Markets "In a Nutshell" for May 1, 2018May 01, 2018
Investment Week at a Glance
Stocks fell last week. The Dow Jones Industrial average lost 0.7 while the S&P 500 fell 0.01%. The New York Stock Exchange Composite (2,000 stocks) was down 0.1% and the “average investor’s index” (Value Line index) dropped 0.2%. Foreign stocks (DJ Global ex U.S.) declined 0.4%. Bond yields rose as the year Treasury yield ended at 2.96%. (Data sources: Barron’s Financial, Wall Street Journal)
Why aren’t stocks going up?
Barron’s columnist Randall Forsyth wonders (in this week’s Barron’s) why the stock market is ignoring such good earnings news (corporate earnings growing over 15%, best in 6 years) as stock prices stay flat. Forsyth writes that higher interest rates may be the cause as investors, for the first time in 9 years, are able to get “safe yields” in short term bonds that exceed dividend paying stocks. Higher rates, while being good for savers can eat into future stock performance.
U.S. economic growth slows
The U.S.Commerce Dept. reported that the U.S. economy grew at an annualized rate of 2.3% in the first quarter of 2018. While slower than the 3% of 2017, growth is still at a higher pace than the average rate of growth since 2000. First quarters have been repeatedly weak since the recovery started in 2009.
“Big Oil Gushes Cash…”
We have repeatedly written about the bargains in oil and energy stocks. Energy stocks crashed following the crash in oil in 2015-16 (when oil fell from $70 to below $30 a barrel). The Wall Street Journal (4/28-29) reports that combined profits at Exxon, Shell, Chevron and Total SA were $16.8 billion, the highest since 2014. Energy stocks have soared 11% this past month but likely have room to grow as they still sport a -4% 5 year average return (Morningstar equity energy sector).
The ten year U.S. Treasury Note yield hit a 3% rate of interest last week for the first time since what year? a. 2010 b. 2014 c. 2016 d. 2017...Answer is below…
Have a good week!
Answer to quiz: