August 30, 2016

LIBOR Surge May Rule Out September Fed Rate Hike

WEEKLY UPDATE – August 29, 2016 We are going to discuss LIBOR Surge May Rule Out September Fed Rate Hike in this article. After rallying for weeks, the major indexes fell last week ahead of key remarks by Federal Reserve officials and turbulence in money markets.[1]  For the week, the S&P 500 lost 0.68%, the Dow fell 0.85%, the NASDAQ dropped 0.37%, while the MSCI EAFE gained 0.16%.[2] Even as the Fed has kept interest rates flat, an unexpected surge in short-term interest rates triggered by an industry rule change is potentially doing some of the Fed’s work for it. If you ever tune in to the financial news, you may have heard the term LIBOR (pronounced LIE-bor) mentioned in reference to money markets (what we call the trade of short-term loans between banks and other financial institutions). LIBOR Surge May Rule Out September Fed Rate Hike LIBOR, the London Interbank Offered Rate, is a benchmark used for a vast range of debt, including mortgages and corporate loans. Recently, the three-month LIBOR (the rate charged for lending dollars for three months) has reached multi-year highs (rising more than 30% since this June), tightening credit conditions without any action by the […]
August 23, 2016

NASDAQ Posts Eighth Week of Gains

NASDAQ Posts Eighth Week of Gains WEEKLY UPDATE – August 22, 2016 The S&P 500 and Dow ended last week slightly lower, but the NASDAQ posted an eighth straight week of gains for the first time since 2010.[1] For the week, the S&P 500 lost 0.01%, the Dow fell 0.13%, the NASDAQ gained 0.10%,and the MSCI EAFE lost 0.64%.[2] What is the Fed thinking? Minutes from the July Federal Reserve Open Market Committee meeting showed that officials are split about the economic outlook and when to raise interest rates. Hawkish rhetoric from Fed members who favor a rate hike soon could push the central bank into raising rates as early as September. More dovish officials aren’t convinced that tepid inflation will rise to the Fed’s 2.0% objective and favor a wait-and-see approach to raising interest rates.[3] After several months of strong labor market gains, some economists think the economy is close to full employment and central bankers should move soon to put on the brakes by raising interest rates. If the economy gets overheated, prices could rise too much and push the economy into a boom/bust cycle that federal officials are anxious to avoid. While a few years of outsized growth […]
August 8, 2016

SP 500 at New High After Jobs Blowout

“SP 500 at New High After Jobs Blowout”, WEEKLY UPDATE – August 8, 2016 Stocks bounced last week, ending sharply higher after a better-than-expected jobs report. For the week, the SP 500 gained 0.43%, the Dow rose 0.60%, the NASDAQ added 1.14%, but the MSCI EAFE lost 1.41%.[1] SP 500 Among last week’s major events was a shockingly good July jobs report. Last month, the economy added 255,000 new jobs, blowing away expectations of 180,000 jobs.[2] Even better, the gains were broad-based and the labor force participation rate (an area of concern because fewer people in our population were actively participating in the labor force) ticked upward.[3] Overall, not too shabby. Headline unemployment remained stable at 4.9%, but that single number hides a lot of complexity. Let’s dig a little deeper. The chart below shows six different measures of unemployment, each slicing the data in a different way. The U-6 unemployment rate is the most comprehensive, showing total unemployed, marginally attached workers (discouraged workers and those considered barely employed) and those total employed part time for economic reasons.[4] You can see that all measures rose during the recession and have been steadily dropping ever since. While headline unemployment (U-3 unemployment in official […]
June 7, 2016

What Did the May Jobs Report Show Us?

What Did the May Jobs Report Show Us? WEEKLY UPDATE – JUNE 6, 2016 Stocks closed the holiday-shortened week mixed, with some sectors losing ground while others gained after a disappointing May jobs report signaled that the economy may not be strong enough for the Federal Reserve to raise rates this month. For the week, the S&P 500 ended flat, the Dow lost 0.37%, the NASDAQ increased 0.18%, and the MSCI EAFE added 0.13%.[1] On Friday, we got a look at how the labor market did in May. Analysts looked to the report to see whether the labor market would give the Fed the ammunition it needed to move at the June meeting. Here are a few things we took away: Job growth disappoints…but it has happened before The economy created just 38,000 new jobs last month, the worst showing since September 2010. The number of new jobs sharply missed expectations, which called for around 160,000 new jobs.[2]  However, seasonal factors, like a massive Verizon worker strike, which took 34,000 workers out of the count, were at play and may have affected hiring numbers.[3] The labor market has suffered temporary setbacks before. For example, in December 2013, the economy added […]