Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Click for Bio

Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 

  S&P 500 Index Companies Set Stock Buyback Record in Q2’18
Posted Under: Conceptual Investing

 
View from the Observation Deck  

  1. Stock buybacks are one way that a company can return capital to shareholders, particularly those companies that reduce outstanding share count.
  2. Companies with excess cash can also spend it on such things as capital expenditures, stock dividends, mergers and acquisitions and research and development. 
  3. We chose Q3'07 as the start date for the period depicted in the chart because prior to Q1'18 and Q2'18 it stood as the biggest quarter ever for S&P 500 Index buybacks at $172.0 billion, according to S&P Dow Jones Indices.
  4. S&P 500 Index buybacks totaled an all-time high of $190.62 billion (preliminary total) in Q2'18, up 0.8% from the $189.05 billion executed in Q1'18 (previous record) and up 58.7% from the $120.11 billion spent on buybacks in Q2'17, according to S&P Dow Jones Indices. 
  5. Goldman Sachs expects S&P 500 Index buybacks to exceed $1 trillion for the first time in 2018, according to MarketWatch. For the 5-year period ended 6/30/18, S&P 500 Index buybacks totaled $2.82 trillion, according to S&P Dow Jones Indices. 
  6. Critics of companies repurchasing sizable chunks of their own stock often say that they would rather see management invest that money back into the company instead. In the current climate, it may be possible to have one's cake and eat it too.   
  7. Corporate profits are so robust these days that capital expenditures are also on the rise. Goldman Sachs reported that capital spending by S&P 500 companies totaled $341 billion in the first half of 2018, up 19.2% from the $286 billion posted in the first half of 2017. If companies maintain the current pace, it would mark the fastest growth in capital spending in at least 25 years, according to MarketWatch. 
This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks (currently 505) used to measure large-cap U.S. stock market performance.

Download a PDF of this post, please click here.
Posted on Tuesday, September 25, 2018 @ 1:13 PM • Post Link Share: 
Print this post Printer Friendly
  US Stock Markets Ended September 21, 2018
Posted Under: Weekly Market Commentary

 

Despite the S&P 500 index closing lower on Monday, it finished Thursday at all-time high before dipping slightly lower Friday. Equities were led by the financial and material sectors, both had tailwinds of rising interest rates. Conversely, higher bond yields stunted the real estate and utility sectors, both underperformed the broader market. President Trump decided to move forward with an additional 10% tariff on $200b worth of Chinese imports starting Monday September 24th. The White House had discussed moving the new tariffs up to 25% but it appears that has been delayed until next year in an effort to get the Chinese back to the negotiating table. Red Hat Inc., an open source software provider, fell over 6.5% after announcing quarterly revenue below expectations, it was the worst performing company in the S&P 500 index last week. The poor quarterly results were likely due to a shift from their legacy on-site infrastructure business, to their main growth driver called OpenShift which had some near-term headwinds. MGM Resorts International announced plans to acquire the operations of the Hard Rock Rocksino which buoyed the stock nearly 3% last week. Under Armor Inc. announced plans to cut 400 jobs as part of the company's overall restructuring, the announcement rallied their shares over 6% for the week. ADT Inc. rallied over 7% after they announced a deal with Amazon.Com Inc. to integrate security services with their new Alexa Guard product. Adobe Systems Inc. fell over 2% Friday, after equity markets didn't seem to like the company purchasing Marketo from Vista Equity Partners for $4.75b. Overall economic fundamentals remain strong, corporate profits robust and new highs in sight. The S&P 500 is projected to grow earnings by 5.4% next quarter and 21.8% for 2018.   

Posted on Monday, September 24, 2018 @ 8:17 AM • Post Link Share: 
Print this post Printer Friendly
  US Economy and Credit Markets Ended September 21, 2018
Posted Under: Weekly Market Commentary

 

The yield curve steepened last week, and Treasury yields moved higher across all maturities with the yield on the benchmark U.S. 10-year Treasury rising above 3%. Selling in U.S. government bonds accelerated on Tuesday after President Donald Trump said about $200 billion of Chinese imports would be taxed at 10% effective September 24, lower than the initial rate expected to be as high as 25%. However, the rate will likely rise to 25% at the end of 2018. New issues of corporate debt also contributed to the selling in Treasury's. In economic data, initial jobless claims were 201,000 for the week ended September 15, which was less than the consensus estimate of 210,000 and 3,000 claims less than the previous week's level. According to the Labor Department, the September 15 level of initial claims is the lowest since November 15, 1969 when it was 197,000. This week, the Federal Open Market meets on Tuesday and Wednesday and is widely expected to raise the target range for the federal funds rate by 25 basis points. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Tuesday: September Conf. Board Consumer Confidence (132.0, 133.4); Wednesday: September 26 FOMC Rate Decision – Upper Bound (2.25%, 2.00%), September 21 MBA Mortgage Applications (N/A, 1.6%), August New Home Sales (630k, 627k); Thursday: September 22 Initial Jobless Claims (209k, 201k), 2Q GDP Annualized QoQ (4.2%, 4.2%), August Preliminary Durable Goods Orders (1.9%, -1.7%), August Preliminary Wholesale Inventories MoM (0.3%, 0.6%); Friday: September Final U. of Mich. Sentiment (100.5, 100.8), August Personal Income (0.4%, 0.3%), August Personal Spending (0.3%, 0.4%), September Chicago Purchasing Manager (62.0, 63.6).

Posted on Monday, September 24, 2018 @ 8:15 AM • Post Link Share: 
Print this post Printer Friendly
  Health Care Stock Returns Have Outpaced Rising Health Expenditures
Posted Under: Conceptual Investing

 
View from the Observation Deck  
  1. Today's blog post is another attempt to show that investors have a potential long-term remedy for mitigating rising health care costs – owning health care stocks.
  2. As indicated in the chart, from 2007 through 2016, the annual percentage rise in U.S. health expenditures ranged from 2.9% (2013) to 6.5% (2007). There were no years in which costs fell.  
  3. Over that same period, the S&P 500 Health Care Index posted a cumulative total return of 149.68%, or an average annual return of 9.57%, according to Bloomberg. This period included a 22.8% decline in 2008 and 2.7% decline in 2016.
  4. In 2016 (most recent year for data), U.S. health care spending rose 4.3% to $3.34 trillion, according to the Centers for Medicare & Medicaid Services. 
  5. Out-of-pocket health care costs for consumers rose 3.9% in 2016, the fastest growth rate since 2007, according to The Washington Post. It also points out that 29% of people who were getting insurance through their employer in 2016 were enrolled in high-deductible plans, up from 20% in 2014. Deductibles rose by 12% in 2016, compared to just a 7% hike in 2014.
  6. Rising health care costs is an ongoing problem in need of some long-term solutions. Perhaps one of them might be to invest in the very companies that are raising said prices.  
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. There can be no assurance that any of the projections cited will occur. The S&P 500 Health Care Index is a capitalization-weighted index comprised of S&P 500 constituents operating in the health care sector. 

Download a PDF of this post, please click here.
Posted on Thursday, September 20, 2018 @ 11:34 AM • Post Link Share: 
Print this post Printer Friendly
  Trump Rally (11/8/16-9/14/18) vs. Trump Tariffs (3/8/18-9/14/18)
Posted Under: Conceptual Investing

 
View from the Observation Deck  

  1. A common thread running through the Trump Rally and the Trump Tariffs is President Trump's policy of "America First." 
  2. While each of the equity indices featured in the chart have posted positive average annualized total returns (green bars) since Donald Trump won the presidential election on 11/8/16, the U.S. equity indices have clearly outperformed their foreign counterparts through 9/14/18. 
  3. On 3/8/18, President Trump signed a proclamation authorizing tariffs on imported steel (25%) and aluminum (10%). Since that initial proclamation, the Trump administration has authorized additional tariffs, primarily targeting China.
  4. We believe that the tariffs have negatively impacted the total returns (white bars) of the two foreign equity indices since 3/8/18, with emerging markets suffering the most. The U.S. equity indices have continued to perform well, largely due to the passage of the Tax Cuts & Jobs Act on 12/22/17 and the pro-U.S. tariffs.
  5. The U.S. dollar has strengthened since the tariffs commenced, creating some headwind for foreign stocks. From 3/8/18 through 9/14/18, the U.S. dollar rose by 5.27%, as measured by the U.S. Dollar Index (DXY), according to Bloomberg. That represents a reversal from how the U.S. dollar performed after Trump's victory in the presidential election and the start of the tariffs. From 11/8/16 through 3/8/18, the U.S. Dollar Index declined by 7.85%. 
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 NASDAQ 100 Index includes 100 of the largest domestic and non-financial companies listed on The NASDAQ Stock Market based on market capitalization. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks (currently 505) used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The MSCI World (ex U.S.) Index is a free-float weighted index 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. The U.S. Dollar Index (DXY) indicates the general international value of the dollar relative to a basket of major world currencies.

Download a PDF of this post, please click here.
Posted on Tuesday, September 18, 2018 @ 2:26 PM • Post Link Share: 
Print this post Printer Friendly
  Optimism at a 20-Year High
Posted Under: Weekly Market Commentary Video
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 Tuesday, September 18, 2018 @ 11:46 AM • Post Link Share: 
Print this post Printer Friendly
  US Stock Markets Ended September 14, 2018
Posted Under: Weekly Market Commentary

 
After falling last week, equities regained their footing and posted solid gains for the week on renewed trade deal optimism. President Donald Trump directed aides to procced with tariffs on an additional $200 billion in Chinese goods. However, the administration has delayed an announcement on the new round of tariffs due to concerns raised by corporations. Information technology stocks rallied, recovering part of the losses the sector suffered last week on fears of more stringent regulation and the effect of tariffs on the industry's trade-dependent companies. In economic news, U.S. core inflation unexpectedly dropped in August as medical-care costs and apparel prices fell, leaving room for the Federal Reserve to continue to raise rates slowly. The Fed is widely expected to raise rates later this month. In stock news, Activision Blizzard, Inc. released a new multiplayer battle royale game to compete with Fortnite. Apple Inc. unveiled three new smartphones with higher price tags and a next generation watch with added health features. Shares of Sonic Corp. jumped after the restaurant chain pre-announced better-than-expected comparable store sales on increased store traffic. Discovery, Inc. shares moved higher following a licensing agreement with Hulu to provide over 4,000 episodes on the streaming service. Looking ahead to the future, trade sentiment will likely continue to drive sentiment in the market over the short-run with earnings season nearly a month away. With the S&P 500 in reach of recent highs, continued strength in corporate profits could propel the market to new highs in the coming quarters. The S&P 500 is projected to grow earnings by 19.3% next quarter and 23.5% for 2018.
Posted on Monday, September 17, 2018 @ 8:09 AM • Post Link Share: 
Print this post Printer Friendly
  US Economy and Credit Markets Ended September 14, 2018
Posted Under: Weekly Market Commentary

 
Treasury prices dropped moderately over the course of the week on increased supply of short-term debt. On Tuesday, an offering of short-term treasuries, which are most vulnerable to interest rate increases, was met with tempered demand causing Treasury prices to fall in order to make room for the new supply. Investors continue to expect faster rate hikes from the Federal Reserve as the implied probability of a second rate hike by December rose to 77.2%, compared to 66.9% a week ago. Wholesale inflation of -0.1% was lower than the expected 0.2% and consumer prices rose only 0.2% compared to an expected 0.3%, which tempered fears of increased inflation, especially after a higher than expected increase in wages. Treasury yields did not move very much the rest of the week as retail sales growth of 0.1% was below an expected 0.4% but industrial production was up 0.4% compared to an expected growth of 0.3%. Yields rose slightly on Friday as investors were more optimistic with regard to the trade tensions between the U.S. and China. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Monday: September Empire Manufacturing (23.0, 25.6); Wednesday: September 14 MBA Mortgage Applications (N/A, -1.8%), August Housing Starts (1.24m, 1.168m); Thursday: September 15 Initial Jobless Claims (210k, 204k), August Leading Index (0.5%, 0.6%), August Existing Home Sales (5.38m, 5.34m); Friday: September Prelim. Markit US Manufacturing PMI (55.0, 54.7).
Posted on Monday, September 17, 2018 @ 8:06 AM • Post Link Share: 
Print this post Printer Friendly
  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 9/11/18, the S&P 500 and S&P MidCap 400 Indices closed 0.90% and 0.75% below their respective all-time highs set on 8/29/18, according to Bloomberg. The S&P SmallCap 600 Index closed 1.46% below its all-time high set on 8/31/18. 
  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 9/12/18 were 62%, 53% and 50%, 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 9/12/18 were 63%, 59% and 63%, respectively.
  6. The percentage of stocks trading above their 50-Day moving average by sector ranged from 23% (Energy) to 100% (Telecommunication Services). 
  7. The percentage of stocks trading above their 200-Day moving average by sector ranged from 38% (Financials & Materials) to 86% (Utilities).
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 a capitalization-weighted index comprised 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.

Download a PDF of this post, please click here.
Posted on Thursday, September 13, 2018 @ 1:38 PM • Post Link Share: 
Print this post Printer Friendly
  A Snapshot of Bond Valuations
Posted Under: Bond Market

 
View from the Observation Deck  
  1. Today's blog post is one we do ongoing so that investors can monitor fluctuations in bond prices relative to changes in interest rates.
  2. The yield on the benchmark 10-year Treasury note (T-note) rose from 2.04% at the close of 9/7/17 to 2.94% on 9/7/18, or an increase of 90 basis points (bps), according to Bloomberg. The closing low for the period was 2.04% (9/7/17), while the closing high was 3.11% (5/17/18). The all-time closing low for the yield on the 10-year T-note was 1.36% on 7/8/16, according to Bloomberg. 
  3. Since 9/7/17, the Federal Reserve (the "Fed") has increased the federal funds target rate (upper bound) 75 bps, from 1.25% to 2.00%. For the 30-year period ended 9/7/18, the federal funds target rate (upper bound) averaged 3.24%, according to Bloomberg. 
  4. Brian Wesbury, Chief Economist at First Trust Advisors L.P., sees the Fed raising the federal funds target rate two more times in 2018 and four times in 2019. At the current quarter-point per hike pace, the benchmark lending rate would end 2019 at 3.50%, just above the 30-year average of 3.24%. 
  5. The S&P/LSTA U.S. Leveraged Loan 100 Index was the only index in the chart that posted a price gain for the 12-month period ended 9/7/18. 
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 ICE BofAML 22+ Year U.S. Municipal Securities Index tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market. The ICE BofAML Fixed Rate Preferred Securities Index tracks the performance of investment grade fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market. The S&P/LSTA U.S. Leveraged Loan 100 Index is a market value-weighted index designed to measure the performance of the largest segment of the U.S. syndicated leveraged loan market. The ICE BofAML 7-10 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government in its domestic market. The ICE BofAML U.S. High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofAML U.S. Corporate Index tracks the performance of U.S. dollar denominated investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofAML Global Corporate Index tracks the performance of investment grade corporate debt publicly issued in the major domestic and Eurobond markets. 

Download a PDF of this post, please click here.

Posted on Tuesday, September 11, 2018 @ 2:19 PM • Post Link Share: 
Print this post Printer Friendly

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.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
Weekly Video
Weekly Market Commentary
Weekly Market Watch
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
Historical Perspective on the Yield Curve
US Stock Markets Ended September 7, 2018
US Economy and Credit Markets Ended September 7, 2018
Sector Performance Via Market Capitalization (Year-to-Date)
The U.S. Dollar Is Actually Down Since 12/16/15
Looking Back to Understand the Future
US Stock Markets Ended August 31, 2018
US Economy and Credit Markets Ended August 31, 2018
Accentuate the Positive
Treasury Yields Are Up Since July 2016 And Returns Have Suffered
Archive
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2018 All rights reserved.