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Posts Tagged ‘Stocks’

Stocks Climb As Fears of Economic Slowdown Subside

Posted by hkarner - 20. Januar 2019

Date: 19-01-2019
Source: The Wall Street Journal

Economic data, signs of easing trade tensions, and a batch of upbeat earnings help lift major indexes

U.S. stocks climbed Friday to notch their fourth consecutive week of gains as the fears of an economic slowdown that gripped markets in December seem to have subsided.

Data showing a healthy labor market, as well as signals from central bankers that the Federal Reserve will be flexible with monetary policy, have offered relief to investors who earlier worried that the Fed’s pace of interest-rate increases could jolt an economy on shaky footing.

The four-week winning streak by the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite is their biggest on a percentage basis since October 2011. The blue-chip index has rebounded 13% since bottoming out on Christmas Eve and suffering its worst December since 1931.

“Investor sentiment has really improved from the turmoil just before Christmas,” said Brian Jacobsen, a senior multisector strategist at Wells Fargo Asset Management, adding “we almost got a do-over” since then as investors have jumped back into the market at improved valuations.

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What Amazon’s Rise to No. 1 Says About the Stock Market

Posted by hkarner - 13. Januar 2019

Date: 12-01-2019
Source: The Wall Street Journal By Jason Zweig

The biggest companies are the still the most dominant. The biggest companies today make up less of the overall market than those in the past. And the biggest companies can still be toppled.

On Jan. 7, Amazon.com Inc. became the world’s largest company by market capitalization. Its rise might make you think today’s biggest technology companies are turning into unstoppable juggernauts of growth, or that turnover at the top is only accelerating.

First, consider the history of all the companies that have ranked No. 1 by market size. It’s full of surprises.

From the beginning of 1926 through the end of last year, only 10 companies have ever ranked No. 1 among all U.S. stocks by market capitalization. Amazon has just become the 11th, succeeding Microsoft Corp. , Apple Inc., Exxon Mobil Corp. , General Electric Co. , Walmart Inc., Altria Group Inc., International Business Machines Corp. , DowDuPont Inc., General Motors Co. and AT&T Inc. Den Rest des Beitrags lesen »

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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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The Great Cheapening of 2018: Global Stock Valuations Now at Five-Year Lows

Posted by hkarner - 13. Dezember 2018

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

Bargain or Fire Sale?

Global equity valuations have dropped considerably, with some measures falling tofive-year lows or further.

The stumble in global equity markets this year has outrun a moderation in expectations for earnings growth, leaving stock valuations at their cheapest in about half a decade by some measures.

What’s Happening
The forward price to earnings ratio for global stocks is at five-year lows, having dropped to about 13.3 times. That’s down from more than 16 times in early 2018, according to FactSet’s World stock index, which includes tens of thousands of listed securities around the world.

The price to earnings ratio is a favorite among analysts and investors for valuing companies.

Valuations for some blue-chip stocks have plumbed multiyear lows: Japan’s Honda Motor Co. and U.S. computing giant International Business Machines Corp. , for example, have both seen their PE ratios fall to around 10-year lows this quarter.

On one alternative, price to free cash flow, which measures the money a company has generated after operating expenses and capital spending, the trend is even more clear. By that measure, stocks are the cheapest they have been since early 2012, when the eurozone sovereign debt crisis was still raging. Den Rest des Beitrags lesen »

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Where to Put Your Money in 2019

Posted by hkarner - 11. Dezember 2018

Date: 10-12-2018
Source: The Wall Street Journal

Don’t give up on stocks, despite their stumbles, and look beyond bonds when allocating assets for the new year. Even ‘cash’ investments might pay off.

It is time to position your portfolio to survive a volatile 2019.

Most veteran market observers agree than an array of factors, from trade disputes to rising interest rates, will create more turbulence as an aging bull market becomes more vulnerable to emotion-driven selloffs. Adding to the uncertainty is the fact that market strategists seem to have an array of forecasts for the markets in 2019—both positive and negative.

For instance, Morgan Stanley ’s chief equity strategist, Mike Wilson, has been calling for the S&P 500, now at 2633 after last week’s slide, to end next year at 2750, while Credit Suisse ’s David Golub says it could hit 3350 as investors are willing to pay more for corporate earnings.

The only point on which everyone seems to agree is that the path ahead will be bumpy. Den Rest des Beitrags lesen »

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No Refuge for Investors as 2018 Rout Sends Stocks, Bonds, Oil Lower

Posted by hkarner - 27. November 2018

Date: 26-11-2018
Source: The Wall Street Journal

The failure of so many investment strategies is viewed by some as a warning of what could come following years of above-average returns

Stocks, bonds and commodities from copper to crude oil to burlap are staging a rare simultaneous retreat, putting global markets on track for one of their worst years on record and deepening a sense of unease on Wall Street.

Data show global stocks and bonds could both finish the year in the red for the first time in at least a quarter-century, according to BlackRock Inc. BLK -0.25%

Major stock benchmarks in the U.S., Europe, China and South Korea have all slid 10% or more from recent highs. Crude oil’s tumble has dragged it well into bear-market territory, emerging-market currencies have broadly fallen against the dollar, and bitcoin’s price—which had a meteoric rally last year—crashed below $5,000 last week for the first time since October 2017. Den Rest des Beitrags lesen »

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U.S. Stocks Give Up 2018 Gains as Tech Selloff Spreads

Posted by hkarner - 21. November 2018

Date: 20-11-2018
Source: The Wall Street Journal

The S&P 500 and Dow industrials slip intraday below their October troughs

Stocks around the world tumbled Tuesday, putting major U.S. indexes at risk of closing below their October lows and wiping out yearly gains.

What started as a technology company selloff bled into other corners of the market, as investors dumped shares of everything from retailers to oil-and-gas companies in favor of relatively safe assets such as bonds and reliable dividend payers like utility companies.

The result: Some traders who stepped in to scoop up shares in late October, hoping for a quick rebound, are now in danger of losing those potential profits and more. That puts the stock market in a tenuous position, several said.

“The buy-the-dippers are getting concerned. Now we’re going to see how much of the rebound was real buyers versus renters that were just trying to buy the dip,” said Justin Wiggs, managing director in equity trading at Stifel Nicolaus. According to his calculations, as of this morning about 16% of S&P 500 companies are now below their October lows. Den Rest des Beitrags lesen »

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Big Tech’s sell-off

Posted by hkarner - 4. November 2018

Date: 02-11-2018
Source: The Economist: Schumpeter

The shares of the world’s tech giants have sunk. Wobble or wipeout?

Business booms and busts follow a pattern. They start with an exciting change in the economy. Managers and investors collectively create a story about it, which begins as an explanation, then morphs into an extrapolation, and then into an exaggeration. Eventually the data contradict the narrative, boom turns to bust, and a bout of austerity follows. A rout in internet firms’ share prices since August has led plenty of people to ask if the tech industry is experiencing this sequence of hope, hubris and hurt for the second time in two decades. The answer is: to a degree, yes. The level of hype is particularly high, and some of the numbers are decidedly soft. That matters because tech firms are now so big and so spendthrift that a slowdown could damage the economy.

Rarely in stockmarket history have so many investors made so much money from so few shares going up for so long. Some 37% of the rise in the value of all firms in the s&p 500 index since 2013 is explained by six of its members: Alphabet, Amazon, Apple, Facebook, Microsoft and Netflix. About 28% of the rise in Chinese equities over the same period is owing to two firms: Alibaba and Tencent. Managers and investors have bought into a tale of effortless disruption by an elite of firms led by the world’s brainiest people. Den Rest des Beitrags lesen »

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The Big Tech Selloff

Posted by hkarner - 1. November 2018

Date: 01-11-2018
Source: The Wall Street Journal By The Editorial Board

Why the fall from super-high values shouldn’t hurt the larger economy.

Herbert Stein famously observed some 40 years ago that what can’t continue won’t, which bears remembering as tech stocks fall following a fantastic nine-year run fueled in part by the Federal Reserve. Americans no doubt wish that stocks could climb forever, but the tech selloff looks like a healthy correction.

Stocks bounced back Wednesday, but before that the tech-heavy Nasdaq had slumped 12% since its August peak. Falling FAANG stocks— Facebook , Apple, Amazon, Netflix and Google parent Alphabet—have swung the S&P 500 into a correction zone. Netflix tumbled 21% and Amazon fell 20% in October. Texas Instruments , IBM and Nvidia have also seen substantial stock price declines.

A tech revaluation was perhaps inevitable as prices leapt over earnings like LeBron James over Kevin Durant. Amazon’s stock in September was trading at nearly 160 times earnings, which wasn’t going to last. But what makes this month’s tech sale so jarring is that it comes amid strong quarterly earnings growth. Den Rest des Beitrags lesen »

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Falling Share Prices and the Outlook for the US Economy

Posted by hkarner - 30. Oktober 2018

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

Three forces will cause US long-term interest rates to continue to rise. But, in all likelihood, short-term rates will not increase fast enough to give the Federal Reserve sufficient room for monetary stimulus before the next economic downturn begins.

CAMBRIDGE – The Standard and Poor’s 500 index of share prices has fluctuated wildly during 2018 but has returned to nearly the same level that it was at the beginning of the year. The absence of a net fall for the year reflects the combination of a rise in corporate profits and a 12% decline in the price-earnings ratio. And the fall in the price-earnings ratio is an indication of the likely evolution of share prices in the next few years.

The price/earnings (P/E) ratio is now 40% higher than its historic average. Its rise reflects the very low interest rates that have prevailed since the US Federal Reserve cut the federal funds interest rate to near zero in 2008. As long-term interest rates rise, however, share prices will be less attractive to investors and will decline. Den Rest des Beitrags lesen »

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