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  A Snapshot of Moving Averages
Posted Under: Broader Stock Market

 
View from the Observation Deck  

  1. In today's post, we are showing the percentage of stocks in some major U.S. stock indices that are trading above their respective 50-Day and 200-Day moving averages.
  2. Moving averages tend to smooth out day-to-day price fluctuations and can be a useful tool for traders to identify both positive trends and reversals, in our opinion.
  3. On 10/11/19, the S&P 500, S&P MidCap 400 and S&P SmallCap 600 Indices closed 1.84%, 6.52% and 14.82%, respectively, below their all-time highs, according to Bloomberg.
  4. The percentage of stocks in the S&P 500, S&P MidCap 400 and S&P SmallCap 600 Indices trading above their 50-Day moving averages on 10/11/19 were 61%, 62% and 57%, respectively.
  5. The percentage of stocks in the S&P 500, S&P MidCap 400 and S&P SmallCap 600 Indices trading above their 200-Day moving averages on 10/11/19 were 62%, 53% and 45%, respectively.
  6. The percentage of stocks trading above their 50-Day moving average by S&P 500 sector ranged from 36% (Energy) to 75% (Utilities).
  7. The percentage of stocks trading above their 200-Day moving average by S&P 500 sector ranged from 25% (Energy) to 89% (Utilities).
  8. Click here to see where these averages stood on 8/13/19. 

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance, while the 11 major S&P 500 Sector Indices (Real Estate was added as the 11th major sector in 2016 but data is not available for this chart) are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization. 

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Posted on Tuesday, October 15, 2019 @ 1:15 PM • Post Link Share: 
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  US Stock Markets Ended Oct. 11, 2019
Posted Under: Weekly Market Commentary

 
After three weeks of declines beginning in mid-September, the S&P 500 Index gained 66 basis points last week. Concerns over the United States and China trade talks moved equities lower early in the week as the index declined almost 2.00% through Tuesday. However, equities began to trend up by Wednesday as optimism set in after reports that China would consider a limited trade deal if no additional tariffs were inflicted by the United States. The index climbed 2.71% the last three days of the week on continued positive news and reports that a partial agreement had been reached on Friday. Crude oil jumped this week after a missile attack on an Iranian oil tanker which raised concerns that tension in the Middle East could cause disruption in global supply. Crude oil showed a 3.58% increase and closed at $54.70 per barrel. University of Michigan Consumer Sentiment Index came in higher than expected on Friday, reporting a three-month high. U.S. initial jobless claims of 210K were lower than the consensus estimate of 220K and the previous week's claims of 219K. Fastenal Company, a retailer and wholesaler of industrial and construction supplies, was the best performing stock in the S&P 500 Index last week returning 14.35%. The stock jumped 17.15% on Friday after releasing positive third quarter earnings results. Apple Inc. returned 4.05% last week, hitting an all-time closing high of $236.21 and becoming the most valuable U.S. company over Microsoft. The stock has outperformed in 2019 with a 51.55% year-to-date return and has produced a 20-year average annual return of over 26% through last Friday. Devon Energy Corp, an independent oil and gas exploration and production company, was the worst performing stock in the S&P 500 Index last week declining 5.93%. In the last week the stock has seen its price target lowered by several analysts. The stock has declined 39.10% from its 2019 high on April 22. Earnings announcements expected this week include JP Morgan Chase & Company, Johnson & Johnson, Bank of America Corp, The Coca-Cola Company, Wells Fargo & Company, UnitedHealth Group Inc., Citigroup Inc., Morgan Stanley, Abbott Laboratories, Netflix Inc. and many others.
Posted on Monday, October 14, 2019 @ 8:04 AM • Post Link Share: 
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  US Economy and Credit Markets Ended Oct. 11, 2019
Posted Under: Weekly Market Commentary

 
U.S. government bond yields rose last week following a breakthrough in the trade war between the U.S. and China. Yields jumped on Friday after President Donald Trump said the U.S. reached a "substantial phase one deal" with China, deescalating the trade war between the two countries. Additionally, Treasury Secretary Steven Mnuchin announced that the U.S. would forgo new tariffs on imports of Chinese goods scheduled to take effect this week. In economic data, the Producer Price Index unexpectedly declined 0.3% in September over the prior month, the Labor Department announced on Tuesday, while rising 1.4% over last year. Consumer prices also came in below expectations, as the Consumer Price Index was unchanged in September over the prior month. The inflation data did not deter expectations that the Fed will cut interest rates at the end of October. Meanwhile, the University of Michigan Consumer Sentiment Index came in above estimates on higher real income expectations, as the consumer remained a bright spot in the U.S. economy. Major economic reports (related consensus forecasts, prior data) for the upcoming week include Tuesday: October Empire Manufacturing (1.0, 2.0); Wednesday: October 11 MBA Mortgage Applications (N/A, 5.2%), September Retail Sales Advance MoM (0.3%, 0.4%); Thursday: October 12 Initial Jobless Claims (215k, 210k), September Housing Starts (1,318k, 1,364k), September Industrial Production MoM (-0.2%, 0.6%); Friday: September Leading Index (0.1%, 0.0%).
Posted on Monday, October 14, 2019 @ 8:02 AM • Post Link Share: 
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  How Some Major S&P Stock Indices Have Fared Since The 2016 Brexit Vote
Posted Under: Conceptual Investing

 
View from the Observation Deck  
  1. On 6/23/17, the citizens of the United Kingdom (UK) voted to exit ("Brexit") the European Union (EU). 
  2. The EU is an economic and political partnership involving 28 European countries. The UK is the first member to seek to opt out of the EU. 
  3. It was originally scheduled to exit on 3/29/19, but the UK and EU were unable to reach an agreement and so the negotiation process has been extended a couple of times, according to BBC News.     
  4. As of today, the next self-imposed deadline for a decision on the UK pulling out is 10/31/19. The UK government is looking to get a deal agreement at an EU summit on 10/17/19. If it doesn't, the UK may need to secure a third extension, though UK  Prime Minister Boris Johnson has threatened to exit even without a deal, according to the BBC. Stay tuned.  
  5. While the Brexit vote (6/23/16) initially created some anxious moments in the equities markets, its impact spanned just 10 trading days. 
  6. The sell-off in the S&P 500 Index only lasted two trading days. It took eight trading days to fully recover the losses, according to data from Bloomberg. 
  7. For comparative purposes (not in chart), from 6/23/16 through 10/8/19, the MSCI Europe Net Total Return Index posted a cumulative total return of 15.65% (USD), according to Bloomberg.  
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance, while the 11 major S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization. The MSCI Europe Index is a free-float weighted index designed to measure the equity market performance of the developed markets in Europe. 

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Posted on Thursday, October 10, 2019 @ 1:48 PM • Post Link Share: 
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  The Only Constant Is Change
Posted Under: Sectors

 
View from the Observation Deck  
  1. One of the most common questions we field on an ongoing basis is the following: What are your favorite sectors?
  2. Sometimes the answer is more evident than at other times, in our opinion.
  3. You didn't need much of a crystal ball to tout Information Technology in 1998 and 1999 (top-performing S&P 500 sector both years by a wide margin), as was the case with Energy in 2004 & 2005, according to performance data from Bloomberg.
  4. From 2006-2018, however, no sector in the S&P 500 Index was able to repeat as the top-performer on a calendar year basis.
  5. As indicated in the chart above, while the top-performing sectors in Q3'19 were the same, and in the same order, as in Q4'18, this time around investors made money as opposed to losing less. 
  6. With the exception of Q4'18, S&P 500 Index sector returns were mostly strong for the 12-month period ended 9/30/19. While the S&P 500 Index posted a total return of 4.25% for the period, five of the 11 sectors outperformed the broader index, according to Bloomberg. They were as follows: 27.10% (Utilities); 24.74% (Real Estate); 16.85% (Consumer Staples); 8.60% (Information Technology); and 5.69% (Communication Services).  
  7. Despite the respectable showing, investors were net sellers of sector funds over the 12-month period ended August 2019 (most recent data). Sector Equity mutual funds and exchange-traded funds (ETFs) reported estimated net outflows totaling $60.7 billion (-$33.3 billion/Active vs. -$27.4 billion/Passive), according to Morningstar. 
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. Past performance is no guarantee of future results. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The respective S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector. 

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Posted on Tuesday, October 8, 2019 @ 3:00 PM • Post Link Share: 
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  The Lack of Bulls is Bullish Sign!
Posted Under: Weekly Market Commentary

 
Bob Carey, Chief Market Strategist at First Trust Advisors L.P., discusses the latest developments in the market and takes a look ahead.
Posted on Monday, October 7, 2019 @ 1:22 PM • Post Link Share: 
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  US Stock Markets Ended Oct. 4, 2019
Posted Under: Weekly Market Commentary

 
U.S. stocks moved lower for the week amid worries about a possible economic downturn. Losses were driven by a 47.8 reading for the ISM Manufacturing Index, the lowest value since June 2009. Readings above 50 signal an expansion in manufacturing activity, while readings below 50 signal contraction. This was the second consecutive month with a reading below 50, stoking concern of an economic slowdown in manufacturing. In other economic data, 136,000 jobs were added in September but missed economist expectations of 145,000. In addition, the ISM Non-Manufacturing fell to 52.6 but remained in expansionary territory. Turning to stock news, discount online brokers tumbled after Charles Schwab Corp. announced zero commissions on all ETFs and stock trades in a move that was quickly followed by key competitors. TD Ameritrade Holdings Corp. fell by over 28% due to higher exposure in revenue from commissions than Charles Schwab Corp. which lost nearly 14% of its value. Shares of Delta Air Lines, Inc. moved lower after raising its estimated non-fuel cost for next quarter on bad weather, higher volumes and increased labor costs. Homebuilder Lennar Corp. gained after issuing higher guidance and beating earnings estimates on strong orders from the West. Looking ahead, potential trade deals and geopolitical concerns are likely to remain key market drivers next week as Chinese Vice Premier Liu He will be in Washington to negotiate on trade with U.S. representatives and the Brexit deadline nears. Earnings season will unofficially kick-off in less than two weeks with a number of major banks announcing results. S&P 500 earnings are expected to fall by 3.6% for the quarter but could turn positive as most companies tend to beat expectations.
Posted on Monday, October 7, 2019 @ 8:15 AM • Post Link Share: 
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  US Economy and Credit Markets Ended Oct. 4, 2019
Posted Under: Weekly Market Commentary

 
Yields dropped last week for short-term and long-term U.S. Treasury notes as investors digested mixed economic data throughout the week. On Tuesday, the ISM Manufacturing Index for September came in at 47.8, below the consensus expectation of 50.0. A reading below 50 signals a contraction, while above 50 signals an expansion. The ISM Manufacturing Index, which is a survey, fell to a decade low as negative trade-related sentiment continues to stoke fears of a looming recession. Later in the week, the ISM Non-Manufacturing Index for September was reported at 52.6. The reading slightly missed the consensus expectation, but still signaled an expansion, and the major measures for non-manufacturing activity all came in above 50.0. To wrap up the week, Friday's jobs report indicated nonfarm payrolls rose 136,000 last month. Nonfarm payrolls came in roughly 9,000 less than expected, though revisions for July/August pushed nonfarm payrolls up to 181,000. Unemployment dropped to 3.5% in September, the lowest reading in 50 years. Despite the weak manufacturing survey, the September jobs report along with the non-manufacturing survey continues to signal towards a resilient domestic economy. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Monday: September Monthly Budget Statement ($89.0b, $119.1b); Tuesday: September PPI Final Demand MoM (0.1%, 0.1%), September PPI Final Demand YoY (1.8%, 1.8%); Wednesday: October 4 MBA Mortgage Applications (n/a, 8.1%), August Final Wholesale Inventories MoM (0.4%, 0.4%); CPI MoM (0.1%, 0.1%), CPI YoY (1.8%, 1.7%), October 5 Initial Jobless Claims (281k, 219k), September 28 Continuing Claims (1651k, 1651k); Friday: September Import Price Index MoM (-0.1%, -0.5%), October Preliminary University of Michigan Sentiment (92.0, 93.2).   
Posted on Monday, October 7, 2019 @ 8:12 AM • Post Link Share: 
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  One Take On The U.S. Dollar
Posted Under: Conceptual Investing

 
View from the Observation Deck  
  1. We get asked from time to time what our take is on the U.S. dollar and where we think it may be headed next. 
  2. The dollar is still regarded as the world's primary reserve currency. Its relative strength over time can be influenced by such things as central bank monetary policy, geopolitics and trade. 
  3. U.S. investors with exposure to foreign securities, commodities and the stocks of U.S. multinational companies are particularly vulnerable to fluctuations in the U.S. dollar. 
  4. Predicting the direction of the dollar, or any currency, can be a daunting task, even for professionals who specialize in it. One thing we can provide is some context. 
  5. As indicated in the chart above, as of 9/30/19, the 10-, 20- and 30-year averages for the U.S. Dollar Index carried readings of 87.76 to 90.96, which is a relatively tight range.
  6. When the Trump administration officially launched its initial round of tariffs on 3/8/18 targeting steel and aluminum imports the U.S. Dollar Index (DXY) stood at a reading of 90.18, in line with the historical averages. 
  7. To add some additional context, over the past 30 years, the index peaked at a reading of 120.90 on 7/5/01, while hitting a period-low of 71.33 on 4/22/08, according to Bloomberg. The 99.38 reading on 9/30/19 reflects strength, but is not extraordinarily rich.
  8. The escalation of trade tariffs has played a significant role in the increased volatility in the markets and the rise in the U.S. dollar, in our opinion. Despite the two recent rate cuts by the Federal Reserve, we believe that investors are still concerned that the ongoing trade conflict between the U.S. and China (18 months and counting) is negatively impacting global growth.
In the current climate, the U.S. dollar provides a safe-haven destination for capital. 
This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. The U.S. Dollar Index (DXY) indicates the general international value of the dollar relative to a basket of major world currencies.

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Posted on Thursday, October 3, 2019 @ 1:58 PM • Post Link Share: 
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  U.S. Retail Investors Seem Committed To Foreign Equities
Posted Under: International-Global

 
View from the Observation Deck  
  1. Over the past 10 calendar years (2009-2018), retail investors funneled a net $464.38 billion into open-end World Equity mutual funds, according to data from the Investment Company Institute (ICI).
  2. For comparative purposes (not in chart), retail investors liquidated a net $1.34 trillion from U.S. Equity mutual funds over the same period, according to the ICI. 
  3. As indicated in the chart, while a couple of years reflected relatively modest net outflows (see 2016 & 2018), net flows to World Equity mutual funds have been positive for the most part even when the returns on foreign equities were negative (see 2011, 2014 & 2015).  
  4. Net flows to World Equity mutual funds have been largely positive even though the U.S. dollar appreciated 18.28% from 12/31/08 through 12/31/18, as measured by the U.S. Dollar Index (DXY).
  5. Our basic takeaway is that investors recognize that global economic growth rates have been higher than in the U.S., and future estimates suggest this trend could continue. 
  6. As of July 2019, world GDP growth rate estimates were 3.2% for 2019 and 3.5% for 2020, compared to 2.6% and 1.9%, respectively, for the U.S., according to the International Monetary Fund.
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The MSCI World (ex-U.S.) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. World Equity funds invest primarily in stocks of foreign companies. 

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Posted on Tuesday, October 1, 2019 @ 1:51 PM • Post Link Share: 
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These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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