EQM Capital Blog

EQM Capital LLC – Weekly Market Recap 5/22/15 Is the US Economy Ready for Liftoff?

Posted by on May 24, 2015 in EQM Capital Blog

Ready for Liftoff?

U.S. stocks end mixed ahead of Memorial Day weekend

U.S. large-cap indices ended up mixed in a light trading week. The Fed’s comments reassured investors that it would not raise interest rates until the second half of this year. Both the Dow and the S&P 500 Index ended Friday below the record levels touched earlier in the week.  The NASDAQ and Mid Caps remain the “sweet spot” of the market YTD.

Fed minutes indicate June action unlikely

On Friday, Fed Chair Janet Yellen said the central bank still intends to raise interest rates this year but would not commit to the timing of the first increase. Consumer prices, excluding food and fuel, rose at a faster-than-expected 0.3% pace in April—indicating that inflation is moving closer to the Fed’s 2% target goal. Housing starts also climbed in April to the highest level in seven years. Despite the positive data, minutes from the Fed’s April meeting showed that many Fed officials did not think that data in June would show that the U.S. economy was strong enough for a raise in short-term interest rates. Most economists now predict that the Fed’s initial “liftoff” will likely occur in September.

First quarter earnings season comes to a close

With 488 companies in the S&P 500 now having reported results as of Friday, 1Q earnings are on track to rise 0.3% from a year ago, according to FactSet.  At this pace, earnings are on track to post the lowest quarterly earnings growth since the 3Q 2012.

Slowing growth and prospect of rising rates a cause for concern

The combination of slowing profit growth along with the prospect of higher borrowing costs has caused many analysts to adjust their return expectations lower for the year.  The forward 12-month price-to-earnings (P/E) ratio for S&P 500 companies is currently 17X—which is higher than the trailing 5- and 10-year averages, but no where near peak levels.

U.S. Stocks1
Index Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 18,232.02 -40.45 2.29%
S&P 500 2,126.06 3.33 3.26%
NASDAQ Composite 5,089.36 41.07 7.46%
S&P MidCap 400 1,541.94 10.89 6.16%
Russell 2000 1,252.66 8.86 3.98%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.
The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

 

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EQM Capital LLC Weekly Market Recap 5/15/15 – The Case of the Mysteriously Cautious Consumer

Posted by on May 17, 2015 in EQM Capital Blog

mystery-shopper

S&P 500 hits new closing high

The major indices languished much of the week but ended up modestly higher thanks to a strong and broad rally on Thursday. The S&P 500 Index established an all-time closing high. The Nasdaq was the best-performer for the week, however, lifted  by technology names. Smaller-capitalization stocks also outperformed for the week.

European bonds sell-off; China cuts rates

As 1Q earnings season nears an end, traders have refocused their attention on global concerns. European bonds sold off early in the week, as the yield on German bunds bounced off historical lows.  Some investors appeared worried that the renormalizing of interest rates in Europe might be signaling the end of accommodative policy there. China appears headed in the opposite direction however, with the its central bank announcing another cut in interest rates in order to stimulate growth.

Retail sales disappoint again

The Commerce Department reported that retail sales were flat in April, dashing hopes that better Spring weather might bring out shoppers. Analysts had been expecting an 0.3% increase. This news is particularly disheartening given all the positive tailwinds such as strong employment, high consumer confidence,  and low energy costs.  So given all these positives, why is the U.S. Consumer being so cautious?  That still remains the big mystery, but it is causing many economists to revise down their GDP estimates for the year.

Jobless claims at 15-year low

A tightening labor market is finally starting to result in real wage gains, as the four-week average of weekly jobless claims hit its lowest level in 15 years.  But more evidence of consumer caution came on Friday when the University of Michigan and Reuters both reported a surprising sharp decline in consumer sentiment.

U.S. Stocks1
Index Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 18,272.56 81.45 2.52%
S&P 500 2122.73 6.64 3.10%
NASDAQ Composite 5048.29 44.74 6.59%
S&P MidCap 400 1531.05 11.18 5.41%
Russell 2000 1243.77 7.50 3.24%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.
The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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EQM Capital LLC – Weekly Market Recap 5/8/15 Goldilocks Keeps Away the Bears

Posted by on May 10, 2015 in EQM Capital Blog

saupload_too_hot_too_cold_just_right

“Goldilocks” jobs reports sparks market turnaround

A strong jobs report sparked a major rally on Friday, sending most of the leading benchmarks higher for the week.  It was a “Goldilocks” employment report:  not too hot, not too cold, but just right.  The April employment results showed economic growth, but not enough to warrant the Fed to raise interest rates.  The major averages re-tested record high levels but failed to break them.  The Dow and S&P 500 were up slightly for the week, but the NASDAQ ended up down 0.04% thanks to a poor showing for some tech names.

Global economic woes resurface

On Tuesday, Greek stocks declined, leading European and other global markets lower on concerns that Greece would be unable to make its scheduled debt repayment. Chinese stocks also weighed on global market sentiment amid speculation that the government there would institute measures to cool stock speculation.

Yellen’s statement on market valuations

While talking to the IMF’s head Christine Lagarde, Fed Chair Janet Yellen commented that “equity-market valuations at this point generally are quite high,” which might lead to “potential dangers.” She qualified her remarks by stating that there was no evidence of new bubbles forming in asset prices and that risks to financial stability were “moderated.” Still, her statement definitely put a curb on market sentiment and was reminiscent of Alan Greenspan’s warning in December 1996 that the market was showing signs of “irrational exuberance”.

Job gains but no signs of wage cost pressure

The Labor Department reported that employers added 223,000 jobs in April and the unemployment rate ticked downward to 5.4%. But more importantly, the report also showed that the tighter job market was not yet resulting in wage cost inflation.  Hourly earnings increased only 0.1%. Stock futures soared on the news as investors reasoned this data increased the likelihood that the Fed would not raise interest rates soon.

Despite the plunge in oil prices and strong U.S. dollar, corporate profits beating estimates

FactSet reported on Friday that first-quarter earnings of S&P 500 companies were on track to increase 0.1%. At the start of April, analysts were expected an earnings decline of 4.7%. While 0.1% is still a minor gain, it is still an impressive showing in the light of the strong U.S. dollar and the plunge of over 50% in energy sector profits. Ex-Energy, FactSet calculates that earnings for the S&P 500 would have risen at a respectable 7.7%.

U.S. Stocks1
Index Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 18,191.11 167.05 2.06%
S&P 500 2116.09 7.80 2.78%
NASDAQ Composite 5003.55 -1.84 5.65%
S&P MidCap 400 1519.87 6.53 4.64%
Russell 2000 1236.27 8.37 2.62%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.
The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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EQM Capital LLC Introduces Investments4Impact Portfolios

Posted by on May 6, 2015 in EQM Capital Blog

Click here to read EQM Capital LLC’s press release for the Investments4Impact portfolios

 

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EQM Capital LLC – Weekly Market Recap 5-1-15 An Economic Chill?

Posted by on May 3, 2015 in EQM Capital Blog

chill-polar-bears-1

Stocks retreat from record highs

The major U.S. equity indices retreated from the record highs they had established the previous week due to some disappointing earnings results and mixed economic data. But a strong rally on Friday, led by biotech names, helped investors recoup some of those losses. The Nasdaq Composite trailed the large-cap indexes, thanks to poor results for several social media stocks such as Yelp!, LinkedIn, and Twitter. There was also some noise about Apple’s new smartwatch, causing its stock to decline. Finally, small-caps surrendered their YTD lead as the dollar lost some of its strength.

Economy experiences weather-related chill

A weak GDP print on Wednesday confirmed that the economy experienced a sharp winter slowdown, with bad weather partially to blame along with a Western port strike. 1Q GDP grew only 0.2% in the first quarter, well below even reduced expectations. Following their meeting that same day, the Fed described the slowdown as “transitory”, which restored some investor confidence.

gdp_large

Business investment sluggish, but consumer spending on track

Although business investment remains sluggish, weak productivity growth feeding into a tepid expansion should continue to keep hiring levels elevated and help support consumer spending. In confirmation of this, on Thursday weekly jobless claims declined to a 15-year low and a consumer sentiment measure remained high.

What’s going on with biotech?

Biotechnology stocks sold off on Thursday, adding to their recent pullback. Stock prices in the sector have soared in recent months, and apparently the “sell in May” crowd are taking profits. While many small-cap biotech valuations do appear to be stretched, large-cap valuations are more reasonable, basically in-line with health care services firms. Along with M&A activity, a string of significant medical advances has supported biotech gains. The FDA has given approval to a number of novel new drugs this year, with even more on the horizon.  So this recent sell-off, may signal May opportunities.

Earnings still better than expected

Tech stocks performed poorly last week as several prominent social media firms reported disappointing revenue and subscriber growth. But overall, the tone of 1Q earnings reports continues to improve. By the end of the busy earnings week, FactSet reported that overall earnings for companies in the S&P 500 Index were on track to fall only 0.4% in the quarter.  This is a much smaller decline than originally projected given the big drop in oil prices and the headwinds of a strong U.S. dollar.

U.S. Stocks1
Index Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 18,024.06 -56.08 1.13%
S&P 500 2108.29 -9.40 2.40%
NASDAQ Composite 5005.39 -86.69 5.69%
S&P MidCap 400 1513.34 -20.81 4.19%
Russell 2000 1227.90 -39.60 1.93%
This chart is for illustrative purposes only and does not represent the performance of any specific security.
Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.
The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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EQM Capital LLC – Weekly Market Recap 4-24-15 NASDAQ in the Clouds

Posted by on Apr 25, 2015 in EQM Capital Blog

Cloud_stock_2_by_AiSac

NASDAQ Hits Record Close

Stocks moved into record territory last week with the S&P 500 Index and smaller-cap benchmarks establishing all-time highs on better-than-expected earnings results. The tech-heavy NASDAQ Composite finally managed to close above 5000, besting the record high level it established 15 years ago. The Dow remained just shy of its record high level hit in March.

Strong dollar weighing on earnings

As 1Q earnings reporting season kicks into high gear, investors remain focused on how the strong U.S. dollar and low energy prices are affecting corporate profits. On Tuesday, chemical giant DuPont fell when it missed earnings due to dollar-strength related weakness. But investors did not penalize everyone equally.  McDonald’s shares rose even after the company reported a nearly 1/3 dip in profits, due in part to currency woes.

Earnings not as bad as feared, but revenues coming in weak

Overall, the strong dollar and weak oil prices appear to be taking a smaller toll on earnings than originally feared. FactSet reports that 1Q earnings for the S&P 500  declined by 2.8%—substantially less than the 4.6% drop predicted a few weeks ago.  The bigger disappointment this quarter has been revenue weakness. At this stage in the Q1 reporting cycle, the ratio of companies beating revenue estimates is the lowest seen in the recent past.  According to FactSet, of the 201 companies that have reported to date, 73% have beat their earnings mean estimate, but only 47% have beat on the top line with more than half missing estimates.  Since Q3 2008, the percentage of companies reporting sales above estimates has finished below 50% only six times.

Business investment weak but housing strong

The Commerce Department reported that durable goods orders outside of the defense and transportation segments barely budged in March, with business investment notably weak. Weekly jobless claims also rose slightly more than anticipated. But better news on the housing front boosted sentiment as March existing home sales  reached their best level in a year and a half.

The tech sector a bright spot thanks to the Cloud

Positive earnings surprises from some prominent technology firms helped markets end the week on an up note and drive the NASDAQ into record territory.  Microsoft, Amazon, Google, and Juniper Networks were among the tech-names to surprise positively on the upside.  One key takeaway from these results was “the Cloud” is becoming more influential and valuable than investors had originally predicted.  Apple reports after the close on Monday.

U.S. Stocks1
Index2 Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 18,080.14 253.84 1.44%
S&P 500 2117.69 36.51 2.86%
NASDAQ Composite 5092.08 160.27 7.52%
S&P MidCap 400 1534.15 18.23 5.63%
Russell 2000 1267.50 15.03 5.21%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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