t really help that.”

Mr. Nolan said that he has recently bought bonds of investment‑grade companies after the Federal Reserve’s recent moves.

Some investors are still anxious because the bond market is sending a more cautious signal. Investors have continued scooping up traditionally safe assets like government bonds and gold as stocks have rallied. The yield on the 10‑year Treasury note has fallen to 0.655% from 1.26% in mid‑March as bond prices have risen, while gold prices hit their highest level in more than seven years this week. The concurrent gains across traditionally risky and safe assets alike suggest that many remain concerned about an extended downturn.

Investors have also treated some corners of the stock market as a hiding place, piling into the technology darlings that powered markets higher in recent years.

“The Nasdaq is trading like a safe haven in a way,” Mr. Ren of Penn Mutual Asset Management said.

A sign urges people to social distance in Des Moines, Iowa. Most nonessential businesses in the state are closed until April 30.

Amazon.com Inc. and Netflix Inc. both surged at least 14% this week and set records, while some of the momentum‑driven trades that were popular earlier in the year also re‑emerged. Tesla Inc. has risen for 10 consecutive trading days, its longest winning streak on record, bringing its gain for the year to 80%.

It seems like a “hold your nose, close your eyes and buy,” situation, said Mike Bailey, director of Research at FBB Capital Partners. “Even though there’s a torrent of economic data coming.”

Mr. Bailey said he has been surprised by the “stocks going up on bad news” phenomenon. However, he has bought shares of Amazon and Apple Inc.

The recent rally among big tech stocks underscores their hefty influence on the market. The S&P 500, which is weighted by market‑capitalization, is down 11% this year, while a version of the index that gives every company an equal weighting has plummeted 19%.

“You have the trillion dollar guys that are doing fine,” Mr. Nolan said. “I think on average companies have gotten hit really hard.”


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Corona stürzt Aktienmärkte in die schwärzeste Woche seit der Finanzkrise

Posted by hkarner - 4. März 2020

Dank an R.B.

  • Aktualisiert am

Ob in New York oder Frankfurt: Die Aktienkurse rauschen auf der ganzen Welt in die Tiefe. Die amerikanische Notenbank will tun, was nötig ist, um die Wirtschaft zu stützen.

Die Furcht vor den Folgen des neuartigen Coronavirus hat den internationalen Aktienmärkten die schwärzeste Woche seit der Finanzkrise 2008 eingebrockt. Allein seit Wochenauftakt sank der Wert der Unternehmen an den Börsen der Welt um fast sechs Billionen Dollar.

Eine Beruhigung ist vorerst nicht in Sicht. „Die Investoren versuchen, sich auf das Schlimmste einzustellen“, sagte John Lau, Aktienexperte des Finanzdienstleisters SEI Investments. „Das sind höchst unsichere Zeiten, keiner kennt die Antwort, und die Märkte sind in Panik.“ Bernhard Langer, der Milliarden Dollar für die Fondsgesellschaft Invesco anlegt, sagte der F.A.Z.: „Der Markt befindet sich sozusagen in einem Käuferstreik.“

Fed deutet Zinssenkung an

Der Dow Jones Industrial, der zeitweise deutlich unter 25.000 Punkte gefallen war, schloss mit einem Minus von 1,39 Prozent auf 25.409,36 Punkte. Dennoch ging für das wichtige Börsenbarometer mit einem Wochenverlust von 12,4 Prozent eine der schlimmsten Handelswochen seit Jahren zu Ende. Noch markanter waren die Einbußen zuletzt nur während der Finanzmarktkrise im Oktober 2008. Auf Vierwochensicht sieht es kaum besser aus: Mit minus 10 Prozent hat der Dow den verlustreichsten Monat seit genau elf Jahren hinter sich.

Der breiter gefasste S&P 500 verlor am Freitag 0,82 Prozent auf 2954,22 Punkte, nachdem es im Tagesverlauf auch für den marktbreiten Index zeitweise um mehr als 3 Prozent abwärts gegangen war. Der Nasdaq 100 schaffte am Tagesende sogar ein Plus von 0,30 Prozent auf 8461,83 Zähler.

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In the Stock Market, It’s a Dog-Eat-Dow World

Posted by hkarner - 26. Dezember 2018

Date: 24-12-2018
Source: The Wall Street Journal

Going into the last week of the 2018, major stock indexes are on track for their worst year since 2008

Experts think more trading volatility could be in store in the year ahead.

Market volatility spurred by recent worries about interest rates, trade tensions and slowing economic growth are sending investors to the dogs—the Dogs of the Dow, that is.

Investors have fled shares of companies like technology firms that are known for their growth prospects in favor of those that offer higher dividend yields, benefiting followers of the classic investing theory, which is beating the benchmark Dow Jones Industrial Average in 2018.

The strategy entails buying the 10 highest-yielding components of the 30-stock Dow industrials at the beginning of a year and holding the shares over the following 12 months. That gives investors dividend income and the benefit of buying cheaper stocks. Excluding dividend increases, yields rise when stock prices fall, highlighting a hallmark of the strategy.

Going into the last week of the 2018, major stock indexes are on track for their worst year since 2008, and more volatility could be in store. Trading tends to be light during the holiday-shortened week, which could trigger bigger-than-normal price swings, though heavy volume in recent sessions signals things could also prove busier than usual. Worries about the Federal Reserve’s path of interest-rates increases, simmering trade tensions with China and stalling economic growth around the world have tested the durability of the nearly 10-year bull-market run in U.S. stocks in recent sessions.

The Dogs’ returns this year are negative through Friday, but the losses are smaller than those of the broader blue-chip index. That is a reversal from earlier in the year when Dogs underperformed as major indexes climbed to records on the back of robust corporate earnings growth and 2017’s massive tax overhaul.

Among this year’s Dogs are health-care giant Merck & Co., which has surged 34% in 2018 on a total-return basis including dividend payments; Cisco Systems Inc., which has climbed 13%; and Verizon Communications Inc., up 8.7%. The biggest drag is a company that lost its home in the blue-chip index earlier this year: General Electric Co.

“Buying strength in anything other than utilities or dividend payers has not worked out,” said Frank Cappelleri, executive director at Instinet LLC. He added he expects more investors to rotate into haven stocks at the start of the year when investors tend to make adjustments to their portfolios after reviewing their end-of-year performance statements.

That flight from risk appears to be accelerating heading into the final week of the year. Investors have yanked money out of both stock and bond funds at a quickening pace, in some cases moving their positions to cash. Meanwhile, utilities and real-estate companies, beloved in weak economies for their steady distribution payments, are among the best recent performers, posting smaller losses than other sectors.

Despite the outperformance of the Dogs this year, they haven’t been immune to the fears rattling the broader stock market and are on track for their first negative return since 2008, according to Dow Jones Market Data. They have slumped 2.7% through Friday on a total-return basis, versus a 7.1% fall for the broader index. That contrasts with the first three quarters of the year when the Dogs returned 5.8%, short of the Dow industrials’ 8.8% gain.

Over a longer time frame, the Dogs’ returns are more impressive. They have beaten the broader index in three of the past four years and 60% of the time over the past 20 years, according to Dow Jones Market Data. Last year was an exception: As the Dow industrials hit five 1,000-point milestones, the Dogs returned roughly 15% compared with the broader average’s 28% return.

One big attraction of the Dogs is their high distribution payments to investors. Each of the Dogs at the end of 2017 boasted a dividend yield of at least 3.1%, which is well above the current yield of 2.792% on the benchmark 10-year Treasury note and the 2.4% average dividend yield for all Dow components.

“The value in owning dividend stocks right now is these have strong balance sheets,” said Sandy Pomeroy, portfolio manager at Neuberger Berman Equity Income Fund. “Right now in particular with the economy potentially slowing and the Fed tightening, all of a sudden these things look stronger rather than buying the dream.”

Her fund holds shares of Verizon and Pfizer Inc., but she has steered clear of International Business Machines Corp. , despite its attractive yields.

“Fundamentals matter,” she said, adding that buying companies solely for a high dividend isn’t necessarily the best strategy. Her fund looks for the sustainability of the dividend and possibility for dividend growth, she said.

Merck, which carried a 3.4% dividend yield at the end of 2017, has soared this year as the pharmaceutical company has made solid progress in research and development of new drugs. Pfizer has also provided some bite in 2018, rising 20% on a total-return basis. Pharma stocks in general have had a good year—the health-care sector of the S&P 500 is the only group other than utilities on track for yearly gains, while Merck and Pfizer are the best performers in the Dow industrials on a price-basis as well.

Only four Dogs have suffered losses in 2018 after factoring in dividends: GE, IBM and energy giants Exxon Mobil Corp. and Chevron Corp. , whose tumble has coincided with a steep drop in oil prices.

GE entered the year with a hefty dividend yield of nearly 5%. Since then, its stock has lost nearly 60% of its value, the one-time industrial stalwart cut its dividend to a token penny a share and the company has been kicked out of the blue-chip index. As a result, it won’t be a part of next year’s pack of Dogs. In its place will likely be JPMorgan Chase & Co.; the other nine dogs are on track to be back in 2019.

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U.S. Stocks Surge, Erasing Recent Losses

Posted by hkarner - 17. Oktober 2018

   Date: 16-10-2018
Source: The Wall Street Journal

Broad rally marks the latest bout of volatility for major indexes; shares of Goldman and Morgan Stanley jump

U.S. stocks soared Tuesday, sending the Dow Jones Industrial Average up more than 400 points, as gains in everything from technology firms to banks helped major indexes claw back recent losses.

Tuesday’s moves marked the latest bout of volatility for stocks, which have swung throughout October as investors have grappled with fresh questions about the nine-year bull market’s durability.

With bond yields at multiyear highs, many say stocks have begun to lose some of the luster they held for years in an environment of ultralow interest rates. Investors are also contending with recent weakness in technology shares, which some worry look overextended after dominating the latest leg of the bull market.

Yet even with those worries, many feel the domestic economy still looks strong—something that they say has helped the U.S. stock market keep charging on.

Shares of Goldman Sachs and Morgan Stanley jumped after the two firms said third-quarter profits surged double-digit percentages, thanks to a flurry of deal making and trading. Even technology firms, which had led major indexes lower Monday, got a jolt higher Tuesday. Den Rest des Beitrags lesen »

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General Ejected

Posted by hkarner - 29. Juni 2018

Date: 28-06-2018
Source: The Economist

John Flannery gets down to business restructuring General Electric
Booted from the Dow this week, GE is becoming humbler but fitter

THIS should have been one of the darkest weeks in the history of General Electric (GE). The firm founded by Thomas Edison has been a member of the Dow Jones Industrial Average, a stockmarket index comprised of leading American companies, for over a century. Alas, mismanagement and a failure to move with the times have turned the erstwhile icon of innovation into a disorganised, debt-laden mess. GE’s shares have plunged to below a quarter of their peak value in 2000. On June 26th GE was ejected from the Dow index and replaced by Walgreens Boots Alliance, a big health-care firm.

Yet on that same day a ray of sunshine also fell on GE. John Flannery, an insider known for his number-crunching skills who took over as the troubled firm’s boss last August, announced details of a much-awaited restructuring plan. Over the next couple of years GE will spin off its healthcare division and unwind its newish stake in Baker Hughes, a petroleum-services firm. He had previously confirmed the sale of its train locomotive division. Taken together, these three units generate roughly $40bn a year, about a third of the firm’s annual revenues.

GE’s share price rose on the news. The obvious reason for cheer was Mr Flannery’s renewed promise to slim down the unwieldy conglomerate, including a vow to slash its net debt and pension obligations by $25bn. He also promised to cut an extra $500m in costs, on top of previously announced cuts, by 2020. Beyond this willingness to wield the axe, Mr Flannery’s plan for fixing GE has three attractive elements: call them “spinners”, spin-offs and “spinning down”. Den Rest des Beitrags lesen »

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The Trump Bunc of Idiots

Posted by hkarner - 27. Juni 2018

Date: 26-06-2018
Source: The Wall Street Journal
Subject: Trade Rift Within Trump Administration Sends Stocks on Wild Ride

DJIA sheds 1.3% after Mnuchin says China isn’t a target of investment-control effort and trade adviser Navarro says move is aimed at Beijing

WASHINGTON—Bitter fights over trade within the Trump administration again broke into the open, driving wild swings in the stock market as the White House’s top trade adviser clashed with the Treasury secretary over restrictions on foreign investment.

For weeks, the administration has been planning a two-pronged effort to block Chinese companies from obtaining advanced U.S. technology. The U.S. would block Chinese companies from investing in U.S. technology companies, while restricting U.S. technology exports to China. Beijing has reacted strongly to the escalating tensions, with President Xi Jinping vowing to “punch back” against the U.S. trade measures.

The rising tensions over technology transfers sent investors fleeing from some of the market’s best-performing technology firms on Monday. The Dow Jones Industrial Average shed as many as 497 points before ending down 328.09 points, or 1.3%, at 24252.80. Den Rest des Beitrags lesen »

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Abstieg eines Giganten: GE fliegt nach 110 Jahren aus Dow Jones

Posted by hkarner - 20. Juni 2018

Jedidajah Otte, 20. Juni 2018, 18:21 derstandard.at

Das Ausscheiden aus dem Dow Jones markiert den Wandel in der US-Wirtschaft. Einst glorreiche Industrieriesen können mit neuen Konzernen nicht mithalten

Mit der Erfindung der Glühbirne durch Mitbegründer Thomas Edison fing alles an, nun hat General Electric (GE) einen neuen Meilenstein erreicht: Das amerikanische Industriekonglomerat wird nach mehr als 110 Jahren aus dem US-Leitindex Dow Jones ausgeschlossen. Am 26. Juni rückt die Drogeriekette Walgreens Boots Alliance an die Stelle des 126 Jahre alten Siemens-Rivalen im Dow, der sich aus 30 der größten Industrieunternehmen der USA zusammensetzt. Das teilte der Indexanbieter S&P Dow Jones Indices in der Nacht zum Mittwoch mit. Mit der Aufnahme von Walgreens spiegle der Index die Bedeutung der Verbraucher und der Arzneimittelbranche für die US-Wirtschaft besser wider. Wie konnte ein Technologiegigant wie GE, der dem Dow seit 1907 ununterbrochen angehörte und über Jahrzehnte eines der amerikanischen Unternehmen mit dem höchsten Börsenwert war, von einem derartigen Schicksal ereilt werden?

Die Probleme begannen mit dem Einstieg in den Finanzsektor und der Krise von 2008, in deren Folge GE enorme Verluste hinnehmen musste. Seit 2000 ist der Kurs der GE-Aktie um 80 Prozent eingebrochen, 2017 verbuchte GE ein Minus von 37 Prozent und schnitt somit am schlechtesten von allen Dow-Mitgliedern ab. Seit Jahresbeginn ist die GE-Aktie um weitere 26 Prozent gesunken. Daran konnte auch der neue Vorstandschef John Flannery nichts ändern, der im August an die Konzernspitze kam, um seinen umstrittenen Vorgänger Jeff Immelt abzulösen und dem strauchelnden Riesenunternehmen neues Leben einzuhauchen. Den Rest des Beitrags lesen »

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U.S. Stocks Rise After Two Turbulent Weeks

Posted by hkarner - 14. Februar 2018

Date: 13-02-2018
Source: The Wall Street Journal

Dow jumps 400 points following its largest one-week percentage decline in more than two years

U.S. stocks roared for a second consecutive session Monday as commodity prices stabilized, providing a respite for investors after two bruising weeks that pushed indexes from New York to Hong Kong into correction territory.

The S&P 500 and Dow Jones Industrial Average climbed out of the gate, marched steadily higher and never reversed course during the day. The S&P closed up 1.4% while the Dow gained 1.7%, but remain off 7.5% and 7.6% from their Jan. 26 highs.

The steady upward moves marked a sharp departure from recent days. Concern over rising bond yields and collapsing bets that the market’s low volatility would continue led investors to pull a record amount of money from equity funds in a single week and dump other assets, like oil and gold. In total last week, the blue-chip Dow changed direction 53 times, including 29 times in a single session.

Although markets rose Monday, many investors and analysts warn that any recovery could be tested as early as Wednesday, when a Bureau of Labor Statistics report on consumer prices gives investors a fresh look at inflation data. Further evidence of inflation could stoke another bout of pressure on bonds and stocks, rattling markets anew. Den Rest des Beitrags lesen »

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Dow Industrials Plunge Into Correction

Posted by hkarner - 9. Februar 2018

Date: 09-02-2018
Source: The Wall Street Journal

Blue-chip index falls more than 1,000 points and is now down more than 10% from its January high

The Dow Jones Industrial Average and S&P 500 entered correction territory for the first time in two years on Thursday as worries about rising interest rates and newfound volatility continued to rattle the markets.

The Dow hadn’t been in a correction—a decline of at least 10% from a recent high—since February 2016. And traders were bracing for more upheaval.

“We opened around the highest levels of the day and closed at the lows, and that’s telling us the sellers aren’t quite done yet,” said Jonathan Corpina, senior managing partner at broker-dealer Meridian Equity Partners.

Stocks spent much of the session Thursday deep in the red as a shaky day in the bond market appeared to spill over into equities. But stocks’ losses escalated near the end of the trading day, with the blue-chip index falling more than 400 points in the final 30 minutes of the session.

The Dow ended down 1,032.89 points, or 4.1%, to 23860.46. The plunge marks the second-steepest point decline on record, after Monday’s 1,175.21-point swoon. In percentage terms, however, neither drop ranks among the 100 biggest one-day plunges on record. Den Rest des Beitrags lesen »

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What Should We Make of the Stock-Price Drop?

Posted by hkarner - 7. Februar 2018

Date: 06-02-2018

Source: The Wall Street Journal

The selloff feeds two narratives—one involving a brief correction, the other a tale of woe for stock and bond investors


Good news, it seems, is bad news again. Payroll figures that showed more jobs and more pay for Americans sparked a market decline Friday that only got worse on Monday.

Over the past two trading days, the S&P 500 fell by 6.1%—the steepest such drop since August 2015, but something that has happened on average once every two years since 1964. It still came as a shock after such a long period of subdued volatility.

We shouldn’t put too much weight on any given day’s price moves, but the recent market plunge feeds two narratives, one of which could be really bad news. Den Rest des Beitrags lesen »

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